Filed
Pursuant to Rule 424(b)(2)
Registration
No. 333-163620
OVERTURE
ACQUISITION CORP.
c/o Maples
Corporate Services Limited
Ugland House
Grand Cayman, KY1-1104
Cayman Islands
To the Shareholders and Warrantholders of Overture Acquisition
Corp.:
You are cordially invited to attend the extraordinary general
meeting of the shareholders of Overture Acquisition Corp. (the
“Company”) at 10:00 a.m., Eastern time,
and special meeting of the warrantholders of the Company at
10:30 a.m., Eastern time, on January 27, 2010, at the
offices of Ellenoff Grossman & Schole LLP, 150 East
42nd Street, 11th Floor, New York, New York10017.
The Company is pleased to report that our Board of Directors has
approved the Master Agreement dated December 10, 2009 (the
“Master Agreement”) by and among the Company,
Overture Re Holdings Ltd., the Company’s newly formed,
wholly owned Bermuda holding company (“Overture Re
Holdings”), Jefferson National Financial Corp., a
Delaware corporation (“JNF”), Jefferson
National Life Insurance Company, a Texas insurance company and a
wholly owned subsidiary of JNF (“JNL”), and JNL
Bermuda LLC, a newly formed Delaware limited liability company
and wholly owned subsidiary of JNL (“JNL
Bermuda”), JNF Asset Management LLC, a Delaware limited
liability company (“JNFAM”) and the founders of
the Company (the “Founders”) pursuant to which,
among other things, following a future closing and amalgamation
(term for merger under Bermuda law) with JNL Bermuda, Overture
Re Ltd., a to-be-formed wholly owned Bermuda subsidiary of
Overture Re Holdings (“Overture Re”) will
reinsure blocks of annuities and acquire a portfolio of
securities, among other things, in consideration for up to
$120,000,000 and Overture Re will be a long term reinsurer
domiciled in Bermuda.
At the extraordinary general meeting of the Company’s
shareholders (the “Extraordinary General
Meeting”), the Company’s shareholders will be
asked to consider and vote on proposals: (i) to approve a
business combination and the transactions contemplated by the
Master Agreement (the “Transaction”) which,
among other things, provides for the amalgamation of JNL Bermuda
and Overture Re, pursuant to which the amalgamated company shall
be a long term reinsurer domiciled in Bermuda (the
“Business Combination” and the proposal, the
“Business Combination Proposal”); (ii) to
approve by special resolution the change of name of the Company
from “Overture Acquisition Corp.” to “Overture
Capital Corp.” (the “Name Change
Proposal”); (iii) to approve by special resolution
an amendment to the Company’s amended and restated
memorandum and articles of association (the
“Articles”) to add provisions to allow the
Company to repurchase its own ordinary shares (“Ordinary
Shares”) without shareholder approval in certain
limited circumstances (the “Repurchase Amendment
Proposal”); (iv) to approve by special resolution
an amendment to the Articles to eliminate the staggered board
provision in the Articles (the “Staggered Board
Elimination Proposal”; (v) to approve the
repurchase by the Company of the Ordinary Shares issued to the
Company’s Founders (the “Founder Shares”)
prior to the Company’s initial public offering (the
“IPO”) (the “Share Repurchase
Proposal”); (vi) to elect seven Directors to the
Board of Directors to serve until the 2010 Annual General
Meeting of Shareholders or until their successors have been duly
elected or appointed and qualified (the “Board of
Directors Proposal”); (vii) to approve the
adoption of the 2010 Stock Incentive Plan (the
“Incentive Plan Proposal”); and (viii) to
adjourn the Extraordinary General Meeting to a later date or
dates, if necessary, to permit further solicitation and vote of
proxies if, at the time of the Extraordinary General Meeting, it
appears we cannot consummate the transactions contemplated by
the Master Agreement (the “Shareholder Adjournment
Proposal”).
At the special meeting of the Company’s warrantholders (the
“Special Meeting of Warrantholders”),
warrantholders will be asked to consider and vote upon a
proposal to amend the terms of the warrant agreement governing
the Company’s 15,000,000 warrants issued in its IPO (the
“Public Warrants”) and the 4,380,000 warrants
issued to the Company’s Founders, in a private placement
immediately prior to the Company’s IPO, which we refer to
as the founder warrants and, collectively with the Public
Warrants, the “Company Warrants”) to provide
that (i) the exercise price of our warrants will be
increased from $7.00 to $11.00 per share, (ii) the
expiration date of the Company Warrants will be extended from
January 30, 2013 to January 30, 2015, and
(iii) the price at which our Ordinary Shares must trade
before we are able to redeem the warrants we issued in our IPO
will be increased from $14.25 to $20.00 (the “Warrant
Amendment Proposal”). In addition, warrantholders will
be asked to approve a proposal to adjourn the special meeting to
a later date or dates, if necessary, to permit further
solicitation and vote of proxies if, at the time of the Special
Meeting of Warrantholders it appears the Warrant Amendment
Proposal will not be approved (the “Warrantholder
Adjournment Proposal”).
Each of these proposals is more fully described in the
accompanying proxy statement/prospectus.
The approval of the Business Combination Proposal requires the
affirmative vote of a majority of the Ordinary Shares issued in
our IPO (the “Public Shares”), present and
entitled to vote at the Extraordinary General Meeting or at an
adjourned meeting. If the holders of 30% or more of the Public
Shares vote against the Business Combination Proposal and demand
that their Public Shares be redeemed for a pro rata portion of
the trust account in which a substantial portion of the net
proceeds of the Company’s IPO are held, the Company will
not, pursuant to the terms of its Articles, be permitted to
consummate the Transaction. See the section entitled
“The Extraordinary General Meeting of Shareholders and
the Special Meeting of Warrantholders —
Redemption Rights”for additional information.
The approval of each of the Name Change Proposal, the Repurchase
Amendment Proposal, and the Staggered Board Elimination Proposal
requires the affirmative vote of not less than two-thirds of the
votes cast by such shareholders as being entitled to do so,
voting in person or by proxy at the Extraordinary General
Meeting. Pursuant to the Company’s Articles, the Name
Change Proposal, the Repurchase Amendment Proposal and the
Staggered Board Elimination Proposal cannot be approved at an
adjourned meeting.
The approval of each of the Share Repurchase Proposal, the Board
of Directors Proposal, the Incentive Plan Proposal and the
Shareholder Adjournment Proposal requires the affirmative vote
of a majority of the shareholders as being entitled to do so,
voting in person or by proxy at the Extraordinary General
Meeting or at an adjourned meeting.
After careful consideration, the Board of Directors of the
Company has unanimously approved the Master Agreement and the
Transaction and recommends that shareholders vote or give
instruction to vote “FOR” the approval of the Business
Combination Proposal, “FOR” the Name Change Proposal,
“FOR” the Repurchase Amendment Proposal,
“FOR” the Staggered Board Elimination Proposal,
“FOR” the “Share Repurchase Proposal,
“FOR” each of the nominees in the Board of Directors
Proposal, “FOR” the Incentive Plan Proposal and, if
required, “FOR” the Shareholder Adjournment Proposal
to be presented at the Extraordinary General Meeting of
Shareholders.
In connection with the closing of the Transaction, JNL has
agreed to, on the Closing Date, beneficially own or have
commitments to acquire up to 24.5% of the Company’s
Ordinary Shares, taking into account the shareholders
redemptions, the obligation of the Company to repurchase the
Founders Shares and any issuance of Ordinary Shares to JNL
pursuant to the Master Agreement, in (i) open market
purchases (the “Open Market Purchases”) prior
to the record date (the “Record Date”) of the
Extraordinary General Meeting, (ii) in privately negotiated
share purchase transactions (the “JNL Private Share
Purchases”) with record holders of the Company’s
Ordinary Shares subsequent to the Record Date but prior to the
Extraordinary General Meeting,
and/or
(iii) through the purchase of such number of Ordinary
Shares from the Company in a private placement, not to exceed
19.9% of the Ordinary Shares (collectively, the “Share
Issuance”) such that it will on the Closing Date
beneficially own or have commitments to acquire in the aggregate
24.5% of the Company’s Ordinary Shares outstanding as of
the closing date of the Transaction (the “Closing
Date”). Accordingly, upon consummation of the
Transaction, JNL will hold approximately 24.5% of the
Company’s Ordinary Shares taking into account the
shareholders redemptions, the obligation of the Company to
repurchase the Founders Shares and any issuance of Ordinary
Shares to JNL pursuant to the Master Agreement.
Abstentions, while considered present for the purposes of
establishing a quorum at the Extraordinary General Meeting, will
have no effect on the Business Combination Proposal, the Name
Change Proposal, the Repurchase Amendment Proposal, the
Staggered Board Elimination Proposal, the Share Repurchase
Proposal, the Board of Directors Proposal, the Incentive Plan
Proposal or the Shareholder Adjournment Proposal. Broker
non-votes, while considered present for the purposes of
establishing a quorum, will have no effect on the Business
Combination Proposal, the Name Change Proposal, the Repurchase
Amendment Proposal, the Staggered Board Elimination Proposal,
the Share Repurchase Proposal, the Board of Directors Proposal,
the Incentive Plan Proposal or the Shareholder Adjournment
Proposal.
Abstentions are considered present for purposes of establishing
a quorum at the Special Meeting but will have the same effect as
a vote “AGAINST” the Warrant Amendment Proposal. A
broker non-vote, while
considered present for purposes of establishing a quorum, will
have the same effect as a vote “AGAINST” the Warrant
Amendment Proposal.
You may vote against the Transaction and elect to have the
Company redeem your Public Shares for a pro rata portion of the
trust account into which a substantial portion of the net
proceeds of the Company’s initial public offering were
deposited. You should be aware that because the Company’s
IPO prospectus did not disclose that funds in its trust account
might be used, directly or indirectly, to purchase Public Shares
other than from holders who have voted against the Business
Combination Proposal and demanded that their Public Shares be
redeemed for cash or that the Company may seek to amend the
Warrant Agreement, each holder of Public Shares at the time of
the Transaction who purchased shares in the IPO may bring
securities law claims against the Company for rescission or
damages. No appraisal rights are available under the Companies
Law (2009 Revision) of the Cayman Islands to the shareholders of
the Company in connection with the proposed Transaction.
Pursuant to the Master Agreement, the Company has agreed to
repurchase from the Founders of the Company 3,750,000 Founder
Shares that the Founders purchased prior the Company’s IPO.
In consideration of the repurchase of such Founder Shares at
their initial purchase price of $0.006 per share, or an
aggregate of $25,000, the Founders will receive
(i) Class A warrants to purchase an aggregate of
46,875 shares of JNF common stock at an exercise price of
$75.00 per share, subject to a floating strike price adjustment,
and (ii) Class B warrants to purchase an aggregate of
46,875 shares of JNF common stock at an exercise price of
$125.00 per share, subject to a floating strike price
adjustment, and (iii) the right to the issuance of
2,812,500 of the Company’s Ordinary Shares issuable in
three equal tranches in the event the volume weighted average
price of the Company’s Ordinary Shares for any ten days
during a 30 day period equals or exceeds $12, $16 and $20,
respectively.
Approval of the Warrant Amendment Proposal requires the
affirmative vote of the holders of a majority of the Company
Warrants outstanding as of the record date for the Special
Meeting of Warrantholders. The approval of the Warrantholder
Adjournment Proposal requires the affirmative vote of a majority
of the Company Warrants issued and outstanding as of the record
date voted at the Special Meeting of Warrantholders.
After careful consideration, the Board of Directors of the
Company unanimously recommends that warrantholders vote or give
instruction to vote “FOR” the approval of the Warrant
Amendment Proposal and the Warrantholder Adjournment Proposal to
be presented at the Special Meeting of Warrantholders.
Enclosed are (i) the notice of the Special Meeting of
Warrantholders, (ii) the notice of Extraordinary General
Meeting of Shareholders, and (iii) a proxy
statement/prospectus containing detailed information concerning
the Warrant Amendment Proposal, the Warrantholder Adjournment
Proposal, the Business Combination Proposal, the Name Change
Proposal, the Repurchase Amendment Proposal, the Staggered Board
Elimination Proposal, the Share Repurchase Proposal, the Board
of Directors Proposal, the Incentive Plan Proposal and the
Shareholder Adjournment Proposal. Whether or not you plan to
attend the Special Meeting and the Extraordinary General
Meeting, we urge you to read these materials carefully.
Your vote is important. Whether or not you plan to attend the
Special Meeting of Warrantholders or the Extraordinary General
Meeting of Shareholders, as the case may be, please sign, date
and return the enclosed proxy card as soon as possible in the
envelope provided. The Company cannot consummate the
Transaction unless (i) the Warrant Amendment Proposal is
approved; (ii) the Business Combination Proposal is
approved and holders of no more than one share less than 30% of
the Public Shares elect to vote against the Business Combination
Proposal and redeem their Public Shares for a pro rata portion
of the trust account; (iii) the Repurchase Amendment
Proposal, the Share Repurchase Proposal, the Board of Directors
Proposal and the Incentive Plan Proposal are each approved by
shareholders, and (iv) the closing conditions set forth in
the Master Agreement are met.
Only Company warrantholders who held Company Warrants and
Company shareholders who held Ordinary Shares on January 7,2010, the record date, will be entitled to vote at the Special
Meeting of Warrantholders or the Extraordinary General Meeting
of Shareholders, as the case may be. A signed proxy card that is
returned without an indication of how to vote on a particular
matter will be voted “FOR” the proposals to be
presented at the Special Meeting of Warrantholders and
“FOR” each proposal to be presented at the
Extraordinary General Meeting of Shareholders. If your warrants
or shares are held in an account at a
brokerage firm or bank, you must instruct your broker or bank on
how to vote your warrants or shares, as the case may be, or, if
you wish to attend the Special Meeting of Warrantholders or the
Extraordinary General Meeting of Shareholders and vote in
person, you must obtain a proxy from your bank or broker. If you
do not submit your proxy or vote in person at the Special
Meeting of Warrantholders, or, if you hold your warrants through
a broker or bank and if you do not instruct your broker how to
vote your warrants, or obtain a proxy from your broker or bank
to vote in person at the Special Meeting of Warrantholders, it
will have the same effect as a vote against the Warrant
Amendment Proposal to be presented to the warrantholders, as
more fully described in the attached proxy statement/prospectus.
If you do not submit your proxy or vote in person at the
Extraordinary General Meeting of Shareholders or, if you hold
your shares through a broker or bank and if you do not instruct
your broker how to vote your shares or obtain a proxy from your
broker or bank to vote in person at the Extraordinary General
Meeting of Shareholders, then you will have not voted in respect
of your shares at the Extraordinary General Meeting of
Shareholders.
The existence of the financial and personal interests of the
Founders and directors of the Company may result in a conflict
of interest. Pursuant to the Master Agreement, it is anticipated
that Messrs. Hunt, Blazer and Lufkin will continue to serve
as directors of the Company. In addition, Founders will receive
warrants to purchase common stock of JNF, the parent of JNL and
JNFAM, that would on a fully diluted basis represent
approximately 10% of JNF. In addition, subsequent to the closing
of the Transaction, the Company will be required to issue
2,812,500 Ordinary Shares to the Founders in three tranches if
the average closing price of the Company’s Ordinary Shares
equals or exceeds $12, $16 or $20, respectively. If the
Transaction is not consummated, the 3,750,000 Founders Shares
that were acquired before the Company’s IPO for an
aggregate purchase price of $25,000 would be worthless because
the Founders are not entitled to receive any of the proceeds of
the Company’s trust account with respect to such shares. In
addition, if the Transaction is not consummated, the 4,380,000
founder warrants which were purchased by the Founders for an
aggregate purchase price of $4,380,000 would expire worthless.
Furthermore, if the Company liquidates and dissolves,
Messrs. Hunt and Blazer will be liable to pay debts and
obligations to vendors and other entities that are owed money by
the Company for services rendered or products sold to the extent
such creditors bring claims which would otherwise require
payment from the trust account, but only if such vendors or
entities did not execute a waiver. If the Company goes into
liquidation and there are no funds remaining to pay the costs
associated with the implementation and completion of such
liquidation, the Company’s Founders have agreed to advance
the Company the funds necessary to pay such costs and expenses
and not to seek reimbursement for such expenses.
Please see the section titled “Risk Factors”
beginning on page 41 of the proxy statement/prospectus to
read about certain risk factors to be considered in connection
with your decision to vote to adopt the proposals set forth
herein. You are encouraged to read carefully the proxy
statement/prospectus in its entirety.
Thank you for your consideration of these matters.
Sincerely,
John F. Hunt Chairman
Chief Executive Officer
Director
Secretary
IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW
YOU WISH TO VOTE, YOUR WARRANTS OR SHARES, AS APPLICABLE, WILL
BE VOTED IN FAVOR OF EACH OF THE PROPOSALS. IN THAT EVENT, YOU
WILL NOT BE ELIGIBLE TO HAVE YOUR SHARES REDEEMED FOR A PRO
RATA PORTION OF THE TRUST ACCOUNT INTO WHICH A SUBSTANTIAL
PORTION OF THE NET PROCEEDS OF THE COMPANY’S INITIAL PUBLIC
OFFERING WERE DEPOSITED. IN ORDER TO EXERCISE
REDEMPTION RIGHTS, YOU MUST VOTE AGAINST THE BUSINESS
COMBINATION PROPOSAL AND DEMAND THAT THE COMPANY REDEEM
YOUR PUBLIC SHARES FOR A PRO RATA PORTION OF THE
TRUST ACCOUNT NO LATER THAN THE CLOSE OF THE VOTE ON THE
BUSINESS COMBINATION. IN ORDER TO REDEEM YOUR SHARES, YOU MUST
TENDER YOUR SHARES TO THE COMPANY’S TRANSFER AGENT
PRIOR TO THE EXTRAORDINARY GENERAL MEETING OF
SHAREHOLDERS. YOU MAY TENDER SHARES BY EITHER
DELIVERING THE SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY
DELIVERING THE SHARES ELECTRONICALLY THROUGH THE DEPOSITORY
TRUST COMPANY. GIVEN THE RELATIVELY SHORT SOLICITATION
PERIOD, IT IS ADVISABLE FOR SHAREHOLDERS TO USE ELECTRONIC
DELIVERY OF THE PUBLIC SHARES. IF THE TRANSACTION IS NOT
CONSUMMATED, THEN THESE SHARES WILL NOT BE REDEEMED FOR A
PRO RATA PORTION OF THE TRUST ACCOUNT. IF YOU HOLD THE
SHARES THROUGH A BROKERAGE FIRM OR BANK, YOU MUST INSTRUCT
THE ACCOUNT EXECUTIVE AT YOUR BANK TO WITHDRAW THE
SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR
REDEMPTION RIGHTS. SEE “THE EXTRAORDINARY GENERAL
MEETING OF SHAREHOLDERS AND THE SPECIAL MEETING OF
WARRANTHOLDERS — REDEMPTION RIGHTS”BEGINNING ON PAGE 77 OF THE PROXY STATEMENT/PROSPECTUS
FOR MORE SPECIFIC INSTRUCTIONS.
Neither the Securities and Exchange Commission nor any state
regulatory agency has approved or disapproved of the
Transaction, passed upon the merits or fairness of the
Transaction or passed upon the adequacy or accuracy of the
disclosure in the attached proxy statement/prospectus. Any
representation to the contrary is a criminal offense.
To the Shareholders of Overture Acquisition Corp.:
NOTICE IS HEREBY GIVEN that an extraordinary general
meeting of the shareholders (the “Extraordinary General
Meeting”) of Overture Acquisition Corp. (the
“Company”), a Cayman Islands exempted company,
will be held at 10:00 a.m. New York time, on
January 27, 2010, at the offices of Ellenoff
Grossman & Schole LLP, the Company’s counsel, at
150 East 42nd Street, 11th Floor, New York, New York10017.
You are cordially invited to attend the Extraordinary General
Meeting, at which meeting shareholders will be asked to consider
and vote upon the following resolutions, which are more fully
described in the accompanying proxy statement/prospectus:
(1) The Business Combination Proposal — to
approve a business combination and the transactions contemplated
by the Master Agreement (the “Transaction”),
dated as of December 10, 2009 (the “Master
Agreement”), by and among the Company, Overture Re
Holdings Ltd., the Company’s newly formed, wholly owned
Bermuda holding company (“Overture Re
Holdings”), Jefferson National Financial Corp., a
Delaware corporation (“JNF”), Jefferson
National Life Insurance Company, a Texas insurance company and a
wholly owned subsidiary of JNF (“JNL”), and JNL
Bermuda LLC, a Delaware limited liability company and a newly
formed wholly owned subsidiary of JNL (“JNL
Bermuda”), JNF Asset Management LLC, a Delaware limited
liability company (“JNFAM”) and the founders of
the Company (the “Founders”) which, among other
things, provides for the amalgamation of JNL Bermuda and
Overture Re Ltd., a to be formed, wholly owned Bermuda
subsidiary of Overture Re Holdings (“Overture
Re”), pursuant to which the amalgamated company shall
be a long term reinsurer domiciled in Bermuda (the
“Business Combination” and the proposal, the
“Business Combination Proposal”);
(2) The Name Change Proposal — to approve
by special resolution the change of name of the Company from
“Overture Acquisition Corp.” to “Overture Capital
Corp.” (the “Name Change Proposal”);
(3) The Repurchase Amendment Proposal — to
approve by special resolution an amendment to the Company’s
amended and restated memorandum and articles of association (the
“Articles”) to add provisions which allow the
Company to purchase its own ordinary shares (“Ordinary
Shares”) without shareholder approval in certain
limited circumstances (the “Repurchase Amendment
Proposal”);
(4) The Staggered Board Elimination
Proposal — to approve by special resolution an
amendment to the Company’s Articles to eliminate the
staggered board provision in the Articles (the
“Staggered Board Elimination Proposal”);
(5) The Share Repurchase Proposal — to
approve the repurchase by the Company of the Ordinary Shares
issued to the Company’s Founders (the “Founders
Shares”) prior to the Company’s initial public
offering (the “IPO”) (the “Share
Repurchase Proposal”);
(6) The Board of Directors Proposal — to
elect seven directors (the “Directors”) to the
Company’s board of directors (the “Board of
Directors”) upon consummation of the Transaction to
serve until the 2010 annual general meeting of shareholders or
until their successors have been duly elected or appointed and
qualified (the “Board of Directors Proposal”);
(7) The Incentive Plan Proposal — to
approve the adoption of the 2010 Stock Incentive Plan (the
“Incentive Plan”) pursuant to which the Company
may issue up to the lesser of (i) 1.5 million Ordinary
Shares or (ii) 10% of the outstanding Ordinary Shares at
the closing of the Transaction (the “Incentive Plan
Proposal”);
(8) The Shareholder Adjournment Proposal —
to consider and vote upon the adjournment of the Extraordinary
General Meeting to a later date or dates, if necessary, to
permit further solicitation and vote of proxies if, at the time
of the Extraordinary General Meeting of Shareholders, it appears
we cannot consummate the transactions contemplated by the Master
Agreement and the other proposals to be considered by
shareholders (the “Shareholder Adjournment
Proposal”); and
(9) Such other procedural matters as may properly come
before the Extraordinary General Meeting of Shareholders or any
adjournment or postponement thereof.
After careful consideration, the Board of Directors of the
Company has unanimously approved the Master Agreement and the
Transaction and recommends that shareholders vote or give
instruction to vote “FOR” the approval of the Business
Combination Proposal, “FOR” the Name Change Proposal,
“FOR” the Repurchase Amendment Proposal,
“FOR” the Staggered Board Elimination Proposal,
“FOR” the “Share Repurchase Proposal,
“FOR” each of the nominees in the Board of Directors
Proposal, “FOR” the Incentive Plan Proposal and, if
required, “FOR” the Shareholder Adjournment Proposal
to be presented at the Extraordinary General Meeting of
Shareholders.
The existence of the financial and personal interests of the
Founders and directors of the Company may result in a conflict
of interest. Pursuant to the Master Agreement, it is anticipated
that Messrs. Hunt, Blazer and Lufkin will continue to serve
as directors of the Company. In addition, founders will receive
warrants to purchase common stock of JNF, the parent of JNL and
JNFAM, that would on a fully diluted basis represent
approximately 10% of JNF. In addition, subsequent to the closing
of the Transaction, the Company will be required to issue
2,812,500 Ordinary Shares to the Founders in three tranches if
the average closing price of the Company’s Ordinary Shares
equals or exceeds $12, $16 or $20, respectively. If the
Transaction is not consummated, the 3,750,000 Founders Shares
that were acquired before the Company’s IPO for an
aggregate purchase price of $25,000 would be worth a nominal
value because the Founders are not entitled to receive any of
the proceeds of the Company’s trust account with respect to
such shares. In addition, if the Transaction is not consummated,
the 4,380,000 Founder warrants which were purchased by the
Founders for an aggregate purchase price of $4,380,000 would
expire worthless. Furthermore, if the Company liquidates and
dissolves, Messrs. Hunt and Blazer will be liable to pay
debts and obligations to vendors and other entities that are
owed money by the Company for services rendered or products sold
to the extent such creditors bring claims which would otherwise
require payment from the trust account, but only if such vendors
or entities did not execute a waiver. If the Company goes into
liquidation and there are no funds remaining to pay the costs
associated with the implementation and completion of such
liquidation, the Company’s Founders have agreed to advance
the Company the funds necessary to pay such costs and expenses
and not to seek reimbursement for such expenses.
You may vote against the Transaction and elect to have the
Company redeem your Public Shares for a pro rata portion of the
trust account into which a substantial portion of the net
proceeds of the Company’s initial public offering were
deposited. You should be aware that because the Company’s
IPO prospectus did not disclose that funds in its trust account
might be used, directly or indirectly, to purchase Public Shares
other than from holders who have voted against the Business
Combination Proposal and demanded that their Public Shares be
redeemed for cash or that the Company may seek to amend the
Warrant Agreement, each holder of Public Shares at the time of
the Transaction who purchased shares in the IPO may bring
securities law or common law claims against the Company for
rescission or damages. No appraisal rights are available under
the Companies Law (2009 Revision) of the Cayman Islands to the
shareholders of the Company in connection with the proposed
Transaction.
These proposals are described in the attached proxy
statement/prospectus which the Company urges you to read in its
entirety before voting.
All Company shareholders are cordially invited to attend the
Extraordinary General Meeting in person. To ensure your
representation at the Extraordinary General Meeting, however,
you are urged to complete, sign, date and return the enclosed
proxy card as soon as possible. You may also cast your vote in
person at the Extraordinary General Meeting. If your shares are
held in an account at a brokerage firm or bank, you must
instruct your broker or bank on how to vote your shares or, if
you wish to attend the Extraordinary General Meeting and vote in
person, you must obtain a proxy from your broker or bank. If you
do not submit your proxy or vote in person at the Extraordinary
General Meeting of Shareholders or, if you hold your shares
through a broker or bank and if you do not instruct your broker
how to vote your shares or obtain a proxy from your broker or
bank to vote in person at the Extraordinary General Meeting of
Shareholders, then you will have not voted in respect of your
shares at the Extraordinary General Meeting.
The Board of Directors of the Company has fixed the close of
business on January 7, 2010 as the record date for the
determination of shareholders entitled to notice of and to vote
at the Extraordinary General Meeting and at any adjournment or
postponement thereof. On the record date, there were 18,750,000
Ordinary Shares issued and outstanding and entitled to vote at
the Extraordinary General Meeting.
Each holder of Ordinary Shares issued in the Company’s IPO
(the “Public Shares”) has the right to vote
against the Business Combination Proposal and demand the Company
redeem such Public Shares for a pro rata portion of the funds
held in the Company’s trust account into which a
substantial portion of the net proceeds of the Company’s
IPO were deposited. These Public Shares will be redeemed for
cash only if the Transaction is consummated. If the holders of
30% or more of the Public Shares vote against the Transaction
and demand redemption of their Public Shares, the Company will
not consummate the Transaction.
On the record date for the Extraordinary General Meeting, the
Company’s Founders held an aggregate of 3,750,000 Ordinary
Shares that were issued prior to the IPO, which we refer to as
the Founder Shares, which means the Company’s Founders own
an aggregate of approximately 20.0% of the Ordinary Shares
issued and outstanding on the record date. In connection with
the IPO, the Company and the representatives of the underwriters
of the IPO entered into agreements with the Founders, pursuant
to which the Founders agreed to vote the Founder Shares in
accordance with the majority of the votes cast by the holders of
Public Shares with respect to the Business Combination Proposal.
In addition, in connection with the IPO, the Founders of the
Company agreed to vote any Ordinary Shares purchased in the open
market in favor of the Business Combination Proposal. The
Founders of the Company have indicated that they intend to vote
such Ordinary Shares they hold in favor of all other proposals
presented at the Extraordinary General Meeting.
Your vote is important. Please sign, date and
return your proxy card as soon as possible to make sure that
your shares are represented at the Extraordinary General
Meeting. You may also cast your vote in person at the
Extraordinary General Meeting. If your shares are held in an
account at a brokerage firm or bank, you must instruct your
broker or bank on how to vote your shares. The Company’s
board of directors hereby directs that all proxies be deposited
no later than the time for holding the meeting or any adjourned
meeting at the offices of Ellenoff Grossman & Schole
LLP, 150 East 42nd Street, New York, NY10017.
You should be aware that because the Company’s IPO
prospectus did not disclose that funds in its trust account
might be used, directly or indirectly, to purchase Public Shares
other than from holders who may vote against the Business
Combination Proposal and demanded that their Public Shares be
redeemed for cash or that the Company may seek to amend the
Warrant Agreement, each holder of Public Shares at the time of
the Transaction who purchased Public Shares in the IPO may bring
securities law claims against the Company for rescission (under
which a successful claimant has the right to receive the total
amount paid for his or her securities pursuant to an allegedly
deficient prospectus, plus interest and less any income earned
on the securities, in exchange for surrender of the securities)
or damages.
If the Company is unable to complete the Transaction or fails to
complete an initial business combination by January 30,2010, the Company will automatically go into liquidation and, as
part of this process, will distribute to the holders of Public
Shares the amount in its trust account plus any remaining
non-trust account
IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW
YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF
EACH OF THE APPLICABLE PROPOSALS. IN THAT EVENT, YOU WILL NOT BE
ELIGIBLE TO HAVE YOUR SHARES REDEEMED FOR A PRO RATA
PORTION OF THE TRUST ACCOUNT INTO WHICH A SUBSTANTIAL
PORTION OF THE NET PROCEEDS OF THE COMPANY’S INITIAL PUBLIC
OFFERING WERE DEPOSITED. IN ORDER TO EXERCISE
REDEMPTION RIGHTS, YOU MUST VOTE AGAINST THE BUSINESS
COMBINATION PROPOSAL AND DEMAND THAT THE COMPANY REDEEM
YOUR PUBLIC SHARES FOR A PRO RATA PORTION OF THE
TRUST ACCOUNT NO LATER THAN THE CLOSE OF THE VOTE ON THE
BUSINESS COMBINATION PROPOSAL. IN ORDER TO REDEEM YOUR SHARES,
YOU MUST TENDER YOUR SHARES TO THE COMPANY’S TRANSFER
AGENT PRIOR TO THE EXTRAORDINARY GENERAL MEETING OF
SHAREHOLDERS. YOU MAY TENDER SHARES BY EITHER
DELIVERING THE SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY
DELIVERING THE SHARES ELECTRONICALLY THROUGH THE DEPOSITORY
TRUST COMPANY. GIVEN THE RELATIVELY SHORT SOLICITATION
PERIOD, IT IS ADVISABLE FOR SHAREHOLDERS TO USE ELECTRONIC
DELIVERY OF THE PUBLIC SHARES. IF THE TRANSACTION IS NOT
CONSUMMATED, THEN THESE SHARES WILL NOT BE REDEEMED FOR A
PRO RATA PORTION OF THE TRUST ACCOUNT. IF YOU HOLD THE
SHARES THROUGH A BROKERAGE FIRM OR BANK, YOU MUST INSTRUCT
THE ACCOUNT EXECUTIVE AT YOUR BANK TO WITHDRAW THE
SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR
REDEMPTION RIGHTS. SEE “EXTRAORDINARY GENERAL
MEETING OF SHAREHOLDERS AND SPECIAL MEETING OF
WARRANTHOLDERS — REDEMPTION RIGHTS”BEGINNING ON PAGE 77 OF THE PROXY STATEMENT/PROSPECTUS
FOR MORE SPECIFIC INSTRUCTIONS.
To the Warrantholders of Overture Acquisition Corp.:
NOTICE IS HEREBY GIVEN that a special meeting of
warrantholders (the “Special Meeting of
Warrantholders”) of Overture Acquisition Corp. (the
“Company”), a Cayman Islands exempted company,
will be held at 10:30 a.m. New York time, on
January 27, 2010, at the offices of Ellenoff
Grossman & Schole LLP, the Company’s counsel, at
150 East 42nd Street, New York, New York10017. You are
cordially invited to attend the Special Meeting of
Warrantholders, at which meeting warrantholders will be asked to
consider and vote upon the following proposals, which are more
fully described in the accompanying proxy statement/prospectus:
(1) The Warrant Amendment Proposal — to
consider and vote upon a proposal to amend the warrant
agreement, dated January 30, 2008 (the “Warrant
Agreement”), by and between the Company and American
Stock Transfer & Trust Company, as warrant agent,
which governs the Company’s 15,000,000 warrants issued in
the Company’s initial public offering (the “Public
Warrants”) and the 4,380,000 warrants issued to the
founders of the Company (“Founders”), in a private
placement immediately prior to the Company’s initial public
offering (which we refer to as the founder warrants and,
collectively with the Public Warrants, the “Company
Warrants”), to provide that (i) the exercise price
of our warrants will be increased from $7.00 to $11.00 per
share, (ii) the expiration date of the warrants will be
extended from January 30, 2013 to January 30, 2015,
and (iii) the price at which our Ordinary Shares must trade
before we are able to redeem the warrants we issued in our
initial public offering (“IPO”) will be
increased from $14.25 to $20.00 (the “Warrant Amendment
Proposal”);
(2) The Warrantholder Adjournment
Proposal — to consider and vote upon a proposal to
adjourn the Special Meeting of Warrantholders to a later date or
dates, if necessary, to permit further solicitation and vote of
proxies if, based upon the tabulated vote at the time of the
Special Meeting of Warrantholders, there are not sufficient
votes to approve the Warrant Amendment Proposal; and
(3) Such other procedural matters as may properly come
before the Special Meeting of Warrantholders or any adjournment
or postponement thereof.
After careful consideration, the Company’s Board of
Directors has unanimously determined that the Warrant Amendment
Proposal is fair to and in the best interests of the Company and
unanimously recommends that Company warrantholders vote
“FOR” the Warrant Amendment Proposal and if required
“FOR” the Warrantholder Adjournment proposal.
The existence of the financial and personal interests of the
Founders and directors of the Company may result in a conflict
of interest. Pursuant to the Master Agreement, it is anticipated
that Messrs. Hunt, Blazer and Lufkin will continue to serve
as directors of the Company. In addition, Founders will receive
warrants to purchase common stock of JNF, the parent of JNL and
JNFAM, that would on a fully diluted basis represent
approximately 10% of JNF. In addition, subsequent to the closing
of the Transaction, the Company will be required to issue
2,812,500 Ordinary Shares to the Founders in three tranches if
the average closing price of the Company’s Ordinary Shares
equals or exceeds $12, $16 or $20, respectively. If the
Transaction is not consummated, the 3,750,000 Founders Shares
that were acquired before the Company’s IPO for an
aggregate purchase price of $25,000 would be worth a nominal
value because the Founders are not entitled to receive any of
the proceeds of the Company’s trust account with respect to
such shares. In addition, if the Transaction is not consummated,
the 4,380,000 Founder warrants which were purchased by the
Founders for an aggregate purchase price of $4,380,000 would
expire worthless. Furthermore, if the Company liquidates and
dissolves,
Messrs. Hunt and Blazer will be liable to pay debts and
obligations to vendors and other entities that are owed money by
the Company for services rendered or products sold to the extent
such creditors bring claims which would otherwise require
payment from the trust account, but only if such vendors or
entities did not execute a waiver. If the Company goes into
liquidation and there are no funds remaining to pay the costs
associated with the implementation and completion of such
liquidation, the Company’s Founders have agreed to advance
the Company the funds necessary to pay such costs and expenses
and not to seek reimbursement for such expenses.
These proposals are described in the attached proxy
statement/prospectus, which the Company urges you to read in its
entirety before voting.
All Company warrantholders are cordially invited to attend the
Special Meeting of Warrantholders. To ensure your representation
at the Special Meeting of Warrantholders, however, you are urged
to complete, sign, date and return the enclosed proxy card as
soon as possible. If you are a warrantholder of record, you may
also cast your vote in person at the Special Meeting of
Warrantholders. If your warrants are held in an account at a
brokerage firm or bank, you must instruct your broker or bank on
how to vote your warrants or, if you wish to attend the Special
Meeting of Warrantholders and vote in person, you must obtain a
proxy from your broker or bank. If you do not submit your proxy
or vote in person at the Special Meeting of Warrantholders or,
if you hold your warrants through a broker or bank and you do
not instruct your broker how to vote your warrants or obtain a
proxy from your broker or bank to vote in person at the Special
Meeting of Warrantholders, it will have the same effect as a
vote against the approval of the Warrant Amendment Proposal.
The Board of Directors of the Company has fixed the close of
business on January 7, 2010 as the record date for the
determination of warrantholders entitled to notice of and to
vote at the Special Meeting of Warrantholders and at any
adjournment thereof. As of the record date, there were
19,380,000 Company Warrants issued and outstanding and entitled
to vote at the Special Meeting of Warrantholders.
As of the record date for the Special Meeting of Warrantholders,
our Founders owned the 4,380,000 founder warrants which means
the Company’s Founders, directors and officers own an
aggregate of approximately 23.0% of the outstanding Company
Warrants. The Founders, directors and officers of the Company
have indicated that they intend to vote the Company Warrants
they hold in favor of the Warrant Amendment Proposal and the
Warrantholder Adjournment Proposal.
Your vote is important regardless of the number of Company
Warrants you own. Whether you plan to attend the Special Meeting
of Warrantholders or not, please read the enclosed proxy
statement/prospectus carefully, sign, date and return the
enclosed proxy card as soon as possible in the envelope
provided. If your warrants are held in “street name”
or are in a margin or similar account, you should contact your
broker or bank to ensure that votes related to the Company
Warrants you beneficially own are properly counted. The
Company’s board of directors hereby directs that all
proxies be deposited no later than the time for holding the
meeting or any adjourned meeting at the offices of Ellenoff
Grossman & Schole LLP, 150 East 42nd Street, New York,
NY10017.
If the Company is unable to complete the Transaction or fails to
complete an initial business combination by January 30,2010, the Company will automatically go into liquidation and, as
part of this process, will distribute to the holders of Public
Shares the amount in its trust account plus any remaining
non-trust account funds after payment of all of its liabilities.
In the event of the Company’s liquidation, the
Company’s warrants will expire worthless.
IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW
YOU WISH TO VOTE, YOUR WARRANTS WILL BE VOTED IN FAVOR OF THE
WARRANT AMENDMENT PROPOSAL AND THE WARRANTHOLDER
ADJOURNMENT PROPOSAL. IF THE TRANSACTION IS NOT COMPLETED AND
THE COMPANY DOES NOT COMPLETE A BUSINESS COMBINATION BY JANUARY30, 2010, YOUR WARRANTS WILL EXPIRE WORTHLESS.
PROXY
STATEMENT/PROSPECTUS FOR SPECIAL MEETING
OF WARRANTHOLDERS AND EXTRAORDINARY GENERAL MEETING OF
SHAREHOLDERS
AND PROSPECTUS FOR WARRANTS AND ORDINARY SHARES OF
OVERTURE ACQUISITION CORP.
We are pleased to announce that the Board of Directors of
Overture Acquisition Corp. (“Overture”or the
“Company”) and the Company’s wholly owned
subsidiary, Overture Re Holdings Ltd., a newly formed Bermuda
holding company (“Overture Re Holdings”), have
agreed to the amalgamation of JNL Bermuda LLC, a Delaware
limited liability company (“JNL Bermuda”) with
Overture Re Holdings’ to-be-formed Bermuda subsidiary,
Overture Re Ltd. (“Overture Re”), which will be
a Bermuda long term reinsurer.
Summary
of the Material Terms of the Master Agreement
•
The Company is a special purpose acquisition company
incorporated as an exempted company under the laws of the Cayman
Islands on September 25, 2007. The Company was incorporated
for the purpose of acquiring, through a merger, share capital
exchange, asset acquisition, share purchase, reorganization or
other similar business combination, an operating business having
a fair market value of at least 80% of the balance held in the
Company’s trust account (exclusive of the
underwriters’ deferred underwriting compensation plus
interest thereon held in the trust account) at the time of such
business combination and resulting in ownership by the Company
of at least 51% of the voting equity interests of the operating
business. For more information about the Company, see the
section entitled “Business of the Company”beginning on page 157.
•
On December 10, 2009, the Company entered into a Master
Agreement (the “Master Agreement”) with
Overture Re Holdings, Jefferson National Financial Corp.
(“JNF”), Jefferson National Life Insurance
Company, a wholly owned subsidiary of JNF
(“JNL”), JNL Bermuda, a newly formed wholly
owned subsidiary of JNL and John F. W. Hunt, Lawton W. Fitt,
Paul S. Pressler, Marc J. Blazer (and certain entities
controlled by Marc J. Blazer), Domenico DeSole and Mark
Booth (the “Founders”). The Master Agreement
sets forth terms and conditions on which the parties will enter
into the transactions described therein to effect the
amalgamation of JNL Bermuda with Overture Re. For further
information concerning the Master Agreement, see
“Proposals To Be Considered By
Shareholders — The Master Agreement”
beginning on page 94. The preceding description of the Master
Agreement is not complete and is qualified in its entirety by
reference to such later section of this proxy
statement/prospectus and to the complete text of the Master
Agreement.
•
JNL Bermuda is a Delaware limited liability company. For more
information about JNL Bermuda, see the sections entitled
“Proposals to be Considered by Shareholders —
Unaudited Pro Forma Condensed Combined Financial
Information,”“Business of Overture Re,”and
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations of JNL Carve-Out”beginning on pages 38, 199, and 176, respectively.
JNL’s carve out financial statements begin on
page F-25.
•
At the extraordinary general meeting of the Company’s
shareholders (the “Extraordinary General
Meeting”), the Company’s shareholders will be
asked to consider and vote on proposals: (i) to approve a
business combination and the transactions contemplated by the
Master Agreement (the “Transaction”) which,
among other things, provides for the amalgamation of JNL Bermuda
with Overture Re, pursuant to which the amalgamated company
shall be a long term reinsurer domiciled in Bermuda (the
“Business Combination” and the proposal, the
“Business Combination Proposal”); (ii) to
approve by special resolution the change of name of the Company
from “Overture Acquisition Corp.” to “Overture
Capital Corp.” (the “Name Change
Proposal”); (iii) to approve by special resolution
an amendment to the Company’s amended and restated
memorandum and articles of association (the
“Articles”) to add provisions to allow the
Company to repurchase its own ordinary shares (“Ordinary
Shares”) without shareholder approval in certain
limited circumstances (the “Repurchase Amendment
Proposal”); (iv) to approve by special resolution
an amendment to the Articles to eliminate the staggered board
provision in the Articles (the “Staggered Board
Elimination Proposal”); (v) to approve the
repurchase by the Company of the Ordinary Shares issued to the
Company’s Founders (the “Founders Shares”)
prior to the Company’s initial public offering (the
“IPO”) the (“Share Repurchase
Proposal”); (vi) to
elect seven Directors to the Board of Directors to serve until
the 2010 Annual General Meeting of Shareholders or until their
successors have been duly elected or appointed and qualified
(the “Board of Directors Proposal”);
(vii) to approve the adoption of the 2010 Stock Incentive
Plan (the “Incentive Plan Proposal”); and
(viii) to adjourn the Extraordinary General Meeting to a
later date or dates, if necessary, to permit further
solicitation and vote of proxies if, at the time of the
Extraordinary General Meeting, it appears we cannot consummate
the transactions contemplated by the Master Agreement (the
“Shareholder Adjournment Proposal”). For more
information about the Extraordinary General Meeting, see the
section entitled “Extraordinary General Meeting of
Shareholders and the Special Meeting of Warrantholders”beginning on page 73.
•
In connection with the Transaction, at the Special Meeting of
Warrantholders, the Company’s warrantholders will be asked
to approve a proposal to amend the terms of the Warrant
Agreement, which governs the Company’s 15,000,000 warrants
issued in its IPO (the “Public Warrants”) and
the 4,380,000 warrants issued to the Company’s Founders, in
a private placement immediately prior to the Company’s IPO,
which we refer to as the founder warrants (collectively with the
Public Warrants, the “Company Warrants”), to
provide that (i) the exercise price of the Company Warrants
will be increased from $7.00 to $11.00 per share, (ii) the
expiration date of the Company Warrants will be extended from
January 30, 2013 to January 30, 2015, and
(iii) the price at which our ordinary shares
(“Ordinary Shares”) must trade before we are
able to redeem the Company Warrants we issued in our initial
public offering (“IPO”) will be increased from
$14.25 to $20.00. For more information about the Warrant
Amendment, see the section entitled “Proposals to be
Considered by the Warrantholders — The Warrant
Amendment Proposal” beginning on page 154.
The Company and JNF plan to consummate the Transaction as
promptly as practicable after the Special Meeting of
Warrantholders and the Extraordinary General Meeting of
Shareholders, and in any event prior to January 30, 2010,
provided that:
•
The holders of Company Warrants have approved the Warrant
Amendment Proposal;
•
The Company’s shareholders have approved the Business
Combination Proposal;
•
The Company’s shareholders have approved the Repurchase
Amendment Proposal;
•
The Company’s shareholders have approved the Share
Repurchase Proposal;
•
The Company’s shareholders have approved the Board of
Directors Proposal;
•
The Company’s shareholders have approved the Incentive Plan
Proposal;
•
Holders of no more than one share less than 30% of the
Company’s Ordinary Shares included in the units sold in the
Company’s IPO, referred to herein as the “Public
Shares,” vote against the Business Combination Proposal
and demand redemption of their Public Shares for a pro rata
portion of the trust account into which a substantial portion of
the net proceeds of the IPO were deposited; and
•
The conditions specified in the Master Agreement, as the same
may be amended, have been satisfied or waived.
See the description of the Master Agreement in the section
entitled “Proposals to be Considered by
Shareholders — The Master Agreement”beginning on page 94. The Master Agreement is attached
as Annex I to this proxy statement/prospectus. We encourage
you to read the Master Agreement in its entirety. The form of
Amendment No. 1 to the Warrant Agreement is attached as
Annex II to this proxy statement/prospectus. The text of
the resolutions to be approved by shareholders is attached as
Annex III. Following shareholder approval of the Repurchase
Amendment Proposal and the Staggered Board Elimination Proposal
and the consummation of the Transaction, the amendments to the
Company’s amended and restated memorandum and articles of
association (the “Articles”) described above
will be effective. A copy of the proposed 2010 Stock Incentive
Plan is attached as Annex IV to this proxy
statement/prospectus. A copy of the fairness opinion issued by
Houlihan Smith & Co. Inc. with respect to the
Transaction is attached as Annex V.
Under the Articles, the Company may not proceed with the
Transaction if holders of 30% or more of the Public Shares
(4,499,999 shares) vote against the Transaction and elect
to have the Company redeem their Public Shares for a pro rata
portion of the trust account into which a substantial portion of
the net proceeds of
the IPO were deposited. Additionally, in order for the funds
held in the trust account to be released to the Company for
general corporate purposes, the Company must complete a business
combination with an operating business having a fair market
value of at least 80% of the balance held in the Company’s
trust account (exclusive of the underwriters’ deferred
underwriting compensation plus interest thereon held in the
trust account) at the time of such business combination and
resulting in ownership by the Company of at least 51% of the
voting equity interests of the operating business. As the
Company’s management and its Board of Directors believe the
fair market value of the operating business of JNL Bermuda is
approximately $120,000,000, and since the Company’s Board
of Directors received a fairness opinion as to the equity value
from Houlihan Smith & Company, Inc. (“Houlihan
Smith”), which is annexed to this proxy
statement/prospectus as Annex V, the Company believes the
operating business and 80% threshold required will be met and
the funds held in trust will be released to the Company for
general corporate purposes upon the closing of the Transaction.
See the section entitled “Proposals to be Considered by
Shareholders — The Master Agreement.”
You may vote against the Transaction and elect to have the
Company redeem your Public Shares for a pro rata portion of the
trust account into which a substantial portion of the net
proceeds of the Company’s initial public offering were
deposited. You should be aware that because the Company’s
IPO prospectus did not disclose that funds in its trust account
might be used, directly or indirectly, to purchase Public Shares
other than from holders who have voted against the Business
Combination Proposal and demanded that their Public Shares be
redeemed for cash or that the Company may seek to amend the
Warrant Agreement, each holder of Public Shares at the time of
the Transaction who purchased shares in the IPO may bring
securities law or common law claims against the Company for
rescission or damages. No appraisal rights are available under
the Companies Law (2009 Revision) of the Cayman Islands to the
shareholders of the Company in connection with the proposed
Transaction.
The Company’s units, Ordinary Shares and Public Warrants
are listed on the NYSE Amex under the symbols “NLX”
and “NLX -WS,” respectively. On January 7, 2010,
the units, Ordinary Shares and Public Warrants had a closing
price of $10.20, $10.01 and $0.33, respectively.
The Company believes that, for United States federal income tax
purposes, the Transaction will have no direct tax effect on
shareholders of the Company. However, if you vote against the
Business Combination Proposal and elect to redeem your Public
Shares for cash, there may be certain tax consequences, such as
realizing a loss or gain on your investment in the
Company’s Public Shares. A Company warrantholder whose
warrants have appreciated in value may be required to recognize
gain for federal income tax purposes in connection with the
Warrant Amendment and may suffer adverse tax consequences under
the passive foreign investment company rules. See “United
States Taxation” below for further discussion on material
federal income tax consequences for shareholders and
warrantholders. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS
REGARDING YOUR PARTICULAR TAX CONSEQUENCES.
This proxy statement/prospectus provides you with detailed
information about the Warrant Amendment Proposal, the
Transaction, the Business Combination Proposal, the Name Change
Proposal, the Repurchase Amendment Proposal, the Staggered Board
Elimination Proposal, the Share Repurchase Proposal, the Board
of Directors Proposal, the proposed Incentive Plan, the Special
Meeting of Warrantholders and the Extraordinary General Meeting
of Shareholders. The Company encourages you to carefully read
this entire document and the documents annexed hereto, including
the Master Agreement, the form of Amendment No. 1 to the
Warrant Agreement, the shareholder resolutions, the proposed
Incentive Plan, and the Fairness Opinion, which are attached
hereto as Annexes I, II, III, IV and V,
respectively.
YOU SHOULD ALSO CAREFULLY CONSIDER THE RISK FACTORS BEGINNING
ON PAGE 41, TOGETHER WITH ALL OF THE OTHER INFORMATION
INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS BEFORE YOU DECIDE
WHETHER TO VOTE OR INSTRUCT YOUR VOTE TO BE CAST TO ADOPT THE
PROPOSALS SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS.
The Company is soliciting the enclosed proxy cards on behalf of
the Board of Directors of the Company, and it will pay all costs
of preparing, assembling and mailing the proxy materials. In
addition to mailing out proxy materials, the Company’s
officers may solicit proxies by telephone or fax, without
receiving any additional compensation for their services. The
Company has requested brokers, banks and other fiduciaries to
forward proxy materials to the beneficial owners of the
Company’s Ordinary Shares and Public Warrants. The Company
has also retained the proxy soliciting firm of
Morrow & Co., LLC to solicit proxies on our behalf.
Neither the Securities and Exchange Commission nor any state
securities commission has determined if the attached proxy
statement/prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
The Company consummated its IPO, on February 2, 2008. JP
Morgan Securities Inc. (“JP Morgan”) acted as
bookrunning manager of the IPO and as the representative of the
underwriters of the IPO. JP Morgan and the other underwriters
may provide assistance to the Company and its directors and
executive officers, and may be deemed to be participants in the
solicitation of proxies. $7,500,000 of the underwriters’
discounts and commissions relating to the Company’s IPO
were deferred pending shareholder approval of the Company’s
business combination. Management has reached an agreement with
each of the underwriters, pursuant to which such deferred
underwriters’ compensation has been reduced to up to
$1,000,000 to the extent there is between $100,000,000 and
$150,000,000 in trust at the consummation of the Transaction.
The amendment to the underwriters agreement provides that to the
extent there is at least $100 million in the trust at the
consummation of the Transaction, the underwriters shall receive
$20,000, pro rata, for each $1 million in excess of
$100 million. If there is less than $100 million in
the trust at the consummation of the Transaction, the
underwriters are not entitled to any compensation. Pursuant to a
financial advisory agreement by and between the Company and
Credit Suisse, the Company agreed to pay Credit Suisse a
transaction fee (the “Transaction Fee”), payable upon
the first closing in connection with a Transaction, equal to
1.5% of the aggregate value of the Transaction; provided,
however, in no event shall the Transaction Fee payable by the
Company to Credit Suisse in connection with a Transaction be
less than $2 million. In addition, pursuant to a financial
advisory agreement by and between the Company and JP Morgan, the
Company has agreed to pay JP Morgan a financial advisory fee of
$500,000 upon the consummation of the Transaction. If the
Transaction is not consummated and the Company is required to be
liquidated and dissolved, neither Credit Suisse nor the
underwriters will receive any such fees. Warrantholders and
Shareholders are advised that the underwriters have a financial
interest in the successful outcome of the proxy solicitation.
TRADEMARKS,
TRADENAMES, SERVICE MARKS AND SERVICE NAMES
This proxy statement/prospectus contains trademarks, tradenames,
service marks and service names of Overture Acquisition Corp.,
Overture Capital Corp., Overture Re Holdings Ltd., Overture Re
Ltd., Jefferson National Life Insurance Company, Monument
Advisor and Jefferson National Financial Corp. and other
companies.
Why am I receiving this proxy statement/prospectus?
A.
The Company, Overture Re Holdings, JNF, JNL, JNFAM, JNL Bermuda
and the Founders of the Company have entered into a Master
Agreement, as of December 10, 2009. The agreement is
referred to as the Master Agreement.
The Company’s shareholders are being asked to consider and
vote upon a proposal to approve the Master Agreement and the
Transaction. A copy of the Master Agreement is attached to this
proxy statement/prospectus as Annex I. You are encouraged
to read this proxy statement/prospectus, including all the
annexes hereto.
Shareholders are also being asked to consider and approve
(i) the Name Change Proposal, (ii) the Repurchase
Amendment Proposal, (iii) the Staggered Board Elimination
Proposal, (iv) the Share Repurchase Proposal, (v) the
Board of Directors Proposal, and (vi) the Incentive Plan
Proposal.
A copy of the form of the proposed resolutions to be approved
are attached to this proxy statement/prospectus as
Annex III. The form of the Incentive Plan is attached
hereto as Annex IV.
Shareholders are also being asked to, if necessary, approve an
adjournment of the Extraordinary General Meeting to a later date
or dates, to permit further solicitation and voting of proxies
if, at the time of the Extraordinary General Meeting, it appears
we cannot consummate the transactions contemplated by the Master
Agreement or approve the other proposals.
Warrantholders are being asked to consider and vote upon a
proposal to amend the Warrant Agreement, which governs the
Company Warrants to provide that (i) the exercise price of
our warrants will be increased from $7.00 to $11.00 per share,
(ii) the expiration date of the Company Warrants will be
extended from January 30, 2013 to January 30, 2015,
and (iii) the price at which our Ordinary Shares must trade
before we are able to redeem the Company Warrants we issued in
our IPO will be increased from $14.25 to $20.00 (the
“Warrant Amendment Proposal”). The form of the
Amendment to the Warrant Agreement is attached hereto as
Annex II.
Warrantholders are also being asked to approve an adjournment of
the Special Meeting of Warrantholders to a later date or dates,
if necessary, to permit further solicitation and voting of
proxies if, at the time of the Special Meeting, it appears the
Warrant Amendment Proposal will not be approved.
You should read this proxy statement/prospectus carefully.
Your vote is important. You are encouraged to vote as soon as
possible after carefully reviewing this proxy
statement/prospectus and its annexes.
Q.
What is being voted on?
A.
The proposals on which the Company’s shareholders are being
asked to vote and the proposals on which the Company’s
warrantholders are being asked to vote are as follows:
Shareholder Proposals:
The proposals on which the Company’s shareholders are being
asked to vote and the proposals on which the Company’s
warrantholders are being asked to vote are as follows:
The Business Combination Proposal. To adopt
the Master Agreement and approve the Transaction.
The Name Change Proposal. To approve by
special resolution the change of name of the Company from
“Overture Acquisition Corp.” to “Overture Capital
Corp.”
The Repurchase Amendment Proposal. To approve
by special resolution an amendment to the Company’s
Articles to add provisions to allow the Company to repurchase
its own Ordinary Shares without shareholder approval in certain
limited circumstances.
The Staggered Board Elimination Proposal. To
approve by special resolution an amendment to the Articles to
eliminate the staggered board provisions in the Articles.
The Share Repurchase Proposal.To approve the
repurchase by the Company of the Ordinary Shares issued to the
Company’s Founders (the “Founder Shares”) prior
to the Company’s initial public offering (the
“IPO”).
The Board of Directors Proposal.To elect
seven Directors to the Board of Directors to serve until the
2010 annual general meeting of shareholders or until their
successors have been duly elected or appointed and qualified.
The Incentive Plan Proposal. To approve the
adoption of the 2010 Stock Incentive Plan, pursuant to which the
Company may issue up to the lesser of (i) 1.5 million
Ordinary Shares, or (ii) 10% of the outstanding Ordinary
Shares at the closing of the Transaction.
The Shareholder Adjournment Proposal. To
adjourn the Extraordinary General Meeting to a later date or
dates, if necessary, to permit further solicitation and vote of
proxies if, at the time of the Extraordinary General Meeting, it
appears we cannot consummate the transactions contemplated by
the Master Agreement or approve the other proposals.
It is important for you to note that in the event the Business
Combination Proposal does not receive the requisite vote for
approval, then the Company will not consummate the Transaction,
effect the Name Change Proposal, the Repurchase Amendment
Proposal, the Staggered Board Elimination Proposal, the Share
Repurchase Proposal, the Board of Directors Proposal or the
Incentive Plan Proposal. If the Company does not consummate the
Transaction and fails to complete a business combination by
January 30, 2010, the Company will be required to liquidate
and dissolve and the warrants will expire worthless.
Warrantholder Proposals:
The Warrant Amendment Proposal. To approve an
amendment to the Warrant Agreement, which governs the Company
Warrants so that (i) the exercise price of the Company
Warrants will be increased from $7.00 to $11.00 per share,
(ii) the expiration date of the Company Warrants will be
extended from January 30, 2013 to January 30, 2015,
and (iii) the price at which our Ordinary Shares must trade
before we are able to redeem the Company Warrants we issued in
our IPO will be increased from $14.25 to $20.00.
The Warrantholder Adjournment Proposal. To
approve an adjournment of the Special Meeting of Warrantholders
to a later date or dates, if necessary.
It is important for you to note that the approval of the Warrant
Amendment Proposal is a condition to the consummation of the
Transaction and the Warrant Amendment will not be consummated
unless the Transaction is consummated.
Q.
Are the proposals conditioned on one another?
A.
Yes. The effectiveness of the Warrant Amendment Proposal, the
Share Repurchase Proposal, the Board of Directors Proposal and
the Incentive Plan Proposal are conditioned upon approval of the
Business Combination Proposal. The approval of the Warrant
Amendment Proposal, the Share Repurchase Proposal, the Board of
Directors Proposal and the Incentive Plan Proposal are
conditions to the consummation of the Transaction. The Business
Combination Proposal will be presented at the Extraordinary
General Meeting of Shareholders only if the Share Repurchase
Proposal, the Board of Directors Proposal and the Incentive Plan
Proposal are approved.
The Company was formed for the purpose of acquiring, through a
merger, share capital exchange, asset acquisition, share
purchase, reorganization or any other similar business
combination, an operating business, which the Company refers to
as its initial business combination, with a fair market value of
at least 80% of the balance held in the Company’s trust
account (exclusive of the underwriters’ deferred
underwriting compensation plus interest thereon held in the
trust account) at the time of such business combination and
resulting in ownership by the Company of at least 51% of the
voting equity interests of the operating business.
The Company consummated its IPO on January 30, 2008,
raising gross proceeds of approximately $154,380,000 (which
includes the proceeds of a private placement of 4,380,000
warrants for $4,380,000 to our Founders), of which $150,530,000
was placed in a trust account immediately following the IPO and,
in accordance with the Articles, will be released upon the
consummation of a business combination. As of September 30,2009, $150,530,000 was held on deposit in the trust account,
which includes $7.5 million in deferred underwriting
compensation. Management has reached an agreement with each of
the underwriters pursuant to which, such deferred
underwriters’ compensation has been reduced to up to
$1,000,000 to the extent there is between $100,000,000 and
$150,000,000 in trust at the consummation of the Transaction.
The amendment to the underwriters agreement provides that to the
extent there is at least $100 million in the trust at the
consummation of the Transaction, the underwriters shall receive
$20,000, pro rata, for each $1 million in excess of
$100 million. If there is less than $100 million in
the trust at the consummation of the Transaction, the
underwriters are not entitled to any compensation. Pursuant to a
financial advisory agreement by and between the Company and
Credit Suisse, the Company agreed to pay Credit Suisse a
transaction fee (the “Transaction Fee”), payable upon
the first closing in connection with a Transaction, equal to
1.5% of the aggregate value of the Transaction; provided,
however, in no event shall the Transaction Fee payable by the
Company to Credit Suisse in connection with a Transaction be
less than $2 million. In addition, pursuant to a financial
advisory agreement by and between the Company and JP Morgan, the
Company has agreed to pay JP Morgan a financial advisory fee of
$500,000 upon the consummation of the Transaction. If the
Transaction is not consummated and the Company is required to be
liquidated and dissolved, none of JP Morgan, Credit Suisse nor
the underwriters will be entitled to any such fees.
In addition, the funds released to the Company from the trust
account subsequent to the closing of the Transaction may be used
to purchase Public Shares in privately negotiated transactions.
We believe that this transaction generates an investment
opportunity for our shareholders given the dislocation in the
capital markets and the insurance industry, the opportunity to
accumulate long dated liabilities and lock in attractive yields
on matched duration assets, and the experienced management team
we are partnering with.
The demand for capital relief among insurance companies,
particularly among smaller writers who have fewer options to
raise capital, is greater than ever, yet the Reinsurance
industry is highly concentrated and many incumbent providers
have impaired balance sheets in their own right. As a result,
many small insurance companies are underserved by existing
reinsurers. Given this backdrop, we believe that Overture Re
will have significant opportunities to acquire blocks from
distressed seller at attractive valuations.
Similar to the opportunity to acquire deposits at attractive
valuations as a result of the savings and loan crises in the
1980’s, we believe that the economic environment offers
reinsurance providers similarly attractive pricing on acquiring
long dated liabilities. When you combine this opportunity to
aggregate significant liabilities at a low cost of capital, and
at the same time can capture attractive yields on a portfolio of
both liquid fixed income instruments of highly rated issuers,
and higher yields on less liquid long dated securities, there is
a unique opportunity to lock in attractive spreads for a long
period of time. So not only do we see a client base in need of
capital, we see a market opportunity to generate attractive
yields for our investors.
Most importantly, we are pleased to partner with a management
team that has significant experience in fixed income asset
management, heavily regulated financial institutions, and what
management believes to be a track record of identifying market
opportunities before they became commonplace.
See the section entitled “Proposals to be Considered by
Shareholders — The Business CombinationProposal — The Company’s Board of Directors’
Reasons for the Approval of the Transaction” (page 87)
for additional information.
Q.
Do the Founders and Directors of the Company have any
conflicts on interests in the Transaction?
A.
The existence of the financial and personal interests of the
Founders and directors of the Company may result in a conflict
of interest. Pursuant to the Master Agreement, it is anticipated
that Messrs. Hunt, Blazer and Lufkin will continue to serve
as directors of the Company. In addition, the Founders will
receive warrants to purchase common stock of JNF, the parent of
JNL and JNFAM, which would on a fully diluted basis represent
approximately 10% of JNF. In addition, subsequent to the closing
of the Transaction, the Company will be required to issue
2,812,500 Ordinary Shares to the Founders in three tranches if
the average closing price of the Company’s Ordinary Shares
equals or exceeds $12, $16 or $20, respectively. If the
Transaction is not consummated, the 3,750,000 Founders’
shares that were acquired before the Company’s IPO for an
aggregate purchase price of $25,000 would be worth a nominal
value because the Founders are not entitled to receive any of
the proceeds of the Company’s trust account with respect to
such shares. In addition, if the Transaction is not consummated,
the 4,380,000 Founder warrants which were purchased by the
Founders for an aggregate purchase price of $4,380,000 would
expire worthless. Furthermore, if the Company liquidates and
dissolves, Messrs. Hunt and Blazer will be liable to pay
debts and obligations to vendors and other entities that are
owed money by the Company for services rendered or products sold
to the extent such creditors bring claims which would otherwise
require payment from the trust account, but only if such vendors
or entities did not execute a waiver. If the Company goes into
liquidation and there are no funds remaining to pay the costs
associated with the implementation and completion of such
liquidation, the Company’s Founders have agreed to advance
the Company the funds necessary to pay such costs and expenses
and not to seek reimbursement for such expenses.
Q.
Why is the Company proposing the Warrant Amendment
Proposal?
A.
Warrantholders are being asked to approve the Warrant Amendment
Proposal because the approval of the Warrant Amendment Proposal
is a condition to the consummation of the Transaction and the
Company’s Board of Directors believes that this proposal is
in the best interests of the Company following the consummation
of the Transaction. Based upon a review of other special purpose
acquisition corporation business combination structures, the
Company’s management believes that the terms of the public
warrants must be restructured in order to obtain shareholder
approval of the Transaction will result in a transaction that is
less dilutive to our shareholders in that we will receive more
consideration per share than the net asset value per share
immediately following the consummation of the transactions
contemplated by the Master Agreement.
Q.
Why is the Company proposing the Name Change Proposal?
A.
The Name Change Proposal is being presented because the
Company’s Board of Directors believes that this proposal is
in the best interests of the Company following the consummation
of the Transaction.
Q.
Why is the Company proposing the Repurchase Amendment
Proposal?
A.
The Board has determined that adopting the Repurchase Amendment
Proposal in connection with the consummation of the Transaction
and from time to time will provide the Company flexibility that
is commonly afforded to publicly traded entities with respect to
opportunities which may arise to repurchase its shares and is in
the best interests of the Company. The adoption of the
Repurchase Amendment Proposal would eliminate the need for
specific shareholder approval of any repurchase of its
outstanding Ordinary Shares in certain limited circumstances,
including purchases of Public Shares contemplated in the section
entitled “Proposals to be Considered by
Shareholders — The Business CombinationProposal — Actions that May Be Taken to Secure
Approval of the Company’s Shareholders.”
(page 91)
Why is the Company proposing the Staggered Board Elimination
Proposal?
A.
The Staggered Board Elimination Proposal is being presented
because the Company’s Board of Directors believes that this
proposal is in the best interests of the Company following the
consummation of the Transaction.
The Company believes that the elimination of the staggered board
is in the shareholders’ best interests for the following
reasons:
•
The election of the members of the Board of Directors is among
the most fundamental rights of the Company’s shareholders.
This weighs in favor of permitting the shareholders to vote with
respect to each director on an annual basis and not be required
to wait up to three years to express a view on a particular
director.
•
Allowing the shareholders to vote annually on the performance of
the entire Board of Directors, as well as individual directors,
would increase the directors’ accountability to the
shareholders, causing an attendant increase in management’s
accountability.
•
A classified Board of Directors structure can diminish Board of
Director accountability because shareholders are able to vote
against only those directors whose terms expire in a given year.
Thus, if in a given year shareholders desire to vote against a
director whose term does not expire until a future year, they
will be unable to express their dissatisfaction and remove the
director promptly through the board election process.
•
Classified Boards of Directors may facilitate management and
board entrenchment even if a majority of shareholders are
dissatisfied with management or Board of Director performance.
This would be a particularly important consideration if a
company’s management and Board of Directors failed to
respond to stockholder concerns arising from sustained poor
performance, excessive compensation practices or similar issues.
•
Classified Boards of Directors may prevent or hinder bidders
from acquiring a company even at a price that is acceptable to a
majority of shareholders.
Q.
Why is the Company proposing the Share Repurchase
Proposal?
A.
The Share Repurchase Proposal is being presented because the
repurchase of the Founder Shares is a condition to the
Transaction. The parties to the Master Agreement negotiated the
forfeiture of the Founders’ shares to eliminate the
dilutive affect of such shares. Because Cayman Islands law does
not permit forfeiture of such shares, the shares must be
repurchased which must be approved by a separate proposal at the
Extraordinary General Meeting of Shareholders.
Q.
Why is the Company proposing the Incentive Plan Proposal?
A.
The approval of the adoption of the Incentive Plan is being
proposed to aid the Company in recruiting and retaining
directors, officers, employees and consultants capable of
assuring the future success of the Company. There has been no
agreement or determination with respect to the issuance of
shares under the Incentive Plan after the consummation of the
Transaction. In addition, the approval of the Incentive Plan
Proposal is a condition to the Transaction.
Q.
What vote is required to approve the proposals presented at
the Special Meeting of Warrantholders?
A.
Approval of the Warrant Amendment Proposal requires the
affirmative vote of the holders of a majority of the Company
Warrants outstanding as of the record date. Broker non-votes and
abstentions will have the same effect as a vote
“AGAINST” the Warrant Amendment Proposal. The approval
of the Warrantholder Adjournment Proposal requires the
affirmative vote of a majority of the Company Warrants issued
and outstanding as of the record date voted at the Special
Meeting of Warrantholders.
Q.
What votes are required to approve the proposals presented at
the Extraordinary General Meeting of Shareholders?
The approval of the Business Combination Proposal requires the
affirmative vote of a majority of the Public Shares voted at the
Extraordinary General Meeting or at an adjourned meeting. If the
holders of 30% or more of the Public Shares vote against the
Transaction and demand that their Public Shares be redeemed for
a pro rata portion of the trust account, the Company will not,
pursuant to the terms of the Articles, be permitted to
consummate the Transaction. See the section entitled
“The Extraordinary General Meeting of Shareholders and
the Special Meeting of Warrantholders —
Redemption Rights (page 77)” for additional
information.
The approval of each of the Name Change Proposal, the Repurchase
Amendment Proposal and the Staggered Board Elimination Proposal
requires the affirmative vote of not less than two-thirds of the
votes cast by such shareholders as being entitled to do so, vote
in person or by proxy at the Extraordinary General Meeting.
Pursuant to the Company’s Articles, none of these proposals
can be approved at an adjourned meeting.
The approval of each of the Share Repurchase Proposal, Board of
Directors Proposal, the Incentive Plan Proposal and the
Shareholder Adjournment Proposal requires the affirmative vote
of a majority of the shareholders as being entitled to do so,
vote in person or by proxy at the Extraordinary General Meeting
or at an adjourned meeting.
In connection with the Company’s IPO, the Company,
JP Morgan and the Company’s Founders entered into an
agreement pursuant to which the Founders agreed to vote their
3,750,000 Founder Shares, in accordance with the majority of
votes cast by the holders of Public Shares with respect to the
Business Combination Proposal. In addition, in connection with
the IPO, the Founders, directors and officers of the Company
agreed to vote any Ordinary Shares purchased subsequent to the
IPO in favor of the Business Combination Proposal. The Founders
of the Company have indicated that they intend to vote any such
shares acquired subsequent to the IPO in favor of all of the
proposals presented at the Extraordinary General Meeting.
Provided the Share Repurchase Proposal is approved, the Founders
Share Repurchase shall be consummated after the closing of the
Business Combination.
Q.
What happens if I vote against the Business Combination
Proposal?
A.
If you are a holder of Public Shares and you vote against the
Business Combination Proposal, you have the right to demand that
the Company redeem your shares for a pro rata portion of the
trust account in which a substantial portion of the net proceeds
of the Company’s IPO were deposited. This right is referred
to herein as the redemption right.
If holders of 30% or more of the Public Shares vote against the
Business Combination Proposal and properly demand redemption,
the Company will not consummate the Transaction and your Public
Shares will not be redeemed for a pro rata portion of the trust
account. If the Company fails to complete an initial business
combination by January 30, 2010, the Company will be
required to liquidate and dissolve and the warrants will expire
worthless.
Q.
How do I exercise my redemption rights?
A.
If you are a holder of Public Shares and wish to exercise your
redemption rights, you must do all of the
following:
(i) deliver your Public Shares to the Company’s
transfer agent physically or electronically through the
Depository Trust Company (“DTC”) prior to
the Extraordinary General Meeting; (Given the relatively short
solicitation period, it is advisable for shareholders to use
electronic delivery of the Public Shares.)
(ii) vote against the Business Combination Proposal; and
(iii) prior to the vote on the Business Combination
Proposal, demand that the Company redeem your Public Shares for
a pro rata portion of the trust account.
Any action that does not include a vote against the Business
Combination Proposal will prevent you from exercising your
redemption rights. Your vote on any proposal other than the
Business Combination Proposal will have no impact on your right
to redeem your Public Shares, provided that the Transaction is
consummated.
You may exercise your redemption rights either by checking the
box on the proxy card or by submitting your request in writing
to Felix Orihuela of American Stock Transfer &
Trust Company, the Company’s transfer agent, at the
address listed at the end of this section. Warrantholders and
shareholders who hold their securities in “street
name” through a broker or bank will have the option to
authorize their proxies to vote their securities electronically
through the Internet or by telephone. As of the date of this
proxy statement/prospectus substantially all outstanding Public
Shares and Public Warrants are held in street name. If you hold
your securities through a broker, bank or other nominee, you
should check your proxy card or voting instruction card
forwarded by your broker, bank or other nominee who holds your
securities for instructions on how to vote by these methods.
If you (i) initially vote for the Business Combination
Proposal but then wish to vote against it and exercise your
redemption rights, or (ii) initially vote against the
Business Combination Proposal and wish to exercise your
redemption rights but do not check the box on the proxy card
providing for the exercise of your redemption rights or do not
send a written request to the Company to exercise your
redemption rights, or (iii) initially vote against the
Business Combination Proposal but later wish to vote for it, you
may request the Company to send you another proxy card on which
you may indicate your intended vote. You may make such request
by contacting the Company at the phone number or address listed
at the end of this section.
Any request for redemption, once made, may be withdrawn at any
time up to the vote taken with respect to the Business
Combination Proposal at the Extraordinary General Meeting. If
you delivered your shares for redemption physically or
electronically to the Company’s transfer agent and decide
prior to the vote not to elect redemption, you may request that
the Company’s transfer agent return the shares (physically
or electronically). You may make such request by contacting the
Company’s transfer agent at the phone number or address
listed at the end of this section.
Any corrected or changed proxy card must be received by the
Company prior to the Extraordinary General Meeting. No demand
for redemption will be honored unless the holder’s Public
Shares have been delivered (physically or electronically) to the
transfer agent prior to the Extraordinary General Meeting. Given
the relatively short solicitation period, it is advisable for
shareholders to use electronic delivery of the Public Shares to
our transfer agent through the DTC by contacting the
shareholder’s broker, bank or nominee. The Company’s
transfer agent will receive the Public Shares on the same day
that electronic delivery instructions are made.
Q.
Do I have appraisal rights if I object to the Transaction?
A.
No appraisal rights are available under the Companies Law (2009
Revision) of the Cayman Islands to the shareholders of the
Company in connection with the proposed Transaction.
What happens to the funds deposited in the trust account
after consummation of the Transaction?
A.
Pursuant to the Master Agreement, $120,000,000 of the funds held
in the trust account will be paid at closing to JNL as
consideration in the Transaction. In addition, the remaining
funds held in the trust account will be released (i) to pay
transaction fees and expenses; (ii) to pay the
Company’s tax obligations and deferred underwriting
discounts and commissions; (iii) to pay those holders of
Public Shares who properly exercised their redemption rights;
and (iv) for working capital and general corporate purposes
of the Company and its subsidiaries. In addition, the funds
released to the Company from the trust account subsequent to the
closing of the Transaction may be used to purchase Public Shares
in privately negotiated transactions.
If no shareholder exercises their redemption rights, we estimate
that the amount available for working capital and general
corporate purposes in Overture Re will be approximately
$125,237,000 consisting of $26,737,000 of cash and $98,500,000
of liquid securities after consummation of the Transaction. If
shareholders holding one share less than 30% of the public
shares exercise their redemption rights, we estimate that the
amount available for working capital and general corporate
purposes in Overture Re will be approximately $81,228,000
consisting of $0.00 cash, $98,500,000 of liquid securities which
is partially offset by $17,272,000 on borrowing against the
portfolio reflected on the liability side of the Unaudited Pro
Forma Combined Balance Sheet. These working capital amounts
reflect the fact that $98,500,000 of securities will be
purchased as part of the $120,000,000 purchase price and
portions of such securities can be sold/liquidated to meet any
necessary capital requirements on an ongoing basis. In
connection with consummation of the Transaction, the trust
account itself will be terminated as its purpose, to fund the
acquisition of a business combination, will have been completed.
Q.
When is the Transaction expected to be completed?
A.
It is currently anticipated that the Transaction will be
consummated promptly following the Special Meeting of
Warrantholders and the Extraordinary General Meeting of
Shareholders to be held on January 27, 2010, provided that
all conditions to the consummation of the Transaction have been
satisfied or waived.
Q.
Since the Company’s IPO prospectus did not disclose that
funds in the trustaccount might be used, directly or
indirectly, topurchase Public Shares or that the Company
mightseek to amend the Warrant Agreement, what are
mylegal rights?
A.
You should be aware that because the Company’s IPO
prospectus did not disclose that funds in its trust account
might be used, directly or indirectly, to purchase Public Shares
other than from holders who have voted against the Business
Combination Proposal and demanded that their Public Shares be
redeemed for cash or that the Company may seek to amend the
Warrant Agreement, each holder of Public Shares at the time of
the Transaction who purchased Public Shares in the IPO may bring
securities law claims against the Company for rescission (under
which a successful claimant has the right to receive the total
amount paid for his or her securities pursuant to an allegedly
deficient prospectus, plus interest and less any income earned
on the securities, in exchange for surrender of the securities)
or damages (compensation for loss on an investment caused by
alleged material misrepresentations or omissions in the sale of
a security). Other than the Company’s IPO prospectus not
disclosing that funds in its trust account might be used,
directly or indirectly, to purchase Public Shares in order to
secure approval of the Company’s shareholders for the
Transaction or that the Company may seek to amend the Warrant
Agreement, we are not aware of any other differences between the
information provided in our IPO prospectus and this
prospectus/proxy statement. Such claims may entitle shareholders
asserting them to up to $10.00 per share, based on the initial
offering price of the units in the IPO, comprised of shares and
warrants, less any amount received from sale of the original
warrants purchased with them, plus interest from the date of the
IPO (which, in the case of holders of Public Shares, may be more
than the pro rata share of the trust account to which they are
entitled on redemption or liquidation). Such claims could
further diminish the amount of funds available following the
Transaction for working capital and general corporate purposes.
See “Proposals to be Considered by
Shareholders — The Business CombinationProposal — Rescission Rights.” (page 93)
You are urged to carefully read and consider the information
contained in this proxy statement/prospectus, including the
annexes, and to consider how the Warrant Amendment Proposal will
affect you as a warrantholder and how the Transaction will
affect you as a shareholder of the Company, as the case may be.
You should then vote as soon as possible in accordance with the
instructions provided in this proxy statement/prospectus and on
the enclosed proxy card or, if you hold your shares through a
brokerage firm, bank or other nominee, on the voting instruction
form provided by the broker, bank or nominee.
Q.
How do I vote?
A.
If you are a holder of record of Company Warrants or Ordinary
Shares on the record date of January 7, 2010, you may vote
with respect to the applicable proposals in person at the
Special Meeting of Warrantholders or the Extraordinary General
Meeting, as the case may be, or by submitting a proxy for the
Special Meeting of Warrantholders or the Extraordinary General
Meeting. You may submit your proxy by completing, signing,
dating and returning the enclosed warrantholder and/or
shareholder proxy card in the accompanying pre-addressed postage
paid envelope. The Company’s board of directors has
directed that all proxies be deposited no later than the time
for holding the meeting or any adjourned meeting, at the offices
of Ellenoff Grossman & Schole LLP, 150 East 42nd
Street, New York, NY10017.
If you hold your Company Warrants or Ordinary Shares in
“street name,” which means your Company Warrants or
Ordinary Shares are held of record by a broker, bank or nominee,
you should contact your broker, bank or nominee to ensure that
votes related to the Company Warrants or Ordinary Shares you
beneficially own are properly counted. In this regard, you must
provide the record holder of your Company Warrants or Ordinary
Shares with instructions on how to vote your Company Warrants or
Ordinary Shares, as applicable. Warrantholders and shareholders
who hold their securities in “street name” through a
broker or bank will have the option to authorize their proxies
to vote their securities electronically through the Internet or
by telephone. As of the date of this proxy statement/prospectus
substantially all outstanding Public Shares and Public Warrants
are held in street name. If you hold your securities through a
broker, bank or other nominee, you should check your proxy card
or voting instruction card forwarded by your broker, bank or
other nominee who holds your securities for instructions on how
to vote by these methods. Votes submitted at any time prior to
the Special Meeting of Warrantholders or the Extraordinary
General Meeting of Shareholders, as the case may be, will be
accepted. However, to ensure that your vote is properly counted
and to avoid any problems or unforeseen delays, you should
submit your vote as early as possible and prior to midnight on
the day before the Special Meeting of Warrantholders or the
Extraordinary General Meeting of Shareholders, as the case may
be. After such time, a holder will need to contact his bank,
broker or nominee directly to vote or change his vote.
If you wish to attend the Special Meeting of Warrantholders or
the Extraordinary General Meeting and vote in person, you must
obtain a proxy from your broker, bank or nominee to vote your
Company Warrants or Ordinary Shares at the Special Meeting of
Warrantholders or the Extraordinary General Meeting, as the case
may be.
Q.
What will happen if I abstain from voting at the Special
Meeting of Warrantholders or theExtraordinary General
Meeting of Shareholders?
A.
The Company will count a properly executed proxy marked
“ABSTAIN” with respect to a particular proposal,
whether presented at the Special Meeting of Warrantholders or
the Extraordinary General Meeting of Shareholders, as present
for purposes of determining whether a quorum is present.
An abstention from voting on the Warrant Amendment Proposal to
be presented to the warrantholders will have same effect as a
vote “AGAINST” this proposal.
An abstention from voting on the Warrantholder Adjournment
Proposal will have the same effect as a vote “AGAINST”
on such proposal.
Abstentions, while considered present for the purposes of
establishing a quorum at the Extraordinary General Meeting, will
have no effect on the Business Combination Proposal. An
abstention on the Business
Combination Proposal will preclude you from having your Public
Shares redeemed for a pro rata portion of the trust account. In
order to exercise your redemption rights, you must cast a vote
against the Business Combination Proposal, make an election on
the proxy card to redeem such Public Shares or submit a request
in writing to the Company’s transfer agent at the address
listed at the end of this section and deliver your shares to the
Company’s transfer agent physically or electronically
through DTC prior to the Extraordinary General Meeting. Given
the relatively short solicitation period, it is advisable for
shareholders to use electronic delivery of the Public Shares to
our transfer agent through the DTC by contacting the
shareholder’s broker, bank or nominee. The Company’s
transfer agent will receive the Public Shares on the same day
that electronic delivery instructions are made.
Abstentions are not treated as votes under Cayman Islands law
and the Company’s Articles and will not have any effect on
any of the Name Change Proposal, the Repurchase Amendment
Proposal, the Staggered Board Elimination Proposal, the Share
Repurchase Proposal, the Board of Directors Proposal, the
Incentive Plan Proposal or the Shareholder Adjournment Proposal.
Q.
What will happen if I sign and return my proxy card without
indicating how I wish to vote?
A.
Signed and dated proxies received by the Company without an
indication of how the warrantholder or shareholder intends to
vote on a proposal will be voted in favor of each proposal
presented to warrantholders or shareholders, as the case may be.
Holders of Public Shares will not be entitled to exercise their
redemption rights if such shareholders return a proxy card to
the Company without an indication of how they desire to vote
with respect to the Business Combination Proposal or, for
shareholders holding their Public Shares in street name, if such
shareholders fail to provide voting instructions to their
brokers, banks or other nominees.
Q.
If I am not going to attend the Special Meeting of
Warrantholders or the Extraordinary General Meeting in person,
should I return my proxycard instead?
A.
Yes. Whether or not you plan to attend the Special Meeting of
Warrantholders or the Extraordinary General Meeting, after
carefully reading and considering the information contained in
this proxy statement/prospectus, please complete and sign your
proxy card. Then return the enclosed proxy card in the return
envelope provided herewith as soon as possible, to ensure your
warrants or shares are represented at the Special Meeting of
Warrantholders or the Extraordinary General Meeting, as the case
may be.
Q.
If my warrants or shares are held in “street name,”
will my broker, bank or nomineeautomatically vote my
warrants or shares for me?
A.
No. Under the rules of various U.S national and regional
securities exchanges, your broker, bank or nominee cannot vote
your warrants or shares with respect to non-discretionary
matters unless you provide instructions on how to vote in
accordance with the information and procedures provided to you
by your broker, bank or nominee. The Company believes the
proposals presented to the warrantholders and shareholders will
be considered non-discretionary and therefore your broker, bank
or nominee cannot vote your warrants or shares without your
instructions.
If you do not provide instructions with your proxy or sign your
proxy card your bank or broker may deliver a proxy card
expressly indicating that it is NOT voting your warrants or
shares; this indication that a bank or broker is not voting your
warrants or shares is referred to as a “broker
non-vote.” Broker non-votes will be counted for purposes of
determining whether a quorum is present, but will not count for
purpose of determining the number of votes cast at the Special
Meeting of Warrantholders or the Extraordinary General Meeting
of Shareholders. Your bank, broker or other nominee can vote
your warrants or shares only if you provide instructions on how
to vote. You should instruct your broker to vote your warrants
or shares in accordance with directions you provide.
Q.
May I change my vote after I have mailed my signed proxy
card?
A.
Yes. You may change your vote by sending a later-dated, signed
proxy card to the Company at the address set forth below so that
it is received by the Company, at the offices of Ellenoff
Grossman & Schole LLP,
the location of the meetings, prior to the Special Meeting of
Warrantholders or the Extraordinary General Meeting, as
applicable, or attend the Special Meeting of Warrantholders or
the Extraordinary General Meeting in person and vote. You also
may revoke your proxy by sending a notice of revocation to the
Company, which must be received prior to the Special Meeting of
Warrantholders or the Extraordinary General Meeting.
Q.
What should I do if I receive more than one set of voting
materials?
A.
You may receive more than one set of voting materials, including
multiple copies of this proxy statement/prospectus and multiple
proxy cards or voting instruction cards. For example, if you
hold your warrants or shares in more than one brokerage account,
you will receive a separate voting instruction card for each
brokerage account in which you hold warrants or shares. If you
are a holder of record and your warrants or shares are
registered in more than one name, you will receive more than one
proxy card. If you are a holder of Public Warrants and Public
Shares, you will receive more than one proxy card. Please
complete, sign, date and return each proxy card and voting
instruction card that you receive in order to cast a vote with
respect to all of your warrants or shares.
Q.
Who can help answer my questions?
A.
If you have questions about the Transaction or if you need
additional copies of the proxy statement/prospectus or the
enclosed proxy card you should contact:
Marc Blazer, President
c/o Maples
Corporate Services Limited
Ugland House
Grand Cayman KY1-1104
Cayman Islands
Tel:
(646) 736-1376
Fax:
(646) 224-8971
or
You may also contact Morrow & Co., LLC, the
Company’s proxy solicitor at:
To obtain timely delivery, warrantholders and shareholders must
request the materials no later than January 20, 2010. You
may also obtain additional information about the Company from
documents filed with the Securities and Exchange Commission, or
SEC, by following the instructions in the section entitled
“Where You Can Find More Information.”
If you intend to vote against the Transaction and seek
redemption of your Public Shares, you will need to deliver your
Public Shares (either physically or electronically) to the
Company’s transfer agent prior to the Extraordinary General
Meeting. Given the relatively short solicitation period, it is
advisable for shareholders to use electronic delivery of the
Public Shares to our transfer agent through the DTC by
contacting the shareholder’s broker, bank or nominee. The
Company’s transfer agent will receive the Public Shares on
the same day that electronic delivery instructions are made. If
you have questions regarding the certification of your position
or delivery of your Public Shares, please contact:
Felix Orihuela
American Stock Transfer & Trust Company
59 Maiden Lane, Plaza Level New York, New York10038
Tel:
(718) 921-8210
Fax:
(718) 921-8355
This summary highlights selected information from this proxy
statement/prospectus and is qualified in its entirety by the
more detailed information included elsewhere in this proxy
statement/prospectus. Because this is a summary, it may not
contain all of the information that is material or important to
you. Accordingly, you should read this entire proxy
statement/prospectus carefully, including the annexes. Please
also see the section entitled “Where You Can Find More
Information.”
The Company is an exempted company incorporated under the laws
of the Cayman Islands on September 25, 2007 for the purpose
of acquiring, through a merger, share capital exchange, asset
acquisition, share purchase, reorganization or any other similar
business combination, an operating business which the Company
refers to as its initial business combination, with a fair
market value of at least 80% of the balance held in the
Company’s trust account (exclusive of the
underwriters’ deferred underwriting compensation plus
interest thereon held in the trust account) at the time of such
business combination and resulting in ownership by the Company
of at least 51% of the voting equity interests of the operating
business. To date, the Company’s efforts have been limited
to organizational activities, its IPO and the search for a
suitable business combination.
If the Company is unable to complete the Transaction or fails to
complete an initial business combination by January 30,2010, the Company will automatically go into liquidation and, as
part of this process, will distribute to the holders of Public
Shares the amount in its trust account plus any remaining
non-trust account funds after payment of all of its liabilities.
In the event of the Company’s liquidation, the
Company’s warrants will expire worthless.
The Company’s Ordinary Shares and Public Warrants are
currently listed on the NYSE Amex under the symbols
“NLX” and “NLX-WS,” respectively. Following
the Transaction, the Company anticipates that the Ordinary
Shares and Public Warrants will continue to be listed on the
NYSE Amex.
The mailing address of the Company’s registered office is
c/o Maples
Corporate Services Limited, Ugland House, Grand Cayman KY1-1104,
Cayman Islands. Its telephone number is
(646) 736-1376.
Overture
Re Holdings and Overture Re
Overture Re Holdings was recently incorporated and Overture Re
will be incorporated by the Company to consummate the
Transaction. In the Transaction, JNL Bermuda will be amalgamated
with Overture Re and the amalgamated company will be a long term
reinsurer domiciled in Bermuda.
JNL
Bermuda
JNL Bermuda is a recently formed Delaware limited liability
company. JNL Bermuda is a wholly owned subsidiary of JNL. While
JNL Bermuda is a newly-formed entity, its business will be a
continuation of a portion of JNL’s current operating
business. JNL Bermuda and JNL will enter into a Reinsurance
Option and Contribution Agreement pursuant to which JNL Bermuda,
or its permitted successor or assign, may exercise the option to
reinsure fixed and variable annuity blocks of JNL (the
“Reinsurance Option and Contribution
Agreement”) — upon meeting certain
conditions, including that JNL Bermuda, or its permitted
successor or assign, obtains all necessary licenses for
operation as a reinsurer in Bermuda, as required pursuant to the
terms and conditions set forth in the form of Quota Share
Reinsurance Agreement attached to the Master Agreement. Also JNL
will contribute certain employees and other assets, including a
portfolio of securities, to JNL Bermuda pursuant to the
Reinsurance Option and Contribution Agreement.
JNL Bermuda intends to employ up to three executive officers.
JNL Bermuda will enter into the Investment Management Agreement
with its affiliate JNF Asset Management, LLC
(“JNFAM”) for investment
services with respect to a portion of JNL Bermuda’s asset
portfolio. JNL Bermuda’s asset portfolio consists of
approximately $98,500,000 (valued as of December 10, 2009
and subject to adjustment) of liquid, fixed-income securities.
If the Transaction is consummated, JNL Bermuda will be
amalgamated with Overture Re. Overture Re would then exercise
the option under the Reinsurance Option and Contribution
Agreement, enter into the Quota Share Reinsurance Agreement with
JNL and assume the Investment Management Agreement.
The block that is subject to the Reinsurance Option and
Contribution Agreement is currently an operating business by
itself. Until the consummation of the Transaction, the block
will be an operating business that is being operated as a part
of JNL. JNL is awaiting approval from the Texas Department of
Insurance before consummating the Transaction which includes
entering into the Reinsurance Option and Contribution Agreement
with JNL Bermuda. JNL hopes to receive approval by mid-January,
2010. Assuming all such approvals are received, and assuming
Overture Re is licensed in Bermuda as a reinsurer (anticipated
to occur by the Closing Date), then at the time of the closing
of the Transaction, JNL Bermuda and JNL will enter into the
Reinsurance Option and Contribution Agreement and the securities
portfolio will be transferred to JNL Bermuda, and the Company
will acquire an operating business through its subsidiary
Overture Re — which will have the authority to conduct
the business of reinsurance as to the block and future
reinsurance business as Overture Re may determine to undertake.
JNL Bermuda’s address is Emporium Building,
4th
Floor, 69 Front Street, Hamilton HM12,
P.O. Box HM3352, Hamilton, HMPX, Bermuda.
Master
Agreement
On December 10, 2009, the Company entered into the Master
Agreement with Overture Re Holdings, JNF, JNL and JNL Bermuda
and the Founders of the Company. Pursuant to the Master
Agreement, certain steps will be implemented to effectuate the
Transaction.
JNL on the Closing Date will beneficially own or have
commitments to acquire 24.5% of the Ordinary Shares of Overture
Acquisition Corp., taking into account the Public Share
redemptions, the obligation of the Company to repurchase the
Founder Shares and any obligation to issue Ordinary Shares to
JNL pursuant to the Master Agreement, by (a) open market
purchases, (b) negotiated purchases or (c) private
placement.
•
JNL Bermuda will have an option to reinsure 90% of the fixed
annuities and 50% of the variable annuities of JNL ($21.5M)
pursuant to Reinsurance Option and Contribution Agreement, plus
a securities portfolio ($98.5M), certain other assets and will
enter into an Investment Management Agreement with JNFAM. JNL
Bermuda will dividend a portion of the securities back to JNL to
reflect any decreases in the purchase price of JNL Bermuda.
•
Overture Re and JNL Bermuda will amalgamate with Overture Re
being the surviving entity — and will obtain the
option, securities portfolio, certain other assets and the
Investment Management Agreement.
•
Overture Acquisition Corp. will have an option to acquire JNFAM.
•
JNL hopes to receive approval from the Texas Department of
Insurance for the Transaction in mid-January 2010. JNL Bermuda
and JNL will execute the Reinsurance Option and Contribution
Agreement and JNL Bermuda will acquire the asset portfolio from
JNL.
Overture Re will exercise option and enter into Quota Share
Reinsurance Agreement with JNL pursuant to which an annuity life
insurance block of JNL is to be quota share reinsured by
Overture Re on a modified coinsurance basis.
•
Overture Re will assume the Investment Management Agreement with
JNFAM. Pursuant to this agreement, initially JNFAM will manage
20% of the regulatory capital of Overture Re and going forward,
will also manage 20% of any additional reinsurance assets
acquired by Overture Re.
•
Directors, management and Founders of Overture Acquisition Corp.
to acquire warrants in JNF pursuant to Warrant Subscription
Agreement.
•
Overture Acquisition Corp. may exercise the option to acquire
JNFAM.
The following summary describes the material provisions of
the Master Agreement. The provisions of the Master Agreement are
complicated and not easily summarized. This summary may not
contain all of the information about the Master Agreement that
is important to you. The following summary is qualified in its
entirety by reference to the complete text of the Master
Agreement. The Master Agreement is attached to this proxy
statement/prospectus as Annex I and is incorporated by
reference into this proxy statement/prospectus, and we encourage
you to read it carefully in its entirety for a more complete
understanding of the Master Agreement and the Transaction.
The Master Agreement was entered into by JNL, JNF, JNL Bermuda,
JNFAM, the Company, Overture Re Holdings and the Founders, on
December 10, 2009. The Master Agreement sets forth, among
other things:
•
representation and warranties of the parties as to, among other
things, due organization, corporate power and authority,
authorization and validity of the Master Agreement and, as
relevant, the other agreements contemplated therein, the receipt
of any necessary consents, approvals and permits, the accuracy
of certain information, and other matters;
•
conditions to be satisfied or waived on or before the Closing
Date (as defined above), to each party’s obligation to
consummate the Transaction (as defined above) on the Closing
Date;
•
covenants regarding conduct of business prior to the Closing
Date and other matters; and
•
circumstances under which the Master Agreement may be terminated
prior to the Closing Date.
The following additional agreements, (together with certain
other agreements the “Transaction Agreements”)
are contemplated in connection with the Transaction and forms of
such agreements are attached to the Master Agreement attached
hereto as Annex I, except as otherwise indicated:
The Founders and the Company will execute and deliver the
Amended and Restated Registration Rights Agreement.
On the Closing Date and subject to the satisfaction or waiver of
all conditions set forth therein, the following actions shall
occur simultaneously:
•
Overture Re and JNL Bermuda will consummate the amalgamation and
other transactions contemplated by the Agreement and Plan of
Amalgamation;
•
all other necessary filings will be made to give effect to the
amalgamation; and
•
if necessary, JNL and the Company shall execute and deliver the
Securities Purchase Agreement. JNL and the Company will only
enter into the Securities Purchase Agreement if JNL has not
obtained 24.5% of the Ordinary Shares of the Company taking into
account the shareholders redemptions, the obligation of the
Company to repurchase the Founders Shares and any issuance of
Ordinary Shares to JNL pursuant to the Master Agreement, through
open market purchases or privately negotiated transfers.
Immediately following the amalgamation of JNL Bermuda with
Overture Re, the following actions shall occur simultaneously:
•
Overture Re, as successor by amalgamation to JNL Bermuda, will
exercise the option to execute the Quota Share Reinsurance
Agreement with JNL, and Overture Re and JNL will execute and
deliver the Quota Share Reinsurance Agreement;
•
Overture Re, as successor by amalgamation to JNL Bermuda, will
assume the Investment Management Agreement with JNFAM;
•
JNF and the Founders will execute and deliver the Warrant
Purchase Agreement and related warrant certificates;
•
The Founders and Overture Re will execute and deliver the
Sponsors’ Agreement;
•
JNL and the Company will execute and deliver the Shareholder
Agreement; and
•
The Incentive Plan will become effective.
The Closing will be held in New York, New York or such other
location as the parties may agree, except that the amalgamation
will be consummated in Hamilton, Bermuda.
Conditions to the obligations of each party to consummate the
Transaction on the Closing Date include:
•
no law shall have been issued by any Governmental Authority
restraining, enjoining or otherwise prohibiting the consummation
of the Transaction or making all or any portion of the
Transaction illegal;
•
all parties shall have received the authorizations, approvals
and consents of third parties and Governmental Authorities
identified on disclosure schedules to the Master Agreement, with
limited exceptions set forth therein;
•
the Business Combination Proposal is approved in accordance with
the requirements set forth above;
•
the Warrant Amendment Proposal is approved in accordance with
the requirements set forth above;
the Share Repurchase Proposal, the Board of Directors Proposal
and the Incentive Plan Proposal are approved in accordance with
the requirements set forth above;
•
the Company and its underwriters and financial advisors have
entered into the Compensation Amendment Agreements;
•
Overture Re has received all necessary licenses, permits and
approvals from all governmental authorities and has taken all
actions required to be duly registered, licensed, or admitted as
an insurer under applicable insurance laws in each jurisdiction
where it is or will be required to be so licensed or admitted to
conduct its business as it relates to the reinsured policies
after the Closing Date, including Bermuda;
•
all Transaction Agreements shall have been fully executed and
delivered by the parties thereto; and
•
the combination of the expected redemptions by shareholders and
payments under forward purchase contracts by the Company are not
to be in excess of $50,000,000.
The conditions to the obligations of each party may only be
waived by the party entitled to benefit from such condition and
may only be waived by written instrument signed by the party
granting the waiver.
Conditions to the obligations of JNF, JNL, JNL Bermuda and JNFAM
to consummate the Transaction on the Closing Date include, but
are not limited to:
•
accuracy of representations and warranties made by each of the
Company, Overture Re Holdings, Overture Re and the Founders
under the Master Agreement and any Transaction Agreement;
•
each of the Company, Overture Re Holdings, Overture Re and the
Founders shall have performed in all material respects all
agreements and complied with all covenants contained in the
Master Agreement and any Transaction Agreement to be performed
or complied with by it prior to or at the Closing;
•
receipt of certificates certifying that specified conditions
have been fulfilled;
•
each of the Company, Overture Re Holdings, Overture Re and the
Founders shall not be subject to any material adverse effect
since the date of the Master Agreement;
•
JNF shall have received the Escrow Amendment Agreement which has
been executed by the Founders, the Company and American Stock
Transfer and Trust Company; and
•
the Company has duly established the Incentive Plan, which
becomes effective immediately after the closing of the
Transaction.
Non-compliance with the conditions to the obligations of JNF,
JNL, JNL Bermuda and JNFAM, may only be waived by written
instrument signed by JNF on behalf of JNF, JNL, JNL Bermuda, and
JNFAM.
Conditions to the obligations of the Company, Overture Re
Holdings, Overture Re and the Founders to consummate the
Transaction on the Closing Date include, but are not limited to:
•
accuracy of representations and warranties made by each of JNF,
JNL, JNL Bermuda and JNFAM under the Master Agreement and
Transaction Agreements;
•
each of JNF, JNL, JNL Bermuda and JNFAM shall have performed in
all material respects all agreements and complied with all
covenants contained in the Master Agreement and the Transaction
Agreements to be performed or complied with by it prior to or at
the Closing;
•
receipt of certificates certifying that specified conditions
have been fulfilled;
•
each of JNF, JNL, JNFAM and JNL Bermuda shall not be subject to
any material adverse effect since the date of the Master
Agreement;
•
JNL shall beneficially own or have made commitments to acquire
on the Closing Date 24.5% of the Ordinary Shares of the Company,
taking into account the shareholders redemptions, the obligation
of
the Company to repurchase the Founder Shares and any issuance of
Ordinary Shares to JNL pursuant to the Master Agreement; and
•
The Company and the Founders shall have enter into an Amended
and Restated Registration Rights Agreement in connection with
the registration rights granted to the Founders at the time of
the IPO.
Non-compliance with the conditions to the obligations of the
Company, Overture Re Holdings, Overture Re and the Founders, may
only be waived by written instrument signed by the Company,
Overture Re Holdings, Overture Re and the Founders. No party to
the Master Agreement may rely on the failure of a condition, if
such failure was caused by the failure of a party or its
affiliates to comply with its or its affiliates obligations or
any other provision under the Master Agreement.
The Master Agreement may be terminated and the Transaction
abandoned in the following circumstances:
•
by mutual written consent of the parties thereto;
•
by either JNF, JNL, JNL Bermuda and JNFAM, on the one hand, or
the Company, Overture Re Holdings, Overture Re and the Founders,
on the other hand, if it becomes impossible to satisfy certain
of the closing conditions;
•
by either JNF, JNL, JNL Bermuda and JNFAM, on the one hand, or
the Company, Overture Re Holdings, Overture Re and the Founders,
on the other hand, if the Closing has not occurred on or before
5:00 p.m. New York City time on January 30, 2010, or
such later date as may be agreed in writing by the parties (such
date, the “Outside Date”); provided, however, that the
right to terminate the Master Agreement in such circumstance
will not be available to any party whose failure (or failure of
its affiliates) to fulfill any of its (or its affiliates’)
obligations contained in the Master Agreement has been the cause
of, resulted in, or contributed to such failure of the Closing
to have occurred;
•
by JNF, JNL, JNL Bermuda and JNFAM if any of the Company,
Overture Re Holdings, Overture Re or the Founders breach any
representation, warranty, or covenant contained in the Master
Agreement such that the conditions set forth in the Master
Agreement cannot be satisfied and such breach cannot be cured by
the Outside Date;
•
by the Company, Overture Re Holdings, Overture Re and the
Founders, if any of JNF, JNL, JNL Bermuda or JNFAM breach any
representation, warranty, or covenant contained in the Master
Agreement such that the conditions set forth in the Master
Agreement cannot be satisfied and such breach cannot be cured by
the Outside Date; or
•
by the Company or JNF if any of the Transaction Agreements are
terminated.
The Master Agreement is governed by the laws of the State of New
York (without regard to conflict of laws principles).
The Master Agreement may be amended, modified, or supplemented
or changed, and any provision can be waived, only in writing
signed by the party against whom enforcement thereof is sought.
If the Closing does not occur, each party agrees to bear all
costs and expenses it, and its affiliates, agents, attorney and
advisers incur relating to the authorization, preparation,
negotiation, execution and performance of the Master Agreement
and the Transaction Agreements. If the Closing does occur, the
Company shall reimburse JNF, JNL, JNFAM and JNL Bermuda for all
of the costs and expenses incurred by them, including without
limitation the costs and expenses of their affiliates, agents,
attorneys, advisers, accountants, actuaries, recruiters and
employee benefit consultants relating to the authorization,
preparation, negotiation, execution, and performance of the
Master Agreement, the Transaction Agreements, the Proxy
Statement/Prospectus and the Transaction, subject to a cap of
$2,000,000.
The parties to the Master Agreement intend to consummate the
Transaction as promptly as practicable following the
Extraordinary General Meeting of Shareholders and the Special
Meeting of Warrantholders, provided that:
•
the holders of Company Warrants have approved the Warrant
Amendment Proposal;
the Company’s shareholders have approved and adopted the
Business Combination Proposal and the Transaction;
•
holders of no more than one share less than 30% of the Public
Shares vote against the Business Combination Proposal and demand
redemption of their Public Shares into a pro rata portion of the
trust account;
•
the Company’s shareholders have approved each of the
Repurchase Amendment Proposal, the Share Repurchase Proposal,
the Board of Directors Proposal and the Incentive Plan
Proposal; and
•
the other conditions specified in the Master Agreement have been
satisfied or waived.
For more information, see the description of the Master
Agreement in the section entitled “Proposals to be
Considered by Shareholders — The Master
Agreement.” (page 94) The Master Agreement is
included as Annex I to this proxy statement/prospectus. We
encourage you to read the Master Agreement in its entirety.
Board of
Directors of the Company Following the Consummation of the
Transaction (Page 196)
Pursuant to the Master Agreement, all of the directors of the
Company as of immediately prior to the Closing will resign from
all of their positions effective as of the Closing Date, and at
and after the Closing Date, the Company shall cause the board of
directors to consist of seven (7) members of which
(i) four (4) members shall be designated as nominees
by JNL and (ii) three (3) members shall be designated
as nominees by Overture and the Founders. See “Directors
and Management of the Company Following the Transaction”(page 196) and “Proposals to be Considered by
Shareholders — The Board of DirectorsProposal” (page 142) for more information.
Tax
Considerations (Page 115)
The Company does not expect the shareholders of the Company to
have United States federal income tax consequences resulting
from the Transaction, except to the extent holders of Public
Shares exercise their redemption rights.
A holder of Public Shares who exercises redemption rights will
generally be required to recognize capital gain or loss upon the
redemption, if such shares were held as a capital asset on the
date of the Transaction. This gain or loss will be measured by
the difference between the amount of cash received and the
shareholder’s tax basis in the redeemed shares.
All shareholders are urged to consult their own tax advisors to
determine their particular tax consequences. The discussion
contained in this proxy statement/prospectus is based on the
provisions of the Internal Revenue Code of 1986, as amended,
applicable current United States Treasury Regulations, judicial
authority, and administrative rulings and practice, in each case
as in effect on the date hereof, and all of which are subject to
change, possibly on a retroactive basis.
For a description of the material federal income tax
consequences of the Transaction, please see the information set
forth in “Proposals to be Considered by
Shareholders — The Master Agreement —
Material Income Tax Consequences of the Transaction to the
Company’s Securityholders.” (page 115)
Anticipated
Accounting Treatment (Page 124)
The Business Combination will be accounted for under the
purchase method of accounting in accordance with U.S. GAAP.
The assets and liabilities of JNL Bermuda will be stated at fair
value. JNL Bermuda’s assets, liabilities and results of
operations will be consolidated with the assets, liabilities and
results of operations of Overture after consummation. The
Overture shareholders will have a controlling voting interest in
JNL Bermuda. Overture will effect this acquisition through the
distribution of cash. Upon acquisition, JNL Bermuda will be
amalgamated with and into Overture Re. a wholly owned subsidiary
of Overture Re Holdings, which is a wholly owned subsidiary of
Overture Acquisition Corp. Accordingly, the shareholders of
Overture shall own 100% of the successor entity to JNL Bermuda.
No appraisal rights are available under the Companies Law (2009
Revision) of the Cayman Islands to the shareholders of the
Company in connection with the consummation of the Transaction.
Redemption Rights
(Page 77)
Pursuant to the Company’s Articles, a holder of Public
Shares may, if the shareholder affirmatively votes against the
Business Combination Proposal, also demand that the Company
redeem such Public Shares for a pro rata portion of the trust
account if the Transaction is consummated. Provided that holders
of no more than one share less than 30% of the Public Shares
exercise their redemption rights (in which case the Company will
not be permitted to consummate the Transaction), Public Shares
with respect to which redemption has been properly demanded will
be redeemed and subsequently cancelled following completion of
the payment of the redemption amount in respect of each Public
Share and upon the appropriate entries being made on the
Company’s Register of Members (Shareholders) by the
Company’s transfer agent. As of September 30, 2009,
this would amount to approximately $10.04 per Public Share. You
will be entitled to receive cash for your Public Shares only if
you vote against the Business Combination Proposal, properly
demand redemption and deliver your shares (either physically or
electronically) to the Company’s transfer agent prior to
the Extraordinary General Meeting of Shareholders and the
Transaction is consummated. Given the relatively short
solicitation period, it is advisable for shareholders to use
electronic delivery of the Public Shares to our transfer agent
through the DTC by contacting the shareholder’s broker,
bank or nominee. The Company’s transfer agent will receive
the Public Shares on the same day that electronic delivery
instructions are made. See the section entitled
“Extraordinary General Meeting of Shareholders and the
Special Meeting of Warrantholders —
Redemption Rights”for the procedure to be
followed if you wish to redeem your Public Shares for cash.
Proxies
Proxies may be solicited by mail, telephone or in person. The
Company’s proxy solicitor is
Morrow & Co. LLC, which can be reached at
470 West Avenue, Stamford, Connecticut. Its telephone
number is
(800) 662-5200.
If you grant a proxy, you may still vote your warrants or
shares, as the case may be, in person if you revoke your proxy
before the Special Meeting of Warrantholders or the
Extraordinary General Meeting. You may also change your vote by
submitting a later-dated proxy as described in the section
entitled “The Extraordinary General Meeting of
Shareholders and the Special Meeting of
Warrantholders — Revoking Your Proxy.”
Reasons
for the Approval of the Transaction (Page 87)
In considering the Transaction, the Company’s Board of
Directors gave considerable weight to the following favorable
factors:
•
Experienced management team — Proven
entrepreneurial management team with strong track record of
launching, growing, and operating innovative financial
institutions in highly regulated environments, with over
20 years insurance and fixed income investing experience;
•
Historic entry point — Management believes
historic dislocation and capital constraints in the industry
create unprecedented opportunity to providers of capital through
reinsurance products;
•
Favorable long term growth characteristic —
Steady long-term growth trajectory of life insurance
policies in force creates opportunities to re-insure additional
blocks of policies as global insurance companies remain capital
constrained to underwrite new policies;
•
Immediate accretive use of proceeds — Overture
Re will reinsure fixed and variable blocks of JNL annuities
enabling Overture Re to be an active reinsurer at the closing of
the Transaction;
•
Operational leverage through turnkey reinsurance
platform — Overture Re will contract with its
affiliates JNL and JNFAM and leverage their platform and their
proven management team, database,
proprietary technology and other infrastructure to provide a
cost effective corporate, policy administration, and investment
management platform;
•
Middle-market focus — Although concentrated at
the top end of the market, the annuity market consists of many
small writers. The extremely fragmented variable annuity market
creates an opportunity to provide reinsurance to many
underserved and capital constrained middle-market insurance
companies;
•
Favorable financial and industry analysis —
Financial analysis, presentation and oral opinion of
Houlihan Smith confirmed by a written opinion dated
December 6, 2009, that indicates the Transaction is fair,
from a financial point of view, to the Company’s
shareholders;
•
Barriers to entry — Considerable regulatory
compliance requirements and highly specialized skill sets
required, provide significant obstacles to entry and
competition; and
•
Favorable domicile; tax advantages — Domicile
in Bermuda and tax advantages from offshore income-producing
activities.
The Company’s Board of Directors believes the above factors
strongly supported its determination and recommendation to
approve the Transaction. The Company’s Board of Directors
did, however, consider the following potentially negative
factors, among others, including the risk factors set forth
elsewhere in this proxy statement/prospectus, in its
deliberations concerning the Transaction:
•
Shareholder redemptions and reduction of trust
funds — The potential for current holders of
Public Shares of the Company to vote against the Transaction and
demand to redeem their shares for cash upon consummation of the
Transaction, reducing the amount of cash available to the
Company following the Closing;
•
Uncertain regulatory
environment — The potential for
industry scrutiny or increased regulation;
•
Interests of officers and directors — Interests
in the Transaction that certain officers and directors of the
Company may have which are different from, or in addition to,
the interests of the Company shareholders generally, including
the matters described under “Proposals to be Considered
by Shareholders — The Business CombinationProposal — Certain Benefits of the Company’s
Directors and Officers and Others in the Transaction;”
•
Limitations on indemnification — The
limitations on indemnification set forth in the Master Agreement
described in “Proposals to be Considered by
Shareholders — The Master Agreement”;
•
Dilution to interests of shareholders — Control
of JNF’s current shareholders, including David Smilow and
his affiliates, of a significant percentage of the
Company’s issued shares after the Transaction; After
consummation of the Transaction, JNL will hold 24.5% of the
Company’s issued and outstanding shares. Ownership of JNF,
the parent entity of JNL, is as follows:
JNF Holding Company, Inc. (entity controlled by D. Smilow)
32.16
%
Inviva, LLC (entity controlled by D. Smilow)
16.71
%
Trimaran Inviva TRPS, LLC (Private Equity Firm)
16.71
%
Jefferson National Financial Corp. Employee Stock Ownership Plan
11.41
%
Inviva, Inc. (entity controlled by D Smilow)
10.72
%
Mitchell Caplan
4.76
%
Others
7.43
%
Total
100
%
Through voting power of JNF Holding Company, Inc., Inviva, LLC
and Inviva, Inc. David Smilow controls 62.5% of the outstanding
stock of JNF;
•
Regulatory issues — The impact of changes in or
additional Bermuda or U.S. registration, licensing or other
regulations affecting the reinsurance business or hedging
activities related thereto;
Offshore operational risks — Potential for tax
law changes, currency fluctuations, and difficulties enforcing
legal rights;
•
Actuarial and mortality risk — Differences in
mortality rates, policyholder behavior, claims and lapse rates
from those assumed;
•
Competitive climate — Adverse changes in
pricing and capacity through unexpected reduction of barriers to
entry or favorable changes in regulatory climate and
availability of capital;
•
Reliance on JNL — Potential inability to
replace managerial, actuarial and administrative services
provided in the event of capitalization, liquidity, financial or
other difficulties experienced by JNL; and
•
Potential liquidation — The fact that if the
Company is unable to obtain shareholder or warrrantholder
approvals or if the parties are unable to obtain regulatory
approvals on a timely basis, the Company will be required to
liquidate.
The Company’s Board of Directors concluded that the
Transaction is fair to, and in the best interests of, the
Company and that the consideration to be paid in the Transaction
is fair to the Company. The Company’s management conducted
a due diligence review of JNL Bermuda that included an industry
analysis, an evaluation of JNL Bermuda’s existing business,
a valuation analysis and financial projections in order to
enable the Board of Directors to evaluate JNL Bermuda’s
business and financial condition and prospects.
Certain
Benefits of the Company’s Directors and Officers and Others
in the Transaction (Page 90)
When you consider the recommendation of the Company’s Board
of Directors in favor of approval of the Transaction, you should
keep in mind that the Company’s directors and officers have
interests in the Transaction that are different from, or in
addition to, your interests as a shareholder. These interests
include, among other things:
•
If the Company is unable to complete the Transaction or fails to
complete an initial business combination by January 30,2010, the Company’s Articles provide that the Company will
go into automatic liquidation and be dissolved. In such event,
the 3,750,000 Founder Shares held by our Founders that were
acquired before the IPO for an aggregate purchase price of
$25,000 would be worthless because the Company’s Founders
are not entitled to receive any of the proceeds of the
Company’s trust account with respect to such Founder
Shares. Such Founder Shares had an aggregate market value of
$37,537,500 based upon the closing price of $10.01 on the NYSE
Amex on the record date.
•
The Company’s Founders purchased an aggregate of 4,380,000
Founder warrants at a purchase price of $1.00 per warrant for an
aggregate purchase price of $4,380,000 in a private placement
prior to the Company’s IPO, which we refer to as the
Founder warrants. All of the proceeds the Company received from
this private placement were deposited into the Company’s
trust account. The Founder warrants, like the Public Warrants,
are subject to and the holder thereof is being asked to consider
and vote upon, the Warrant Amendment Proposal. The
Company’s Founders have indicated that they intend to vote
the Company Warrants they hold in favor of the Warrant Amendment
Proposal. The Founder warrants had an aggregate market value of
$1,445,400 based on the closing price of $0.33 on the NYSE Amex
on the record date.
•
The Company has agreed to repurchase from the Company’s
Founders the 3,750,000 Ordinary Shares purchased by the Founders
prior the Company’s IPO, which we refer to as the Founder
Shares, for an aggregate purchase price of $25,000, subject to
shareholder approval. In consideration of the repurchase of such
Founder Shares at their initial purchase price of $0.006 per
share, or an aggregate of $25,000, the Founders will receive
(i) Class A warrants to purchase an aggregate of
46,875 shares of JNF common stock at an exercise price of
$75.00 per share, subject to adjustment per floating strike
price, and (ii) Class B warrants to purchase an
aggregate of 46,875 shares of JNF common stock at an
exercise price of $125.00 per share, subject to adjustment per
floating strike price, and (iii) 2,812,500 of the
Company’s Ordinary Shares issuable in three equal tranches
in the event the volume weighted
average price of the Company’s Ordinary Shares for any ten
days during a 30 day period equals or exceeds $12, $16 and
$20, respectively.
•
If the Company liquidates and dissolves without consummating a
business combination, the 4,380,000 founder warrants held by the
Company’s Founders would expire worthless. Such founder
warrants had an aggregate market value of $1,445,400 based upon
the closing price of $0.33 on the NYSE Amex on the record date.
•
It is currently anticipated that John F. Hunt, the
Company’s Chairman, Chief Executive Officer and Secretary,
and Marc Blazer, the Company’s President and Treasurer, and
Andrew Lufkin, one of the Company’s directors, will each
continue to serve as directors of the Company following the
Transaction.
•
If the Company liquidates and dissolves without consummating a
business combination, Messrs. Hunt and Blazer will be
liable to pay debts and obligations to vendors and other
entities that are owed money by the Company for services
rendered or products sold to the Company, or to any target
business, to the extent such creditors bring claims that would
otherwise require payment from monies in the trust account, but
only if such entities did not execute a valid and binding
waiver. Based on the Company’s estimated debts and
obligations, it is not currently expected that the Founders will
have any exposure under this arrangement in the event of its
liquidation.
•
If the Company goes into liquidation and there are no funds
remaining to pay the costs associated with the implementation
and completion of such liquidation, the Company’s Founders
have agreed to advance the Company the funds necessary to pay
such costs and complete such liquidation (currently anticipated
to be no more than approximately $15,000) and not to seek
repayment for such expenses.
In addition to the interests of the Company’s directors and
officers in the Transaction, certain individuals promoting the
Transaction
and/or
soliciting proxies on behalf of the Company have interests in
the Transaction that are different from, or in addition to, the
interests of the Company.
JP Morgan and the other underwriters of the IPO may provide
assistance to the Company and its directors and executive
officers and may be deemed to be participants in the
solicitation of proxies. $7,500,000 of the underwriters’
discounts and commissions relating to the Company’s IPO
were deferred pending shareholder approval of the Company’s
initial business combination and were to be released to the
underwriters upon consummation of the Transaction. Management
has reached an agreement with each of the underwriters, pursuant
to which such deferred underwriters’ compensation has been
reduced to up to $1,000,000 to the extent there is between
$100,000,000 and $150,000,000 in trust at the consummation of
the Transaction. The amendment to the underwriters agreement
provides that to the extent there is at least $100 million
in the trust at the consummation of the Transaction, the
underwriters shall receive $20,000, pro rata, for each
$1 million in excess of $100 million. If there is less
than $100 million in the trust at the consummation of the
Transaction, the underwriters are not entitled to any
compensation. Pursuant to a financial advisory agreement by and
between the Company and Credit Suisse, the Company agreed to pay
Credit Suisse a transaction fee (the “Transaction
Fee”), payable upon the first closing in connection with a
Transaction, equal to 1.5% of the aggregate value of the
Transaction; provided, however, in no event shall the
Transaction Fee payable by the Company to Credit Suisse in
connection with a Transaction be less than $2 million. In
addition, pursuant to a financial advisory agreement by and
between the Company and JP Morgan, the Company has agreed to pay
JP Morgan a financial advisory fee of $500,000 upon the
consummation of the Transaction. If the Transaction is not
consummated and the Company is required to be liquidated and
dissolved, the underwriters will not receive any such fees.
Warrantholders and shareholders are advised that the
underwriters have a financial interest in the successful outcome
of the proxy solicitation.
Actions
That May Be Taken to Secure Approval of the Company’s
Shareholders (Page 91)
Pursuant to the Master Agreement, JNF shall beneficially own or
have made commitments to acquire on the Closing Date 24.5% of
the Company’s Ordinary Shares, taking into account the
Public Share redemptions, the obligation of the Company to
repurchase the Founder Shares and any issuance of Ordinary
Shares to JNL
pursuant to the Master Agreement. Such purchases may either be
made in the open market prior to the record date of the
Extraordinary General Meeting, in privately negotiated
transactions prior to the Extraordinary General Meeting, in a
private placement subsequent to the closing of the Transaction
or a combination thereof.
Certain principals of JNF will oversee the business operations
of Overture Re subsequent to the business combination. In
addition, certain principals of JNF will sit on the board of
directors of Overture. In addition to securing the approval of
Overture shareholders to the Transaction, JNF agreed to acquire
24.5% of Overture’s Ordinary Shares as the parties believe
that JNF’s substantial ownership in Overture reinforces
JNL’s commitment to the business. In fact such purchase
allows JNL to execute on its overall enterprise management
strategy for its business to establish a Bermuda reinsurer,
reinsure blocks of business and utilize the favorable
reinsurance climate of Bermuda where so many reinsurance
companies are headquartered.
At any time prior to the Special Meeting of Warrantholders or
Extraordinary General Meeting, as the case may be, during a
period when they are not then aware of any material nonpublic
information regarding the Company or its securities, the
Company, the Company’s Founders, JNF, JNF ’s directors
and officers
and/or their
respective affiliates may negotiate arrangements to purchase
Public Shares from institutional and other investors, or execute
agreements to purchase such shares from them in the future, or
they or the Company may enter into transactions with such
persons and others to provide them incentives for acquiring
Public Shares and/or voting such Public Shares in favor of the
Business Combination Proposal. Funds released from the trust
account upon consummation of the Transaction may be used to
purchase the Public Shares or provide such incentives, although
the Company would require shareholder approval of the Repurchase
Amendment Proposal to do so. The purpose of such purchases and
other transactions would be to increase the likelihood that the
holders of a majority of the Public Shares entitled to vote on
the Business Combination Proposal vote in its favor and that
holders of fewer than one share less than 30% of the Public
Shares vote against the Business Combination Proposal and demand
redemption of their Public Shares for a pro rata portion of the
trust account where it appears that such requirements would
otherwise not be met.
If shareholders approve the Repurchase Amendment Proposal and
such transactions are effected, the consequences could be to
cause the Business Combination Proposal to be approved in
circumstances where such approval could not otherwise be
obtained. Purchases of Public Shares by the persons described
above would allow them to exert more influence over the approval
of the Business Combination Proposal and other proposals and
would likely increase the chances that the Transaction would be
approved. Moreover, any such purchases may make it less likely
that holders of more than one share less than 30% of the Public
Shares will vote against the Business Combination Proposal and
exercise their redemption rights.
On the date of this proxy statement/prospectus, no agreements to
such effect have been entered into with respect to the
Company’s securities. The Company will file a Current
Report on
Form 8-K
with the SEC to disclose agreements entered into or significant
purchases made by any of the aforementioned persons that would
affect the vote on any proposals presented at the Special
Meeting and the Extraordinary General Meeting. Any such report
will include descriptions of the agreements entered into or
significant purchases by any of the aforementioned persons.
Rescission
Rights (Page 93)
If you are a shareholder at the time of the Transaction and you
purchased your shares in the Company’s IPO, you may have
securities claims against the Company for rescission (under
which a successful claimant has the right to receive the total
amount paid for his or her securities pursuant to an allegedly
deficient prospectus, plus interest and less any income earned
on the securities, in exchange for surrender of the securities)
or damages (compensation for loss on an investment caused by
alleged material misrepresentations or omissions in the sale of
a security) on the basis of the Company’s IPO prospectus
not disclosing that funds in its trust account might be used,
directly or indirectly, to purchase Public Shares in order to
secure approval of the Company’s shareholders for the
Transaction or that the Company may seek to amend the Warrant
Agreement. We are not aware of any other differences between the
information provided in our IPO prospectus and this
prospectus/proxy statement.
Such claims may entitle shareholders asserting them to up to
$10.00 per share, based on the initial offering price of the
units sold in the Company’s IPO, less any amount received
from the sale or fair market value of the warrants purchased as
part of the units, plus interest from the date of the
Company’s IPO (which, in the case of holders of Public
Shares, may be more than the pro rata share of the trust account
to which they are entitled on redemption or liquidation). See
“Proposals to be Considered by Shareholders —
The Business Combination Proposal — Rescission
Rights” (page 93) for additional information about
rescission rights.
Regulatory
Matters (Page 124)
The Business Combination and Transaction contemplated by the
Master Agreement are subject to federal or state regulatory
requirements or approvals, including addressing comments raised
by the SEC with respect to this proxy statement/prospectus,
obtaining regulatory approvals required by the Texas Insurance
Department and the Bermuda Monetary Authority and any approvals
required from the Department of Justice and the Federal Trade
Commission pursuant to the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended
(“HSR”), which HSR approvals have been obtained. The
Transaction is subject to additional Cayman Islands regulatory
requirements
and/or
approvals, including notifying the Cayman Islands Registrar of
Companies if certain of the proposals are approved at the
Extraordinary General Meeting.
The Transaction is not subject to any additional Cayman Islands
regulatory requirements and/or approvals, including notifying
the Cayman Islands Registrar of Companies if certain of the
proposals are approved at the Extraordinary General Meeting.
The Transaction is not subject to any additional Bermuda
regulatory requirements or approvals, except for obtaining the
regulatory approval from the Bermuda Monetary Authority as
discussed below.
JNL is an insurance company primarily regulated by the Texas
Department of Insurance (“TX DOI”). JNL is required to
obtain approval from the TX DOI for various elements of the
Transaction.
Overture Re is seeking approval from the Bermuda Monetary
Authority for approval as a Long Term Life Insurer and a
Segregated Account Company under the Segregated Accounts
Companies Act of 2000, as amended.
The Master Agreement is attached as Annex I to this proxy
statement/prospectus. You are encouraged to read the Master
Agreement in its entirety.
Shareholders are being asked to approve a special resolution to
change the Company’s name from “Overture Acquisition
Corp.” to “Overture Capital Corp.”
If the Business Combination Proposal is not approved at the
Extraordinary General Meeting of Shareholders, the Name Change
Proposal will not be presented at the Extraordinary General
Meeting for a vote.
Shareholders are being asked to approve a special resolution to
amend the Articles to add provisions to allow the repurchase by
the Company of its shares, whether listed on a Designated Stock
Exchange or otherwise, without shareholder approval in certain
limited circumstances. See “Proposals to be Considered
by Shareholders — The Business CombinationProposal — Actions that May be Taken to Secure
Approval of the Company’s Shareholders”. At any
time prior to the Special Meeting of Warrantholders or
Extraordinary General Meeting, as the case may be, during a
period when they are not then aware of any material nonpublic
information regarding the Company or its securities, the
Company, the Company’s Founders, JNF, JNF ’s directors
and officers
and/or their
respective affiliates may negotiate arrangements to purchase
Public Shares from institutional and other investors, or execute
agreements to purchase such shares from them in the future, or
they or the Company may enter into transactions with such
persons and others to provide them incentives
for acquiring Public Shares and/or voting such Public Shares in
favor of the Business Combination Proposal. If the Business
Combination Proposal is not approved at the Extraordinary
General Meeting of Shareholders, the Repurchase Amendment
Proposal will not be presented at the Extraordinary General
Meeting for a vote.
In summary, we are recommending the adoption of the Repurchase
Amendment Proposal as we believe such purchases will assist the
Company in obtaining a favorable vote with respect to the
Transaction and therefore are in the best interests of those
shareholders who will remain shareholders of the Company
subsequent to the consummation of the Transaction.
If the Business Combination Proposal is not approved at the
Extraordinary General Meeting of Shareholders, the Repurchase
Amendment Proposal will not be presented at the Extraordinary
General Meeting for a vote.
Shareholders are being asked to approve a special resolution to
amend the Articles to eliminate the staggered board provisions
in the Articles. If the Business Combination Proposal is not
approved at the Extraordinary General Meeting of Shareholders,
the Staggered Board Elimination Proposal will not be presented
at the Extraordinary General Meeting for a vote.
Shareholders are being asked to consider and vote upon the
approval of the Share Repurchase Proposal. The repurchase of the
Founder Shares is a condition precedent to the Master Agreement.
See “Proposals to be Considered by
Shareholders — The Share RepurchaseProposal.” (page 141)
If the Business Combination Proposal is not approved at the
Extraordinary General Meeting of Shareholders, the Share
Repurchase Proposal will not be presented at the Extraordinary
General Meeting for a vote.
Shareholders are being asked to consider and elect seven
directors to the Company’s Board of Directors to hold
office until the 2010 annual meeting of shareholders and until
their successors are elected and qualified. This proposal to
elect seven directors to our Board of Directors is conditioned
upon and subject to the approval of the Business Combination
Proposal. See the section entitled “Proposals to be
Considered by Shareholders — The Board of DirectorsProposal.” (page 142)
The Company’s Board of Directors has approved, and is
seeking shareholder approval of, the adoption of the Incentive
Plan pursuant to which up to the lesser of
(i) 1.5 million Ordinary Shares or (ii) 10% of
the outstanding Ordinary Shares at the closing of the
Transaction may be issued to directors, executive officers,
employees and consultants in accordance with the Incentive
Plan’s terms. The purpose of the Incentive Plan is to aid
the Company in recruiting and retaining employees, officers,
directors and consultants capable of assuring the future success
of the Company.
The Incentive Plan is attached as Annex IV to this proxy
statement/prospectus. You are encouraged to read the Incentive
Plan in its entirety. If the Business Combination Proposal is
not approved at the Extraordinary General Meeting, the Incentive
Plan Proposal will not be presented at the Extraordinary General
Meeting of Shareholders for a vote.
If, based on the tabulated vote, there are not sufficient votes
at the time of the Extraordinary General Meeting approving the
Business Combination Proposal or the other proposals to be
considered by shareholders, the Company’s Board of
Directors may submit a proposal to adjourn the Extraordinary
General Meeting to a later date or dates, if necessary, to
permit further solicitation of proxies.
The Company proposes to amend the Warrant Agreement, which
governs the terms of the Company Warrants to provide that
(i) the exercise price of the Company Warrants will be
increased from $7.00 to $11.00 per share, (ii) the
expiration date of the Company Warrants will be extended from
January 30, 2013 to January 30, 2015, and
(iii) the price at which our Ordinary Shares must trade
before we are able to redeem the warrants we issued in our IPO
will be increased from $14.25 to $20.00. The approval of the
Warrant Amendment Proposal is a condition to the consummation of
the Transaction. Moreover, the consummation of the Warrant
Amendment is conditioned upon the consummation of the
Transaction. Based upon a review of other special purpose
acquisition corporation business combination structures, the
Company’s management believes that the terms of the public
warrants must be restructured in order to obtain shareholder
approval of the Transaction.
We believe the amendment to the Company Warrants is appropriate
given the proposed change in our structure following completion
of the transactions contemplated by the Master Agreement. We
believe one of the effects of increasing the exercise price of
the warrants is that the exercise of the Company Warrants will
result in a transaction that is less dilutive to our
shareholders in that we will receive more consideration per
share than the net asset value per share immediately following
the consummation of the transactions contemplated by the Master
Agreement. Additionally, if the transactions contemplated by the
Master Agreement are not consummated and we do not complete a
business combination by January 30, 2010, the Company
Warrants will expire worthless. If the Warrant Amendment
Proposal is approved, all other terms of the Company Warrants
will remain the same. It is anticipated that one of the likely
effects of increasing the prices at which our Ordinary Shares
must trade before we are able to redeem our warrants is that the
amount of time we would have to wait before we can redeem the
Company Warrants will increase, thereby giving our
warrantholders more time to exercise their Company Warrants.
The form of Amendment No. 1 to the Warrant Agreement is
attached as Annex II to this proxy statement/prospectus.
You are encouraged to read the amendment in its entirety. See
the section entitled “Proposals to be Considered by
Warrantholders — The Warrant Amendment Proposal”for further information.
If, based on the tabulated vote, there are not sufficient votes
at the time of the Special Meeting of Warrantholders approving
the Warrant Amendment Proposal, the Company’s Board of
Directors may submit a proposal to adjourn the Special Meeting
to a later date or dates, if necessary, to permit further
solicitation of proxies. See the section entitled
“Proposals to be Considered by
Warrantholders — The Warrantholder Adjournment
Proposal,” beginning on page 156.
If the Transaction is not consummated and the Company does not
consummate an initial business combination by January 30,2010, the Company will be required to go into automatic
liquidation and dissolve and all the Company Warrants will
expire worthless.
Date,
Time and Place of the Extraordinary General Meeting of
Shareholders and the Special Meeting of Warrantholders (Page
73)
The Extraordinary General Meeting of Shareholders and the
Special Meeting of Warrantholders will be held at
10:00 a.m. and 10:30 a.m., respectively, Eastern time,
on January 27, 2010, at the offices of Ellenoff
Grossman & Schole LLP, the Company’s counsel, at
150 East 42nd Street, New York, New York10017, or such
other date, time and place to which such meeting may be
adjourned or postponed, to consider and vote upon the proposals.
Record
Date; Who is Entitled to Vote (Page 75)
You will be entitled to vote or direct votes to be cast at the
Special Meeting of Warrantholders and the Extraordinary General
Meeting if you owned Company Warrants or Ordinary Shares,
respectively, at the close of business on January 7, 2010,
2009, which is the record date for the Special Meeting of
Warrantholders and the Extraordinary General Meeting. You are
entitled to one vote for each Company Warrant and one vote for
each Ordinary Share you owned at the close of business on the
record date. If your warrants or shares are held in “street
name” or are in a margin or similar account, you should
contact your broker to ensure that votes related to the warrants
or shares you beneficially own are properly counted. On the
record date, there were 19,380,000 Company Warrants outstanding,
of which 15,000,000 are Public Warrants and 4,380,000 are
Founder warrants, and there were 18,750,000 Ordinary Shares
issued and outstanding, of which 15,000,000 are Public Shares
and 3,750,000 are Founder Shares.
Quorum
and Vote for Shareholder Proposals (Page 75)
A quorum of shareholders is necessary to hold a valid
Extraordinary General Meeting of the Company’s
Shareholders. For the purposes of voting on all of the Proposals
except the Business Combination Proposal, a quorum will be
present at the Extraordinary General Meeting if more than 50% of
the holders of the Company’s Ordinary Shares issued and
outstanding on the record date and entitled to vote at the
Extraordinary General Meeting are present in person or by proxy.
A quorum will be present for the purpose of the Business
Combination Proposal if 100% of the holders of the
Company’s Ordinary Shares issued and outstanding on the
record date and entitled to vote at the Extraordinary General
Meeting are present in person or by proxy. Pursuant to the
Company’s Articles, if this quorum is not present within
half an hour from the time appointed at an adjourned meeting,
then the shareholders present at the adjourned meeting shall be
a quorum provided that the Name Change Proposal, the Repurchase
Amendment Proposal and the Staggered Board Elimination Proposal
may not be adopted with a reduced quorum in any adjourned
meeting. Abstentions and broker non-votes will count as present
for the purposes of establishing a quorum.
The approval of the Business Combination Proposal requires that
the majority of the Public Shares present and entitled to vote
at the Extraordinary General Meeting are voted in favor of the
Business Combination Proposal at the Extraordinary General
Meeting or at an adjourned meeting and that the holders of 30%
or more of the Public Shares do not vote against the Business
Combination Proposal and exercise their redemption rights in
respect of their Public Shares. If holders of 30% or more of the
Public Shares vote against the Business Combination Proposal and
demand that their Public Shares be redeemed for a pro rata
portion of the trust account, the Company will not, pursuant to
the terms of the Articles, be permitted to consummate the
Transaction. Please note you cannot seek redemption of your
Public Shares unless you vote against the Business Combination
Proposal and affirmatively elect to have your Public Shares
redeemed.
The approval of each of the Name Change Proposal, the Repurchase
Amendment Proposal, and the Staggered Board Elimination Proposal
requires the affirmative vote of not less than two-thirds of the
votes cast by such shareholders as being entitled to do so,
voting in person or by proxy at the Extraordinary General
Meeting. Pursuant to the Company’s Articles, the Name
Change Proposal, the Repurchase Amendment Proposal, and the
Staggered Board Elimination Proposal cannot be approved at an
adjourned meeting.
The approval of each of the Share Repurchase Proposal, the Board
of Directors Proposal, the Incentive Plan Proposal and the
Shareholder Adjournment Proposal requires the affirmative vote
of a majority of the shareholders as being entitled to do so,
voting in person or by proxy at the Extraordinary General
Meeting or at an adjourned meeting.
Abstentions, while considered present for the purposes of
establishing a quorum, will have no effect on the Business
Combination Proposal, the Name Change Proposal, the Repurchase
Amendment Proposal, the Staggered Board Elimination Proposal,
the Board of Directors Proposal, the Share Repurchase Proposal,
the Incentive Plan Proposal or the Shareholder Adjournment
Proposal. Broker non-votes, while considered present for the
purposes of establishing a quorum, will have no effect on the
Business Combination Proposal, Name Change Proposal, the
Repurchase Amendment Proposal, the Staggered Board Elimination
Proposal, the Share Repurchase Proposal, the Board of Directors
Proposal, the Incentive Plan Proposal or the Shareholder
Adjournment Proposal.
Quorum
and Required Vote for Warrantholder Proposals
(Page 75)
A quorum of warrantholders is necessary to hold a valid meeting.
A quorum will be present at the Special Meeting of
Warrantholders if a majority of the outstanding Company Warrants
is represented in person or by proxy. Abstentions and broker
non-votes will count as present for the purposes of establishing
a quorum.
The approval of the Warrant Amendment Proposal will require the
affirmative vote of the holders of a majority of the Company
Warrants outstanding as of the record date. The approval of the
Warrantholder Adjournment Proposal requires the affirmative vote
of a majority of the Company Warrants issued and outstanding as
of the record date voted at the Special Meeting of the
Warrantholders.
Abstentions are considered present for the purposes of
establishing a quorum but will have the same effect as a vote
“AGAINST” the Warrant Amendment Proposal. Broker
non-votes, while considered present for the purposes of
establishing a quorum, will have the same affect as a vote
“AGAINST” the Warrant Amendment Proposal.
Vote of
the Founders and Management (Page 80)
As of the record date for the Special Meeting of Warrantholders,
the Company’s Founders own the 4,380,000 founder warrants,
approximately 22.6% of the outstanding Company Warrants. The
Founders have indicated that they intend to vote in favor of the
Warrant Amendment Proposal.
On the record date for the Extraordinary General Meeting, the
Company’s Founders beneficially owned and were entitled to
vote an aggregate of 3,750,000 Founder Shares, an aggregate of
approximately 20.0% of the Company’s outstanding Ordinary
Shares. In connection with the IPO, the Company entered into an
agreement with the Company’s Founders pursuant to which the
Founders agreed to vote the Founder Shares on the Business
Combination Proposal in accordance with the majority of the
votes cast by the holders of Public Shares. In addition, in
connection with the IPO, the Founders and our directors and
officers agreed to vote any Ordinary Shares purchased subsequent
to the IPO in favor of the Business Combination Proposal. The
Founders of the Company have indicated that they intend to vote
in favor of all other proposals presented at the Extraordinary
General Meeting.
Recommendation
to Shareholders (Page 74)
After careful consideration of the terms and conditions of the
Business Combination Proposal, the Name Change Proposal, the
Repurchase Amendment Proposal, the Staggered Board Elimination
Proposal, the Share Repurchase Proposal, the Board of Directors
Proposal and the Incentive Plan Proposal, the Company’s
Board of Directors has determined unanimously that each of them
is fair to, and in the best interests of, the Company and
unanimously recommends that the shareholders vote or instruct
their vote to be cast “FOR” each of these proposals.
After careful consideration of the Warrant Amendment Proposal,
the Company’s Board of Directors has determined unanimously
that the Warrant Amendment Proposal is fair to, and in the best
interests of, the Company and unanimously recommends that the
warrantholders vote or instruct their vote to be cast
“FOR” the Warrant Amendment Proposal and
“FOR” the Warrantholder Adjournment Proposal.
In evaluating the proposals described herein, you should
carefully read this proxy statement/prospectus and especially
consider the factors discussed in the section entitled
“Risk Factors.” These risks include the
following:
•
The Company may not be able to consummate an initial business
combination within the required time frame, in which case, it
would be forced to liquidate and dissolve and its warrants will
expire worthless.
•
Public shareholders, together with any affiliates of theirs
or any other person with whom they are acting in concert or as a
partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of our securities, will be
restricted from seeking shareholder redemption rights with
respect to more than 10% of the Public Shares.
•
If the Company is forced to liquidate before the completion
of a business combination and distribute the trust account, the
holders of Public Shares may receive less than $10.04 per
share.
•
Public shareholders who wish to have their shares redeemed
into a pro rata portion of the trust account must comply with
specific requirements for redemption that may make it more
difficult for them to exercise their redemption rights prior to
the deadline for exercising redemption rights.
•
The Company’s shareholders may be held liable for claims
by third parties against it to the extent of distributions
received by them.
•
The Company’s directors have potential conflicts of
interest in recommending that shareholders vote in favor of
approval of the Transaction and adoption of the Master
Agreement.
•
The Company’s officers and directors and certain
affiliates may have a conflict of interest in recommending that
shareholders vote in favor of the Transaction.
•
The financial statements included in this proxy
statement/prospectus do not take into account the consequences
to the Company of a failure to complete a business combination
by January 30, 2010.
•
The NYSE Amex may delist the Company’s securities from
quotation on its exchange which could limit investors’
ability to make transactions in the Company securities and
subject it to additional trading restrictions.
•
Public shareholders at the time of the Transaction who
purchased their units in the IPO and do not exercise their
redemption rights may have rescission rights and related
claims.
•
The Company’s shareholders may not have as much control
of the Company as they do now as a consequence of the
acquisition of 24.5% of the Ordinary Shares by JNL. Having a
minority share position may reduce the influence that the
Company’s current shareholders have on the management of
the Company.
•
If the Transaction is completed, a large portion of the funds
in the trust account established by the Company in connection
with its IPO for the benefit of public shareholders may be used
for the purchase, directly or indirectly, of Public Shares held
by public shareholders. As a consequence, if the Transaction is
completed, such funds will not be available to the Company for
working capital and general corporate purposes.
The Company’s outstanding warrants may have an adverse
effect on the market price of our Ordinary Shares and make it
more difficult to effect an initial business combination.
•
Compliance with the Sarbanes-Oxley Act will require
substantial financial and management resources and may increase
the time and costs of completing an acquisition.
•
Shareholders will be voting without having disclosure about
the portfolio supporting the Block.
•
Completion of the Transaction is subject to a number of
conditions.
•
The opinion obtained by the Company from its financial
advisor will not reflect changes in circumstances prior to the
Transaction.
•
Pursuant to the Master Agreement, JNL will acquire 24.5% of
the Company’s issued and outstanding Ordinary Shares, and
to the extent JNL is unable to purchase such shares in the open
market or in privately negotiated transactions with record
shareholders of the Company prior to the Extraordinary General
Meeting or a combination thereof, it will acquire, not to exceed
19.9% of such shares, through a private placement and will be
given registration rights with respect to all such shares
acquired.
•
In the event the registration statement is declared
effective, the Company may be required to take additional costly
steps to deliver its final proxy statement/prospectus to its
shareholders and warrantholders.
•
Concentration of ownership after the Transaction may have the
effect of delaying or preventing a change in control.
•
The exercise of the Company’s directors’ and
officers’ discretion in agreeing to changes or waivers in
the terms of the Transaction may result in a conflict of
interest when determining whether such changes or waivers are
appropriate and in the best interests of the Company.
•
If the Transaction’s benefits do not meet the
expectations of financial or industry analysts, the market price
of the Company’s securities following the Transaction may
decline.
•
Uncertainties in management’s assessment of JNL Bermuda
could cause the Company not to realize the benefits anticipated
to result from the Transaction.
•
Future sales of the Company’s shares may cause the
market price of its securities to drop significantly even if its
business is doing well.
•
The price of the Company’s securities will be subject to
market factors, and your investment in our securities could
decline in value.
•
Overture has no operating history and its future performance
cannot be predicted based on the financial information included
in this Proxy Statement/Prospectus.
•
If Overture Re fails to obtain sufficient reinsurance
business, Overture Re’s ability to transact reinsurance
operations would be significantly and adversely affected.
•
Annuity contracts Overture Re may reinsure in the future may
expose Overture Re to mortality risk.
•
Interest rate fluctuations could negatively affect the income
we derive from the difference between the interest rates
Overture Re may earn on its investments and the interest
Overture Re may pay under its reinsurance contracts.
•
Policyholders may voluntarily terminate the policies in
numbers different than priced for, causing Overture Re to pay
greater than expected death benefits or to fail to recoup costs
or a statutory surplus strain.
•
Policyholders may cease paying premium on the policies,
causing the termination of such policies, in numbers different
than priced for, causing Overture Re to fail to recoup costs or
a statutory surplus strain.
Actual expenses relating to reinsurance coverage provided by
Overture Re may be higher than expected.
•
The invested assets supporting the business of Overture Re
may decrease in value if the assets default or decrease in
earning power.
•
If interest rates fall, funds reinvested will earn less than
expected.
•
If interest rates rise, policyholders may seek withdrawal of
funds.
•
Overture Re may develop a hedging program which may prove to
be deficient or in need of alterations.
•
Overture Re’s risk management, pricing and other models
may prove to be deficient or in need of significant
alterations.
•
Even if Overture Re’s models are adequately designed,
errors in data collection, dissemination and input as applied to
the program and models could generate erroneous results and
adversely affect Overture Re’s business.
•
If Overture Re’s investment strategy is not successful,
it could suffer unexpected losses.
•
Changes in the capital markets, interest rates or volatility
affect the market for products with variable annuity
guarantees.
•
Claims may exceed Overture Re’s reserves, which could
adversely affect its business.
•
Overture Re may not achieve the results shown in the
financial projections.
•
Overture Re may be dependent on a small number of large
transactions, which, if any of them has an unfavorable outcome
or fails to materialize as expected, could adversely affect
Overture Re.
•
Competition in the insurance industry could reduce Overture
Re’s risk margins.
•
The insurance and reinsurance business is historically
cyclical, and we can expect to experience periods with excess
capacity and unfavorable premium rates.
•
Overture Re depends on the performance of others and their
failure to perform in a satisfactory manner could negatively
affect it.
•
Investment management services to be provided to Overture Re
by JNFAM are essential for Overture Re’s business
operations, and replacing JNFAM, if necessary, could be time
consuming and disruptive.
•
Counterparties’ failure to perform their obligations to
Overture Re or JNL could adversely affect Overture Re.
•
Overture Re’s or JNL’s failure to establish and
maintain necessary information technology and risk management
systems could adversely affect Overture Re.
•
Interruption or loss of Overture Re’s information
processing systems or failure to maintain secure information
systems could have a material adverse effect on its business.
•
Overture Re could incur substantial losses if financial
institutions in which it maintains its cash, securities or other
investment assets fail.
•
Overture Re’s business, results of operations, financial
condition or liquidity may be materially adversely affected by
errors and omissions and the outcome of claims, lawsuits and
proceedings.
•
Comparisons of JNL’s carve-out underwriting results to
Overture Re’s expected results going forward may not be
meaningful due to the fact that JNL’s historical carve-out
financial statements relate only to the JNL carve-out block,
while Overture Re’s business going forward will expand
beyond the JNL carve-out block.
•
Overture Re’s failure to raise additional capital could
adversely affect Overture Re.
There may be potential conflicts of interest between Overture
Re and shareholders and affiliates of Overture Re which could
adversely affect Overture Re.
•
Overture Re’s business will rely on JNL, and if JNL
experiences capitalization, liquidity, financial or other
difficulties, Overture Re may not be able to replace the
managerial, actuarial, administrative and investment management
services provided by JNL in a timely manner.
•
Overture Re will be dependent on its key personnel and may
not be able to retain or hire key employees or successfully
integrate its new management team to fully implement its newly
formulated business strategy.
•
Emerging claim issues could adversely affect the business of
Overture Re.
•
Natural disasters, catastrophes and disasters caused by
humans, including the threat of terrorist attacks and related
events, epidemics and pandemics may adversely affect Overture
Re’s business and results of operations.
•
The Transaction involves a business combination with a
company located in Bermuda and will expose the Company to
certain risks that may negatively impact our operations.
•
Following the Transaction, the exemption of the
Company’s subsidiaries, Overture Re Holdings and Overture
Re from certain Bermuda taxes will be effective until
March 28, 2016, and if such exemption is not extended the
Company’s results of operations could be adversely
affected.
•
The Company’s subsidiaries, Overture Re Holdings is and
Overture Re will be incorporated in Bermuda, and a majority of
their directors and all of their and the Company’s assets
will be located outside the United States. As a result, it may
not be possible for security holders to enforce civil liability
provisions of the U.S. federal or state securities laws.
•
In the event of a change or adverse interpretation of
relevant income tax law, regulation or treaty, Overture
Re’s overall tax rate may be substantially higher than the
rate used for purposes of its consolidated financial
statements.
•
Overture Re’s business in Bermuda could be adversely
affected by Bermuda employment restrictions.
•
Operating as a foreign corporation could adversely affect
Overture Re’s ability to conduct business in the U.S.
•
Bermuda insurance regulations may adversely affect Overture
Re’s ability to write reinsurance policies.
•
Overture Re’s ability to pay dividends may be limited by
Bermuda law.
•
If Overture Re becomes subject to insurance statutes and
regulations other than those of Bermuda, or there is a change to
a Bermuda law or application of Bermuda law, there could be a
significant and adverse impact on the Company’s business
and profitability.
•
If Overture Re chooses to attempt, or deems it necessary, to
become licensed in a jurisdiction other than Bermuda, Overture
Re may have to modify its operations and business in manner that
could be adverse to Overture Re.
•
Overture Re may be unable to provide adequate collateral for
reinsurance treaties, which would adversely affect Overture Re
and its operations.
•
While the Company does not currently intend to pay dividends,
its ability to pay dividends, now or in the future, may be
constrained by its lack of direct revenues and limitations on
the payment of dividends which Bermuda law imposes on Overture
Re.
•
Overture Re Holdings and Overture Re may become subject to
taxes in Bermuda after March 28, 2016, which may have a
material adverse effect on their financial condition and
operating results and on an investment in the Securities.
The impact of the Organization for Economic Cooperation and
Development’s directive to eliminate harmful tax practices
is uncertain and could adversely affect Overture Re and Overture
Re Holdings’ tax status in Bermuda.
•
Risks related to Cayman Islands Taxation.
•
Overture Re could be treated as engaged in a trade or
business in the United States for federal income tax purposes
and subject to U.S. federal corporate income tax, a 30%
branch profits tax, and possibly state and local taxes.
•
Potential Application of the Federal Insurance Excise Tax.
•
Potential Application of the “Controlled Foreign
Corporation” Rules.
•
U.S. Holders may be subject to current U.S. federal
income taxation at ordinary income rates on their proportionate
share of Overture Re’s related person insurance income,
even if that income is not distributed.
•
U.S. Holders that dispose of the Company’s shares
may be subject to U.S. federal income taxation at the rates
applicable to dividends on all or a portion of their gains.
•
U.S. Holders that hold the Company’s securities
will be subject to adverse U.S. federal income tax
consequences if the Company, Overture Re Holdings or Overture Re
are treated as a passive foreign investment company.
•
U.S. tax-exempt organizations that own the
Company’s shares may recognize unrelated business taxable
income.
•
Changes in U.S. federal income tax law could materially
adversely affect an investment in the Shares.
The Company is providing the following selected historical
financial information to assist you in your analysis of the
financial aspects of the Transaction.
The following selected historical financial information of the
Company as of September 30, 2009 and for the nine months
ended September 30, 2009 and 2008 are derived from the
Company’s unaudited financial statements, which are
included elsewhere in this proxy statement/prospectus. The
following selected historical financial information of the
Company as of December 31, 2008 and 2007 and for the year
ended December 31, 2008 and for the period from
September 25, 2007 (inception) through December 31,2008 are derived from the Company’s audited financial
statements, which are included elsewhere in this proxy
statement/prospectus. The results of operations for interim
periods are not necessarily indicative of the results of
operations which might be expected for the entire year.
The following information is only a summary and should be read
in conjunction with the unaudited interim financial statements
of the Company for the nine months ended September 30, 2009
and 2008 and the notes thereto and the audited financial
statements of the Company for the year ended December 31,2008 for the period from September 25, 2007 (inception)
through December 31, 2008 and the notes thereto and
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations of the Company”contained elsewhere in this proxy statement/prospectus.
JNL is providing the following selected historical financial
information for its fixed and variable annuity block that will
be subject to reinsurance effected by the Transaction (the
“Block,” the “JNL carve-out” or the
“JNL carve-out block,” to assist you in your analysis
of the financial aspects of the Transaction.
The following selected historical financial information of JNL
carve-out as of September 30, 2009 and for the nine months
ended September 30, 2009 and 2008 are derived from
JNL’s carve-out unaudited financial statements, which are
included elsewhere in this proxy statement/prospectus. The
following selected historical financial information of JNL
carve-out as of December 31, 2008 and 2007 and for the
years ended December 31, 2008, 2007 and 2006 are derived
from JNL’s carve-out audited financial statements, which
are included elsewhere in this proxy statement/prospectus. The
results of operations for interim periods are not necessarily
indicative of the results of operations which might be expected
for the entire year.
The following information is only a summary and should be read
in conjunction with the unaudited interim financial statements
of JNL carve-out for the nine months ended September 30,2009 and 2008 and the notes thereto and the audited financial
statements of JNL carve-out for the years ended
December 31, 2008, 2007 and 2006 and the notes thereto and
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations of JNL Carve-Out”contained elsewhere in this proxy statement/prospectus.
The Company believes that the most relevant presentation of the
historical financial information is on the carve-out basis
presented in this prospectus/proxy statement. The Company has
discrete historical financial information for the Reinsurance
Block that can be easily segregated for years 2006 through the
present. The Company did not maintain a segregated block in 2005
or 2004 on a basis consistent with years 2006 through the
present and the Company had a different product mix and
additional, unrelated lines of business in 2005 and 2004.
Therefore the Company did not provide such selected financial
information for 2005 and 2004.
9 Months Ended
9 Months Ended
Year Ended
Year Ended
Year Ended
9/30/09
9/30/08
12/31/08
12/31/07
12/31/06
(Unaudited)
(Unaudited)
(Dollars in thousands)
Statement of Operations Data:
Total revenues
22,392
21,083
25,515
33,232
32,869
Benefits and expenses:
Total benefits and expenses
18,355
20,944
28,555
30,040
34,863
Income (loss) before Federal income tax (benefit) expense
The pro forma financial statements included below are being
provided to assist you in your analysis of the financial aspects
of the Transaction.
The unaudited pro forma combined balance sheet combines the
historical carve-out balance sheets of JNL and the Company as of
September 30, 2009 giving effect to the Business
Combination as if it had occurred on September 30, 2009.
The unaudited pro forma combined statements of operations and
comprehensive income (loss) combine the historical carve-out
statements of operations of JNL for the nine months ended
September 30, 2009 and for the year ended December 31,2008 with those of the Company for the nine months ended
September 30, 2009 and for the year ended December 31,2008, giving effect to the Business Combination as if it had
occurred at the beginning of the period on January 1, 2009
and January 1, 2008, respectively.
The Transaction is being consummated pursuant to the Master
Agreement the Company, Overture Re Holdings, JNF, JNL, a
wholly owned subsidiary of JNF, and JNL Bermuda, a newly formed
wholly owned subsidiary of JNL.
Pursuant to the Master Agreement Overture Re and JNL Bermuda
will amalgamate and Overture Re will be the successor entity
acquiring the (i) option to reinsure 90% of JNL’s
fixed annuities and 50% of JNL’s variable annuities (the
“Reinsurance Option”); (ii) employees of JNL
Bermuda; and (iii) fixed income securities and other assets
of JNL Bermuda. The value of these elements contained in JNL
Bermuda and purchased by Overture Re is anticipated to meet or
exceed $120 million, thus satisfying the Company’s
business combination requirement of an operating business having
a fair market value of at least 80% of the balance held in the
Company’s trust account at the time of such business
combination. Following the amalgamation, Overture Re will
exercise the Reinsurance Option and enter into a Reinsurance
Agreement with JNL.
The pro forma adjustments give effect to events that are
directly attributable to the Transactions discussed above that
have a continuing impact on the operations of the Company and
are based on available data and certain assumptions that
management believes are factually supportable.
The unaudited pro forma combined financial statements described
above should be read in conjunction with the Company’s
historical financial statements and the carve-out historical
financial statements of JNL and the related notes thereto. The
pro forma adjustments are preliminary and the unaudited pro
forma information is not necessarily indicative of the financial
position or results of operations that may have actually
occurred had the acquisition taken place on the dates noted, or
of continuing entity’s future financial position or
operating results.
The following unaudited pro forma financial statements have been
prepared using two different assumptions with respect to the
number of outstanding shares of the Company immediately
following the Business Combination, as follows:
•
assuming no redemption — this presentation assumes
that no Public Shares of the Company are redeemed as part of the
Business Combination
•
assuming maximum redemption — this presentation
assumes the maximum number of Public Shares are redeemed as part
of the Business Combination resulting in the redemption of
4,499,999 shares.
In the case of both assumptions, the data is based on
(a) information and projections currently available to the
parties, including the estimated adjusted Company trust value of
$150.4 million, and (b) approximately 15 million
shares of the Company Ordinary Shares outstanding following the
repurchase of Founders’ shares of 3.75 million Founder
Shares.
Detailed information as to the weighted average shares for each
period presented are provided in Note l to the Unaudited Pro
Forma Combined Statements of Operations and Comprehensive Income
(Loss).
The following table sets forth selected historical equity
ownership information for the Company and Overture Re Holdings
and unaudited pro forma combined per share ownership information
after giving effect to the Transaction, assuming (i) that
no holders of Public Shares have exercised their redemption
rights and (ii) that holders of 30% less one share of the
Public Shares have exercised their redemption rights. The
Company is providing this information to aid you in your
analysis of the financial aspects of the Transaction. The
historical information should be read in conjunction with
“Selected Historical Consolidated Financial
Information of Overture Re Holdings,”and
“Selected Historical Financial Information of the
Company” included elsewhere in this proxy
statement/prospectus and the historical consolidated and
combined financial statements of the Company and Overture Re
Holdings and the related notes thereto included elsewhere in
this proxy statement/prospectus. The unaudited pro forma per
share information is derived from, and should be read in
conjunction with, the unaudited condensed combined pro forma
financial data and related notes included elsewhere in this
proxy statement/prospectus.
The unaudited condensed combined pro forma share information are
presented for informational purposes only and are subject to a
number of uncertainties and assumptions and do not purport to
represent what the companies’ actual performance or
financial position would have been had the transaction occurred
on the dates indicated and does not purport to indicate the
financial position or results of operations as of any future
date or for any future period.
The unaudited pro forma consolidated per share information does
not purport to represent what the actual results of operations
of the Company and Overture Re Holdings would have been had the
Transaction been completed or to project the Company’s or
Overture Re Holdings’ results of operations that may be
achieved after the Transaction. The unaudited pro forma book
value per share information below does not purport to represent
what the value of the Company and Overture Re Holdings would
have been had the Transaction been completed nor the book value
per share for any future date or period.
Book value per share of the Company is computed by dividing the
sum of total shareholders’ equity plus Ordinary Shares
subject to possible redemption by the 18,750,000 shares
outstanding at the balance sheet date. Book value per share for
the pro forma columns is computed by dividing the total
shareholders’ equity by15,000,000 shares outstanding
assuming no redemption and 10,500,001 shares outstanding
assuming maximum redemption.
You should carefully consider the following risk factors,
together with all of the other information included in this
proxy statement/prospectus, before you decide whether to vote or
instruct your vote to be cast to adopt proposals described in
this proxy statement/prospectus. As the Company’s
operations will primarily be those relating to JNL Bermuda upon
consummation of the Transaction, a number of the following risk
factors relate to such business and operations of JNL
Bermuda.
The
Company may not be able to consummate an initial business
combination within the required time frame, in which case, it
would be forced to liquidate and dissolve and its warrants will
expire worthless.
Pursuant to the Company’s Articles, it will have until
January 30, 2010 in which to complete an initial business
combination. If the Company fails to consummate the Transaction,
it will likely be unable to consummate an initial business
combination with a different target within the required time
frame and the Company will go into automatic liquidation. In
that event, the liquidator will distribute to all of the holders
of Public Shares, in proportion to the number of shares held by
them, an aggregate sum equal to the amount in the trust account,
inclusive of any interest, plus any remaining net assets, less
expenses or reserves for obligations and claims of creditors. In
such event, there will be no distribution with respect to the
Company’s outstanding warrants. Accordingly, the warrants
will expire worthless.
Public
shareholders, together with any affiliates of theirs or any
other person with whom they are acting in concert or as a
partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of our securities, will be
restricted from seeking shareholder redemption rights with
respect to more than 10% of the Public Shares.
Public shareholders, together with any affiliate of his, her or
it or any other person with whom he, she or it is acting in
concert or as a partnership, syndicate or other group for the
purpose of acquiring, holding or disposing of our securities,
will be restricted from seeking shareholder redemption rights
with respect to more than 10% of the Public Shares. Accordingly,
if you own more than 10% of the Public Shares, vote all of your
shares against a proposed initial business combination and such
proposed initial business combination is approved, you will not
be able to seek shareholder redemption rights with respect to
the full amount of your Public Shares and may be forced to hold
such additional Public Shares or sell them in the open market.
The Company cannot assure you that the value of such additional
Public Shares will appreciate over time following an initial
business combination or that the market price of such Public
Shares will exceed the per-share redemption price.
If the
Company is forced to liquidate before the completion of a
business combination and distribute the trust account, the
holders of Public Shares may receive less than $10.04 per
share.
If the Company is unable to complete an initial business
combination by January 30, 2010, and is automatically
liquidated, the per-share liquidation distribution may be less
than $10.04 because of the expenses incurred subsequent to the
IPO and in seeking an initial business combination or due to
amounts reserved for claims or potential claims of creditors.
Furthermore, there will be no distribution with respect to the
Company’s outstanding warrants, which will expire worthless
if it liquidates without consummating a business combination.
The placing of funds in trust may not protect those funds from
third party claims against the Company. Although the Company has
and will continue to seek to have all vendors (other than its
independent accountants) it engages and prospective target
businesses with which it negotiates, execute agreements with the
Company waiving any right, title, interest or claim of any kind
in or to any monies held in the trust account for the benefit of
its public shareholders, there is no guarantee that they will
execute such agreements. Furthermore, there is no guarantee
that, even if such entities execute such agreements with the
Company, they will not seek recourse against the trust account.
Nor is there any guarantee that such entities will agree to
waive any claims they may have in the future as a result of, or
arising out of, any negotiations, contracts or
agreements with the Company and will not seek recourse against
the trust account for any reason. There is also no guarantee
that a court would uphold the validity of such agreements.
Further, the Company could be subject to claims from parties not
in contract with it who have not executed a waiver, such as a
third party claiming tortious interference as a result of its
initial business combination.
Accordingly, the proceeds held in trust could be subject to
claims which could take priority over those of the
Company’s public shareholders and, as a result, the
per-share liquidation price could be less than approximately
$10.04 due to claims of such creditors. If the Company
automatically liquidates without consummating a business
combination, John F. W. Hunt and Marc J. Blazer have agreed that
they will be personally liable, by means of direct payment to
the trust account, to ensure that the proceeds in the trust
account are not reduced by the claims of target businesses,
claims of vendors or other entities that are owed money by the
Company for services rendered or contracted for or products sold
to the Company or lenders for borrowed money. However, the
agreement entered into by Messrs. Hunt and Blazer
specifically provides there will be no liability as to any
claimed amounts owed to a third party who executed a valid and
enforceable waiver. Furthermore, there could be claims from
parties other than vendors or target businesses that would not
be covered by the indemnity from Messrs. Hunt and Blazer,
such as shareholders and other claimants who are not parties in
contract with the Company who file a claim for damages against
the Company. The measures described above are the only actions
the Company will take to ensure that the funds in the trust
account are not depleted by claims against the trust. Because
the Company will seek to have all vendors (other than our
independent accountants) and prospective target businesses
execute agreements with the Company waiving any right, title,
interest or claim of any kind they may have in or to any monies
held in the trust account, we believe the likelihood of
Messrs. Hunt and Blazer having any such obligations is
minimal. Based upon representations from Messrs. Hunt and
Blazer as to their accredited investor status (as such term is
defined in Regulation D under the United States Securities
Act) and that they have sufficient funds available to them to
satisfy their indemnification obligations to the Company,
management believes they will be able to satisfy any
indemnification obligations that may arise. However, in the
event Messrs. Hunt and Blazer have liability to the Company
under these indemnification arrangements, management cannot
assure you that they will have the assets necessary to satisfy
those obligations. Therefore, the Company cannot assure you that
the per-share distribution from the trust account, if it
liquidates, will not be less than approximately $10.04, plus
interest, due to such claims.
Additionally, if the Company becomes insolvent
and/or is
required to seek court supervision of its liquidation or a
petition to wind up the company is filed against the Company
which is not dismissed, the proceeds held in the trust account
will be subject to applicable Cayman Islands insolvency law and
may be included in its insolvent estate and subject to the
claims of third parties with priority over the claims of the
Company’s shareholders. To the extent any such claims
deplete the trust account, the Company cannot assure you it will
be able to return to the Company’s public shareholders at
least $10.04 per share.
Public
shareholders who wish to have their shares redeemed into a pro
rata portion of the trust account must comply with specific
requirements for redemption that may make it more difficult for
them to exercise their redemption rights prior to the deadline
for exercising redemption rights.
The holders of Public Shares who wish to have their Public
Shares redeemed into a pro rata portion of the funds held in the
Company’s trust account must tender their certificates to
the Company’s transfer agent prior to the Extraordinary
General Meeting of Shareholders or deliver their shares to the
transfer agent electronically through the DTC. In order to
obtain a physical share certificate, a stockholder’s broker
and/or
clearing broker, DTC and the Company’s transfer agent will
need to act to facilitate this request. Given the relatively
short solicitation period, it is advisable for shareholders to
use electronic delivery of the Public Shares to our transfer
agent through the DTC by contacting the shareholder’s
broker, bank or nominee. The Company’s transfer agent will
receive the Public Shares on the same day that electronic
delivery instructions are made.
The
Company’s shareholders may be held liable for claims by
third parties against it to the extent of distributions received
by them.
The Company’s Articles provide that if by January 30,2010 it has not consummated an initial business combination it
will immediately go into a voluntary liquidation procedure under
the Companies Law (2009 Revision) of the Cayman Islands. Upon
the appointment of the liquidator, the directors’ powers
will be suspended. The liquidator will give at least
21 days’ notice to creditors of his intention to make
a distribution by notifying known creditors (if any) and by
placing a public advertisement in the Cayman Islands Official
Gazette and taking any other steps he considers appropriate,
after which the assets of the Company would be distributed. As
soon as the affairs of the Company are fully
wound-up,
the liquidator must present his final report and accounts before
a final general meeting which must be called by a public notice
at least 21 days before it takes place. After the final
meeting, the liquidator must make a return to the Cayman Islands
Registrar of Companies confirming the date on which the meeting
was held and three months after the date of such filing, the
Company will be dissolved. However, the liquidator will instruct
the trustee to liquidate the trust account to the Company’s
public shareholders as soon as reasonably possible after the end
of the 21 days’ notice period to creditors referenced
above and the Company’s directors and officers have agreed
to assist the liquidator in taking any action necessary to
liquidate the trust account as soon as reasonably practicable if
it does not complete an initial business combination by
January 30, 2010.
In certain limited circumstances, the Company’s
shareholders could potentially be liable for any claims to the
extent of distributions received by them pursuant to such
process and any liability of the Company’s shareholders may
extend beyond the date of such dissolution. Accordingly, the
Company cannot assure you that third parties or a future
liquidator of the Company will not seek to recover from our
shareholders amounts paid to them by the Company. If the Company
becomes insolvent
and/or it is
forced to seek court supervision in respect of its liquidation,
or a petition to wind up the Company is filed against it which
is not dismissed, any distributions received by shareholders
could, in certain circumstances, be viewed under applicable
debtor/creditor
and/or
insolvency laws as either a “preferential payment” or
a “fraudulent transfer” or may otherwise be regarded
as an improper distribution to shareholders. As a result, a
liquidator of the Company or defrauded creditor of the Company
may apply to the Cayman Islands court seeking to recover amounts
improperly received by the Company’s shareholders. The
Company cannot assure you that claims will not be brought
against public shareholders for these reasons.
The
Company’s directors have potential conflicts of interest in
recommending that shareholders vote in favor of approval of the
Transaction and adoption of the Master Agreement.
When considering the Company’s Board of Directors’
recommendation that the shareholders vote in favor of the
approval of the Transaction and the adoption of the Master
Agreement, the Company’s shareholders should be aware that
directors and executive officers of the Company have interests
in the Transaction that may be different from, or in addition
to, the interests of the Company. These interests include:
•
the continued indemnification of the Company under the Master
Agreement and the continuation of directors’ and
officers’ liability insurance after the Transaction; If the
Transaction is not approved, the Company and the current
officers and directors will not be entitled to such
indemnification;
•
the Company’s officers and directors will only be
reimbursed for out of pocket expenses incurred in operating the
Company, including the expenses of searching for, negotiating
and consummating the Transaction in excess of the amount of
allotted for such purposes from the trust upon consummation of
the Transaction;
•
the retention of some of the directors and officers of the
Company as directors and officers of the Company;
•
the continued right of the Company’s Founders to hold
Ordinary Shares in the Company; The financial interest of the
Company’s Founders as a result of such ownership may give
rise to a conflict of interest in determining whether the terms
and conditions of the Transaction are appropriate and in the
Company’s shareholders’ best interest;
the continued right of the Company’s Founders to hold
founder warrants in the Company; The financial interest of the
Founders as a result of such ownership may give rise to a
conflict of interest in determining whether the terms and
conditions of the Transaction are appropriate and in the
Company’s shareholders’ best interest; and
•
the right of the Company’s Founders to hold warrants in JNF
and to receive up to 2,812,500 of the Company’s Ordinary
Shares upon the occurrence of certain events.
These personal and financial interests may influence the
Company’s directors in determining whether the terms and
conditions of the Transaction are appropriate and in the
Company’s shareholders’ best interest and in making
their recommendation that you vote in favor of the approval of
the Transaction and the adoption of the Master Agreement.
The
Company’s officers and directors and certain affiliates may
have a conflict of interest in recommending that shareholders
vote in favor of the Transaction.
The Company’s Founders and entities affiliated with certain
of its Founders, own Ordinary Shares that were issued prior to
the Company’s IPO in consideration for an aggregate
purchase price of $25,000. Additionally, the Company’s
Founders purchased an aggregate of 4,380,000 founder warrants,
each at a purchase price of $1.00 per warrant, immediately prior
to the consummation of the Company’s IPO. Such purchasers
waived their right to receive distributions from the
Company’s trust account with respect to the Founders Shares
upon the Company’s liquidation if it is unable to
consummate an initial business combination. Accordingly, the
Founders Shares as well as the founder warrants will be
worthless if the Company does not consummate the Transaction as
it is unlikely to find a substitute target for an initial
business combination. The personal and financial interests of
the Company’s Founders may influence their motivation in
timely identifying and selecting a target business and
completing an initial business combination. See
“Proposals to be Considered by Shareholders —
The Business Combination Proposal — Certain Benefits
of the Company’s Directors and Officers and Others in the
Transaction.”
In addition, pursuant to the Master Agreement, the Company has
agreed to repurchase all of the 3,750,000 Founder Shares. In
consideration of the repurchase of the Founder Shares, the
Founders will receive: (i) warrants to purchase
46,875 shares of JNF common stock at an exercise price of
$75.00 per share (ii) warrants to purchase
46,875 shares of JNF common stock at an exercise price of
$125.00 per share subject to the floating strike price
adjustments, and (iii) a right to receive up to 2,812,500
of the Company’s Ordinary Shares issuable in three equal
tranches in the event the volume weighted average price of the
Company’s Ordinary Shares for any ten days during a
30 day period equals or exceeds $12, $16 and $20,
respectively.
The approximate value of the Founder’s warrants in JNF is
$365,428. The valuation was derived using the Black Scholes
model using the following assumptions:
The exercise price of the Class A and B Warrants was
determined in negotiations for the overall transaction and the
structure reflects anticipation of future growth and value
creation in the strategic business which would cause additional
value to the warrantholders.
Consequently, the Company’s Founders’ discretion when
determining whether the terms, conditions and timing of a
particular business combination are appropriate and in the
Company’s best interests may result in a conflict of
interest. See “Certain Relationships and Related
Transactions” for a discussion of other potential
conflicts of interests, such as the option to purchase JNFAM.
The
financial statements included in this proxy statement/prospectus
do not take into account the consequences to the Company of a
failure to complete a business combination by January 30,2010.
The financial statements included in this proxy
statement/prospectus have been prepared assuming that the
Company would continue as a going concern. As discussed in
Note 1 to the Notes to the Company’s Financial
Statements for the year ended December 31, 2008, the
Company is required to complete the Transaction pursuant to the
Company’s Articles by January 30, 2010. The
possibility of the Transaction not being consummated raises
substantial doubt as to the Company’s ability to continue
as a going concern and the financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
The
NYSE Amex may delist the Company’s securities from
quotation on its exchange which could limit investors’
ability to make transactions in the Company securities and
subject it to additional trading restrictions.
The Company’s securities are listed on the NYSE Amex, a
U.S. national securities exchange. Although the Company
expects to continue to meet the minimum continued listing
standards, the Company cannot assure you that its securities
will continue to be listed on the NYSE Amex in the future prior
to an initial business combination. Additionally, in connection
with the Transaction, the Company will file a new initial
listing application and must meet its initial listing
requirements as opposed to its more lenient continued listing
requirements. The Company cannot assure you that it will be able
to meet those initial listing requirements at that time.
Although the Company seeks to continue the listing of its
Ordinary Shares and Warrants on the NYSE Amex or another
national securities exchange following consummation of the
Transaction, there can be no assurance that its securities will
be listed or, if listed, that the Company will be able to comply
with the continued listing standards of the NYSE Amex or the
listing standards of another national securities exchange.
If the NYSE Amex delists the Company’s securities from
trading on its exchange and the Company is unable to list its
securities on another exchange, the Company could face
significant material adverse consequences, including:
•
a limited availability for market quotations for the
Company’s securities;
•
reduced liquidity with respect to the Company’s securities;
•
a determination that the Ordinary Shares are a “penny
stock,” which will require brokers trading in the Ordinary
Shares to adhere to more stringent rules and possibly result in
a reduced level of trading activity in the secondary trading
market for the Ordinary Shares;
•
limited amount of news and analyst coverage for the
Company’s securities; and
•
a decreased ability to issue additional securities or obtain
additional financing in the future.
In addition, the Company would no longer be subject to stock
exchange rules, including rules requiring the Company to have a
certain number of independent directors and to meet other
corporate governance standards.
Public
shareholders at the time of the Transaction who purchased their
units in the IPO may have rescission rights.
There are two aspects of the Transaction as described in this
proxy statement/prospectus which was not described in the
prospectus issued by the Company in connection with its IPO.
First, that the funds in the trust account might be used to
purchase shares from shareholders of the Company who have
indicated their intention to vote against the Transaction and
redeem their shares for cash, and second, the amendment of the
Warrant Agreement. Consequently, the Company’s use of funds
in the trust account to purchase shares of shareholders who have
indicated their intention to vote against the Transaction or the
Company’s amendment of the Warrant Agreement might be
grounds for a shareholder who purchased shares in the IPO, to
seek rescission of the purchase of the units he acquired in the
IPO. A successful claimant for damages under federal or state
law could be awarded an amount to compensate for the decrease in
value of his or her shares caused by the alleged violation
(including, possibly, punitive damages), together with interest,
while retaining the shares. The rescission right and
corresponding liability will continue against the Company after
the Transaction. If the Company is required to pay damages, its
results of operations could be adversely affected. These
differences between this proxy statement/prospectus and the
prospectus issued by the Company in connection with its IPO are
the only differences which we are aware of.
The
Company’s shareholders may not have as much control of the
Company as they do now as a consequence of the acquisition of
24.5% of the Ordinary Shares by JNL. Having a minority share
position may reduce the influence that the Company’s
current shareholders have on the management of the
Company.
In connection with the closing of the Transaction, JNL has
agreed to beneficially own or have made commitments to acquire
on the Closing Date 24.5% of the Company’s Ordinary Shares,
taking into account the Public Shares redemptions, the
obligation of the Company to repurchase the Founders Shares and
any issuance of Ordinary Shares to JNL pursuant to the Master
Agreement, by (i) Open Market Purchases prior to the record
date of the Extraordinary General Meeting, (ii) privately
negotiated share purchase transactions with record holders of
the Company’s Ordinary Shares subsequent to the record date
but prior to the Extraordinary General Meeting
and/or
(iii) purchase of such number of Ordinary Shares from the
Company, not to exceed 19.9%, such that it will on the Closing
Date beneficially own or have commitments to acquire in the
aggregate 24.5% of the Company’s outstanding Ordinary
Shares following the closing date of the Transaction.
Accordingly, following consummation of the Transaction, JNL will
hold approximately 24.5% of the issued and outstanding Ordinary
Shares, taking into account the Public Shares redemptions, the
obligation of the Company to repurchase the Founder Shares and
any issuance of Ordinary Shares to JNL pursuant to the Master
Agreement. In addition, subsequent to the closing of the
Transaction, the Company will be required to issue 2,812,500
Ordinary Shares to the Founders in three tranches if the volume
weighted average price of the Company’s Ordinary Shares for
any ten days during a 30 day period equals or exceeds
$12, $16 and $20, respectively. Consequently, the ability of the
current Company shareholders following the Transaction to
influence management of the Company through the election of
directors will be substantially reduced.
If the
Transaction is completed, a large portion of the funds in the
trust account established by the Company in connection with its
IPO for the benefit of public shareholders may be used for the
purchase, directly or indirectly, of Public Shares held by
public shareholders. As a consequence, if the Transaction is
completed, such funds will not be available to the Company for
working capital and general corporate purposes.
After the payment of the consideration to JNL and expenses
associated with the Transaction, including deferred underwriting
commissions, the balance of funds in the Company’s trust
account will be available to
the Company for working capital and general corporate purposes.
However, up to approximately $5 million of the funds in the
trust account may be used to acquire Public Shares, either from
holders thereof who vote against the Business Combination
Proposal and elect to convert their Public Shares into cash or
from holders thereof who have indicated their intention to vote
against the Business Combination Proposal but sell their shares
to the Company or its affiliates so that such Public Shares will
be voted in favor of the Business Combination Proposal. As a
result of such purchases, the amount of funds from the
Company’s trust account that will be released to the
Company following the Transaction for working capital and
general corporate purposes will be diminished.
The
Company’s outstanding warrants may have an adverse effect
on the market price of our Ordinary Shares and make it more
difficult to effect an initial business
combination.
The Company has issued warrants to purchase 15,000,000 Ordinary
Shares as part of the units sold in its IPO and the founder
warrants to purchase 4,380,000 Ordinary Shares (an aggregate of
19,380,000 warrants). The potential for the issuance of a
substantial number of additional shares upon exercise of these
warrants could make the Company a less attractive acquisition
vehicle in the eyes of a target business. Such securities, when
exercised, will increase the number of issued and outstanding
Ordinary Shares. Additionally, the sale, or even the possibility
of sale, of the shares underlying the warrants could have an
adverse effect on the market price for the Company’s
securities or on its ability to obtain future financing. If and
to the extent these warrants are exercised, you may experience
dilution to your holdings. Shareholders will be asked to vote on
an amendment to the exercise price, expiration date and
redemption price of the issued and outstanding Company warrants.
Compliance
with the Sarbanes-Oxley Act will require substantial financial
and management resources and may increase the time and costs of
completing an acquisition.
Section 404 of the Sarbanes-Oxley Act requires that the
Company evaluate and report on its system of internal controls
beginning with its Annual Report on
Form 10-K
for the year ending December 31, 2008. If the Company fails
to maintain the adequacy of its internal controls, the Company
could be subject to regulatory scrutiny, civil or criminal
penalties
and/or
shareholder litigation. Any inability to provide reliable
financial reports could harm the Company’s business.
Section 404 of the Sarbanes-Oxley Act also requires that
the Company’s independent registered public accounting firm
report on management’s evaluation of its system of internal
controls beginning with its Annual Report on
Form 10-K
for the year ending December 31, 2010. Furthermore, any
failure to implement required new or improved controls, or
difficulties encountered in the implementation of adequate
controls over the Company’s financial processes and
reporting in the future, could harm its operating results or
cause the Company to fail to meet its reporting obligations.
Inferior internal controls could also cause investors to lose
confidence in the Company’s reported financial information,
which could have a negative effect on the trading price of its
shares.
Completion
of the Transaction is subject to a number of
conditions.
The obligations of the parties to consummate the Transaction are
subject to the satisfaction or waiver of specified conditions
set forth in the Master Agreement. Such conditions include
satisfaction by all parties of covenants and obligations
contained in the Master Agreement, the accuracy in all material
respects on the date of the Master Agreement and the closing
date of all of the parties’ representations and warranties,
obtaining material consents, approval of the regulatory
agencies, redemption of not more than one share less than 30% of
the Public Shares, warrantholder and shareholder approval of the
proposals contained herein, execution of ancillary agreements
and the exchange of certain securities of the Founders for
securities of Overture Re and JNF, as set forth in the Master
Agreement. It is possible some or all of these conditions will
not be satisfied or waived by the parties to the Master
Agreement, and therefore, the Transaction may not be consummated.
The
opinion obtained by the Company from its financial advisor will
not reflect changes in circumstances prior to the
Transaction.
The Company has obtained a fairness opinion, dated as of
December 6, 2009, from its financial advisor, Houlihan
Smith. The Company has not obtained nor will obtain an
additional updated fairness opinion prior to completion of the
Transaction. Changes in the proposed operations and prospects of
Overture Re, general market and economic conditions and other
factors that may be beyond the control of the Company and
Overture Re, and on which the fairness opinion was based, may
alter the value of the Company or Overture Re or the price of
the Company’s securities by the time the Transaction is
completed. The fairness opinion does not speak to any date other
than the date of such opinion, and as such, the opinion will not
address the fairness of the Transaction consideration, from a
financial point of view, at any date after the date of such
opinion, including at the time the Transaction is completed. For
a description of the opinion, see “Proposals to be
Considered by Shareholders — The Master
Agreement — Opinion of Houlihan Smith &
Company Inc.”
Pursuant
to the Master Agreement, JNL will acquire 24.5% of the
Company’s issued and outstanding Ordinary Shares, and to
the extent JNL is unable to purchase such shares in the open
market or in privately negotiated transactions with record
shareholders of the Company prior to the Extraordinary General
Meeting or a combination thereof, it will acquire, not to exceed
19.9% of such shares, through a private placement and will be
given registration rights with respect to all such shares
acquired.
Following consummation of the Transaction, JNL will on the
Closing Date beneficially own or have commitments to acquire
24.5% of the issued and outstanding shares of the Company,
taking into account the Public Shares redemptions, the
obligation of the Company to repurchase the Founders Shares and
any issuance of Ordinary Shares to JNL pursuant to the Master
Agreement. Because JNL will be deemed to be an affiliate of the
Company, shares so acquired will be restricted securities and
accordingly, JNL will be entitled, pursuant to a registration
rights agreement, to require the Company to register the resale
of such shares. If JNL exercises its registration rights with
respect to such shares, there will be additional securities
eligible for trading in the public market. The presence of these
additional securities trading in the public market may have an
adverse effect on the market price of our Ordinary Shares.
Shareholders
Will Be Voting Without Having Disclosure About the Portfolio
Supporting the Block.
Shareholders will be voting on the matters disclosed in this
proxy statement/prospectus without having disclosure about the
specific investments to be allocated to the Block. The
investments in the portfolio will not be selected until the time
of closing of the Transaction. Shareholders voting on the
Transaction will not have disclosure that separately identifies
the portfolio effectively supporting the policy liabilities of
the Block at the time they vote. Although the Company expects
that the relative proportions of the investment asset classes of
securities to be received from JNL will be generally similar to
those currently in JNL’s general accounts portfolio,
because it is not possible to segregate the assets supporting
the Overture Re receivable prior to the closing of the
Transaction, the specific qualities and characteristics of the
portfolio are uncertain. JNL anticipates that the portfolio
allocated to the Block will be substantially similar to the JNL
portfolio by or in terms of asset class, maturity, credit rating
and concentration, except that it will contain exclusively fixed
maturities available for sale and will not include preferred
stock, common stock, mortgage loan trusts, mortgage loans on
real estate, real estate, notes receivable, put option
contracts, and other invested assets.
In the
event the registration statement is declared effective, the
Company may be required to take additional costly steps to
deliver its final proxy statement/prospectus to its shareholders
and warrantholders.
The Company must close the Transaction by January 30, 2010
or, pursuant to the Company’s Articles, will go into
automatic liquidation. Due to the short period of time between
execution of the Master Agreement (delaying the filing of the
registration statement with the SEC) and January 30, 2010,
the Company expects to incur additional costs for additional
mailings, overnight delivery costs and services of its proxy
solicitation firm. In addition, shareholders and warrantholders
may have a relatively short period to review the proxy
statement/prospectus and consider the Transaction and the
expenses of the Transaction will increase, reducing the funds
released to the Company for working capital in the event the
Transaction is closed.
Concentration
of ownership after the Transaction may have the effect of
delaying or preventing a change in control.
If a business combination with JNL Bermuda is consummated, JNL
Bermuda’s current sole member, JNL, will on the Closing
Date beneficially own or have commitments to acquire up to 24.5%
of the issued and outstanding Ordinary Shares, taking into
account any Public Share redemptions, the obligation of the
Company to repurchase the Founder Shares and any issuance of
Ordinary Shares to JNL pursuant to the Master Agreement. As a
result, JNL may have the ability to significantly influence the
outcome of corporate actions requiring shareholder approval.
This concentration of ownership may have the effect of delaying
or preventing a change in control and might adversely affect the
market price of the Ordinary Shares.
The
exercise of the Company’s directors’ and
officers’ discretion in agreeing to changes or waivers in
the terms of the Transaction may result in a conflict of
interest when determining whether such changes or waivers are
appropriate and in the best interests of the
Company.
In the period leading up to the closing of the Transaction,
events may occur which would require the Company to agree to
amend the Master Agreement, to consent to certain actions taken
by the parties thereto or to waive rights that the Company is
entitled to under the Master Agreement. In any circumstances, it
would be discretionary on the Company, acting through its board
of directors, to grant its consent or waive its rights. The
existence of the financial and personal interests of the
directors may result in a conflict of interest on the part of
one or more of the directors between what he may believe is best
for the Company and what he may believe is best for himself in
determining whether or not to take the requested action. On the
date of this proxy statement/prospectus, the Company does not
believe there will be any changes or waivers that its directors
and officers would be likely to make after shareholder approval
of the Business Combination Proposal has been obtained. While
certain changes could be made without further shareholder
approval, the Company intends to circulate a new or amended
proxy statement/prospectus and resolicit its shareholders if
changes to the terms of the transaction that would have a
material impact on its shareholders are required prior to the
shareholder vote on the Business Combination Proposal.
The existence of the financial and personal interests of the
Founders and directors of the Company may result in a conflict
of interest. Pursuant to the Master Agreement, it is anticipated
that Messrs. Hunt, Blazer and Lufkin will continue to serve
as directors of the Company. In addition, the Founders will
receive warrants to purchase common stock of JNF, the parent of
JNL and JNFAM, which would on a fully diluted basis represent
approximately 10% of JNF. In addition, subsequent to the closing
of the Transaction, the Company will be required to issue
2,812,500 Ordinary Shares to the Founders in three tranches if
the average closing price of the Company’s Ordinary Shares
equals or exceeds $12, $16 or $20, respectively. If the
Transaction is not consummated, the 3,750,000 Founders’
shares that were acquired before the Company’s IPO for an
aggregate purchase price of $25,000 would be worth a nominal
value because the founders are not entitled to receive any of
the proceeds of the Company’s trust account with respect to
such shares. In addition, if the Transaction is not consummated,
the 4,380,000 Founder warrants which were purchased by the
Founders for an aggregate purchase price of $4,380,000 would
expire worthless. Furthermore, if the Company liquidates and
dissolves, Messrs. Hunt and Blazer will be liable to pay
debts and obligations to vendors and other entities that are
owed money by the Company for services rendered or products sold
to the extent such creditors bring claims which would otherwise
require payment from the trust account, but only if such vendors
or entities did not execute a waiver. If the Company goes into
liquidation and there are no funds remaining to pay the costs
associated with the implementation and completion of such
liquidation, the Company’s Founders have agreed to advance
the Company the funds necessary to pay such costs and expenses
and not to seek reimbursement for such expenses.
If the
Transaction’s benefits do not meet the expectations of
financial or industry analysts, the market price of the
Company’s securities following the Transaction may
decline.
The market price of the Company’s securities following the
Transaction may decline as a result of the Transaction if:
•
the Company does not achieve the perceived benefits of the
Transaction as rapidly, or to the extent anticipated by,
financial or industry analysts; or
•
the effect of the Transaction on the Company’s financial
results is not consistent with the expectations of financial or
industry analysts.
Accordingly, investors may experience a loss as a result of a
decline in the market price of the Company’s securities
following the Transaction. A decline in the market price of the
Company’s securities also could adversely affect its
ability to issue additional securities and its ability to obtain
additional financing in the future.
Uncertainties
in management’s assessment of JNL Bermuda could cause the
Company not to realize the benefits anticipated to result from
the Transaction.
It is possible that, following the Transaction, uncertainties in
assessing the value, strengths and potential profitability of,
and indentifying the extent of all weaknesses, risks, contingent
and other liabilities of JNL Bermuda could cause the Company not
to realize the benefits anticipated to result from the
Transaction.
Future
sales of the Company’s shares may cause the market price of
its securities to drop significantly even if its business is
doing well.
Our Founders or their permitted transferees are entitled to
demand that we register the resale of their founder warrants and
underlying Ordinary Shares at any time after the
Lock-Up
Period. In addition, JNL will have demand and piggy-back
registration rights as to the 24.5% of the Ordinary Shares it
will own following the consummation of the Transaction. We will
bear the expenses in connection with the filing of any such
registration statements. If such individuals exercise their
registration rights with respect to all of their securities,
then there will be an additional 4,380,000 founder warrants (as
well as 4,380,000 Ordinary Shares underlying the warrants) and
the 24.5% of the outstanding Ordinary Shares which will be owned
by JNL eligible for trading in the public market. The presence
of these additional securities trading in the public market may
have an adverse effect on the market price of our securities. In
addition, the existence of these rights may make it more
difficult to effectuate the Transaction.
The
price of the Company’s securities will be subject to market
factors, and your investment in our securities could decline in
value.
Following the Transaction, there is a risk that an active
trading market in the Company’s securities may not develop
or be adequately maintained. In addition, the overall market for
securities in recent years has experienced extreme price and
volume fluctuations that have particularly affected the market
prices of many smaller companies. These fluctuations have been
extremely volatile and are often unrelated or disproportionate
to the operating performance of these companies. These broad
market fluctuations could result in extreme fluctuations in the
price of the Company’s securities, which could cause a
decline in the value of your securities.
If any of the following risks were actually to occur,
Overture’s business, financial condition or results of
operations could be materially adversely affected.
Overture
has no operating history and its future performance cannot be
predicted based on the financial information included in this
proxy statement/prospectus.
The Company’s subsidiary, Overture Re, will not commence
operations until this Transaction has been completed. Therefore,
there is no historical information upon which to evaluate its
performance. The Company based its projections of Overture
Re’s performance on publicly available information and the
industry knowledge, experience and judgment of its board of
directors. This may not be indicative of Overture Re’s
future performance.
In general, companies in the initial stages of development
present substantial business and financial risks and may suffer
significant losses. There can be no assurance that Overture Re
will be able to generate sufficient revenue from operations to
pay its operating expenses. Overture Re also will be subject to
risks generally associated with the formation of any new
business. It must successfully develop business relationships,
establish operating procedures, acquire property, obtain
regulatory approvals, hire management and other staff and
complete other tasks appropriate for the conduct of its intended
business activities. In particular, Overture Re’s success
depends on, among other things, its ability to:
•
attract and retain personnel with underwriting, actuarial and
hedging expertise;
•
model and accurately price its reinsurance;
•
capitalize on new business opportunities; and
•
evaluate effectively the risks that it assumes under the
reinsurance policies that it writes and manage such risks in
volatile or down markets.
Failure to achieve any of these business objectives would have a
material adverse effect on Overture Re and the Company.
If
Overture Re fails to obtain sufficient reinsurance business,
Overture Re’s ability to transact reinsurance operations
would be significantly and adversely affected.
The Company believes that demand for reinsurance of life
insurance products is now increasing due to favorable market
conditions, among other factors. However, the Company cannot
predict how long these conditions will persist and inability to
obtain sufficient reinsurance of blocks of insurance could
adversely affect earnings results.
Annuity
contracts Overture Re may reinsure in the future may expose
Overture Re to mortality risk.
Adverse mortality risk is the risk that death claims may differ
from the timing or amount assumed in pricing reinsurance
contracts. Mortality experience that is less favorable could
negatively affect our net income, if we reinsure annuities with
guaranteed death benefits. The Quota Share Reinsurance Agreement
coverage excludes such death benefits, but there is no assurance
that Overture Re will not seek to provide such coverage in the
future, and its evaluation of the risk may prove incorrect.
Interest
rate fluctuations could negatively affect the income we derive
from the difference between the interest rates Overture Re may
earn on its investments and the interest Overture Re may pay
under its reinsurance contracts.
Significant changes in interest rates expose reinsurance
companies to the risk of not earning income on investments, or
experiencing losses based on the difference between the interest
rates earned on investments and the credited interest rates paid
out under outstanding reinsurance contracts. Both rising and
declining interest rates could negatively affect the income
Overture Re may derive from these interest rate spreads. During
periods of falling interest rates, our investment earnings will
be lower because interest earnings on some of the variable
interest rate investments of Overture Re will likely have
declined in parallel with market interest rates. Additionally,
new investments in fixed or variable interest rate investments
will likely bear lower interest rates. Overture Re may not be
able to fully offset the decline in investment earnings with
lower crediting rates on its reinsurance contracts that have
cash values. During periods of rising interest rates,
Overture Re may be contractually obligated to increase the
crediting rates on its reinsurance contracts that have cash
values. However, Overture Re may not have the ability to
immediately acquire investments with interest rates sufficient
to offset the increased crediting rates on its reinsurance
contracts. While Overture Re develops and maintains
asset/liability management programs and procedures designed to
reduce the volatility of its income when interest rates are
rising or falling, we cannot assure you that changes in interest
rates will not affect Overture Re’s interest rate spreads.
Changes in interest rates may also affect Overture Re’s
business in other ways. Lower interest rates may result in lower
sales of certain insurance and investment products of JNL or
Overture Re’s other customers, which would reduce the
demand for Overture Re’s reinsurance of these products.
Policyholders
may voluntarily terminate the policies in numbers different than
priced for, causing Overture Re to pay greater than expected
death benefits or to fail to recoup costs or a statutory surplus
strain.
The policyholders of the policies that Overture Re may reinsure
may voluntary terminate the policies (such voluntary termination
by a policyholder is called a “surrender”). Surrenders
usually involve the return of the policy’s cash surrender
value to the policyholder. The actual amount of surrenders may
be significantly different from the amount of surrenders that
Overture Re assumed in pricing. If the actual amount of
surrenders is significantly less than the amount that Overture
Re priced for, Overture Re may have to pay greater than expected
death benefits in future years, adversely impacting its
profitability. If the actual amount of surrenders is
significantly higher than priced for, the premiums that Overture
Re receives may decrease, Overture Re’s deferred
acquisition costs may be unrecoverable, and Overture Re may not
be able to recoup the amount of free surplus that may have been
used if premiums were insufficient to cover expenses and
policyholder liability that was set up at the commencement of
the reinsurance of the policies, possibly triggering loss
recognition that would adversely impact its profitability.
Furthermore, for policies with cash surrender benefits,
surrenders significantly greater than expected may constrain
Overture Re’s liquidity. Overture Re may experience
increased surrenders due to the recent volatility and disruption
in the global financial markets, which has caused higher
unemployment and lower family income affecting policyholders.
Historically surrenders have averaged per year between 10% and
16% of account value annually from 2006 to present.
Policyholders
may cease paying premium on the policies, causing the
termination of such policies, in numbers different than priced
for, causing Overture Re to fail to recoup costs or a statutory
surplus strain.
The policyholders of the policies that Overture Re may reinsure
may defer paying premiums or may cease paying the premium due
under such policies altogether, thereby bringing about the
termination of such policies (such termination of a policy due
to the policyholder’s nonpayment of premium is called a
“lapse”). The actual amount of lapses may be
significantly different from the amount of lapses that Overture
Re assumed in pricing. If the actual amount of lapses is
significantly less than the amount that Overture Re priced for,
Overture Re may have to pay greater than expected death benefits
in future years, adversely impacting its profitability. If the
actual amount of lapses is significantly higher than priced for,
the premiums that Overture Re receives may decrease, Overture
Re’s deferred acquisition costs may be unrecoverable, and
Overture Re may not be able to recoup the amount of free surplus
that may have been used if premiums were insufficient to cover
expenses and policyholder liability that was set up at the
commencement of the reinsurance of the policies, possibly
triggering loss recognition that would adversely impact its
profitability. Overture Re may experience increased lapses due
to the recent volatility and disruption in the global financial
markets, which has caused higher unemployment and lower family
income affecting policyholders. Historically lapses and
surrenders have averaged per year between 10% and 16% of account
value annually from 2006 to present. Future lapses and surrender
rates are anticipated to be in a similar range.
Actual
expenses relating to reinsurance coverage provided by Overture
Re may be higher than expected.
Actual expenses relating to reinsurance coverage provided by
Overture Re may be higher than those that Overture Re priced
for. Expenses per policy reinsured may be higher as a result of
a lower number of policies reinsured than anticipated, or as a
result of Overture Re’s operations being less efficient
than anticipated. A significant increase in expenses may impact
Overture Re’s profitability.
The
invested assets supporting the business of Overture Re may
decrease in value if the assets default or decrease in earning
power.
The invested assets of Overture Re that will support its reserve
liabilities will consist of
available-for-sale
(AFS) fixed maturity securities of various holdings, types and
maturities. These investments are subject to general credit,
liquidity, market and interest rate risks, and Overture Re is
exposed to such risks on its portfolio. Beginning in the latter
half of 2007 and continuing into 2008 and 2009, the capital and
credit markets have experienced an unusually high degree of
volatility. As a result, the market for fixed income securities
has experienced illiquidity, increased price volatility, credit
downgrade events and increased expected probability of default.
Securities that are less liquid are more difficult to value and
may be hard to sell, if desired. Due to the current reduced
liquidity in capital markets, Overture Re may be unable to sell
or buy significant volumes of assets at quoted prices. Some
issuers have defaulted on their financial obligations for
various reasons, including bankruptcy, lack of liquidity,
downturns in the economy, downturns in real estate values,
operational failure and fraud. These market disruptions in the
current weak economic environment have led to increased
impairments of, and lower earnings on, securities which will
support the reserve liabilities of Overture Re. Lower earnings
on the invested assets of Overture Re constrain the growth of
Overture Re’s capital, in turn constraining the payment of
dividends and advances or repayment of funds to the Company.
Further excessive defaults or other reductions in the value of
securities could have a material adverse effect on Overture
Re’s business, results of operations and financial
condition, which in turn may affect the Company. In particular,
if there is an unexpected increase in the volume or severity of
claims that may force Overture Re to liquidate securities, or if
Overture Re does not structure the duration of investments to
match its reinsurance liabilities, Overture Re may be forced to
liquidate investments prior to maturity at a time of such market
volatility and disruptions, when the sale of such assets will
incur a significant loss. Investment losses could significantly
decrease Overture Re’s asset base and statutory surplus,
thereby affecting its ability to conduct business.
If
interest rates fall, funds reinvested will earn less than
expected.
If interest rates fall, funds reinvested (coupon payments or
monies received upon asset maturity or call) will earn less than
expected, because rates on such new investments are likely to
have declined with the market interest rates. If asset durations
are less than liability durations, the mismatch will increase.
Certain investments like mortgages and redeemable bonds that may
be in the investment portfolio of Overture Re are more likely to
be repaid as borrowers seek to refinance at lower interest
rates, and Overture Re may be required to reinvest the proceeds
in securities bearing lower interest rates. Risk is heightened
in the current market and economic environment in which certain
securities may be unavailable. Accordingly, net income may
decline as a result of a decrease in the spread between returns
on the investment portfolio and the interest rates either
credited to policyholders or assumed in reserves.
If
interest rates rise, policyholders may seek withdrawal of
funds.
If interest rates rise, policyholders may increasingly request
loans from Overture Re, request withdrawals or voluntarily
terminate the policies, enabling the policyholders to invest
their funds in new products offering higher interest rates. This
activity may result in cash payments by Overture Re, and
Overture Re may have to sell assets to provide for these
withdrawals at a time when the prices of those assets are
affected adversely by the increase in market interest rates,
which may result in realized investment losses. If asset
durations are less than liability durations, the mismatch will
increase. Furthermore, when rising interest rates are coupled
with volatility in interest rates and credit spreads, it is
often more difficult to sell certain fixed income securities,
leading to a risk that Overture Re will find it difficult to
raise the cash necessary to fund a very large amount
of withdrawal activity. Cash payments to policyholders also
result in a decrease in total invested assets and net income.
Early withdrawals may also require accelerated amortization of
deferred policy acquisition costs, which in turn reduces net
income. Furthermore, maturing reinsurance contracts may not
renew at anticipated levels of renewal.
Overture
Re may develop a hedging program which may prove to be deficient
or in need of alterations.
Overture Re may develop a hedging program, and such program
would be untested and may prove to be deficient, lack important
functions or otherwise not provide the utility intended. The
program may need to be further calibrated or developed and it
may take a significant amount of time and further resources
before it will function as intended, if at all. Overture Re
could be adversely affected during periods when the hedging
program is not properly functioning or is otherwise deficient,
including, but not limited to, as a result of actual experience
differing from assumptions, which could have a material adverse
effect on the Company’s financial performance.
Overture
Re’s risk management, pricing and other models may prove to
be deficient or in need of significant
alterations.
Although Overture Re’s administrative services provider has
spent a substantial amount of resources to develop risk
management, pricing and other models appropriate for the blocks
of annuities Overture Re expects to reinsure, they are still
untested and may prove to be deficient, lack important functions
or otherwise not provide the utility intended. The models may
need to be further calibrated or developed and it may take a
significant amount of time and further resources before they
will function as intended, if at all. Overture Re could be
adversely affected during periods when the models are not
properly functioning or are otherwise deficient.
Even
if Overture Re’s models are adequately designed, errors in
data collection, dissemination and input as applied to the
program and models could generate erroneous results and
adversely affect Overture Re’s business.
Any models any administrative services provider may use may
necessarily involve collection and dissemination of large
amounts of data. Examples of data collected and analyzed include
market indices, performances of reinsured variable annuity
contracts, risk statistics, annuity contract information, rates,
expenses and mortality experience. To the extent that errors in
data collection, dissemination and input or other data handling
errors occur and are not identified and corrected by Overture
Re’s internal controls, the information generated by such
program and models and supplied to its employees, affiliates,
business partners and others, may be incorrect and may produce a
deficient basis on which underwriting decisions, pricing,
hedging arrangements, financial reporting and other material
business decisions are made.
If
Overture Re’s investment strategy is not successful, it
could suffer unexpected losses.
Overture Re expects to derive a portion of its income from
assets invested by Overture Re’s investment management
service providers pursuant to Overture Re’s investment
strategy. Overture Re’s operating results will therefore
depend in part on the performance of the investment portfolio,
as well as the ability of the investment management services
providers to effectively manage the portfolio and to implement
Overture Re’s investment strategy. The success of Overture
Re’s investment strategy is crucial to the success of its
business. In particular, Overture Re will structure its
investments to match its anticipated liabilities under
reinsurance treaties to the extent it believes necessary. If
Overture Re’s calculations with respect to these
reinsurance liabilities are incorrect, or if it improperly
structures its investments to match such liabilities, it could
be forced to liquidate investments prior to maturity at a
significant loss.
Changes
in the capital markets, interest rates or volatility affect the
market for products with variable annuity
guarantees.
A prolonged general economic downturn or poor performance of the
equity and other capital markets, such as that which the
U.S. economy has recently experienced, or similar
conditions in the future, could adversely affect the market for
many annuity products. Because Overture Re will obtain
substantially all of its revenues through reinsurance
arrangements that cover a portfolio of annuity products,
Overture Re’s business would be harmed if the market for
annuities were adversely affected.
As with all financial services companies, Overture Re’s
ability to conduct business will depend on consumer confidence
in the industry and its financial strength. Actions of
competitors and financial difficulties of other companies in the
industry and related adverse publicity could undermine consumer
confidence and harm the industry’s reputation, which may in
turn have an adverse effect on Overture Re’s business.
Claims
may exceed Overture Re’s reserves, which could adversely
affect its business.
Overture Re’s success will be dependent upon its ability to
assess, model and price accurately the risks associated with the
business that Overture Re reinsures. If Overture Re fails to
assess the risks it assumes accurately or if events or
circumstances cause Overture Re’s estimates to be
incorrect, Overture Re may not establish appropriate premium
rates and Overture Re’s reserves may be inadequate to cover
claims, which could harm Overture Re’s business or reduce
Overture Re’s net income. Overture Re will rely heavily on
its administrative services provider to properly assess such
risks, although Overture Re cannot guarantee it will do so.
Estimating claim reserves involves actuarial and capital markets
projections at a given point in time of what the insurer
ultimately expects to pay out based on facts and circumstances
then known, predictions of future events, estimates of future
trends in market fluctuations, policy utilization of benefits,
mortality, policyholder terminations and other variable factors
such as inflation. Overture Re is required to rely on
information received from the ceding insurer for many of these
assumptions. If such information turns out to be inaccurate,
Overture Re’s business could be adversely affected.
Overture
Re may not achieve the results shown in the financial
projections.
Overture Re’s financial projections are based on
assumptions. Although such assumptions are believed to be
reasonable, many of such assumptions do not have an empirical
basis and may not be accurate. Unanticipated events and
circumstances are likely to occur. Actual results realized
during any future period are likely to vary from the projections
and the variations may be material and adverse. There can be no
assurance that Overture Re will be able to achieve the results
shown in such projected financial statements.
Reinsurance claims are inherently unpredictable and the
projected financial statements, therefore, have limited value as
a projection of future claims or operating results. No
representation is made as to the reasonableness of the model or
the underlying assumptions or calculations and Overture Re
assumes no responsibility therefore.
Overture Re will use various tools to analyze and manage the
reinsurance exposures it will assume from variable annuity
underwriters and the risks from adverse investment markets that
could impact Overture Re’s overall reinsurance and
investment portfolio. Inadequacies in these tools, such as
inaccurate estimates and assumptions in Overture Re’s risk
modeling software, defects in the modeling logic or software
code or unenforceability of loss limitation provisions in
policies, could result in losses. Overture Re may not be able to
achieve the market penetration assumed in the projected
financial statements (either as to the number of ceding
companies or as to the amount of premium from each ceding
company) due to a number of reasons, including, without
limitation, general market conditions, competition,
creditworthiness concerns of ceding companies or regulatory
constraints relating to the acceptability of Overture Re as a
reinsurer. Average premium rate levels are based on estimates of
rates for reinsurance in which Overture Re expects to
participate. The actual rates that Overture Re will receive may
differ significantly. Furthermore, actual acquisition costs,
overhead expenses and investment yields could vary substantially
from assumed levels.
Actual cash flows may also deviate significantly from
assumptions. Because there is currently no active market for the
reinsurance of variable annuity guarantees, actual rates may be
different from those used in the assumptions set forth in this
proxy statement/prospectus.
Overture
Re may be dependent on a small number of large transactions,
which, if any of them has an unfavorable outcome or fails to
materialize as expected, could adversely affect Overture
Re.
Overture Re’s business may rely on a small number of
transactions and ceding companies. Thus, Overture Re would be
more sensitive to the underwriting and actuarial errors made in
connection with a particular transaction and to an adverse
change in the financial condition of a particular transaction or
cedant, the occurrence of which could have a material adverse
effect on Overture Re.
Competition
in the insurance industry could reduce Overture Re’s risk
margins.
The insurance and reinsurance industry is highly competitive.
Overture Re expects to compete on an international and regional
basis with major U.S., Bermuda, European and other international
insurers and reinsurers and underwriting syndicates, some of
which have greater financial, marketing and management resources
than Overture Re. Overture Re expects to compete with new
companies that continue to be formed to enter the insurance and
reinsurance markets. In addition, capital market participants
have created alternative products that are intended to compete
with reinsurance products. Increased competition could result in
fewer clients, smaller blocks of business, lower policy premium
rates and less favorable policy or treaty terms and conditions,
which could have a material adverse effect on Overture Re’s
growth and profitability. The U.S. annuity and life
reinsurance markets are served by numerous international and
domestic reinsurance companies. Overture Re will focus on the
smaller policy block market where competition is less intense
and it can leverage its capabilities more fully. The Company
believes that its primary competitors in the North American
annuity and life reinsurance market are currently the following,
or their affiliates: Athene Re, Max Capital and Wilton Re.
However, within the reinsurance industry, this can change from
year to year.
The
insurance and reinsurance business is historically cyclical, and
we can expect to experience periods with excess capacity and
unfavorable premium rates.
The insurance and reinsurance business historically has been a
cyclical industry characterized by periods of intense price
competition due to excessive capacity as well as periods when
shortages of capacity permitted favorable premium levels. An
increase in premium levels is often offset by an increasing
supply of insurance and reinsurance capacity, either by capital
provided by new entrants or by the commitment of additional
capital by existing insurers or reinsurers, which may cause
prices to decrease. Any of these factors could lead to a
significant reduction in policy premium rates, less favorable
policy or treaty terms and conditions and fewer clients or
smaller blocks of business. In addition to these considerations,
changes in the frequency of claims may affect the cycles of the
insurance and reinsurance business significantly.
Overture
Re depends on the performance of others and their failure to
perform in a satisfactory manner could negatively affect
it.
Overture Re will rely upon its insurance clients to provide
timely, accurate information. Overture Re may experience
volatility in its earnings as a result of erroneous or untimely
reporting from its clients. Overture Re will work closely with
its clients and monitor their reporting to minimize this risk.
Overture Re also will rely on original underwriting decisions
made by its clients. Overture Re cannot assure you that these
processes or those of its clients will adequately control
business quality or establish appropriate pricing.
Investment
management services to be provided to Overture Re by JNFAM are
essential for Overture Re’s business operations, and
replacing JNFAM, if necessary, could be time consuming and
disruptive.
JNFAM will provide investment management services to Overture Re
in connection with its general business operations and its
specific blocks of reinsured annuities, which will be necessary
for Overture Re’s anticipated business activities. Overture
Re will use the services of JNFAM to manage certain assets.
Overture
Re will rely on JNFAM to provide investment advice and execute
investment transactions that are within its investment policy
guidelines with respect to these assets. Poor performance on the
part of JNFAM could negatively affect Overture Re’s
financial performance. Although JNFAM will agree to abide by
performance standards in the provision of its services, JNFAM
may default in its compliance with such standards. In the event
that JNFAM fails to comply with such standards or is inefficient
or deficient in performing its obligations, such noncompliance
may have a material and adverse impact on the conduct of
Overture Re’s business and its financial condition.
JNFAM will depend on the managerial, actuarial and other skills
and expertise of its employees in providing investment advice to
Overture Re. There is no assurance that JNFAM will be able to
retain management or other key employees or replace them to the
extent they leave JNFAM. The loss of any such individual’s
services and expertise could adversely affect JNFAM’s
operations, and in turn an adverse impact on Overture Re.
Similarly, the bankruptcy, business discontinuation, change of
control or adverse change in the financial condition of JNFAM
could have a material and adverse effect on its performance and
result in an adverse effect on Overture Re.
In the event that JNFAM’s performance is unacceptable and
Overture Re seeks to replace JNFAM, it may be difficult to find
another organization with a comparable level of expertise ready,
willing and able to provide such services to Overture Re. If a
replacement were able to be found, transitioning of data and
records from JNL to the replacement services provider, and
integrating Overture Re’s then-existing business with such
replacement services provider’s organization could take
time and entail substantial expense for Overture Re, including
but not limited to the expense of converting Overture Re’s
records from JNFAM’s information technology system to a
system that may be significantly different. The delay,
inefficiencies, expense and potential for error inherent in
replacing JNFAM may have a material and adverse effect on
Overture Re’s business, financial condition and results of
operations.
Counterparties’
failure to perform their obligations to Overture Re or JNL could
adversely affect Overture Re.
JNL entered into a reinsurance agreement with Scottish Re US,
Inc. (“SRUS”) effective January 1, 2005, whereby
it ceded 30% of its reserves on select annuity contracts. The
reinsurance on the fixed account portion of these contracts is
on a coinsurance basis. The reinsurance on the separate account
portion of these contracts is on a modified coinsurance basis
upon which the JNL maintains possession of the assets which
support the reserves ceded. In January 2005, JNL transferred
reserves of approximately $54,600, under the coinsurance portion
of the contract, to SRUS. On January 5, 2009, the Delaware
Department of Insurance (“Delaware Department”) issued
an order of supervision against SRUS which, among other things,
requires the Delaware Department’s consent to any
transaction outside the ordinary course of business and
formalized certain reporting and processes already informally in
place between SRUS and the Delaware Department. As of
December 31, 2008, the balance of the Block’s annuity
business ceded to SRUS was approximately $56,000, under
coinsurance, and is included in reinsurance recoverable on paid
losses and ceded reserves. SRUS continues to maintain the
capital ratios required by the reinsurance agreement. JNL
continues to evaluate the financial condition of SRUS with
respect to JNL’s existing exposure. SRUS continues to
perform under its contractual obligations to JNL. However, it
cannot predict what changes in the status of SRUS’s
financial condition may have on its ability to take the reserve
credit for the business of SRUS in the future. If JNL were
unable to take the reserve credit for the business ceded to
SRUS, it could have a material adverse impact on JNL’s
financial condition.
Overture
Re’s or JNL’s failure to establish and maintain
necessary information technology and risk management systems
could adversely affect Overture Re.
Overture Re does not currently have any proven information
technology or risk management systems of its own and may
encounter difficulties establishing the information technology
and risk management systems necessary to run its business, which
could result in a loss or delay of revenues, higher than
expected claim levels, diversion of management resources and
harm to Overture Re’s reputation or an increase in costs.
Overture Re will rely upon the availability to it of information
and technology systems necessary to run Overture Re’s
business, including processing and servicing policies,
evaluating risk and determining hedging requirements, through
its administrative services and investment management agreements
and affiliation with JNL. If JNL were to cease to have necessary
rights, through ownership or licensing, to all or any portion of
the software platforms and systems with which it will provide
such services to Overture Re, or we are rendered unable to
provide such services in an effective manner, and Overture Re
were unable to develop or obtain replacement technology and
systems, Overture Re’s business would be materially
adversely affected. The performance of Overture Re’s
information technology and risk management systems is critical
to its business and its ability to process transactions, provide
customer service, perform its underwriting process and manage
its risk mitigation and claim management process.
Interruption
or loss of Overture Re’s information processing systems or
failure to maintain secure information systems could have a
material adverse effect on its business.
Overture Re’s business will depend on readily available
systems, secure information and the ability of its employees to
process transactions. Overture Re’s capacity to service its
clients will rely on storing, retrieving, processing and
managing information. Interruption or loss of its information
processing capabilities through loss of stored data, the failure
of computer equipment or software systems, telecommunications
failure or other disruption could have a material adverse effect
on its business, financial condition and results of operations.
Despite the business contingency plans Overture Re will adopt,
its ability to conduct business may be adversely affected by a
disruption in the infrastructure that supports its business and
its physical locations. This may include a disruption involving
physical site access, terrorist activities, disease pandemics,
electrical, communications or other services used by Overture
Re, its employees or third parties with whom Overture Re will
conduct business. Although Overture Re will have certain
disaster recovery procedures in place and insurance to protect
against such contingencies, such procedures may not be effective
and any insurance or recovery procedures may not continue to be
available at reasonable prices and may not address all such
losses or compensate Overture Re for the possible loss of
clients occurring during any period that it is unable to provide
services.
Furthermore, Overture Re will depend on computer systems to
store information about its clients and parties associated with
the underlying policies, some of which is private. Database
privacy, identity theft, and related computer and internet
issues are matters of growing public concern and are subject to
frequently changing rules and regulations. A growing body of
United States and
non-United
States laws designed to protect the privacy of
personally-identifiable information, as well as to protect
against its misuse, and the judicial interpretations of such
laws, may adversely affect Overture Re’s business. The
evolving nature of all of these laws and regulations, as well as
the evolving nature of various governmental bodies’
enforcement efforts, and the possibility of new laws in this
area, may adversely affect Overture Re’s ability to collect
and disseminate or share certain information and may negatively
affect the ability of Overture Re or its administrative services
providers to make use of that information. Overture Re’s
failure to adhere to or successfully implement processes in
response to changing regulatory requirements in this area could
result in legal liability or harm to its reputation. Overture Re
and its service providers will take reasonable and appropriate
security measures to prevent unauthorized access to information
in its databases. However, Overture Re’s technology and
systems may fail to adequately secure the private information it
will maintain in its databases and protect it from theft or
inadvertent loss. In such circumstances, Overture Re may incur
liability to its clients or underlying policyholders, which
could result in litigation or adverse publicity that could have
a material adverse effect on its business.
Overture
Re could incur substantial losses if financial institutions in
which it maintains its cash, securities or other investment
assets fail.
The recent deterioration of the global credit and financial
markets has created challenging conditions for financial
institutions, including depositories, trustees and custodial
institutions. As the fallout from the credit crisis persists,
the financial strength of these institutions may continue to
decline. Overture Re will maintain cash balances at various
United States depository institutions that are significantly in
excess of the United
States Federal Deposit Insurance Corporation insurance limits.
Overture Re will also maintain cash balances in foreign
financial institutions. Overture Re will also maintain
securities and other investment assets accounts and facilities
at varied financial institutions. If one or more of the
institutions in which Overture Re maintains significant cash
balances, securities or other investment assets were to fail,
its ability to access these funds or other assets might be
temporarily or permanently limited, or delayed for an
indeterminate period of time, and it may incur expense in
obtaining access to such funds or assets. Overture Re could face
a material liquidity problem and potentially material financial
losses from any such limitation or delay.
Overture
Re’s business, results of operations, financial condition
or liquidity may be materially adversely affected by errors and
omissions and the outcome of claims, lawsuits and
proceedings.
In the ordinary course of Overture Re’s business it may
become subject to actual or potential claims, lawsuits and other
proceedings relating to alleged errors and omissions in
connection with the management of reinsured risks. Because the
handling of claims may involve substantial amounts of money,
errors and omissions claims against it may arise which allege
its potential liability for all or part of the amounts in
question. Claimants may seek large damage awards and these
claims may involve potentially significant defense costs. Such
claims, lawsuits and other proceedings could, for example,
include allegations of damages for its employees’ or
agents’ improperly failing to appropriately apply funds
that it or its administrative services providers hold for its
clients on a fiduciary basis. Errors and omissions claims,
lawsuits and other proceedings arising in the ordinary course of
business will be covered in part by professional indemnity or
other appropriate insurance. The terms of this insurance will
vary by policy year. In respect of self-insured risks, Overture
Re will establish provisions against these items which it
believes to be adequate in the light of current information and
legal advice, and it will adjust such provisions from time to
time according to developments. Overture Re’s business,
results of operations, financial condition and liquidity may be
adversely affected if in the future its insurance coverage
proves to be inadequate or unavailable or there is an increase
in liabilities for which it self-insures. Overture Re’s
ability to obtain professional indemnity insurance in the
amounts and with the deductibles it desires in the future may be
adversely impacted by general developments in the market for
such insurance or its own claims experience. In addition,
claims, lawsuits and other proceedings may harm its reputation
or divert management resources away from operating its business.
Comparisons
of JNL’s carve-out underwriting results to Overture
Re’s expected results going forward may not be meaningful
due to the fact that JNL’s historical carve-out financial
statements relate only to the JNL carve-out block, while
Overture Re’s business going forward will expand beyond the
JNL carve-out block.
Overture Re intends to reinsure the Block as well as to reinsure
blocks of annuity and life insurance policies from third parties
and to reinsure additional blocks of policies from JNL. There
can be no assurance that JNL will continue to write insurance in
the future at the level it has historically done. For example,
many insurance companies, including JNL, experienced increased
capital needs in 2008 that caused them to write fewer policies.
In addition, investors may desire segregated accounts focused on
discrete reinsurance opportunities. These additional areas of
business that Overture Re currently intends to pursue will make
period-to-period comparisons of JNL’s historical
underwriting results on the Block less meaningful or not
meaningful at all.
Overture
Re’s failure to raise additional capital could adversely
affect Overture Re.
Overture Re’s future capital requirements will depend on
many factors, including Overture Re’s ability to
successfully write new business and to establish premium rates
and reserves at levels sufficient to cover losses. To the extent
that the funds generated by Overture Re’s ongoing
operations and initial capitalization are insufficient to fund
future operating requirements and cover claim payments, Overture
Re may need to raise additional funds through financings or
curtail its growth and reduce its assets. If Overture Re cannot
obtain adequate capital, or obtain capital on unfavorable terms,
its business, operating results and financial condition could be
adversely affected.
There
may be potential conflicts of interest between Overture Re and
shareholders and affiliates of Overture Re which could adversely
affect Overture Re.
Overture Re’s executive officers, directors, shareholders,
underwriters and affiliates may engage in commercial activities
and enter into transactions or agreements with Overture Re or
compete with Overture Re, which may give rise to conflicts of
interest and which could adversely affect Overture Re.
Our policy with respect to related-party transactions is that
material matters be discussed and voted upon by disinterested
directors. For example, if there were a material amendment to
the agreements with JNFAM or JNL, the interested directors would
recuse themselves.
There are a number of existing transactions or arrangements that
may give rise to a potential conflict of interest between
Overture Re and its shareholders and affiliates, which may or
may not adversely affect Overture Re. Pursuant to the terms of
the Master Agreement, the Company will be granted an option to
purchase JNFAM six months after the Closing of the Transaction.
In addition, the Company has the right to terminate the services
provided by JNL pursuant to the Quota Share Reinsurance
Agreement. The Founders will have an economic interest in both
the Company and JNF. JNF is the ultimate parent entity of JNL
and JNFAM. Two of the Founders and two of the directors of JNL
will be on the board of directors of the Company.
Overture Re’s officers’ and directors’ ability to
compete with Overture Re will be circumscribed by their
fiduciary duties under corporate law.
The Shareholders’ Agreement includes a corporate
opportunities provision that provides that the representatives
that JNL nominates to the board of directors of the Company
shall be obliged to present corporate opportunities relating to
reinsurance which they encounter to the board of directors of
the Company first for consideration. If any officer or director
of Overture who also serves as an officer or director of JNL
becomes aware of any other potential transaction outside of the
reinsurance business
and/or
related to JNL’s current lines of business, such officer or
director shall present such opportunity to JNL first for
consideration.
Overture
Re’s business will rely on JNL, and if JNL experiences
capitalization, liquidity, financial or other difficulties,
Overture Re may not be able to replace the managerial,
actuarial, administrative and investment management services
provided by JNL in a timely manner.
Pursuant to the Quota Share Reinsurance Agreement, Overture Re
will rely on JNL to provide managerial, actuarial,
administrative and investment management services to Overture Re
in connection with the blocks reinsured from JNL. More
specifically these services will include the servicing of policy
holders including call center support, processing customer
trades, sending customer statements, preparing financial summary
data and associated actuarial analysis and similar services.
Investment management services will be provided in connection
with the assets supporting the blocks being reinsured by JNL to
Overture Re. Such services will include investment advice and
execution of investment transactions.
In the event that JNL is unable to provide these services it may
be difficult to find another organization with a comparable
level of expertise, ready, willing and able to provide such
services to Overture Re. If a replacement were able to be found,
transitioning of data and records from JNL to the replacement
services provider could take time and entail substantial expense
for Overture Re, including but not limited to the expense of
converting records from JNL’s system to another service
provider. The delay, inefficiencies, expense and potential for
error inherent in replacing JNL may have a material and adverse
effect on Overture Re’s business, financial condition and
results of operations.
Overture
Re will be dependent on its key personnel and may not be able to
retain or hire key employees or successfully integrate its new
management team to fully implement its newly formulated business
strategy.
While Overture Re expects to retain Messrs. Girouard and
Heaphy upon consummation of the Transaction, each of whom is
presently employed by JNL, Overture Re will still need to
attract additional personnel in order to fully implement its
business strategy. After Overture Re’s management team and
other
personnel are assembled, Overture Re’s ability to implement
its business strategy will depend on the successful integration
of the management team and other personnel. The number of
available, qualified persons in the insurance and reinsurance
industry to fill these positions may be limited. Overture
Re’s inability to attract and retain key employees could
delay or prevent Overture Re from fully implementing its
business strategy and could significantly and negatively affect
Overture Re’s business.
Emerging
claim issues could adversely affect the business of Overture
Re.
As industry practices and legal, judicial, social and other
environmental conditions change, unexpected and unintended
issues related to claims and coverage may emerge. These issues
may adversely affect Overture Re’s business, for instance,
by extending coverage beyond its underwriting intent, by
increasing the number or size of claims or change contract
holders’ and insurance carriers’ behavior inconsistent
with Overture Re’s assumptions and models. In some
instances, these changes may not become apparent until some time
after Overture Re has issued reinsurance or retrocession
contracts that are affected by the changes. As a result, the
full extent of liability under Overture Re’s reinsurance
and retrocession contracts may not be known for many years after
a contract is issued.
Natural
disasters, catastrophes and disasters caused by humans,
including the threat of terrorist attacks and related events,
epidemics and pandemics may adversely affect Overture Re’s
business and results of operations.
Natural disasters and terrorist attacks, as well as epidemics
and pandemics, can adversely affect Overture Re’s business
and results of operations because they accelerate mortality
risk. Terrorist attacks in the United States and in other
parts of the world and the threat of future attacks could have a
negative effect on Overture Re’s business. The consequences
of further natural disasters, terrorist attacks, armed
conflicts, epidemics and pandemics are unpredictable and
Overture Re may not be able to foresee events that could have an
adverse effect on its business.
The
Transaction involves a business combination with a company
located in Bermuda and will expose the Company to certain risks
that may negatively impact our operations.
The proposed Transaction involves a Bermuda company, and will
subject the Company to risks associated with companies operating
in Bermuda, including any of the following:
•
rules and regulations or currency conversion or corporate
withholding taxes on individuals;
•
tariffs and trade barriers;
•
regulations related to customs and import/export matters;
•
longer payment cycles;
•
tax issues, such as tax law changes and variations in tax laws
as compared to the United States;
•
currency fluctuations and exchange controls;
•
challenges in collecting accounts receivable;
•
cultural and language differences;
•
employment regulations;
•
the expiration of the tax treaty in 2016;
•
crime, strikes, riots, civil disturbances, terrorist attacks and
wars; and
•
deterioration of political relations with the United States.
The Company cannot assure you that it would be able to
adequately address these additional risks. If the Company were
unable to do so, its operations might suffer. Additionally, the
Company will acquire a company located outside of the United
States, therefore it is likely that substantially all of its
assets will be located outside of the United States and some of
the Company’s executive officers and directors might reside
outside of the United States. As a result, it may not be
possible for investors in the United States to enforce their
legal rights, to effect service of process upon the
Company’s directors or executive officers or to enforce
judgments of United States courts predicated upon civil
liabilities and criminal penalties of the Company’s
directors and executive officers under U.S., federal securities
laws.
Following
the Transaction, the exemption of the Company’s
subsidiaries, Overture Re Holdings and Overture Re from certain
Bermuda taxes will be effective until March 28, 2016, and
if such exemption is not extended the Company’s results of
operations could be adversely affected.
The Bermuda Minister of Finance, under the Exempted Undertakings
Tax Protection Act 1966 of Bermuda, has given Overture Re
Holdings and Overture Re an assurance that if any legislation is
enacted in Bermuda that would impose tax computed on profits or
income, or computed on any capital asset, gain or appreciation,
or any tax in the nature of estate duty or inheritance tax, then
the imposition of any such tax will not be applicable to them or
any of their operations, shares, debentures or other
obligations, except insofar as such tax applies to persons
ordinarily resident in Bermuda or to any taxes payable by either
of them in respect of real property leased to either of them in
Bermuda. This assurance by the Bermuda Minister of Finance
expires on March 28, 2016. There is no guarantee that
Overture Re Holdings and Overture Re will receive a renewed
assurance from the Bermuda Minister of Finance, or that the
Bermuda Government will not take action to impose taxes on their
businesses. If the Bermuda Government imposed significant taxes
on Overture Re Holdings or Overture Re business, their earnings
could decline significantly and the Company’s results of
operations could be adversely affected.
The
Company’s subsidiaries, Overture Re Holdings and Overture
Re are incorporated in Bermuda, and a majority of their
directors and all of their and the Company’s assets will be
located outside the United States. As a result, it may not be
possible for security holders to enforce civil liability
provisions of the U.S. federal or state securities
laws.
Overture Re Holdings and Overture Re are incorporated under the
laws of Bermuda and all of the Company’s assets represented
by such subsidiaries are and will be located outside the United
States. In addition, a majority of the subsidiaries directors
are not (and some future directors may not be) citizens or
residents of the United States. In addition, a significant
portion of the assets of
non-U.S. directors
are (and for new directors may be) located outside the United
States. Consequently, it may be difficult to serve legal process
within the United States upon any of the
non-U.S. directors.
In addition, it may not be possible to enforce court judgments
obtained in the United States against the subsidiaries in
Bermuda or against their
non-U.S. directors
in their home countries, or in countries other than the United
States where the subsidiaries or they have assets, particularly
if the judgments are based on the civil liability provisions of
the federal or state securities laws of the United States. There
is some doubt as to whether the courts of Bermuda and other
countries would recognize or enforce judgments of
U.S. courts obtained against the subsidiaries or the
Company’s directors or officers based on the civil
liabilities provisions of the federal or state securities laws
of the United States or would hear actions against the
subsidiaries or those persons based on those laws. The Company
has been advised by its legal advisors in Bermuda that the
United States and Bermuda do not currently have a treaty
providing for the reciprocal recognition and enforcement of
judgments in civil and commercial matters. Therefore, a final
judgment for the payment of money rendered by any federal or
state court in the United States based on civil liability,
whether or not based solely on U.S. federal or state
securities laws, would not automatically be enforceable in
Bermuda. Similarly, those judgments may not be enforceable in
countries, other than the United States, where the subsidiaries
or the subsidiaries’
non-U.S. directors
have assets.
In the
event of a change or adverse interpretation of relevant income
tax law, regulation or treaty, Overture Re’s overall tax
rate may be substantially higher than the rate used for purposes
of its consolidated financial statements.
Overture Re’s effective tax rate will be based upon the
application of currently applicable income tax laws, regulations
and treaties, as well as current judicial and administrative
interpretations of these income tax laws, regulations and
treaties. These income tax laws, regulations and treaties, and
the administrative and judicial authorities interpreting them,
are subject to change at any time, and any such change may be
retrospective. Presently, a number of countries are considering
changes to their tax laws that have the potential to affect
negatively the tax expense of our subsidiaries, including those
that operate within and outside those countries. At present,
certain pieces of proposed legislation could, if enacted in
their current form, adversely impact Overture Re’s tax rate
and the amount of tax that it pays. However, it is unclear
whether these proposals will be enacted in their current form
and the Company does not believe it is possible at this time to
predict whether and how future proposals may affect Overture Re
and the Company’s results on a consolidated basis.
Overture
Re’s business in Bermuda could be adversely affected by
Bermuda employment restrictions.
Overture Re will employ a number of non-Bermudians in its
Bermuda office including its Chief Executive Officer, its Chief
Financial Officer and its General Counsel. It may hire
additional non-Bermudians as its business grows. Under Bermuda
law, non-Bermudians (other than spouses of Bermudians, holders
of permanent residents’ certificates and holders of working
residents’ certificates) may not engage in any gainful
occupation in Bermuda without a valid government work permit. A
work permit may be granted or renewed upon showing that, after
proper public advertisement, no Bermudian, spouse of a
Bermudian, or holder of a permanent resident’s or working
resident’s certificate who meets the minimum standards
reasonably required by the employer has applied for the job. The
Bermuda government’s policy places a six year term limit on
individuals with work permits, subject to certain exemptions for
key employees. A work permit is issued with an expiry date (up
to five years) and no assurances can be given that any work
permit will be issued or, if issued, renewed upon the expiration
of the relevant term. Overture Re may not be able to use the
services of one or more of its non-Bermudian employees if it is
unable to obtain work permits for them, which in turn could have
a material adverse effect on Overture Re’s business,
financial condition and results of operations.
Operating
as a foreign corporation could adversely affect Overture
Re’s ability to conduct business in the U.S.
Overture Re will not maintain an office or solicit reinsurance
business, advertise, settle claims or conduct other reinsurance
activities in any jurisdiction other than Bermuda where the
conduct of such activities would require it to be so authorized
or admitted. The Company believes Overture Re will conduct its
U.S. business in a manner similar to that employed by other
non-admitted reinsurers that provide reinsurance to
U.S. primary insurers. The Company believes that, to the
extent that these operating guidelines are followed, Overture
Re’s activities comply with the current applicable
insurance laws and regulations. While Overture Re will not be
admitted to do business in any jurisdiction except Bermuda,
insurance departments in the U.S. or elsewhere might take
the position that its activities violate the prohibitions on the
transaction of insurance by a non-admitted insurer. The
insurance laws of each state of the U.S. and of many
non-U.S. jurisdictions
regulate the sale of insurance and reinsurance within that
jurisdiction by alien insurers and reinsurers, such as Overture
Re, which is not authorized or admitted to do business within
such jurisdiction. If a state insurance department were to raise
this issue and prevail, it could argue further that Overture Re
is operating in that state without appropriate licenses or
approvals. In that event, the insurance department could attempt
to take any of several actions, including imposing fines or
penalties on Overture Re. There can be no assurance that
Overture Re’s location, regulatory status or restrictions
on its activities resulting from its regulatory status would not
adversely affect its ability to conduct its business. In the
event such issues or disputes arise, Overture Re may be required
to consider various alternatives to its operations, including
modifying or restricting the manner of conducting its business
or, with respect to cessions by primary insurers in the U.S.,
applying to conduct business as an admitted or approved
reinsurer, establishing trust funds to secure its reinsurance
performance or having to comply with the various financial and
other requirements necessary to operate on an admitted or
approved basis, either directly or by subjecting Overture Re to
U.S. taxation. Furthermore, the applicable insurance laws
and regulations are subject to change. Two bills, the
Nonadmitted and Reinsurance Reform Act of 2009 and the
Reinsurance Regulatory Modernization Act of 2009, purporting to
regulate insurance and reinsurance, are currently pending in
Congress which may adversely affect the cost, manner or
feasibility of doing business if enacted.
Bermuda
insurance regulations may adversely affect Overture Re’s
ability to write reinsurance policies.
Overture Re will be registered and licensed to conduct
reinsurance from within Bermuda, and the statutes, regulations
and policies of Bermuda may affect its ability to write
reinsurance policies and to make certain investments or
distributions. Bermuda statutes and regulations applicable to
Overture require that it, among other things: (i) maintain
minimum levels of capital and surplus, satisfy solvency
standards, restrict dividends and distributions (including
returns of capital), and (ii) cooperate with certain
periodic and other examinations by the Bermuda Monetary
Authority (“BMA”) of its financial condition. The
Company is unable to predict what additional government
regulations, if any, affecting Overture Re’s business may
be promulgated in Bermuda in the future or how such regulations
may be interpreted. In addition, no assurances can be given
that, if Overture Re were to become subject to any insurance
laws of the U.S. or any state thereof or of any other
country at any time in the future, Overture Re would be in
compliance with such laws.
Overture
Re’s ability to pay dividends may be limited by Bermuda
law.
Any dividends paid on Overture Re’s Ordinary Shares will be
subject to limitations imposed on dividends under Bermuda law
and regulations. Under the Bermuda Insurance Act 1978, as
amended, which we refer to as the Bermuda Insurance Act, and
related regulations, Overture Re is required to maintain certain
minimum solvency levels and Overture Re will be prohibited from
declaring or paying dividends that would result in noncompliance
with such requirement. In addition, under the Bermuda Insurance
Act, Overture Re Holdings is prohibited from declaring or paying
any dividends of more than 25% of its total statutory capital
and surplus, as shown on its previous financial year statutory
balance sheet, unless at least seven days before payment of the
dividends it files with the BMA an affidavit that it will
continue to meet its required solvency margins. The BMA requires
that the loss and loss expense provision reflect the present
value of future cash flows associated with all financial
guaranty contracts (which, for statutory reporting purposes,
includes those contracts written as credit default swaps)
attaching prior to the balance sheet date where anticipated
losses are estimated over the lifetime of contracts, with
appropriate probabilistic allowance for potential adverse
scenarios. As such, estimated losses on insured credit
derivatives contracts reduce statutory capital. In addition,
under the Bermuda Companies Act, each subsidiary may only
declare or pay dividends if, among other matters, there are
reasonable grounds for believing it is and will be after any
such payment, able to pay its liabilities as they become due and
that the realizable value of its assets will not thereby be less
than the sum of its aggregate liabilities and its issued share
capital and share premium accounts. These restrictions may limit
the amount of funds available for distribution to holders of the
Company’s Ordinary Shares.
If
Overture Re becomes subject to insurance statutes and
regulations other than those of Bermuda, or there is a change to
a Bermuda law or application of Bermuda law, there could be a
significant and adverse impact on the Company’s business
and profitability.
Overture Re will be a registered Bermuda insurance company and
subject to regulation and supervision in Bermuda. Overture Re
will be subject to Bermuda insurance statutes, regulations and
policies of the BMA which will require Overture Re, among other
things, to:
•
Maintain minimum levels of capital, surplus and liquidity;
Maintain a principal office and appoint and maintain a principal
representative in Bermuda; and
•
Provide for the performance of certain periodic examinations of
us and our financial condition.
These statutes and regulations may, in effect, restrict Overture
Re’s ability to write reinsurance policies, to distribute
funds and to pursue its investment strategy. It is not possible
to predict the future impact of changing law or regulation on
the operations of Overture Re. Such changes, if any, could have
an adverse effect on Overture Re. Overture Re intends to conduct
its business so that it will not be subject to licensing
requirements or insurance regulations in the United States. The
insurance laws of each U.S. state and many
non-U.S. jurisdictions
regulate the sale of insurance within that jurisdiction by alien
insurers, such as Overture Re, which are not authorized or
admitted to do business in that jurisdiction. Overture Re does
not intend to maintain an office or to solicit, advertise,
settle claims or conduct other insurance activities in any
jurisdiction other than Bermuda where its activities would
require it to be so authorized or admitted. Overture Re believes
that so long as it follows its operating guidelines, it will
conduct its activities in compliance with applicable insurance
statutes and regulations. However, it cannot assure you that
insurance regulators in the United States or elsewhere will not
review its activities or, that if there were such a review, that
they would not be successful in claiming that Overture Re is
subject to the jurisdiction’s licensing requirements.
If
Overture Re chooses to attempt, or deems it necessary, to become
licensed in a jurisdiction other than Bermuda, Overture Re may
have to modify its operations and business in a manner that
could be adverse to Overture Re.
The modification of the conduct of Overture Re’s business
resulting from Overture Re becoming licensed in certain
jurisdictions could significantly and negatively affect its
business, including subjecting it to risk-based capital and
other regulations which could substantially affect the
composition of its hedge portfolio and the returns on the
portfolio. In addition, Overture Re’s failure to comply
with insurance statutes and regulations could significantly and
adversely affect Overture Re’s business by limiting its
ability to conduct business as well as subjecting it to
penalties and fines.
Generally, Bermuda insurance statutes and regulations applicable
to Overture Re are less restrictive than those that would be
applicable to Overture Re if it were subject to the insurance
laws of any state in the United States. In the past, there have
been congressional and other initiatives in the United States
regarding proposals to supervise and regulate insurers domiciled
outside the United States. If in the future Overture Re would
become subject to any insurance laws of the United States or any
state thereof or of any other jurisdiction, Overture Re cannot
assure that it would be in compliance with those laws or that
coming into compliance with those laws would not have a
significant and negative effect on its business.
The offshore insurance and reinsurance regulatory framework
recently has become subject to increased scrutiny in many
jurisdictions, including in the United States and in various
states within the United States. Overture Re is not able to
predict the future impact on its operations of changes in the
laws and regulation to which it is or may become subject.
Overture
Re may be unable to provide adequate collateral for reinsurance
treaties, which would adversely affect Overture Re and its
operations.
Many jurisdictions do not permit insurance companies to take
credit for reinsurance obtained from unlicensed or non-admitted
insurers on their statutory financial statements unless
appropriate security measures are in place. Accordingly, for
each reinsurance treaty, Overture Re intends to create a trust
to hold sufficient assets as collateral, establish a letter of
credit, enter into a funds withheld arrangement, or other
arrangement that will provide the ceding insurer credit for
reinsurance. There is no assurance that Overture Re will be able
to put such arrangements in place. If Overture Re were to be
unable to provide collateral sufficient to provide the required
security for its reinsurance treaties, Overture Re’s
ability to operate its business would be severely limited. In
addition, Overture Re may not be able to obtain such collateral
on favorable terms, which could adversely affect its financial
condition, operating costs and new business volume.
While
the Company does not currently intend to pay dividends, its
ability to pay dividends, now or in the future, may be
constrained by its lack of direct revenues and limitations on
the payment of dividends which Bermuda law imposes on Overture
Re.
The Company does not expect to have any significant operations
or assets other than its ownership of the shares of Overture Re
Holdings and Overture Re (the “Subsidiaries”).
Dividends and other permitted distributions from its
Subsidiaries are expected to be the Company’s sole source
of funds to meet ongoing cash requirements, including debt
service payments and other expenses and to pay dividends to the
Company’s shareholders if it were to decide to pay such
dividends. Overture Re does not intend to pay dividends to its
shareholders in the foreseeable future. In addition, Bermuda law
regulations limit the declaration and payment of dividends and
the making of distributions by Overture Re and Overture Re
Holdings to the Company. The inability of Overture Re and
Overture Re Holdings to pay dividends in an amount sufficient to
enable the Company to meet its cash requirements at the holding
company level could have a material adverse effect on the
Company’s operations.
Overture
Re Holdings and Overture Re may become subject to taxes in
Bermuda after March 28, 2016, which may have a material
adverse effect on their financial condition and operating
results and on an investment in the Securities.
Overture Re Holdings and Overture Re will seek an assurance from
the Bermuda Minister of Finance, under the Bermuda Exempted
Undertakings Tax Protection Act 1966, as amended, that if any
legislation is enacted in Bermuda that would impose tax computed
on profits or income, or computed on any capital asset, gain or
appreciation, or any tax in the nature of estate duty or
inheritance tax, then the imposition of any such tax will not be
applicable to Overture Re Holdings and Overture Re or any of its
operations or shares, debentures or other obligations (except
insofar as such tax applies to persons ordinarily resident in
Bermuda or to any taxes payable by them in respect of real
property or leasehold interests in Bermuda held by them) until
March 28, 2016.
Because the Minister of Finance’s expected assurance
extends only until March 28, 2016, Overture Re Holdings and
Overture Re cannot be certain that they will not be subject to
any Bermuda tax after March 28, 2016. Because Overture Re
Holdings and Overture Re are Bermuda companies, each will be
subject to changes of law or regulation in Bermuda that may have
an adverse impact on its operations, including the imposition of
tax. See “Proposals to be Considered by
Shareholders — The Master Agreement —
Material Tax Consequences of the Transaction to the
Company’s Securityholders.”
The
impact of the Organization for Economic Cooperation and
Development’s directive to eliminate harmful tax practices
is uncertain and could adversely affect Overture Re and Overture
Re Holdings’ tax status in Bermuda.
The Organization for Economic Cooperation and Development (the
“OECD”) has published reports and launched a
global dialogue among member and non-member countries on
measures to limit harmful tax competition. These measures are
largely directed at counteracting the effects of tax havens and
preferential tax regimes in countries around the world. In the
OECD’s report dated April 18, 2002 and periodically
updated, Bermuda was not listed as a uncooperative tax haven
jurisdiction because it had previously committed to eliminate
harmful tax practices and to embrace international tax standards
for transparency, exchange of information and the elimination of
any aspects of the regimes for financial and other services that
attract business with no substantial domestic activity. The
Company is not able to predict what changes will arise from the
commitment or whether such changes will subject Overture Re to
additional taxes.
The Government of the Cayman Islands will not, under existing
legislation, impose any income, corporate or capital gains tax,
estate duty, inheritance tax, gift tax or withholding tax upon
the Company or the
Company’s shareholders. The Cayman Islands are not party to
a double tax treaty with any country that is applicable to any
payments made to or by the Company.
The Company has applied for and has received an undertaking
dated October 9, 2007 from the
Governor-in-Cabinet
of the Cayman Islands that, in accordance with section 6 of
the Tax Concessions Law (1999 Revision) of the Cayman Islands,
for a period of 20 years from the date of the undertaking,
no law which is enacted in the Cayman Islands imposing any tax
to be levied on profits, income, gains or appreciations shall
apply to the Company or its operations and, in addition, that no
tax to be levied on profits, income, gains or appreciations or
which is in the nature of estate duty or inheritance tax shall
be payable (i) on or in respect of the shares, debentures
or other obligations of the Company or (ii) by way of the
withholding in whole or in part of a payment of dividend or
other distribution of income or capital by the Company to its
members or a payment of principal or interest or other sums due
under a debenture or other obligation of the Company.
Overture
Re could be treated as engaged in a trade or business in the
United States for federal income tax purposes and subject to
U.S. federal corporate income tax, a 30% branch profits tax, and
possibly state and local taxes.
The Company, Overture Re Holdings, and Overture Re intend to
take the position that they are not engaged in a trade or
business in the United States and that they are therefore not
subject to U.S. federal income tax on a net income basis
(or branch profits tax or state and local tax). However, because
the determination of whether Overture Re is engaged in a trade
or business is essentially factual, there can be no assurance
that Overture Re will not be treated as engaged in a trade or
business in the United States for federal income tax purposes
and subject to U.S. federal income tax (and possibly a 30%
branch profits) on its income that is effectively connected to
its trade or business in the United States, and possibly
additional state an local taxes. Any such taxes could materially
affect an investor’s return.
Potential
Application of the Federal Insurance Excise Tax.
The IRS has held that the U.S. federal insurance excise tax
(“FET”) is applicable at a 1% rate on reinsurance
cessions or retrocessions of “U.S. risk” by
U.S. insurers or reinsurers to
non-U.S. reinsurers,
as well as to all reinsurance cessions or retrocessions of
U.S. risks by
non-U.S. insurers
or reinsurers to
non-U.S. reinsurers,
even if the FET has been paid on prior cessions of the same
risks. The liability for the FET may be imposed on either the
ceding party or the cedant. Therefore, Overture Re expects that
a 1% excise tax will be imposed on any U.S. risk that is
ceded to Overture Re under a reinsurance cession or retrocession
and on any U.S. risk that is ceded by Overture Re to a
non-U.S. reinsurance
company.
If the Company, Overture Re Holdings, or Overture Re is treated
as a “controlled foreign corporation” (a
“CFC”) for 30 days or more in its taxable year, a
U.S. Holder (as defined below under “United States
Taxation”) that owns (directly, indirectly, including
through
non-U.S. corporations,
or constructively) at least 10% of the total combined voting
power of the Company, Overture Re Holdings, or Overture Re,
respectively (such a shareholder, a “10%
U.S. shareholder”) would be subject to tax on its pro
rata share of Overture Re’s, Overture Re Holdings’,
and Overture Re’s “subpart F income”, as the case
may be (which could be all or substantially all of their
income), even if the income is not distributed.
The Company and Overture Re Holdings will each be CFCs if 10%
U.S. shareholders own in the aggregate more than 50% of the
combined voting power or value of the shares of the Company or
Overture Re Holdings (taking in to account direct and indirect
ownership, including Overture Re Holdings through the Company,
and certain attribution rules). Overture Re will be a CFC if 10%
U.S. shareholders own in the aggregate 25% or more of the
combined voting power or value of the shares of Overture Re
(taking in to account direct and indirect ownership, including
through Overture Re or Overture Re Holdings, and certain
attribution rules). Nevertheless, U.S. Holders should
generally not be subject to tax on Overture’s, Overture Re
Holdings’, or Overture Re’s income so long as the
U.S. Holder does not own and is not treated as owning
securities entitled to more than 9.9% of the total voting power
of all classes of Overture’s shares at any time. However,
as summarized immediately below, U.S. Holders may be
required to report a portion of Overture Re’s “related
party insurance income.” Prospective U.S. Holders
should consult their tax advisors on the application of the
indirect and constructive ownership rules that may apply to them
and the consequences of being a 10% U.S. shareholder of the
Company, Overture Re Holdings, or Overture Re subject to current
tax on some or all of the Company’s, Overture Re
Holdings’, or Overture Re’s income.
U.S.
Holders may be subject to current U.S. federal income taxation
at ordinary income rates on their proportionate share of
Overture Re’s related person insurance income, even if that
income is not distributed.
If (i) United States persons own 25% or more of the
Company’s shares (by vote or by value), (ii) Overture
Re’s related person insurance income (or “RPII”)
(described below under “U.S. Taxation”),
determined on a gross basis, is equal to or exceeds 20% of
Overture Re’s gross insurance income in any taxable year,
and (iii) persons that are directly or indirectly insured
by Overture Re own directly or indirectly 20% or more of
Overture Re’s voting power or value, then any
U.S. Holder that owns shares of the Company directly,
indirectly, or constructively on the last day of Overture
Re’s taxable year would be required to include the
U.S. Holder’s pro rata share of Overture Re’s
RPII for the entire taxable year, determined as if Overture
Re’s RPII were distributed proportionately only to
U.S. Holders that hold interests in the Company on that
date, even if the income is not distributed. In addition, any
RPII that is includible in the income of a U.S. tax-exempt
organization generally will be treated as “unrelated
business taxable income” of that U.S. tax-exempt
organization.
The Company and Overture Re intend to monitor the amount of RPII
that Overture Re earns in any year and use commercially
reasonable methods to attempt to ensure that Overture Re’s
RPII does not equal or exceed 20% of Overture Re’s gross
insurance income for any taxable year. However, Overture Re may
not be able to determine whether its insureds are related
persons for these purposes. Moreover, because JNL is a related
person who is an insured, RPII includes the investment income
from reserves associated with ensuring JNL’s risks, and the
amount of that income may be difficult to predict, the amount of
Overture Re’s RPII may not be capable of being accurately
predicted. Therefore, the Company may not be able to avoid
earning RPII equal to or in excess of 20% of its gross insurance
income. Accordingly, the Company and Overture Re cannot offer
any assurances that its RPII will be less than 20% of Overture
Re’s gross income in any year.
U.S.
Holders that dispose of the Company’s shares may be subject
to U.S. federal income taxation at the rates applicable to
dividends on all or a portion of their gains.
The RPII rules provide that if a U.S. Holder disposes of
shares in a
non-U.S. insurance
company (such as Overture Re) in which United States persons own
25% or more of the shares and the insurance company earns any
RPII in that year, any gain from the disposition will generally
be treated as a dividend to the extent of the holder’s
share of the insurance company’s undistributed earnings and
profits that were accumulated during the period that the
U.S. Holder owned the shares. In addition, the
U.S. Holder will be required to comply with certain
reporting requirements, regardless of the amount of shares owned
by the holder.
Overture Re will earn RPII in each year and it is expected that
United States persons will own 25% or more of the interest in
Overture Re (through the ownership of the Company’s
shares). It is unclear whether this rule applies to the
disposition of the Company’s shares because the Company
will not be directly engaged in the insurance business and will
not directly earn RPII. If these rules do apply to gain on the
sale of the Company’s shares, any gain recognized by a
U.S. Holder on a sale of the Company’s shares may be
treated as ordinary income to the extent of Overture Re’s
current and accumulated earnings and profits. Prospective
U.S. Holders should consult with their tax advisor on the
character of any gain on the sale of shares.
U.S.
Holders that hold the Company’s securities will be subject
to adverse U.S. federal income tax consequences if the Company,
Overture Re Holdings or Overture Re are treated as a passive
foreign investment company.
If the Company, Overture Re Holdings, or Overture Re is treated
as a “passive foreign investment company” (or a
“PFIC”) for U.S. federal income tax purposes, a
U.S. Holder who owns any of the Company’s shares
directly or indirectly will be subject to adverse
U.S. federal income tax consequences, including taxation of
any gain and certain “excess distributions” at
ordinary income rates and an additional penalty tax in the
nature of an interest charge. In addition, if the Company,
Overture Re Holdings or Overture Re is a PFIC, upon the death of
any U.S. Holder who is an individual and owns the
Company’s shares directly or indirectly, the
individual’s heirs or estate will not be entitled to a
“step-up”
in the basis of the shares which might otherwise be available
under U.S. federal income tax laws. The Company intends to
take the position that the Company, Overture Re Holdings and
Overture Re are not PFICs for federal income tax purposes, and
the Company currently does not expect them to become PFICs.
However, there is no authority regarding the application of the
PFIC provisions to reinsurance companies and therefore we cannot
assure you that the Company, Overture Re Holdings and Overture
Re will not be treated as a PFIC.
U.S.
tax-exempt organizations that own the Company’s shares may
recognize unrelated business taxable income.
U.S. tax-exempt organizations may recognize unrelated
business taxable income if the tax-exempt organization is deemed
to earn insurance income. In general, a U.S. tax-exempt
organization will earn insurance income if the Company is a CFC
and the tax exempt shareholder is a 10% U.S. shareholder,
or if the tax-exempt organization is required to report Overture
Re’s RPII. Although we will undertake to take commercially
reasonable efforts to attempt to ensure that tax-exempt
organizations are not required to report RPII, we are not
certain that we will be successful.
Changes
in U.S. federal income tax law could materially adversely affect
an investment in the Shares.
It is possible that legislation could be introduced and enacted
by Congress, or U.S. Treasury regulations could be issued,
that could have an adverse effect on the Company, Overture Re
Holdings, or Overture Re or its U.S. Holders. In
particular, a bill was introduced in Congress on
October 27, 2009 that would require certain foreign
corporations (such as the Company, Overture Re Holdings, and
Overture Re) to enter into an agreement with the IRS to disclose
to the IRS the name, address, and tax identification number of
any U.S. person who owns an interest in the Company,
Overture Re Holdings or Overture Re, and impose a 30%
withholding tax on certain payments of income or capital gains
to the Company, Overture Re Holdings or Overture Re if it fails
to enter into the agreement or satisfy its obligations under the
agreement. If this or similar legislation is enacted, the
Company, Overture Re Holdings and Overture Re intend to satisfy
any obligations imposed on it to avoid the imposition of a
withholding tax. However, if the Company, Overture Re Holdings
or Overture Re is unable to do so (because, for example,
investors fail to provide it with information), payments to it
may be subject to a withholding tax, which could reduce the cash
available for investors. Additionally, existing
U.S. federal income tax laws are unclear on several aspects
relating to the Company, Overture Re Holdings, Overture Re, and
its U.S. Holders, and interpretations of current law could
have an adverse effect on the Company, Overture Re Holdings,
Overture Re, and U.S. Holders of the Company’s shares,
particularly with respect to whether Overture Re is engaged in a
trade or business within the United States, whether the Company,
Overture Re Holdings, or Overture Re is a PFIC, whether
U.S. Holders are subject to current tax on the
Company’s or Overture Re’s “subpart F
income,” and whether gain on the Company’s shares is
treated as ordinary income. These interpretations could possibly
have a retroactive effect. Prospective investors should consult
their tax advisors regarding possible legislative and
administrative changes and their effect on the federal tax
treatment of the Company, Overture Re Holdings and Overture Re
and their investment in the Company, Overture Re Holdings and
Overture Re.
The statements contained in this proxy statement/prospectus that
are not purely historical are forward-looking statements. The
forward-looking statements include, but are not limited to,
statements regarding the Company’s, JNL Bermuda’s or
their respective management’s expectations, hopes, beliefs,
intentions or strategies regarding the future. In addition, any
statements that refer to projections, forecasts or other
characterizations of future events or circumstances, including
any underlying assumptions, are forward-looking statements. The
words “anticipates,”“believe,”“continue,”“could,”“estimate,”“expect,”“intends,”“may,”“might,”“plan,”“possible,”“potential,”“predicts,”“project,”“should,”“would” and
similar expressions may identify forward-looking statements, but
the absence of these words does not mean that a statement is not
forward-looking. Forward-looking statements in this proxy
statement/prospectus may include, for example, statements about
the Company’s and JNL Bermuda’s:
•
ability to complete the Transaction;
•
the benefits of the Transaction;
•
the impairment of other financial institutions and its effect on
our business;
•
requirements to post collateral or make payments due to declines
in market value of assets subject to our collateral arrangements;
•
the fact that the adverse change in mortality, morbidity,
lapsation or claims experience; determination of allowances and
impairments taken on our investments is highly subjective;
•
adverse changes in mortality, morbidity, lapsation or claims
experience;
•
adverse capital and credit market conditions and their impact on
our liquidity, access to capital and cost of capital;
•
changes in our financial strength and credit ratings and the
effect of such changes on our future results of operations and
financial condition;
•
inadequate risk analysis and underwriting;
•
general economic conditions or a prolonged economic downturn
affecting the demand for insurance and reinsurance in our
current and planned markets;
•
the availability and cost of collateral necessary for regulatory
reserves and capital;
•
market or economic conditions that adversely affect the value of
our investment securities or result in the impairment of all or
a portion of the value of certain of our investment securities;
•
market or economic conditions that adversely affect our ability
to make timely sales of investment securities;
•
risks inherent in our risk management and investment strategy,
including changes in investment portfolio yields due to interest
rate or credit quality changes;
•
fluctuations in U.S. or foreign currency exchange rates,
interest rates, or securities and real estate markets;
•
adverse litigation or arbitration results;
•
the adequacy of reserves, resources and accurate information
relating to settlements, awards and terminated and discontinued
lines of business;
•
the stability of and actions by governments and economies in the
markets in which we operate;
•
competitive factors and competitors’ responses to our
initiatives;
•
the success of our clients;
•
successful execution of our entry into new markets;
successful development and introduction of new products and
distribution opportunities;
•
our ability to successfully integrate and operate reinsurance
businesses that JNL Bermuda acquires;
•
regulatory action that may be taken by state Departments of
Insurance with respect to JNL Bermuda, or any of its
subsidiaries;
•
our dependence on third parties, including those insurance
companies and reinsurers to which we cede some reinsurance,
third-party investment managers and others;
•
the threat of natural disasters, catastrophes, terrorist
attacks, epidemics or pandemics anywhere in the world where we
or our clients do business;
•
changes in laws, regulations, and accounting standards
applicable to JNL Bermuda, its subsidiaries, or its business;
•
the effect of our status as an holding company and regulatory
restrictions on our ability to pay principal of and interest on
its debt obligations; and
•
other risks and uncertainties described in this proxy
statement/prospectus, including under the caption “Risk
Factors” and in our other filings with the SEC.
The forward-looking statements contained in this proxy
statement/prospectus are based on the Company’s and
Overture Re’s current expectations and beliefs concerning
future developments and their potential effects. There can be no
assurance that future developments affecting the Company or
Overture Re will be those that they have anticipated. These
forward-looking statements involve a number of risks,
uncertainties (some of which are beyond the Company’s or
Overture Re’s control) and other assumptions that may cause
actual results or performance to be materially different from
those expressed or implied by these forward-looking statements.
These risks and uncertainties include those factors described
under the heading “Risk Factors.” Specifically,
some factors that could cause actual results to differ include:
•
the Company’s ability to complete its initial business
combination within the specified time limits;
•
officers and directors allocating their time to other businesses
or potentially having conflicts of interest with the
Company’s business or in approving the Transaction;
•
success in retaining or recruiting, or changes required in, the
Company’s officers, key employees or directors following
the Transaction;
•
delisting of the Company’s securities from the NYSE Amex
following the Transaction;
•
the potential liquidity and trading of the Company’s public
securities;
anticipated business development activities of the Company
following the Transaction;
•
risks and costs associated with regulation of corporate
governance and disclosure standards (including pursuant to
Section 404 of the Sarbanes-Oxley Act of 2002); and
•
other risks referenced from time to time in the Company’s
filings with the SEC.
Should one or more of these risks or uncertainties materialize,
or should any of our assumptions prove incorrect, actual results
may vary in material respects from those projected in these
forward-looking statements. Neither the Company nor Overture Re
undertakes any obligation to update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be
required under applicable securities laws. Except to the extent
required by applicable laws and regulations, neither the Company
nor Overture Re undertakes any obligation to update these
forward-looking statements to
reflect events or circumstances after the date of this proxy
statement/prospectus or to reflect the occurrence of
unanticipated events.
All forward-looking statements included herein attributable to
the Company, Overture Re or any person acting on either
party’s behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this
section. Except to the extent required by applicable laws and
regulations, neither the Company nor Overture Re undertakes any
obligation to update these forward-looking statements to reflect
events or circumstances after the date of this proxy
statement/prospectus or to reflect the occurrence of
unanticipated events.
Before you grant your proxy or instruct how your vote should be
cast or vote on the approval of the Transaction, you should be
aware that the occurrence of the events described in the
“Risk Factors” section and elsewhere in this
proxy statement/prospectus could have a material adverse effect
on the Company and Overture Re, now or upon completion of the
Transaction.
The Company is furnishing this proxy statement/prospectus to its
shareholders and warrantholders as part of the solicitation of
proxies by its board of directors for use at the Extraordinary
General Meeting of Shareholders and the Special Meeting of
Warrantholders, each to be held on January 27, 2010, and at
any adjournment or postponement thereof. This proxy
statement/prospectus is first being furnished to Company
warrantholders and shareholders on or about January 12,2010. This proxy statement/prospectus provides you with
information you need to know to be able to vote or instruct your
vote to be cast at the Extraordinary General Meeting of
Shareholders and the Special Meeting of Warrantholders.
The Extraordinary General Meeting of Shareholders will be held
at the same location, at 10:00 a.m., Eastern time, on
January 27, 2010 or such other date, time and place to
which such meetings may be adjourned or postponed. The Special
Meeting of Warrantholders will be held at 10:30 a.m.,
Eastern time, on January 27, 2010, at the offices of
Ellenoff Grossman & Schole LLP, the Company’s
counsel, at 150 East 42nd Street,
11th
Floor, New York, New York10017, or such other date, time and
place to which such meeting may be adjourned or postponed.
At the Extraordinary General Meeting of Shareholders, the
Company will ask holders of its Ordinary Shares to consider and
vote upon the following resolutions:
(1) The Business Combination Proposal — to
approve a business combination and the transactions contemplated
by the Master Agreement (the “Transaction”),
dated as of December 10, 2009 (the “Master
Agreement”), by and among the Company, Overture Re
Holdings Ltd., the Company’s newly formed, wholly owned
Bermuda holding company (“Overture Re
Holdings”), Jefferson National Financial Corp., a
Delaware corporation (“JNF”), Jefferson
National Life Insurance Company, a Texas insurance company and a
wholly owned subsidiary of JNF (“JNL”), and JNL
Bermuda LLC, a Delaware limited liability company and a newly
formed wholly owned subsidiary of JNL (“JNL
Bermuda”), JNF Asset Management LLC, a Delaware limited
liability company (“JNFAM”) the Founders of the
Company (the “Founders”) which, among other
things, provides for the amalgamation of JNL Bermuda with
Overture Re Ltd., a to be formed, wholly owned subsidiary of
Overture Re Holdings (“Overture Re”), pursuant
to which the amalgamated company shall be a long term reinsurer
domiciled in Bermuda (the “Business
Combination” and the proposal, the “Business
Combination Proposal”);
(2) The Name Change Proposal — to approve
a special resolution to change the name of the Company from
“Overture Acquisition Corp.” to “Overture Capital
Corp.” (the “Name Change Proposal”);
(3) The Repurchase Amendment
Proposal — to approve a special resolution to
amend the Company’s amended and restated memorandum and
articles of association (the “Articles”) to add
provisions to allow the Company to purchase its own ordinary
shares (“Ordinary Shares”) without shareholder
approval in certain limited circumstances (the
“Repurchase Amendment Proposal”);
(4) The Staggered Board Elimination
Proposal — to approve a special resolution to
amend the Company’s Articles to eliminate the staggered
board provision in the Articles (the “Staggered Board
Elimination Proposal”;
(5) The Share Repurchase Proposal — to
approve the repurchase by the Company of the Ordinary Shares
issued to the Company’s Founders (the “Founders
Shares”) prior to the Company’s initial public
offering (the “IPO”) the “Share
Repurchase Proposal”);
(6) The Board of Directors Proposal — to
elect seven directors (the “Directors”) to the
Company’s board of directors (the “Board of
Directors”) upon consummation of the Transaction to
serve until the 2010 annual general meeting of Shareholders or
until their successors have been duly elected or appointed and
qualified (the “Board of Directors Proposal”);
(7) The Incentive Plan Proposal — to
consider and vote upon a proposal to approve the adoption of the
2010 Stock Incentive Plan (the “Incentive
Plan”) pursuant to which the Company may issue up to
the lesser of (i) 1.5 million Ordinary Shares or
(ii) 10% of the outstanding Ordinary Shares at the closing
of the Transaction (the “Incentive Plan
Proposal”);
(8) The Shareholder Adjournment Proposal —
to consider and vote upon the adjournment of the Extraordinary
General Meeting to a later date or dates, if necessary, to
permit further solicitation and vote of proxies if, at the time
of the Extraordinary General Meeting of Shareholders, it appears
we cannot consummate the transactions contemplated by the Master
Agreement (the “Shareholder Adjournment
Proposal”); and
(9) Such other procedural matters as may properly come
before the Extraordinary General Meeting of Shareholders or any
adjournment or postponement thereof.
At the Special Meeting of Warrantholders, the Company will ask
holders of its Company Warrants to consider and vote upon the
following proposals:
(1) The Warrant Amendment Proposal — to
consider and vote upon a proposal to amend the Warrant
Agreement, which governs the Company Warrants to provide that
(i) the exercise price of the Company Warrants will be
increased from $7.00 to $11.00 per share, (ii) the
expiration date of the Company Warrants will be extended from
January 30, 2013 to January 30, 2015, and
(iii) the price at which our Ordinary Shares must trade
before we are able to redeem the Company Warrants will be
increased from $14.25 to $20.00 (the “Warrant Amendment
Proposal”);
(2) The Warrantholder Adjournment
Proposal — to consider and vote upon a proposal to
adjourn the Special Meeting of Warrantholders to a later date or
dates, if necessary, to permit further solicitation and vote of
proxies if, based upon the tabulated vote at the time of the
Special Meeting of Warrantholders, there are not sufficient
votes to approve the Warrant Amendment Proposal; and
(3) Such other procedural matters as may properly come
before the Special Meeting of Warrantholders or any adjournment
or postponement thereof.
After careful consideration of each of the proposals, the
Company’s Board of Directors has determined unanimously
that each of them is fair to, and in the best interests of, the
Company and unanimously recommends that the shareholders vote or
instruct their vote to be cast “FOR” the Business
Combination Proposal, the Name Change Proposal, the Repurchase
Amendment Proposal, the Staggered Board Elimination Proposal,
the Share Repurchase Proposal, the Board of Directors Proposal
the Incentive Plan Proposal, and the Shareholder Adjournment
Proposal.
After careful consideration of the Warrant Amendment Proposal,
the Company’s Board of Directors has determined unanimously
that the Warrant Amendment is fair to, and in the best interests
of, the Company and unanimously recommends that the
warrantholders vote or instruct their vote to be cast
“FOR” the Warrant Amendment Proposal and
“FOR” the Warrantholder Adjournment Proposal.
You will be entitled to vote or direct votes to be cast at the
Extraordinary General Meeting or Special Meeting of
Warrantholders if you owned Ordinary Shares or Company Warrants,
respectively, at the close of business on January 7, 2010,
which the Company has fixed as the record date for the
Extraordinary General Meeting and the Special Meeting of
Warrantholders. You are entitled to one vote for each Ordinary
Shares and one vote for each Company Warrant you owned at the
close of business on the record date. On the record date, there
were 18,750,000 Ordinary Shares outstanding, of which 15,000,000
are Public Shares and 3,750,000 are Founder Shares and there
were 19,380,000 Company Warrants outstanding, of which
15,000,000 are Public Warrants and 4,380,000 are founder
warrants.
A quorum of shareholders is necessary to hold a valid
Extraordinary General Meeting of the Company’s
Shareholders. For the purposes of voting on all of the Proposals
except the Business Combination Proposal, a quorum will be
present at the Extraordinary General Meeting if more than 50%of
the holders of the Company’s Ordinary Shares issued and
outstanding on the record date and entitled to vote at the
Extraordinary General Meeting are present in person or by proxy.
A quorum will be present for the purpose of the Business
Combination Proposal if 100% of the holders of the
Company’s Ordinary Shares issued and outstanding on the
record date and entitled to vote at the Extraordinary General
Meeting are present in person or by proxy. Pursuant to the
Company’s Articles, if this quorum is not present within
half an hour from the time appointed at an adjourned meeting,
then the shareholders present at the adjourned meeting shall be
a quorum provided that the Name Change Proposal, the Repurchase
Amendment Proposal and the Staggered Board Elimination Proposal
may not be adopted with a reduced quorum in any adjourned
meeting. Abstentions and broker non-votes will count as present
for the purposes of establishing a quorum.
The approval of the Business Combination Proposal requires that
the majority of the Public Shares present and entitled to vote
at the Extraordinary General Meeting are voted in favor of the
Business Combination Proposal at the Extraordinary General
Meeting or at an adjourned meeting and that the holders of 30%
or more of the Public Shares do not vote against the Business
Combination Proposal and exercise their redemption rights in
respect of their Public Shares. If holders of 30% or more of the
Public Shares vote against the Business Combination Proposal and
demand that their Public Shares be redeemed for a pro rata
portion of the trust account, the Company will not, pursuant to
the terms of the Articles, be permitted to consummate the
Transaction. Please note you cannot seek redemption of your
Public Shares unless you vote against the Business Combination
Proposal and affirmatively elect to have your Public Shares
redeemed.
The approval of each of the Name Change Proposal, the Repurchase
Amendment Proposal, and the Staggered Board Elimination Proposal
requires the affirmative vote of not less than two-thirds of the
votes cast by such shareholders as being entitled to do so, vote
in person or by proxy at the Extraordinary General Meeting.
Pursuant to the Company’s Articles, the Name Change
Proposal, the Repurchase Amendment Proposal and the Staggered
Board Elimination Proposal cannot be approved at an adjourned
meeting.
The approval of each of the Share Repurchase Proposal, the Board
of Directors Proposal, the Incentive Plan Proposal and the
Shareholder Adjournment Proposal requires the affirmative vote
of a majority of the shareholders as being entitled to do so,
vote in person or by proxy at the Extraordinary General Meeting
or at an adjourned meeting.
A quorum of warrantholders is necessary to hold a valid meeting.
A quorum will be present at the Special Meeting of
Warrantholders if a majority of the outstanding Company Warrants
is represented in person or by proxy. Abstentions and broker
non-votes will count as present for the purposes of establishing
a quorum.
The approval of the Warrant Amendment Proposal will require the
affirmative vote of the holders of a majority of the Company
Warrants outstanding as of the record date.
The approval of the Warrantholder Adjournment Proposal requires
the affirmative vote of a majority of the Company Warrants
issued and outstanding as of the record date voted at the
Special Meeting of Warrantholders.
Abstentions are considered present for the purposes of
establishing a quorum but will have the same effect as a vote
“AGAINST” the Warrant Amendment Proposal. Broker
non-votes, while considered present for the purposes of
establishing a quorum, will have the same affect as a vote
“AGAINST” the Warrant Amendment Proposal.
As of the record date for the Special Meeting of Warrantholders,
the Company’s Founders own the 4,380,000 founder warrants,
which means the Company’s Founders, directors and officers
own an aggregate of approximately 23.0% of the outstanding
Company Warrants. The Founders, directors and officers of the
Company have indicated that they intend to vote in favor of the
Warrant Amendment Proposal.
Under the rules of various national and regional securities
exchanges, your broker, bank or nominee cannot vote your
warrants or shares with respect to non-discretionary matters
unless you provide instructions on how to vote in accordance
with the information and procedures provided to you by your
broker, bank or nominee. The Company believes the proposals
presented to warrantholders and shareholders will be considered
non-discretionary and therefore your broker, bank or nominee
cannot vote your shares without your instruction. If you do not
provide instructions with your proxy, your broker, bank or
nominee may deliver a proxy card expressly indicating that it is
NOT voting your shares, as the case may be. This indication that
a broker, bank or nominee is not voting your shares is referred
to as a “broker non-vote.”
Abstentions, while considered present for the purposes of
establishing a quorum at the Extraordinary General Meeting, will
have no effect on the Business Combination Proposal, the Name
Change Proposal, the Repurchase Amendment Proposal, the
Staggered Board Elimination Proposal, the Share Repurchase
Proposal, the Board of Directors Proposal, the Incentive Plan
Proposal or the Shareholder Adjournment Proposal. Broker
non-votes, while considered present for the purposes of
establishing a quorum, will have no effect on the Business
Combination Proposal, the Name Change Proposal, the Repurchase
Amendment Proposal, the Staggered Board Elimination Proposal,
the Share Repurchase Proposal, the Board of Directors Proposal,
the Incentive Plan Proposal or the Shareholder Adjournment
Proposal.
Abstentions are considered present for purposes of establishing
a quorum at the Special Meeting but will have the same effect as
a vote “AGAINST” the Warrant Amendment Proposal. A
broker non-vote, while considered present for purposes of
establishing a quorum, will have the same effect as a vote
“AGAINST” the Warrant Amendment Proposal.
Each Company Warrant and each Ordinary Share you own in your
name entitles you to one vote on the applicable proposals. Your
one or more proxy cards show the number of warrants or Ordinary
Shares, as the case may be, you own. There are two ways to vote
your warrants or Ordinary Shares:
•
You can vote by signing and returning the enclosed proxy card.
If you vote by proxy card, your “proxy,” whose name is
listed on the proxy card, will vote your warrants or shares as
you instruct on the proxy card. If you sign and return the proxy
card but do not give instruction on how to vote your warrants,
your warrants will be voted, as recommended by the
Company’s Board of Directors, “FOR” the Warrant
Amendment Proposal and the Warrantholder Adjournment Proposal.
If you sign and return the proxy card but do not give
instructions on how to vote your shares, your shares will be
voted, as recommended by the Board of Directors, “FOR”
the Business Combination Proposal, “FOR” the Name
Change Proposal, “FOR” the Repurchase Amendment
Proposal, “FOR” the Staggered Board Elimination
Proposal, “FOR” the Share Repurchase Proposal,
“FOR” the Board of Directors Proposal, “FOR”
the Incentive Plan Proposal and, if required, “FOR”
the Shareholder Adjournment Proposal.
You can attend the Special Meeting of Warrantholders
and/or the
Extraordinary General Meeting, as the case may be, and vote in
person. We will give you a ballot when you arrive. However, if
your warrants or shares are held in the name of your broker,
bank or another nominee, you must get a proxy from the broker,
bank or other nominee in order to vote your warrants or shares,
at the Special Meeting of Warrantholders or the Extraordinary
General Meeting. That is the only way we can be sure that the
broker, bank or nominee has not already voted your Public
Warrants or Ordinary Shares.
•
Warrantholders and shareholders who hold their securities in
“street name” through a broker or bank will have the
option to authorize their proxies to vote their securities
electronically through the Internet or by telephone. As of the
date of this proxy statement/prospectus substantially all
outstanding Public Shares and Public Warrants are held in street
name. If you hold your securities through a broker, bank or
other nominee, you should check your proxy card or voting
instruction card forwarded by your broker, bank or other nominee
who holds your securities for instructions on how to vote by
these methods. Votes submitted at any time prior to the Special
Meeting of Warrantholders or the Extraordinary General Meeting
of Shareholders, as the case may be, will be accepted. However,
to ensure that your vote is properly counted and to avoid any
problems or unforeseen delays, you should submit your vote as
early as possible and prior to midnight on the day before the
Special Meeting of Warrantholders or the Extraordinary General
Meeting of Shareholders, as the case may be. After such time, a
holder will need to contact his bank, broker or nominee directly
to vote or change his vote.
If you give a proxy, you may revoke it at any time before the
Special Meeting of Warrantholders or the Extraordinary General
Meeting, or at the Special Meeting of Warrantholders or the
Extraordinary General Meeting by doing any one of the following:
•
you may send another proxy card with a later date;
•
you may notify Marc Blazer, the Company’s President, in
writing before the Special Meeting of Warrantholders or the
Extraordinary General Meeting, as applicable, that you have
revoked your proxy; or
•
you may attend the Special Meeting of Warrantholders or the
Extraordinary General Meeting, as applicable, revoke your proxy,
and vote in person, as indicated above.
The Special Meeting of Warrantholders has been called only to
consider the approval of the Warrant Amendment Proposal and the
Warrantholder Adjournment Proposal. The Extraordinary General
Meeting has been called only to consider the Business
Combination Proposal, the Name Change Proposal, the Repurchase
Amendment Proposal, the Staggered Board Elimination Proposal,
the Share Repurchase Proposal, the Board of Directors Proposal,
the Incentive Plan Proposal and, if required, the Shareholder
Adjournment Proposal. Under the Company’s Articles, other
than procedural matters incidental to the conduct of the
Extraordinary General Meeting, no other matters may be
considered if they are not included in the notice of the
Extraordinary General Meeting.
If you have any questions about how to vote or direct a vote in
respect of your Company Warrants or Ordinary Shares, you may
call the Company’s President, Marc Blazer, at
(646) 736-1376.
Pursuant to the Company’s Articles, any of the
Company’s holders of Public Shares on the record date who
vote their Public Shares against the Business Combination
Proposal may also demand such shares be redeemed for a pro rata
portion of the trust account calculated as of two business days
prior to the consummation of the Transaction. If the redemption
request is properly made and the Transaction is
consummated, these Public Shares will be cancelled following
payment of the redemption proceeds from the Company’s trust
account and the appropriate entries being made on the
Company’s Register of Members (Shareholders).
Company shareholders who seek to exercise this redemption right
must vote against the Business Combination Proposal and
affirmatively elect redemption of their Public Shares.
Abstentions and broker non-votes do not satisfy this
requirement. Shareholders seeking to exercise their redemption
rights must also either check the box on the proxy card
providing for the exercise of redemption rights or submit a
request in writing to American Stock Transfer &
Trust Company, the Company’s transfer agent, at the
following address:
American Stock Transfer & Trust Company
59 Maiden Lane, Plaza Level New York, NY10038
Telephone:
718-921-8210
Fax:
718-921-8355
Attention: Felix Orihuela
Warrantholders and shareholders who hold their securities in
“street name” through a broker or bank will have the
option to authorize their proxies to vote their securities
electronically through the Internet or by telephone. As of the
date of this proxy statement/prospectus substantially all
outstanding Public Shares and Public Warrants are held in street
name. If you hold your securities through a broker, bank or
other nominee, you should check your proxy card or voting
instruction card forwarded by your broker, bank or other nominee
who holds your securities for instructions on how to vote by
these methods.
Additionally, shareholders demanding redemption must deliver
their Public Share certificates (either physically or
electronically) through the DTC to the Company’s transfer
agent prior to the Extraordinary General Meeting. Given the
relatively short solicitation period, it is advisable for
shareholders to use electronic delivery of the Public Shares to
our transfer agent through the DTC by contacting the
shareholder’s broker, bank or nominee. The Company’s
transfer agent will receive the Public Shares on the same day
that electronic delivery instructions are made.
If a shareholder (i) initially votes for the Business
Combination Proposal but then wishes to vote against it and
exercise its redemption rights, or (ii) initially votes
against the Business Combination Proposal and wishes to exercise
its redemption rights but does not check the box on the proxy
card providing for the exercise of its redemption rights or does
not send a written request to the Company’s transfer agent
to exercise its redemption rights or (iii) initially votes
against the Business Combination Proposal but later wishes to
vote for it, the shareholder may request the Company to send to
the shareholder another proxy card on which the shareholder may
indicate the shareholder’s intended vote. The shareholder
may make such request by contacting the Company at the following
telephone number or address:
Overture Acquisition Corp.
c/o Maples
Corporate Services Limited
Ugland House
South Church Street
Georgetown
Grand Cayman KY1-1104
Cayman Islands
Telephone:
(646) 736-1376
Fax:
(646) 224-8971
Attention: Marc Blazer, President
You may also contact Morrow & Co., LLC, the
Company’s proxy solicitor, at:
Any request for redemption, once made, may be withdrawn at any
time until the vote is taken with respect to the Business
Combination Proposal at the Extraordinary General Meeting. Any
corrected or changed proxy card must be received by the Company
prior to the Extraordinary General Meeting. Shareholders who
have delivered their shares physically or electronically to the
Company’s transfer agent but decided prior to the
Extraordinary General Meeting not to exercise their redemption
rights may request that the Company’s transfer agent return
the share physically or electronically. Shareholders may make
such request by contacting the Company’s transfer agent,
American Stock Transfer & Trust Company, at the
telephone number or address set forth above.
If the holders of more than 4,499,999 Public Shares (an amount
equal to one share less than 30% of the Public Shares) vote
against the Business Combination Proposal and properly demand
redemption of their Public Shares, the Company will not be able
to consummate the Transaction.
The closing price as reported by NYSE Amex of the Company’s
Ordinary Shares on the record date was $10.01. The cash held in
the trust account, restricted on September 30, 2009 was
approximately $150,530,000 ($10.04 per Public Share). Prior to
exercising redemption rights, shareholders should verify the
market price of the Ordinary Shares as they may receive higher
proceeds from the sale of their Ordinary Shares in the open
market than from exercising their redemption rights if the
market price per share is higher than the redemption price. The
Company cannot assure its shareholders they will be able to sell
their Ordinary Shares in the open market, even if the market
price per share is higher than the redemption price stated
above, as there may not be sufficient liquidity in the
Company’s securities when the Company’s shareholders
wish to sell their shares.
If you properly exercise your redemption rights and the
Transaction is consummated, your Public Shares will be cancelled
following payment of the redemption proceeds from the
Company’s trust account and the appropriate entries being
made on the Company’s Register of Members (Shareholders).
Warrantholders have no right to receive funds held in the trust
account as to the Company Warrants they hold. If the Company
does not consummate the Transaction and fails to complete an
initial business by January 30, 2010, the Company will go
into automatic liquidation and be dissolved and the Company
Warrants and the founder warrants will expire worthless.
No appraisal rights are available under the Companies Law (2009
Revision) of the Cayman Islands to the shareholders of the
Company in connection with the proposals set forth herein.
The Company is soliciting proxies on behalf of its Board of
Directors. All solicitation costs will be paid by the Company.
This solicitation is being made by mail but also may be made by
telephone or in person. The Company and its directors, officers
and employees may also solicit proxies in person, by telephone
or by other electronic means, including email and facsimile.
The Company has hired Morrow & Co., LLC to assist in
the proxy solicitation process. It will pay that firm a fee of
$12,500 plus disbursements. Such payments will be made from
non-trust account funds. If the Transaction is successfully
closed, the Company will pay Morrow & Co, LLC an
additional contingent fee of $22,500.
The Company will ask banks, brokers and other institutions,
nominees and fiduciaries to forward its proxy materials to their
principals and to obtain their authority to execute proxies and
voting instructions. The Company will reimburse them for their
reasonable expenses. The Company, JNF and their respective
directors and executive officers may be deemed to be
participants in the solicitation of proxies. The underwriters of
the Company’s IPO may provide assistance to the Company,
JNF and their respective directors and executive officers and
may be deemed to be participants in the solicitation of proxies.
Approximately $7,500,000 of the
underwriters’ fees relating to the IPO were deferred,
pending shareholder approval of the Company’s initial
business combination. Management has reached an agreement with
each of the underwriters, pursuant to which such deferred
underwriters’ compensation has been reduced to up to
$1,000,000 to the extent there is between $100,000,000 and
$150,000,000 in trust at the consummation of the Transaction.
The amendment to the underwriters agreement provides that to the
extent there is at least $100 million in the trust at the
consummation of the Transaction, the underwriters shall receive
$20,000, pro rata, for each $1 million in excess of
$100 million. If there is less than $100 million in
the trust at the consummation of the Transaction, the
underwriters are not entitled to any compensation. Pursuant to a
financial advisory agreement by and between the Company and
Credit Suisse, the Company agreed to pay Credit Suisse a
transaction fee (the “Transaction Fee”), payable upon
the first closing in connection with a Transaction, equal to
1.5% of the aggregate value of the Transaction; provided,
however, in no event shall the Transaction Fee payable by the
Company to Credit Suisse in connection with a Transaction be
less than $2 million. In addition, pursuant to a financial
advisory agreement by and between the Company and JP Morgan, the
Company has agreed to pay JP Morgan a financial advisory fee of
$500,000 upon the consummation of the Transaction. If the
Transaction is not consummated and the Company is required to be
liquidated and dissolved, the underwriters will not receive any
such fees.
Warrantholders and shareholders are advised that the
underwriters have a financial interest in the successful outcome
of the proxy solicitation.
On the record date for the Extraordinary General Meeting, the
Company’s Founders beneficially owned and were entitled to
vote an aggregate of 3,750,000 Founder Shares, which means the
Company’s Founders own an aggregate of approximately 20.0%
of the Company’s issued and outstanding Ordinary Shares. In
connection with the IPO, the Company entered into agreements
with the Founders pursuant to which the Founders agreed to vote
the Founder Shares on the Business Combination Proposal in
accordance with the majority of the votes cast by the holders of
Public Shares. In addition, in connection with the IPO, the
Founders agreed to vote any Ordinary Shares purchased subsequent
to the IPO in favor of the Business Combination Proposal. The
Founders of the Company have indicated that they intend to vote
such shares in favor of all other proposals presented at the
Extraordinary General Meeting of Shareholders.
As of the record date for the Special Meeting of Warrantholders,
the Company’s Founders own the 4,380,000 founder warrants,
which means the Company’s Founders own an aggregate of
approximately 23% of the outstanding Company Warrants. The
Founders of the Company have indicated that they intend to vote
in favor of the Warrant Amendment Proposal.
The discussion in this proxy statement/prospectus of the
Business Combination Proposal and the principal terms of the
Master Agreement are subject to, and is qualified in its
entirety by reference to, the Master Agreement, which is
attached as Annex I to this proxy
statement/prospectus.
Pursuant to the Master Agreement, a wholly-owned subsidiary of
the Company will acquire a recently formed Delaware limited
liability company with financial assets, key employees and an
option to reinsure fixed and variable annuities ceded by JNL.
Under the terms of the Company’s Articles, the Company may
proceed with the Transaction notwithstanding that holders of one
share less than 30% of the Public Shares vote against the
Transaction and exercise their redemption rights.
The parties to the Master Agreement intend to consummate the
Transaction as promptly as practicable following the
Extraordinary General Meeting of Shareholders and the Special
Meeting of Warrantholders, provided that:
•
the holders of Company Warrants have approved the Warrant
Amendment Proposal;
•
the Company’s shareholders have adopted the Master
Agreement and approved the Transaction;
•
holders of no more than one share less than 30% of the Public
Shares vote against the Business Combination Proposal and demand
redemption of their Public Shares for a pro rata portion of the
trust account; and
•
the other conditions specified in the Master Agreement have been
satisfied or waived.
The terms of the Master Agreement are the result of arms-length
negotiations between representatives of the Company, JNF and
Overture Re. The following is a discussion of the background of
these negotiations, the Transaction and related transactions.
The Company is a special purpose acquisition company
incorporated as an exempted company under the laws of the Cayman
Islands on September 25, 2007. The Company was incorporated
for the purpose of acquiring, through a merger, share capital
exchange, asset acquisition, share purchase, reorganization or
other similar business combination, an operating business having
a fair market value of at least 80% of the balance held in the
Company’s trust account (exclusive of the
underwriters’ deferred underwriting compensation plus
interest thereon held in the trust account) at the time of such
business combination and resulting in ownership by the Company
of at least 51% of the voting equity interests of the operating
business.
The registration statement for the Company’s IPO was
declared effective on January 30, 2008the Company
consummated its IPO of 15,000,000 units. Each unit consists
of one Ordinary Share and one Public Warrant. Each Public
Warrant expires on January 30, 2013, or earlier upon
redemption, and entitles the holder to purchase one Ordinary
Share at an exercise price of $7.50 per share. The Ordinary
Shares and the Public Warrants started trading separately
beginning on March 3, 2008.
The gross proceeds from the sale of the Company units were
approximately $150,000,000, not including proceeds of $4,380,000
from the private placement of 4,380,000 founder warrants to the
Company’s Founders. Of these amounts, approximately
$150.5 million of proceeds from the IPO and the Private
Placement, including approximately $7.5 million of deferred
underwriting discounts and commissions, were deposited in trust
and, in accordance with the Company’s Articles, will be
released either upon the consummation of a business combination
or upon the automatic liquidation of the Company. Management has
reached an agreement with each of the underwriters, pursuant to
which such deferred underwriters’ compensation has been
reduced to up to $1,000,000 to the extent there is between
$100,000,000 and $150,000,000 in trust at the
consummation of the Transaction. The amendment to the
underwriters agreement provides that to the extent there is at
least $100 million in the trust at the consummation of the
Transaction, the underwriters shall receive $20,000, pro rata,
for each $1 million in excess of $100 million. If
there is less than $100 million in the trust at the
consummation of the Transaction, the underwriters are not
entitled to any compensation. Pursuant to a financial advisory
agreement by and between the Company and Credit Suisse, the
Company agreed to pay Credit Suisse a transaction fee (the
“Transaction Fee”), payable upon the first closing in
connection with a Transaction, equal to 1.5% of the aggregate
value of the Transaction; provided, however, in no event shall
the Transaction Fee payable by the Company to Credit Suisse in
connection with a Transaction be less than $2 million.
Pursuant to the agreement between Credit Suisse and the Company,
Credit Suisse agreed to assist the Company in:
(a) identifying and introducing the Company to a management
team to execute a reinsurance strategy, (b) developing a
strategy to effect a transaction, including financing
alternatives, and (c) coordinating and preparing for
meetings with investors, including assistance in identifying
potential investors, and assistance in the preparation and
review of materials for investor meetings. In addition, Credit
Suisse agreed to, at the Company request, meet with its board of
directors to discuss a proposed transaction and its financial
implications and provide such other assistance as the Company
and Credit Suisse may from time-to-time reasonably agree. Please
be advised that Credit Suisse did not provide any supplementary
materials to the board of directors of Overture in connection
with its presentation at the December 6, 2009 meeting.
In addition, pursuant to a financial advisory agreement by and
between the Company and JP Morgan, the Company has agreed to pay
JP Morgan a financial advisory fee of $500,000 upon the
consummation of the Transaction.
Pursuant to the Company’s Articles, the Company must
consummate a business combination on or before January 30,2010, or it must automatically liquidate and dissolve.
Subsequent to the consummation of the IPO, the Company commenced
efforts to identify and evaluate potential acquisitions with the
objective of consummating a business combination. The Company
screened potential targets based upon the following
characteristics:
•
Established businesses.The Company sought to
acquire established businesses with sound historical financial
performance. The Company typically focused on companies with a
history of strong operating and financial results.
•
Companies with sound business models. The
Company targeted acquisition candidates with sound business
models that offer opportunities for growth.
•
Companies with a strong competitive industry
position. For each potential acquisition, the
Company reviewed growth prospects, competitive dynamics, level
of consolidation, need for capital investment and barriers to
entry. The Company focused on companies that have a leading
market position or that the Company believed had an opportunity
to develop such a position. The Company analyzed the strengths
and weaknesses of target businesses relative to its competitors,
focusing on brand strength, product quality, customer loyalty,
cost impediments associated with customers switching to
competitors, trademark protection and brand positioning. The
Company sought to acquire businesses that demonstrate advantages
when compared to their competitors, which may help to protect
their market position and profitability and deliver strong free
cash flow.
•
Experienced management team.The Company
sought to acquire businesses that have strong, experienced
management teams. The Company focused on management teams with a
proven track record of driving revenue growth, enhancing
profitability and generating strong free cash flow. The Company
believes that Mr. John F.W. Hunt’s operating
experience of growing businesses will complement, not replace,
the target’s management team. The Company also sought to
supplement target businesses’ management teams with
seasoned and experienced executives or directors recruited
through the extensive professional network of its officers,
directors and special advisors. While certain of our officers
and directors will remain associated with the Company following
the Transaction, it is unlikely that any of them will devote
their full efforts to the Company’s affairs subsequent to
the Transaction.
Diversified customer and supplier base. The
Company sought to acquire businesses that have a diversified
customer and supplier base. Companies with a diversified
customer and supplier base are generally better able to endure
economic downturns, industry consolidation, changing business
preferences and other factors that may negatively influence
their customers, suppliers and competitors.
In addition, the Company’s management attempted to identify
potential targets by initiating conversations with
(i) management’s own network of business associates
and friends, (ii) third-party companies that management
believed could make attractive business combination partners and
(iii) professional service providers (lawyers, accountants,
consultants and investment bankers). The Company educated these
parties on its structure as a special purpose acquisition
company and its criteria for an acquisition. The Company also
responded to inquiries from investment bankers and other similar
professionals representing companies engaged in sale or
financing processes.
The Company’s board of directors was updated on a regular
basis with respect to the status of the business combination
search. Input received from the Company’s board of
directors was material to management’s evaluation of
potential business combinations. Opportunities were evaluated
based on the Company’s stated criteria. Many targets did
not fit the Company’s screening criteria, while some were
eliminated due to an insufficient enterprise value or
indications that the target’s valuation expectations were
too high.
As a result of these efforts, the Company identified and
screened several hundred companies, and continued to narrow its
focus to a select number of viable and actionable targets that
met its criteria. The Company held discussions and negotiations
with approximately 100 companies and financial sponsors,
executed 31 confidentiality agreements, extended seventeen
indications of interest, and entered into one other letter of
intent prior to the current transaction. Broadly speaking, these
indications were submitted after initial discussions with the
targets as exploratory documents outlining potential transaction
structures and valuations. Subsequent to submitting these
indications of interest, management had continued discussions
with some targets, and some indications of interest were
unacceptable to the targets, resulting in a cessation of further
substantive discussions and negotiations. The most frequent
reason given by the targets to cease further negotiations was a
result of disagreement on valuation. Management had extensive
discussions subsequent to initial indications of interests with
nine targets, which resulted in draft letters of intent with
four targets, and executed letters of intent with two, including
JNF.
On August 14, 2009, the Company and a target agreed to
terminate their Letter of Intent which had been entered into on
April 10, 2009. After extensive due diligence from April
through August, and a careful evaluation of the target’s
business prospects and financial condition, and consultation
with JP Morgan, the Company arrived at a valuation range that
would be accepted by the Company’s shareholders. The target
was unable to reach an agreement with respect to the valuation
which led to the cessation of further negotiations and the
withdrawal of the Letter of Intent.
The Company declined to move forward on some opportunities
because it did not believe the financial characteristics,
industry profile
and/or
position, management teams, attainable valuations
and/or deal
structures were suitable in light of the screening criteria
detailed above. There were also companies that were not
interested in pursuing a deal with the Company based on its
publicly-traded status, capital structure or questions regarding
the Company’s ability to timely consummate a transaction.
Other companies accepted competitive bids from other acquirers
or attempted their own initial public offerings. On
September 29, 2009, the Overture board met to discuss three
of the targets which were subject to the draft letters of intent
indicated above. While the Overture board believed that each of
these targets were likely to have entered into the letters of
intent, Overture decided at that meeting to exclusively pursue
the transaction with JNF.
On August 9, 2009, Marc Blazer, President of the Company,
was contacted by a Credit Suisse representative to discuss a
number of opportunities in the real estate and insurance
industries. Mr. Blazer had a longstanding relationship with
Credit Suisse, and the Credit Suisse representative had been
aware of the Company and Mr. Blazer’s interests in
reviewing potential deals for the Company, and had after the IPO
presented other potential targets for the Company to
Mr. Blazer and the Company.
On August 12, 2009, Mr. Blazer met at the offices of
Credit Suisse with representatives of the real estate banking
group and the financial institutions group to discuss a number
of opportunities in the homebuilders sector, the mortgage REIT
sector, and JNF. Mr. Blazer requested additional
information on a number of ideas discussed during the meeting,
and agreed to schedule a meeting with Mr. David Smilow, an
officer of JNF.
On August 25, 2009, Mr. Blazer met with
Mr. Smilow and representatives of Credit Suisse at the
offices of Credit Suisse. Mr. Smilow presented information
on JNF, the reinsurance industry, and the idea of merging
Overture with JNF. Mr. Blazer asked both Mr. Smilow
and the Credit Suisse representative for further background
information on JNF and the industry so that he could familiarize
himself with the company and the industry and weigh the
viability of a potential transaction with JNF. Later that day,
Mr. Smilow emailed Mr. Blazer various documents
relating to JNF and the industry.
On August 26, 2009 Mr. Blazer followed up with
representatives of Credit Suisse to discuss various possible
transaction structures, including a merger with JNF or the
reinsurance business as a stand-alone listed company. That same
day, Mr. Blazer updated the board of directors of Overture
via email on four opportunities he was currently analyzing and
negotiating, including an update of the meeting he held with
Mr. Smilow on August 25.
On August 28, 2009, Mr. Blazer suggested to
Mr. Smilow to continue discussions, and to weigh various
transaction structures, including an analysis of whether a
transaction at the holding company level, or the reinsurance
company as a stand-alone was more attractive. He further
suggested that they meet after Labor Day to continue
discussions. Later that day, Mr. Smilow replied that he
would give further thought to the Hold Co. versus Reinsurance
Co. idea, and would prepare updated financial information and
details on the blocks of policies JNF would contribute to a
business combination, and agreed to meet after Labor Day.
On September 9, 2009, Mr. Blazer had a conference call
with representatives of Credit Suisse to discuss the
opportunity, and JNF’s projections and financial model.
Mr. Blazer asked the Credit Suisse representatives to
suggest some alternative transaction structures that the Company
could explore given the Company’s current capital
structure, or to suggest possible changes to the capital that
could improve prospects for obtaining shareholder approval.
Later that day Mr. Blazer and Mr. Smilow agreed to
schedule a meeting for September 18th, and Mr. Blazer
suggested to both Mr. John Hunt the Company’s CEO and
Mr. Smilow that they meet while Mr. Smilow was in
London on September 16th.
On September 9, 2009, Mr. Blazer had a discussion with
representatives from JP Morgan to update them on various
opportunities he was pursuing on behalf of the Company to
solicit their feedback and advise. A representative of JP Morgan
suggested a follow up conversation with bankers in the financial
institutions group to discuss the opportunity with JNF.
On September 15, 2009, in preparation for a meeting between
Mr. Smilow and Mr. Blazer on September 18th, at
the request of the Company, Credit Suisse emailed a summary of a
possible transaction between JNF and the Company.
Mr. Blazer forwarded this summary to Messrs. Pressler
a director of the Company and Hunt for their review.
On September 16, 2009, Mr. Pressler emailed
Mr. Blazer to express his initially favorable impression of
the potential transaction, and agreed to join the meeting with
Mr. Smilow on the 18th. In addition, Mr. Smilow and
Mr. Hunt met at the residence of Mr. Hunt in London.
There they discussed the opportunity of a potential business
combination between the Company and JNF, or its affiliates.
On September 17, 2009, Mr. Blazer again provided the
board of directors via email with an update on recent
developments in the transactions he was currently pursuing, and
made the board of directors aware of his scheduled meeting with
Mr. Smilow the next day.
On September 18, 2009, after the meeting with
Mr. Smilow at Credit Suisse’s offices, Mr. Blazer
via email informed the board of directors of the discussions
regarding alternative deal structures discussed during the
meeting. He also updated the board of directors on three other
opportunities then under consideration.
On September 18, 2009, Mr. Blazer and
Mr. Pressler met with Mr. Smilow and representatives
of Credit Suisse to further review some financial analysis with
respect to a possible business combination between the
Company and JNF. After some discussion and further analysis,
Messrs. Blazer, Pressler and Smilow agreed in principle
that the more compelling alternative to a business combination
between the Company and JNF was a transaction that resulted in a
business combination of only the proposed reinsurance company
JNF was in the process of forming. Mr. Smilow agreed to
revise the financial projections of JNF to carve out the
operations of the reinsurance company only, and to give further
thought on valuation and other business combination issues.
Messrs. Blazer, Pressler and Smilow concluded that the
acquisition of the reinsurance subsidiary, as a pure play
reinsurance company based in Bermuda, would be perceived as a
more compelling transaction by Overture’s shareholders than
a merger between JNF in its entirety and Overture for the
following reasons: (a) a transaction with JNF in its
entirety would encumber Overture with significant fixed costs
and overhead in certain business lines which did not contribute
significantly to revenues; (b) a combination of onshore
insurance and offshore reinsurance businesses would be confusing
to analysts and less attractive to Overture shareholders; and
(c) we believe Overture would compare favorably on a book
value multiple as a small cap reinsurance company, along the
lines of Enstar Group and Greenlight Re rather than a business
that had both insurance and reinsurance business lines.
On September 21, 2009, Mr. Smilow sent an email to
Mr. Blazer to express his interest in ways the
Company’s domicile could create immediate shareholder value
given the favorable tax and regulatory capital requirements for
the reinsurance business if it were domiciled in Bermuda.
Mr. Smilow further volunteered that the valuation of the
assets to be contributed to the Company had materially improved
since year end 2008. The valuation of JNF’s assets improved
as a result of it being valued on the mark-to-market basis
(having no unrealized losses) as compared to mark-to-market
(with unrealized losses) at the end of 2008. The change in
valuation of JNF’s assets which Mr. Smilow indicated is the
$13 million increase in book value reflected in the GAAP
equity increase from $37 million on December 31, 2008
to $50 million on September 30, 2009. The primary
driver for this increase in value was the change in accumulated
other comprehensive (loss) income on balance sheet which went
from an unrealized loss of $15 million on December 31,2008 to an unrealized loss of $1 million on
September 30, 2009 resulting from the improved market value
of JNL’s fixed income portfolio. Later that evening
Mr. Blazer responded to Mr. Smilow that the Company
was interested in the opportunity, and looking forward to
receiving updated pro forma analysis and appraisals of the
insurance blocks being contributed to the reinsurance company.
Further, Mr. Blazer requested Mr. Smilow’s
perspective on the scalability of the opportunity, his views on
the duration of the current dislocation in the market, the
impact of a more “normalized” market on the growth
prospects of the business, expected targeted returns, and future
liquidity/exit scenarios.
On September 22, 2009, Mr. Blazer and Mr. Smilow
discussed telephonically a transaction that combined a
transaction for the reinsurance business, which exhibited
greater profitability margins than JNF in its entirety, with a
right to the Company to acquire JNL and affiliated entities in
the future should the historic dislocation in the market
normalize. Further, Mr. Blazer and Mr. Smilow agreed
to arrive at terms of a possible letter of intent by the end of
the week in advance of a board meeting Mr. Blazer expected
to schedule the following week in Toronto and London. Later that
afternoon Mr. Blazer informed the board via email of his
discussion with Mr. Smilow, and instructed Ellenoff
Grossman & Schole LLP (EG&S), the Company’s
counsel, to draft a letter of intent for a possible transaction
with JNF.
On September 23, 2009, Mr. Blazer informed Credit
Suisse of his conversation of the previous day with
Mr. Smilow, and explained the broad strokes of a
transaction. He requested additional background information,
including the size of the market opportunity, competitive
analysis of JNF versus competitors, prospective demand for the
opportunity among financial institute group investors, deal
dynamics of other financial sector transactions being marketed
at the time, and the value creation opportunity for Overture
shareholders. That evening, Mr. Brian Heaphy Director of
M&A of JNF, forwarded Mr. Blazer a confidentiality
agreement and a release necessary for Mr. Blazer to obtain
an independent appraisal of the assets to be acquired by the
Company. Later that evening, Mr. Pressler further expressed
his interest to Mr. Blazer in the opportunity relative to
the other transactions the Company was currently reviewing.
Mr. Smilow emailed Mr. Blazer, and copied
Mr. Pressler, Mr. Heaphy and EG&S his thoughts on
contents of a potential letter of intent.
On September 25, 2009, Ms. Sarah Williams of EG&S
and Mr. Heaphy, Director of M&A of JNF, agreed upon a
non-disclosure agreement and waiver against the trust.
On September 25, 2009, Mr. Blazer emailed a first
draft of a letter of intent to Mr. Smilow for discussion
purposes.
On September 29, 2009 the board of directors of the Company
held a meeting and discussed three potential opportunities to
pursue. At the meeting, Mr. Smilow and representatives from
Credit Suisse gave a presentation with respect to the potential
transaction with JNF.
On October 4, 2009, Mr. Blazer emailed a revised
letter of intent to Mr. Heaphy.
On October 9, 2009, Mr. Douglas S. Ellenoff of
EG&S, Ms. Williams and Mr. Heaphy held a
conference call to review the steps required with respect to
obtaining approval from the Bermuda Monetary Authority.
On October 15, 2009, Mr. Blazer and Mr. Pressler,
representatives of the Company, Mr. Ellenoff and
Ms. Williams, representatives of EG&S, Mr. Ira
Schacter and Mr. David Miller, representatives of
Cadwalader Wickersham & Taft LLP (“CWT”),
certain representatives of Credit Suisse, Mr. Heaphy,
Mr. Mitchell Caplan, a special advisor of JNF,
Mr. Smilow and Mr. Michael Girouard, an officer of JNF
met at the offices of Credit Suisse for purposes of exchanging
data and discussing whether a proposed transaction with JNF
would be feasible.
On October 19, 2009, Mr. Blazer met with Bermuda
counsel, and the management team of JNF at the JNF offices to
discuss the transaction, Bermuda regulatory requirements, and to
continue diligence. The teams also agreed to begin a process of
thrice weekly calls at this stage to work toward the launch of
the transaction.
On October 22, 2009, Mr. Blazer had an initial
conversation with Mr. John McGonegal, Managing Director of
Houlihan Smith to discuss the potential retainer of the firm to
assist the Company with its financial analysis and obtain a
fairness opinion.
On November 3, 2009, Mr. Blazer, Mr. Pressler,
Mr. Smilow and Mr. Caplan met with representatives of
JP Morgan to discuss the impending transaction.
On November 10, 2009, Mr. Blazer and Michael Girouard
of JNF held a conference call with BDO Seidman and Marcum LLP to
discuss the accounting treatment of the proposed transaction,
and discuss a potential pre-filing conference call with the SEC
staff to seek guidance on appropriate disclosure of the
transaction. As a result, the parties agreed to prepare a memo
for the SEC with respect to carve out accounting of the blocks
being acquired (the “SEC Accounting Memo”).
On November 13, 2009, Mr. Blazer, the Company’s
President, Ms. Williams, Mr. Phi Nguyen and
Ms. Kathleen Cerveny, each of EG&S, Ms. Adele
Hogan, Mr. Steven Lenkowsky, each of CWT and
Mr. Heaphy met in Toronto, Canada to discuss organizational
issues and requisite business issues related to the Transaction.
On November 20, 2009, Mr. Heaphy, Mr. Caplan,
Mr. Girouard, Mr. Blazer, Ms. Williams,
Mr. Nguyen, Mr. Ellenoff, Ms. Hogan,
Mr. Lenkowsky and Mr. Schacter met in Toronto to
discuss issues related to the Master Agreement, the Transaction
and the ancillary agreements.
On December 1, 2009, Mr. Blazer and Mr. Caplan
met in Toronto to discuss issues related to the Master
Agreement, the Transaction, and the ancillary agreements.
On December 6, 2009, the Board of Directors of Overture met
to discuss the proposed Master Agreement and the Transaction. At
the meeting, Mr. Blazer provided an overview of the
proposed Transaction, including the material terms of the
Transaction. Houlihan Smith & Company, Inc. then gave
a presentation to the Board of Directors with respect to their
opinion that the consideration to be paid in the Transaction is
fair to the shareholders of the Company from a financial point
of view and that it meets the 80% test set forth in the
Company’s Amended and Restated Memorandum and Articles of
Association. The Board of Directors discussed the various
components of the proposed Transaction. Representatives from
Credit Suisse gave an overview of the market opportunity as it
relates to the Transaction and the Company. Mr. Ellenoff
then discussed certain relevant issues, including but not
limited to the regulatory approval process, the accounting
treatment, Caymand Island law considerations and tax issues, for
consideration with respect to the Transaction. Ms. Williams
gave an overview of the various shareholder and warrantholder
proposals to be included in the proxy statement with respect to
the shareholders meeting and warrantholder meeting. Members of
senior management and the Board of Directors discussed the
benefits and various transaction risks related to the proposed
Transaction. The Board of Directors then resolved to approve the
execution and delivery of the Master Agreement and the
Transaction.
On December 6, 2009, the Board of Directors of JNF met to
discuss the proposed Master Agreement and the Transaction. At
the meeting, members of senior management provided an overview
of the proposed Transaction, including the material terms of the
Transaction. The Board of Directors discussed the various
components of the proposed Transaction. Mr. Ira Schacter
discussed the material terms of the Master Agreement and the
related Transaction Agreements. Members of senior management and
the Board of Directors discussed the benefits and various
transaction risks related to the proposed Transaction. The Board
of Directors then resolved to approve the execution and delivery
of the Master Agreement and the Transaction.
The Company’s Board of Directors concluded that the
Transaction is fair to, and in the best interests of, the
Company and that the consideration to be paid in the Transaction
is fair to the Company. The board of directors made an
assessment as to whether the Transaction and the consideration
to be paid were fair, from a financial point of view, to the
shareholders of the Company. The Company’s management
conducted a due diligence review of JNL Bermuda that included an
industry analysis, an evaluation of JNF’s existing
business, a valuation analysis and financial projections in
order to enable the Board of Directors to evaluate JNL
Bermuda’s business and financial condition and prospects.
The Company’s Board of Directors considered various
industry and financial data, including certain financial
analyses developed by the Company and metrics compiled by the
Company’s management in evaluating the consideration to be
paid by the Company in the Transaction.
The Company’s Board of Directors considered a wide variety
of factors in connection with its evaluation of the Transaction.
In light of the complexity of those factors, the Board of
Directors did not consider it practicable to, nor did it attempt
to, quantify or otherwise assign relative weights to the
specific factors it considered in reaching its decision.
Furthermore, individual members of the board may have given
different weight to different factors.
In considering the Transaction, the Company’s Board of
Directors gave considerable weight to the following favorable
factors:
•
Experienced management team — proven
entrepreneurial management team with strong track record of
launching, growing, and operating innovative financial
institutions in highly regulated environments, with over
20 years insurance and fixed income investing experience;
•
Historic entry point — historic dislocation and
capital constraints in the industry create unprecedented
opportunity to providers of capital through reinsurance products;
•
Favorable long term growth characteristics —
steady long-term growth trajectory of life insurance policies in
force creates opportunities to re-insure additional blocks of
policies as global insurance companies remain capital
constrained to underwrite new policies;
•
Immediate accretive use of proceeds — Overture
Re will reinsure fixed and variable blocks of JNL annuities
enabling Overture Re to be an active reinsurer at the closing of
the transaction;
Operational leverage through turnkey reinsurance
platform — Overture Re will use JNL and JNFAM
platform and their proven management team, database, proprietary
technology and other infrastructure to provide a cost effective
corporate, policy administration, and investment management
platform;
•
Middle-Market focus — although concentrated at
the top end of the market, the annuity market consists of many
small writers. The extremely fragmented variable annuity market
creates an opportunity to provide reinsurance to many
underserved and capital constrained middle-market insurance
companies;
•
Favorable financial and industry analysis —
financial analysis, presentation and oral opinion of Houlihan
Smith confirmed by a written opinion dated December 6,2009, favorable, from a financial point of view, to the
Company’s shareholders;
•
Barriers to entry — considerable regulatory
compliance requirements and highly specialized skill sets
required, provide significant obstacles to entry and
competition; and
•
Favorable domicile; tax
advantages — domicile in Bermuda and tax
advantages from offshore income-producing activities.
Further, Management of Overture conducted diligence on JNF, and
compared its findings to similar companies in the industry. In
its analysis, management determined that the most appropriate
metrics to judge the merit of the transaction would be both a
discounted cash flow analysis based on the blocks being
acquired, and a pro forma book value multiple comparison to its
peers. In its efforts to determine that the consideration to be
paid was fair, and in the best interests of the Company and its
shareholders, management analyzed both the historical
performance characteristics of the assets to be acquired and the
projected cash flows of the blocks to be reinsured. Based on
their own analysis, information and analysis available to the
Company, and in consultation with Credit Suisse, Overture
management determined that a 15% discount to cash flow was a
fair price to be paid, and would generate an attractive return
to Overture shareholders. The 15% discount to cash flow was at
the high end of the range of discounts
(11-15%) set
forth in the information and analysis made available to the
Company’s management during their due diligence review.
In addition, based on the proposed transaction structure,
Overture management believed that the book value per share of
the Overture pro forma of the transaction compared favorably to
the book value per share multiples of the Company’s two
closest publicly traded peers: Greenlight Re
(“Greenlight”) and Enstar Group (“Enstar”).
Both Enstar and Greenlight, while more active in property and
casualty reinsurance, predominantly rely on a business model of
acquiring blocks of policies from cedants, rather than
underwriting new flows of policies from cedants which forms the
primary revenue source of larger cap reinsurers. Management
believes that as a result of the similarity of its business
model to that of Enstar and Greenlight, that it will more
closely follow the book value multiples of Enstar, and
Greenlight, rather than its large cap competitors. Given the
range of 1.38-1.41 price to book value of its closest
competitors, management believed that its pro forma price to
book value would compare favorably to its competitors.
In addition, to gain an independent viewpoint of the valuation,
Overture engaged Houlihan Smith to conduct an analysis of the
Company, and perform additional due diligence to arrive at their
own conclusion with respect to the valuation of the Company, and
the fairness of consideration being paid. Houlihan Smith
employed similar methods of analysis, although used a larger
group of publicly traded reinsurance and insurance companies in
their own analysis. Notwithstanding their own methodology, the
conclusion that both management and Houlihan Smith reached,
independent of each other’s efforts, was the same.
The Company’s Board of Directors believes the above factors
strongly supported its determination and recommendation to
approve the Transaction. The Company’s Board of Directors
did, however, consider the following potentially negative
factors, among others, including the risk factors set forth
elsewhere in this proxy statement, in its deliberations
concerning the Transaction:
•
Shareholder redemptions and reduction of trust
funds — the potential for current holders of
Public Shares of the Company to vote against the Transaction and
demand to redeem their shares for cash upon consummation of the
Transaction, reducing the amount of cash available to the
Company following the Closing;
Uncertain regulatory environment — the
potential for industry scrutiny or increased regulation
including hedging activity regulation;
•
Interests of officers and directors — interests
in the Transaction that certain officers and directors of the
Company may have which are different from, or in addition to,
the interests of the Company shareholders generally, including
the matters described under “Proposals to be Considered
by Shareholders — The Business CombinationProposal — Certain Benefits of the Directors and
Officers and Others in the Transaction;”
•
Limitations on indemnification — the
limitations on indemnification set forth in the Master Agreement
described in “Proposals to be Considered by
Shareholders — The Master Agreement;”
•
Dilution to interests of shareholders — control
of JNF’s current shareholders, including David Smilow and
his affiliates, of a significant percentage of the
Company’s issued shares after the Transaction;
•
Regulatory issues — the impact of changes in or
additional Bermuda or U.S. registration, licensing or other
regulations affecting the reinsurance business or hedging
activities related thereto;
•
Offshore operational risks — potential for tax
law changes, currency fluctuations, and difficulties enforcing
legal rights;
•
Actuarial and mortality risk — the effect of
differences in mortality rates, policyholder behavior, claims
and lapse rates from those assumed;
•
Competitive climate — potential adverse
changes in pricing and capacity through unexpected reduction of
barriers to entry or favorable changes in regulatory climate and
availability of capital;
•
Reliance on JNL — potential inability to
replace managerial, actuarial and administrative services
provided in the event of capitalization, liquidity or financial
difficulties experienced by JNL; and
•
Potential liquidation — the fact that if the
Company is unable to obtain shareholder or warrrantholder
approvals or if the parties are unable to obtain regulatory
approvals on a timely basis, the Company will be required to
liquidate.
The Company’s Board of Directors concluded that the
Transaction is fair to, and in the best interests of, the
Company and that the consideration to be paid in the Transaction
is fair to the Company. The Company’s management conducted
a due diligence review of JNL Bermuda that included an industry
analysis, an evaluation of JNL Bermuda’s existing business,
a valuation analysis and financial projections in order to
enable the Board of Directors to evaluate JNL Bermuda’s
business and financial condition and prospects.
Pursuant to an engagement letter dated October 27, 2009, we
engaged Houlihan Smith & Company, Inc. (“Houlihan
Smith”) to render an opinion that the consideration to be
paid for the Transaction on the terms and conditions set forth
in the Master Agreement was fair to the Company from a financial
point of view and that the fair market value of JNL Bermuda is
at least equal to 80% of the Company’s net assets. Overture
engaged Houlihan Smith to conduct an analysis of the Company,
perform additional due diligence to arrive at their own
conclusion with respect to the valuation of the Company, and
opine on the fairness of consideration being paid. Houlihan
Smith employed similar methods of analysis to that used by
Company management, although it used a larger group of publicly
traded reinsurance and insurance companies in its own analysis.
Notwithstanding its own methodology, the conclusion that both
management and Houlihan Smith reached, independent of each
other’s efforts, was the same. Our Board of Directors
determined to utilize the services of Houlihan Smith because it
is an investment banking firm that regularly evaluates
businesses in connection with acquisitions, corporate
restructuring, private placements and for other purposes.
Pursuant to the engagement agreement, the Company agreed to pay
Houlihan Smith a fee of $95,000 and will reimburse Houlihan
Smith for its reasonable
out-of-pocket
expenses, up to $2,500. We have also agreed to indemnify
Houlihan Smith against certain liabilities that may arise out of
the rendering of the opinions. See “Proposals to be
Considered by Shareholders — The Business CombinationProposal — Opinion of Houlihan Smith & Co.,
Inc.”
Upon consummation of the Transaction, the current Company
shareholders will hold approximately 75.5% of the Company’s
Ordinary Shares (assuming (i) no holders of Public Shares
elect to exercise their redemption rights, (ii) the Founder
Shares are redeemed by the Company, and (iii) an aggregate
of up to 3,747,657 shares (or 19.99% of the outstanding)
are issued to JNL in a private placement and 845,519 shares
are purchased by JNL from third parties) or 80.01% (assuming
(i) holders of one share less than 30% of the Public Shares
elect to exercise their redemption rights, (ii) the Founder
Shares are redeemed by the Company, and (iii) an aggregate
of up to 2,623,360 shares (or 19.99% of the outstanding)
are issued to JNL in a private placement and JNL purchases no
shares from third parties), in each case assuming none of the
Warrants are exercised and the Company purchases no Public
Shares. The Company’s Founders have agreed to the
repurchase by the Company of the 3,750,000 Founder Shares in
connection with the Transaction. In consideration of the
repurchase, the Founders will receive: (i) Class A
warrants to purchase 46,875 shares of JNF common stock at
an exercise price of $75.00 per share (subject to floating
strike price adjustments), (ii) Class B warrants to
purchase 46,875 shares of JNF common stock at an exercise
price of $125.00 per share (subject to floating strike price
adjustments), and (iii) a right to receive up to 2,812,500
Ordinary Shares issuable in three tranches in the event the
volume weighted average price of the Company’s Ordinary
Shares for any ten days during a 30 day period equals or
exceeds $12, $16 and $20, respectively.
When you consider the recommendation of the Company’s board
of directors in favor of approval of the Transaction, you should
keep in mind that the Company’s directors and officers have
interests in the Transaction that are different from, or in
addition to, your interests as a shareholder. These interests
include, among other things:
•
If the Company is unable to complete the Transaction or fails to
complete an initial business combination by January 30,2010, the Company’s Articles provide that the Company will
go into automatic liquidation be dissolved. In such event, the
3,750,000 Founder Shares held by the Company’s Founders
that were acquired before the IPO for an aggregate purchase
price of $25,000 would be worthless because the Company’s
Founders are not entitled to receive any of the proceeds from
the Company’s trust account with respect to such shares.
Such shares had an aggregate market value of $37,537,500 based
upon the closing price of $10.01 on the NYSE Amex on the record
date.
•
The Company’s Founders have agreed to the repurchase by the
Company of the 3,750,000 Founder Shares in connection with the
Transaction. In consideration of the repurchase of such Founder
Shares at their initial purchase price of $0.006 per share, or
an aggregate of $25,000, the Founders will receive
(i) Class A warrants to purchase an aggregate of
46,875 shares of JNF common stock at an exercise price of
$75.00 per share, subject to adjustment per floating strike
price, and (ii) Class B warrants to purchase an
aggregate of 46,875 shares of JNF common stock at an
exercise price of $125.00 per share, subject to adjustment per
floating strike price, and (iii) a right to receive up to
2,812,500 of the Company’s Ordinary Shares issuable in
three equal tranches in the event the volume weighted average
price of the Company’s Ordinary Shares for any ten days
during a 30 day period equals or exceeds $12, $16 and $20,
respectively.
•
Our Founders purchased an aggregate of 4,380,000 founder
warrants at a purchase price of $1.00 per warrant for an
aggregate purchase price of $4,380,000 in a private placement
prior to the Company’s IPO. All of the proceeds the Company
received from this private placement were placed in the
Company’s trust account. The founder warrants, like the
Public Warrants, are subject to and the holder thereof is being
asked to consider and vote upon, the Warrant Amendment Proposal.
The Company’s Founders have indicated that they intend to
vote the Company Warrants they hold in favor of the Warrant
Amendment Proposal. If the Company is unable to complete the
Transaction or fails to complete an initial business combination
by January 30, 2010 and is liquidated, all the
Company’s warrants, including the founder warrants, will
expire worthless. The founder warrants had an aggregate
market value of $1,445,400 based on the closing price of $0.33
on the NYSE Amex on the record date.
•
It is currently anticipated that John F. Hunt, the
Company’s Chairman, Chief Executive Officer and Secretary,
and Marc Blazer, the Company’s President and Treasurer,
will each continue to be directors of the Company following the
Transaction.
•
If the Company is unable to consummate a business combination
and goes into automatic liquidation, Messrs. Hunt and
Blazer will be liable to pay debts and obligations to vendors
and other entities that are owed money by the Company for
services rendered or products sold to the Company, or to any
target business, to the extent such creditors bring claims that
would otherwise require payment from monies in the trust
account, but only if such entities did not execute a valid and
binding waiver. Based on the Company’s estimated debts and
obligations, it is not currently expected that the Company will
have any exposure under this arrangement in the event of a
liquidation.
•
If the Company is required to be liquidated and there are no
funds remaining to pay the costs associated with the
implementation and completion of such liquidation, our Founders
have agreed to advance the Company the funds necessary to pay
such costs and complete such liquidation (currently anticipated
to be no more than approximately $15,000) and not to seek
repayment for such expenses.
Management has reached an agreement with each of the
underwriters, pursuant to which, such deferred
underwriters’ compensation has been reduced to up to
$1,000,000 to the extent there is between $100,000,000 and
$150,000,000 in trust at the consummation of the Transaction.
The amendment to the underwriters agreement provides that to the
extent there is at least $100 million in the trust at the
consummation of the Transaction, the underwriters shall receive
$20,000, pro rata, for each $1 million in excess of $100
million. If there is less than $100 million in the trust at the
consummation of the Transaction, the underwriters are not
entitled to any compensation. Pursuant to a financial advisory
agreement by and between the Company and Credit Suisse, the
Company agreed to pay Credit Suisse a transaction fee (the
‘Transaction Fee‘), payable upon the first closing in
connection with a Transaction, equal to 1.5% of the aggregate
value of the Transaction; provided, however, in no event shall
the Transaction Fee payable by the Company to Credit Suisse in
connection with a Transaction be less than $2 million. In
addition, pursuant to a financial advisory agreement by and
between the Company and JP Morgan, the Company has agreed to pay
JP Morgan a financial advisory fee of $500,000 upon the
consummation of the Transaction.
The Company’s Board of Directors determined that the fair
market value of JNL Bermuda in the transaction contemplated by
the Master Agreement met the 80% threshold based upon financial
standards generally accepted by the financial community, such as
actual and potential gross margins, the value of comparable
businesses, earnings and cash flow and book value and based upon
a fairness opinion as to the equity value from Houlihan Smith.
As of September 30, 2009, the Company’s trust account,
restricted balance was $150,530,000. The Company does not
anticipate the trust account balance at the time the Transaction
is completed will be materially greater than the funds held in
trust as of September 30, 2009.
If holders of 30% or more of the Public Shares vote against the
Transaction and seek to exercise their redemption rights, the
Company would not be permitted to consummate the Transaction
even if the required vote for the Business Combination Proposal
is received. To preclude such possibility, JNL has agreed to on
the Closing Date beneficially own or have commitments to acquire
24.5% of the Public Shares of the Company either in the public
market, pursuant to privately negotiated transactions or from
the Company pursuant to a private placement. In addition, the
Company’s Founders, JNL, JNL’s directors and officers
and their respective affiliates may negotiate agreements to
provide for the purchase of Public Shares from certain holders
who indicate their intention to vote against the Transaction and
seek redemption or otherwise wish to sell their
Public Shares. These agreements may also include agreements to
provide such holders of Public Shares with incentive to vote in
favor of the Transaction.
Agreements of such nature would only be entered into and
effected at a time when the Company’s Founders, directors
and officers, JNF, JNF’s directors and officers and their
respective affiliates are not aware of any material nonpublic
information regarding the Company or its securities. Definitive
agreements have not yet been determined but may include:
•
Agreements between the Company and certain holders of Public
Shares pursuant to which the Company would agree to purchase
Public Shares from such holders immediately after the closing of
the Transaction for the price and fees specified in the
agreements;
•
Agreements with third parties to be identified pursuant to which
the third parties would purchase Public Shares. Such agreements
would also provide for the Company, immediately after the
closing of the Transaction, to purchase from such third parties
all of the Public Shares purchased by them for the price and
fees specified in the agreements; or
•
Agreements with third parties pursuant to which the Company
would borrow funds to make purchases of Public Shares for its
own account. The Company would repay such borrowings with funds
released from the trust account following the consummation of
the Transaction.
As a result of the purchases that may be effected through such
agreements, it is likely that the number of Ordinary Shares of
the Company in its public float will be reduced and that the
number of beneficial holders of the Company’s securities
also will be reduced from what it would have been if the Company
did not purchase Public Shares in this manner. This may inhibit
the Company’s ability to continue its listing of its
Ordinary Shares on the NYSE Amex or any other U.S. national
securities exchange due to minimum holder requirements.
The purpose of such agreements would be to increase the
likelihood of obtaining approval of the Business Combination
Proposal and decrease the likelihood that holders of more than
one share less than 30% of the Public Shares vote against the
Business Proposal and demand redemption of their Public Shares
for a pro rata portion of the trust account. All shares
purchased pursuant to such agreements would be voted in favor of
the Transaction and all other proposals presented at the
Extraordinary General Meeting. If the Transaction is not
consummated, the purchasers, other than the Company, would be
entitled to participate in liquidation distributions from the
Company’s trust account with respect to such Public Shares.
Purchases pursuant to such agreements ultimately paid for with
funds originating from the Company’s trust account would
reduce the funds available to the Company after the Transaction
for working capital and general corporate purposes.
Nevertheless, in all events there will be sufficient funds
available to the Company from the trust account to pay the
holders of all Public Shares that are properly redeemed.
If shareholders approve the Repurchase Amendment Proposal and
such transactions are effected, the consequences could be to
cause the Business Combination Proposal to be approved in
circumstances where such approval could not otherwise be
obtained. Purchases of shares by the persons described above
would allow them to exert more influence over the approval of
the Business Combination Proposal and other proposals and would
likely increase the chances that such proposal would be
approved. Moreover, any such purchases may make it less likely
that holders of more than one share less than 30% of the Public
Shares will vote against the Business Combination Proposal and
exercise their redemption rights.
As of the date of this proxy statement/prospectus, no agreements
to such effect have been entered into with any such investor or
holder. In the event that any purchases of Ordinary Shares are
made by JNF or any of their respective affiliates after the
mailing of this proxy statement/prospectus to shareholders but
prior to the Extraordinary General Meeting of Shareholders, the
Company will file a Current Report on
Form 8-K
with the SEC to disclose arrangements entered into or
significant purchases made by any of the aforementioned persons
that would affect the vote on the Business Combination Proposal
or the redemption threshold. Any such report will include
descriptions of the arrangements entered into or significant
purchases by any of the aforementioned persons. If members of
the Company’s Founders, board of directors or officers make
purchases pursuant
to such agreements, they will be required to report these
purchases on beneficial ownership reports filed within two
business days of such transactions with the SEC.
It is possible that the Extraordinary General Meeting of
Shareholders could be adjourned to provide time to seek out and
negotiate such transactions if, at the time of the meeting, it
appears that the requisite vote will not be obtained or that the
limitations on redemptions will be exceeded.
The prospectus issued by the Company in its IPO did not disclose
that funds in the trust account might be used to purchase Public
Shares from holders thereof who have indicated their intention
to vote against the Transaction and redeem their shares for cash
or that the Company may seek to amend the terms of the Warrant
Agreement. Accordingly, if the Transaction is consummated, each
holder of Public Shares at the time of the Transaction who
purchased his or her Public Shares in the IPO may have
securities and common law claims against the Company for
rescission (under which a successful claimant has the right to
receive the total amount paid for his or her securities pursuant
to an allegedly deficient prospectus, plus interest and less any
income earned on the securities, in exchange for surrender of
the securities) or damages (compensation for loss on an
investment caused by alleged material misrepresentations or
omissions in the sale of a security).
Such claims may entitle shareholders asserting them to up to
$10.00 per share, based on the initial offering price of the
units sold in the IPO, less any amount received from the sale or
fair market value of the warrants purchased as part of the
units, plus interest from the date of the IPO (which, in the
case of holders of Public Shares, may be more than the pro rata
share of the trust account to which they are entitled on
redemption or liquidation).
In general, a person who purchased a security pursuant to a
prospectus which contains a material misstatement or omission
must make a claim for rescission within the applicable statute
of limitations period, which, for claims made under
Section 12 of the Securities Act and some state statutes,
is one year from the time the claimant discovered or reasonably
should have discovered the facts giving rise to the claim, but
not more than three years from the occurrence of the event
giving rise to the claim. The limitation period for a claim in
tort (for example, for negligent misstatement) under the laws of
the Cayman Islands is 6 years from the date on which the
cause of action accrued. A successful claimant for damages under
federal or state law could be awarded an amount to compensate
for the decrease in value of his or her shares caused by the
alleged violation (including, possibly, punitive damages),
together with interest, while retaining the shares. Claims under
the anti-fraud provisions of the federal securities laws must
generally be brought within two years of discovery, but not more
than fives years after occurrence. Rescission and damages claims
would not necessarily be finally adjudicated by the time the
Transaction is consummated, and such claims would not be
extinguished by consummation of the Transaction.
Even if you do not pursue such claims, others, who may include
all other holders of Public Shares, may do so. The Company
cannot predict whether shareholders will bring such claims or
whether such claims would be successful. We make no
representations or admissions as to the availability or strength
of any such claims.
The following summary describes the material provisions of
the Master Agreement. The provisions of the Master Agreement are
complicated and not easily summarized. This summary may not
contain all of the information about the Master Agreement that
is important to you. The following summary is qualified in its
entirety by reference to the complete text of the Master
Agreement. The Master Agreement is attached to this proxy
statement/prospectus as Annex I and is incorporated by
reference into this proxy statement, and we encourage you to
read it carefully in its entirety for a more complete
understanding of the Master Agreement and the Transaction.
The Master Agreement has been included to provide information
regarding the terms of the Transaction. Except for its status as
the contractual document that establishes and governs the legal
relations among the Company, Overture Re Holdings, JNF, JNL,
JNFAM, JNL Bermuda and the Founders of the Company with respect
to the Transaction, the Master Agreement is not intended to be a
source of factual, business or operational information about the
parties.
The Master Agreement contains representations, warranties and
covenants that the respective parties made to each other as of
the date of the Master Agreement or other specific dates. The
assertions embodied in those representations, warranties and
covenants were made for purposes of the contract among the
respective parties and are subject to important qualifications
and limitations agreed to by the parties in connection with
negotiating the Master Agreement. The representations,
warranties and covenants in the Master Agreement are also
modified in important part by the underlying disclosure
schedules, which are not filed publicly and which are subject to
a contractual standard of materiality different from that
generally applicable to shareholders, and were used for the
purpose of allocating risk among the parties rather than
establishing matters of fact. The Company does not believe that
these schedules contain information that is material to the vote
on the proposals at the Special Meeting and Extraordinary
General Meeting.
On December 10, 2009, the Company entered into a Master
Agreement (the “Master Agreement”) with
Overture Re Holdings, Jefferson National Financial Corp.
(“JNF”), Jefferson National Life Insurance
Company (“JNL”), a wholly owned subsidiary of
JNF, JNL Bermuda, a newly formed wholly owned subsidiary of JNL
and the Founders of the Company. The Master Agreement sets forth
terms and conditions on which the parties will enter into the
transactions described therein to effect the amalgamation of JNL
Bermuda with Overture Re.
The Master Agreement provides for the amalgamation of JNL
Bermuda with Overture Re, pursuant to which the amalgamated
company will be the Company’s wholly owned subsidiary and,
pursuant to the Master Agreement, JNL will be paid $120,000,000
in cash as consideration for the Transaction.
Structure
of the Transaction
The Transaction is structured as a tax-free reorganization to
the Company, Overture Re, Overture Re Holdings Ltd. and their
affiliates and that there will be no tax effects to the
Company’s shareholders arising from the Transaction. As
part of the Transaction and pursuant to the Master Agreement, a
series of procedural steps will occur to consummate the
Transaction. These steps are described in the paragraph below
titled “Overview of the Transaction. Pursuant to the Name
Change Proposal discussed elsewhere in this proxy
statement/prospectus, the Company will change its name to
“Overture Capital Corp.” If the Transaction is
consummated, $120,000,000 of the funds held in the trust account
will be paid at closing to JNL as consideration in the
Transaction. In addition, the remaining funds held in the trust
account will be released (i) to pay transaction fees and
expenses; (ii) to pay the Company’s tax obligations
and deferred underwriting discounts and commissions;
(iii) to pay those holders of Public Shares who properly
exercised their redemption rights; and (iv) for working
capital and general corporate purposes of the Company and its
subsidiaries. In addition, the funds held in the trust account
may be used to purchase Public Shares in privately negotiated
transactions if the Share Repurchase Proposal is approved at the
Extraordinary General Meeting.
The Master Agreement has been or will be entered into by JNL,
JNF, JNL Bermuda, JNFAM, the Company, Overture Re Holdings and
the Founders of the Company (the “Founders”), on or
about the date hereof. The Master Agreement sets forth, among
other things:
•
representation and warranties of the parties as to, among other
things, due organization, corporate power and authority,
authorization and validity of the Master Agreement and, as
relevant, the other agreements contemplated therein, the receipt
of any necessary consents, approvals and permits, the accuracy
of certain information, and other matters;
•
conditions to be satisfied or waived on or before the Closing
Date (as defined above), to each party’s obligation to
consummate the Transaction on the Closing Date;
•
covenants regarding conduct of business prior to the Closing
Date and other matters; and
•
circumstances under which the Master Agreement may be terminated
prior to the Closing Date.
Forms of the following additional agreements (the
“Transaction Agreements”) contemplated in connection
with the Transaction are attached to the form of the Master
Agreement attached hereto and are summarized below or are
summarized where indicated:
•
Agreement and Plan of Amalgamation;
•
Reinsurance Option and Contribution Agreement (See Reinsurance
and Contribution Agreement Summary on page 206);
•
Quota Share Reinsurance Agreement (See Quota Share Reinsurance
Agreement Summary on page 206);
•
Investment Management Agreement (See Investment Management
Agreement Summary on page 204);
The Company’s 2010 Stock Incentive Plan (See Incentive Plan
Proposal on page 151).
Actions
to be Taken
Under the Master Agreement, on the Closing Date and subject to
the satisfaction or waiver of all conditions set forth therein,
the following actions shall occur in the sequence set forth
below:
On or before the Closing Date, the following actions shall occur:
•
Overture Re Holdings will form Overture Re and Overture Re
will become licensed to operate as a reinsurer in Bermuda;
•
Overture Re and JNL Bermuda will execute and deliver the
Agreement and Plan of Amalgamation;
•
JNL Bermuda and JNFAM will execute and deliver the Investment
Management Agreement;
•
JNL Bermuda and JNL will execute and deliver the Reinsurance
Option and Contribution Agreement;
•
The Company and its financial advisors and underwriters of the
Company will execute and deliver the Compensation Amendment
Agreements;
•
The Company and the Founders will execute and deliver the
Sponsors’ Agreement;
The Founders and the Company will execute and deliver the
Amended and Restated Registration Rights Agreement.
The following actions shall occur simultaneously:
•
Overture Re and JNL Bermuda will execute and deliver the
Agreement and Plan of Amalgamation; and
•
all other necessary filings will be made to give effect to the
amalgamation; and
•
if necessary, JNL and the Company shall execute and deliver the
Securities Purchase Agreement; then
Immediately following the amalgamation of JNL Bermuda with
Overture Re, the following actions shall occur simultaneously:
•
Overture Re, as successor by amalgamation to JNL Bermuda, will
exercise the option to execute the Quota Share Reinsurance
Agreement with JNL, and Overture Re and JNL will execute and
deliver the Quota Share Reinsurance Agreement;
•
Overture Re, as successor by amalgamation to JNL Bermuda, will
assume the Investment Management Agreement with JNFAM;
•
JNF and the Founders will execute and deliver the Warrant
Purchase Agreement and related warrant certificates;
•
The Founders and the Company will execute and deliver the
Sponsors’ Agreement;
•
JNL and the Company will execute and deliver the Shareholder
Agreement; and
•
The Incentive Plan will become effective.
Closing
of the Transaction
The closing of the Transaction will take place promptly
following the satisfaction of the conditions described below
under the subsection entitled “Proposals to be
Considered by Shareholders — The Master
Agreement — Conditions to the Closing of the
Transaction,”unless the Company and JNF agree to hold
the closing at another time but in no event will such time be
later than January 30, 2010.
The Transaction Closing will be held at the offices of Ellenoff
Grossman & Schole LLP, 150 East 42nd Street, 11th
Floor, New York, NY,10017, while certain closing activities and
the amalgamation itself, will be conducted in Bermuda or such
other location as the parties agree.
Conditions
to the Closing of the Transaction
Conditions to the obligations of each party to consummate the
Transaction on the Closing Date include:
•
no law shall have been issued by any Governmental Authority
restraining, enjoining or otherwise prohibiting the consummation
of the Transaction or making all or any portion of the
Transaction illegal;
•
all parties shall have received the authorizations, approvals
and consents of third parties and Governmental Authorities
identified on disclosure schedules to the Master Agreement, with
limited exceptions set forth therein;
•
the Business Combination is approved in accordance with the
requirements set forth above;
•
the Warrant Amendment Proposal is approved in accordance with
the requirements set forth above;
•
the Company and its underwriters and financial advisors have
entered into the Compensation Amendment Agreements;
•
Overture Re has received all necessary licenses, permits and
approvals from all governmental authorities and has taken all
actions required to be duly registered, licensed, or admitted as
an insurer under applicable Insurance Laws in each jurisdiction
where it is or will be required to be so licensed or
admitted to conduct its business as it relates to the reinsured
policies after the Closing Date, including Bermuda;
•
all Transaction Agreements shall have been fully executed and
delivered by the parties thereto; and
•
the combination of the expected redemptions by shareholders and
payments under forward purchase contracts by the Company are not
to be in excess of $50,000,000.
The conditions to the obligations of each party may only be
waived by the party entitled to benefit from such condition and
may only be waived by written instrument signed by the party
granting the waiver.
Conditions to the obligations of JNF, JNL, JNL Bermuda and JNFAM
to consummate the Transaction on the Closing Date include, but
are not limited to:
•
accuracy of representations and warranties made by each of the
Company, Overture Re Holdings, Overture Re and the Founders
under the Master Agreement and any Transaction Agreement;
•
each of the Company, Overture Re Holdings, Overture Re and the
Founders shall have performed in all material respects all
agreements and complied with all covenants contained in the
Master Agreement and any Transaction Agreement to be performed
or complied with by it prior to or at the Closing;
•
receipt of certificates certifying that specified conditions
have been fulfilled;
•
each of the Company, Overture Re Holdings, Overture Re and the
Founders shall not be subject to any material adverse effect
since the date of the Master Agreement;
•
the Company has entered into definitive written agreements in a
form reasonably acceptable to JNF, JNL, JNL Bermuda and JNFAM to
amend its compensation agreements with its financial advisors
and underwriters effective as of the effectiveness of the
amalgamation of JNL Bermuda with and into Overture Re;
•
the Company has entered into definitive written agreements with
the Founders to be effective immediately after effectiveness of
amalgamation of JNL Bermuda with and into Overture Re, to
exchange or cancel certain warrants and repurchase certain
shares owned by the Founders so that after all such exchanges or
repurchases, the Founders retain warrants to purchase
4,380,000 shares at a strike price of $11.00; and
•
Overture has duly established the Equity Incentive Plan, which
becomes effective immediately upon the effectiveness of the
amalgamation of JNL Bermuda with and into Overture Re.
Non-compliance with the conditions to the obligations of JNF,
JNL, JNL Bermuda and JNFAM, may only be waived by written
instrument signed by JNF on behalf of the JNF Parties.
Conditions to the obligations of the Company, Overture Re
Holdings, Overture Re and the Founders to consummate the
Transaction on the Closing Date include, but are not limited to:
•
accuracy of representations and warranties made by each of JNF,
JNL, JNL Bermuda and JNFAM under the Master Agreement and
Transaction Agreements;
•
each of JNF, JNL, JNL Bermuda and JNFAM shall have performed in
all material respects all agreements and complied with all
covenants contained in the Master Agreement and the Transaction
Agreements to be performed or complied with by it prior to or at
the Closing;
•
receipt of certificates certifying that specified conditions
have been fulfilled;
•
each of JNF, JNL, JNFAM and JNL Bermuda shall not be subject to
any material adverse effect since the date of the Master
Agreement;
•
JNL shall beneficially own or have made commitments to acquire
on the Closing Date 24.5% of the Ordinary Shares of the Company,
taking into accounts any redemptions by shareholders, the
obligation of the Company to repurchase the Founders Shares and
any issuance of Ordinary Shares to JNL pursuant to the Master
Agreement; and
The Company and the Founders shall have entered into an Amended
and Restated Registration Rights Agreement in connection with
the registration rights granted to the Founders at the time of
the IPO.
Non-compliance with the conditions to the obligations of the
Company, Overture Re Holdings, Overture Re and the Founders, may
only be waived by written instrument signed by the Company,
Overture Re Holdings, Overture Re and the Founders. No party to
the Master Agreement may rely on the failure of a condition, if
such failure was caused by the failure of a party or its
affiliates to comply with its or its affiliates obligations or
any other provision under the Master Agreement.
The Master Agreement may be terminated and the Transaction
abandoned in the following circumstances:
•
by mutual written consent of the parties thereto;
•
by either JNF, JNL, JNL Bermuda and JNFAM, on the one hand, and
the Company, Overture Re Holdings, Overture Re and the Founders,
on the other hand, if it becomes impossible to satisfy certain
of the closing conditions;
•
by either JNF, JNL, JNL Bermuda and JNFAM, on the one hand, and
the Company, Overture Re Holdings, Overture Re and the Founders,
on the other hand, if the Closing has not occurred on or before
5:00 p.m. New York City time on January 30, 2010, or
such later date as may be agreed in writing to by the parties
(such date, the “Outside Date”); provided,
however, that the right to terminate the Master Agreement
pursuant in such circumstance will not be available to any party
whose failure (or failure of its Affiliates) to fulfill any of
its (or its Affiliates’) obligations contained in the
Master Agreement has been the cause of, resulted in, or
contributed to such failure of the Closing to have occurred;
•
by JNF, JNL, JNL Bermuda and JNFAM if any of the Company,
Overture Re Holdings, Overture Re or the Founders breach any
representation, warranty, or covenant contained in the Master
Agreement such that the conditions set forth in the Master
Agreement cannot be satisfied and such breach cannot be cured by
the Outside Date;
•
by the Company, Overture Re Holdings, Overture Re and the
Founders, if any of JNF, JNL, JNL Bermuda or JNFAM breach any
representation, warranty, or covenant contained in the Master
Agreement such that the conditions set forth in the Master
Agreement cannot be satisfied and such breach cannot be cured by
the Outside Date; or
•
by the Company or JNF is any of the Transaction Agreements are
terminated.
The Master Agreement is governed by the laws of the State of New
York (without regard to conflict of laws principles).
The Master Agreement may be amended, modified, or supplemented
or changed, and any provision can be waived, only in writing
signed by the party against whom enforcement thereof is sought.
If the Closing does not occur, each party agrees to bear all
costs and expenses it, and its affiliates, agents, attorney and
advisers incur relating to the authorization, preparation,
negotiation, execution and performance of the Master Agreement,
the Transaction Agreements. If the Closing does occur, the
Company shall reimburse JNF, JNL, JNFAM and JNL Bermuda for all
of the costs and expenses incurred by them directly related to
this Transaction, including without limitation the costs and
expenses of their Affiliates, agents, attorneys, advisers,
accountants, actuaries, recruiters and employee benefit
consultants relating to the authorization, preparation,
negotiation, execution, and performance of this Agreement, the
Transaction Agreements, the proxy statement/prospectus and the
Transaction subject to a cap of $2,000,000.
The parties to the Master Agreement intend to consummate the
Transaction as promptly as practicable following the Special
Meeting of Warrantholders and Extraordinary General Meeting of
Shareholders, provided that:
•
the holders of Company Warrants have approved the Warrant
Amendment Proposal;
the Company’s shareholders have approved and adopted the
Business Combination Proposal and the Transaction;
•
holders of no more than one share less than 30% of the Public
Shares vote against the Business Combination Proposal and demand
redemption of their Public Shares into a pro rata portion of the
trust account; and
•
the other conditions specified in the Master Agreement have been
satisfied or waived.
The Master Agreement is included as Annex I to this proxy
statement. We encourage you to read the Master Agreement in its
entirety.
Representations
and Warranties of the Company, JNF and Overture Re in the Master
Agreement
The Master Agreement contains a number of representations of the
Company, JNF and Overture Re to each other. The representations
and warranties contained in the Master Agreement are made for
purposes of the Master Agreement and are subject to
qualifications and limitations agreed to by the respective
parties in connection with negotiating the terms of the Master
Agreement. In addition, certain representations and warranties
were made as of a specific date, may be subject to a contractual
standard of materiality different from what might be viewed as
material to shareholders or may have been used for purposes of
allocating risk between the respective parties rather than
establishing matters as facts.
Further, the representation and warranties are qualified by
information in confidential disclosure schedules delivered by
the respective parties together with the Master Agreement. While
the Company, JNF and Overture Re do not believe these schedules
contain information for which the securities laws require public
disclosure, other than information that has already been so
disclosed, the disclosure schedules do contain information that
modify, qualify and create exceptions to the representations,
warranties and covenants set forth in the Master Agreement.
This description of the representations and warranties, and
their reproduction in the copy of the Master Agreement attached
to this proxy statement/prospectus as Annex I, are included
solely to provide investors with information regarding the terms
of the Master Agreement. Accordingly, the representations and
warranties and other provisions of the Master Agreement should
not be read alone and should not be relied on as statements of
true fact, but instead should only be read together with the
information provided elsewhere in this proxy statement. See
“Where You Can Find More Information.”
Materiality
and Material Adverse Effect
Certain of the representations and warranties are qualified by
materiality or Material Adverse Effect. For the purposes of the
Master Agreement, Material Adverse Effect means with respect to
JNF, JNL, JNFAM and JNL Bermuda, any circumstance, change in or
effect on such parties that, individually or in the aggregate
with all other circumstances, is or is reasonably likely to be
materially adverse to (a) the business, operations, assets
or liabilities (including contingent liabilities), employee
relationships, customer relationships, results of operations or
the condition (financial or otherwise) of any of JNF, JNL, JNFAM
and JNL Bermuda, or (b) the ability of JNF, JNL, JNFAM and
JNL Bermuda to consummate the Transaction; other than any effect
resulting from (i) the effect of any change in the United
States or foreign economies or securities or financial markets
in general; (ii) the effect of any change that generally
affects any industry in which JNF, JNL, JNFAM and JNL Bermuda
operate except to the extent such change has a disproportionate
effect on JNF, JNL, JNFAM and JNL Bermuda; (iii) the effect
of any change arising in connection with earthquakes,
hostilities, acts of war, sabotage or terrorism or military
actions or any escalation or material worsening of any such
hostilities, acts of war, sabotage or terrorism or military
actions existing or underway; (iv) the execution,
performance or compliance by JNF, JNL, JNFAM and JNL Bermuda
with the Master Agreement and the Transaction Agreements;
(v) the effect of any changes in applicable Laws or
accounting rules; or (vi) any effect resulting from the
public announcement of this Agreement or the consummation of the
Transaction and with respect to the Company, Overture Re
Holdings and Overture Re, any circumstance, change in or effect
on the Company, Overture Re Holdings and Overture Re that,
individually or in the aggregate with all other circumstances,
is or
is reasonably likely to be materially adverse to (a) the
business, operations, assets or liabilities (including
contingent liabilities), employee relationships, customer
relationships, results of operations or the condition (financial
or otherwise) of the Company, Overture Re Holdings and Overture
Re taken as a whole, or (b) the ability of the Company,
Overture Re Holdings and Overture Re to consummate the
Transaction; other than any effect resulting from (i) the
effect of any change in the United States or foreign economies
or securities or financial markets in general; (ii) the
effect of any change that generally affects any industry in
which the Company, Overture Re Holdings and Overture Re operate
except to the extent such change has a disproportionate effect
on the Company, Overture Re Holdings and Overture Re;
(iii) the effect of any change arising in connection with
earthquakes, hostilities, acts of war, sabotage or terrorism or
military actions or any escalation or material worsening of any
such hostilities, acts of war, sabotage or terrorism or military
actions existing or underway; (iv) the execution,
performance or compliance by the Company, Overture Re Holdings
and Overture Re with the Master Agreement and the Transaction
Agreements; (v) the effect of any changes in applicable
Laws or accounting rules; or (vi) any effect resulting from
the public announcement of the Master Agreement or the
consummation of the Transaction.
Covenants
of the Parties
The parties have agreed to perform their respective obligations
under the Master Agreement and the other transaction agreements
and to enter into, deliver and perform the agreements,
instruments, documents or certificates contemplated by the
Master Agreement and the other transaction agreements or
necessary to be executed in connection with the consummation of
the Transaction.
Overture and Overture Re Holdings shall cause the persons
constituting all of the directors of the Company as of
immediately prior to the Closing to resign from all of their
positions effective as of the Closing Date, and at and after the
Closing Date, shall cause the board of directors of the Company
to consist of seven (7) members of which (i) four
(4) members shall be designated as nominees by JNL and
(ii) three (3) members shall be designated as nominees
by Overture and the Founders.
See “Directors and Management of the Company Following
the Transaction — Directors and Executive
Officers.”
Waiver
The failure by any person to comply with any obligation,
covenant or condition under the Master Agreement may be waived
by the person entitled to the benefit thereof only by a written
instrument signed by the person granting such waiver, but such
waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition will not operate as
a waiver or continuing waiver of, or estoppel with respect to,
any subsequent or other failure. The failure of any person to
enforce at any time any of the provisions of the Master
Agreement will in no way be construed to be a waiver or
continuing waiver of any such provision, nor in any way to
affect the validity of the Master Agreement or any part thereof
or the right of any person thereafter to enforce each and every
such provision. No failure on the part of any party to the
Master Agreement to exercise, and no delay in exercising, any
right, power or remedy under the Master Agreement will operate
as a waiver thereof, nor will any single or partial exercise of
such right, power or remedy by such party preclude any other or
further exercise thereof or the exercise of any other right,
power or remedy.
Amendment
The Master Agreement may be amended pursuant to a written
agreement signed by each of the parties to the Master Agreement.
The Master Agreement may be terminated and the Transaction and
the other transactions contemplated by the Master Agreement may
be abandoned at any time, but not later than the Closing, as
follows:
(a) by mutual written consent of the parties to the Master
Agreement;
(b) by JNF, JNL, JNL Bermuda or JNFAM, on the one hand, or
the Company, Overture Re, Overture Re Holdings or the Founders,
on the other hand, if the closing conditions set forth in the
Master Agreement cannot be satisfied by 5:00 p.m. New York
City time on January 30, 2010;
(c) by JNF, JNL, JNL Bermuda or JNFAM, on the one hand, or
the Company, Overture Re, Overture Re Holdings or the Founders,
on the other hand, if the execution of the Master Agreement and
the Transaction Agreements and the consummation of the
transactions contemplated thereby has not occurred on or before
5:00 p.m. New York City time on January 30, 2010 (or
such later date as may be agreed in writing to by the parties to
the Master Agreement); provided, however, that the right to
terminate the Master Agreement pursuant to this clause will not
be available to any party to the Master Agreement whose failure
(or failure of its affiliates) to fulfill any of its (or its
affiliates’) obligations contained in the Master Agreement
has been the cause of, resulted in, or contributed to the
failure of the consummation of such transactions to have
occurred on or prior to 5:00 p.m. New York City time on
January 30, 2010;
(d) by JNF, JNL, JNL Bermuda or JNFAM if any of the
Company, Overture Re or Overture Re Holdings materially breaches
any representation, warranty, or covenant contained in the
Master Agreement such that the closing conditions in the Master
Agreement that (x) the representations and warranties of
the Company, Overture Re and Overture Re Holdings be true and
correct or (y) the Company, Overture Re and Overture Re
Holdings have performed in all material respects all agreements
and complied with all covenants, would not be satisfied, such
breach cannot be cured by 5:00 p.m. New York City time on
January 30, 2010 and such breach results in a material
adverse effect to the Company, Overture Re and Overture Re
Holdings taken as a whole;
(e) by JNF, JNL, JNL Bermuda or JNFAM if any of the
Founders materially breaches any representation, warranty, or
covenant contained in the Master Agreement such that the closing
conditions in the Master Agreement that (x) the
representations and warranties of the Founders be true and
correct or (y) the Founders have performed in all material
respects all agreements and complied with all covenants, would
not be satisfied, and such breach cannot be cured by
5:00 p.m. New York City time on January 30, 2010;
(f) by the Company, Overture Re or Overture Re Holdings, if
any of JNF, JNL, JNL Bermuda or JNFAM materially breach any
representation, warranty, or covenant contained in the Master
Agreement such that the closing conditions in the Master
Agreement that (x) the representations and warranties of
JNF, JNL, JNL Bermuda and JNFAM be true and correct or
(y) JNF, JNL, JNL Bermuda and JNFAM have performed in all
material respects all agreements and complied with all
covenants, would not be satisfied, such breach cannot be cured
by 5:00 p.m. New York City time on January 30, 2010
and such breach results in a material adverse effect to JNF,
JNL, JNL Bermuda and JNFAM taken as a whole; or
(g) by the Company or JNF if any Transaction Agreement is
terminated.
Effect
of Termination
In the event of termination of the Master Agreement as described
above, the Master Agreement and all Transaction Agreements will
forthwith become void and there will be no liability under the
Master Agreement or any Transaction Agreement on the part of any
party to the Master Agreement, except to the extent that such
termination results from the willful and material breach by a
party to the Master Agreement (provided, however, that certain
specified provisions of the Master Agreement will remain in full
force and effect and will survive any such termination of the
Master Agreement). In the event of termination of the Master
Agreement, none of the parties to the Master Agreement will be
obligated to proceed with the transactions contemplated by the
Master Agreement and the Transaction Agreements. If the closing
of the transactions
contemplated by the Master Agreement and the Transaction
Agreements does not occur, and such transactions are not
consummated by 5:00 p.m. New York City time on
January 30, 2010, any and all of the Transaction Agreements
that have been executed and delivered will terminate and become
forthwith void. If the closing of the transactions contemplated
by the Master Agreement and the Transaction Agreement does not
occur, JNL or any of its affiliates that may hold ordinary
shares of the Company purchased in the open market will be
entitled to liquidation rights.
Indemnification
The Master Agreement sets forth certain indemnification
provisions. Each of JNF, JNL, JNL Bermuda and JNFAM agree to
indemnify each of the Company, Overture Re and Overture Re
Holdings, their respective affiliates, successors and permitted
assigns, officers, directors, managers, employees and agents
from and against any liabilities whatsoever that such
indemnified party may sustain and that result from, arise out of
or relate to any material breach by JNF, JNL, JNL Bermuda or
JNFAM of any of their respective representations, warranties,
covenants or agreements contained in the Master Agreement or the
Transaction Agreements. Similarly, the Company, Overture Re and
Overture Re Holdings agree under the Master Agreement to
indemnify JNF, JNL, JNL Bermuda and JNFAM and their respective
affiliates, successors and permitted assigns, officers,
directors, managers, employees and agents from and against any
liabilities whatsoever that such indemnified party may sustain
and that result from, arise out of or relate to any breach by
the Company, Overture Re or Overture Re Holdings of any of their
respective representations, warranties, covenants or agreements
contained in the Master Agreement or the Transaction Agreements.
In addition, JNF agrees under the Master Agreement to indemnify
each Founder from and against any liabilities whatsoever that
such Founder may sustain and that result from, arise out of or
relate to any material breach by JNF of any of its
representations, warranties, covenants or agreements contained
in the Master Agreement or the Transaction Agreements.
Similarly, each Founder agrees under the Master Agreement to
indemnify JNF from and against any liabilities whatsoever that
JNF may sustain and that result from, arise out of or relate to
any breach by such Founder of any of his or her representations,
warranties, covenants or agreements contained in the Master
Agreement or the Transaction Agreements.
Notwithstanding the foregoing, JNF, JNL, JNL Bermuda and JNFAM,
on the one hand, and the Company, Overture Re and Overture Re
Holdings, on the other hand, in connection with the Master
Agreement, the Transaction Agreements, this Proxy
statement/prospectus or the transactions contemplated by the
Master Agreement and the Transaction Agreements, (1) will
not have any liability until the aggregate amount of any such
liability incurred exceeds $300,000 (and then only the extent of
such excess) and (2) will not have any liability if the
aggregate amount of any such liability incurred exceeds
$1,000,000, such that the maximum amount of aggregate liability
that may be incurred by either JNF, JNL, JNL Bermuda and JNFAM,
on the one hand, or the Company, Overture Re and Overture Re
Holdings, on the other hand, is $1,000,000 less the $300,000
liability basket.
The Master Agreement also sets forth certain provisions relating
to indemnification rights and obligations with respect to
actions brought against an indemnified party by a person that is
not a party to the Master Agreement.
Fees
and Expenses
If the Closing does not occur, each party agrees to bear all
costs and expenses it, and its affiliates, agents, attorney and
advisers incur relating to the authorization, preparation,
negotiation, execution and performance of the Master Agreement
and the Transaction Agreements. If the Closing does occur, the
Company shall reimburse JNF, JNL, JNFAM and JNL Bermuda for all
of the costs and expenses incurred by them, including without
limitation the costs and expenses of their affiliates, agents,
attorneys, advisers, accountants, actuaries, recruiters and
employee benefit consultants relating to the authorization,
preparation, negotiation, execution, and performance of the
Master Agreement, the Transaction Agreements, the Proxy
statement/prospectus and the Transaction, up to an amount of
$2,000,000.
Overture Re expects to enter into employment agreements with its
officers, including its CEO, Chief Actuary and Underwriting
Officer and Michael Girouard, its Chief Financial Officer and
Chief Risk Officer and Brian Heaphy, the General Counsel and
Secretary, and certain other employees upon terms to be agreed
to between Overture Re and such persons. It is anticipated that
the employment agreements will, among other things, provide for
employment for a specified term; specified levels of annual base
salary and target bonus opportunity; monthly housing allowances;
participation in employee benefit plans and insurance programs;
designated severance payments in the event of termination
without cause or for good reason; and post-termination
non-competition and non-solicitation restrictions, in addition
to perpetual confidentiality and non-disparagement requirements.
Agreement
and Plan of Amalgamation
On or as of the Closing Date, JNL Bermuda and Overture Re will
execute and deliver the Agreement and Plan of Amalgamation,
pursuant to which JNL Bermuda and Overture Re will amalgamate in
accordance with Bermuda law. Overture Re will be the surviving
entity and will assume all of the properties, rights and
privileges, powers and obligations of JNL Bermuda, including the
Investment Management Agreement, the option to enter into the
Quota Share Reinsurance Agreement with JNL, the securities
portfolio worth approximately 98,500,000 and the other employees
and assets of JNL Bermuda. The amalgamation of JNL Bermuda and
Overture Re is subject to the satisfaction or waiver of each of
the conditions to Closing set forth in the Master Agreement. In
addition, to effect the amalgamation, the parties will need to
file a Certificate of Amalgamation with the Registrar of
Companies in Bermuda and a Certificate of Merger with the office
of the Secretary of State of the State of Delaware. This
agreement may be terminated at anytime prior to the Closing, if
the Master Agreement is terminated.
Securities
Purchase Agreement
If JNL does not as of the Closing Date beneficially own or have
commitments to acquire 24.5% of the Ordinary Shares of the
Company pursuant to open market purchases or privately
negotiated transfers as of the Closing Date, taking into account
the shareholders redemptions, the obligation of the Company to
repurchase the Founders Shares and any issuance of Ordinary
Shares to JNL pursuant to the Master Agreement, on the Closing
Date, JNL and the Company will execute and deliver the
Securities Purchase Agreement. Pursuant to the Securities
Purchase Agreement, the Company will issue to JNL by a private
placement issuance, the amount of Ordinary Shares of the Company
that JNL requires to on the Closing Date beneficially own or
have commitments to acquire a 24.5% of the Ordinary Shares of
the Company as of the Closing Date, taking into account the
shareholders redemptions, the obligation of the Company to
repurchase the Founders Shares and any issuance of Ordinary
Shares to JNL pursuant to the Master Agreement. The purchase
price for each Ordinary Share issued pursuant to the Securities
Purchase Agreement shall be $10.04 per share.
On the Closing Date, the Company will enter into a registration
rights agreement with JNL with respect to securities of the
Company held by JNL from time to time. The registration rights
agreement will provide that, in certain instances, JNL may
require the Company to register any of its securities held by
JNL on a registration statement filed under the Securities Act,
provided that such registration statement can not become
effective until termination of the applicable
lock-up
period as set forth in the Shareholders Agreement. The Company
will bear the expenses incurred in connection with filing any
such registration statement. In an underwritten offering, all
selling shareholders and the Company shall bear the expenses of
the underwriter pro rata in proportion to the respective amount
of securities each is selling in such offering.
JNL will be entitled to demand that the Company register of the
securities of the Company that JNL may purchase on the open
market, in privately negotiated transfers or that are issued to
JNL pursuant to the Securities Purchase Agreement (described
above). JNL is entitled to make up to two demands that the
Company register such securities. In addition, JNL has certain
“piggy-back” registration rights with respect to
registration statements filed by the Company subsequent to the
date on which the
lock-up
period terminates. In addition, JNL may have the option to
receive or assign its option to receive, an additional issuance
equal to 2 percent of JNL’s current holding of the
Company’s Ordinary Shares if the Company does not use
reasonable best efforts to file a registration statement within
45 days of a demand, or to make such registration statement
effective within 120 days of a demand, or to maintain the
effectiveness of such registration statement for 180 days,
subject to the right of the Company to defer the filing or
effectiveness, or suspend the use of, a registration statement
for a total of 90 days in any consecutive 12 month
period as more fully set forth in the Registration Rights
Agreement.
Shareholders
Agreement
JNL shall have the right to designate as nominees four (4)
members of the board of directors of the Company, pursuant to a
shareholders agreement to be entered into by JNL, the Founders
of the Company, and the Company after the Closing Date. The
Company and the Founders of the Company shall have the right to
designate as nominees three (3) members to the board of
directors of the Company. The representatives that JNL nominates
to the board of directors of the Company shall be obliged to
present corporate opportunities relating to reinsurance which
they encounter to the board of directors of the Company first
for consideration. If any officer or director of Overture who
also serves as an officer or director of JNL becomes aware of
any other potential transaction outside of the reinsurance
business
and/or
related to JNL’s current lines of business, such officer or
director shall present such opportunity to JNL first for
consideration. The Shareholders Agreement also sets forth a
lock-up
period of one year from the closing which is to apply to
ordinary shares of the Company owned by JNL. (Similar
lock-up
provisions are set forth in separate agreements with the
Founders.) The shareholders agreement may terminate at any time
that JNL’s or the Founders’ holdings in the Company
are less than 10% of the Company’s securities on a fully
diluted basis.
Sponsors’
Agreement
On or as of the Closing Date, the Sponsors’ and the Company
will execute and deliver the Sponsors’ Agreement. Pursuant
to this agreement the Company will repurchase the ordinary
shares of the Company issued to the Founders at the time of the
Company’s IPO at the initial purchase price for such shares
of $25,000 in the aggregate. In addition, pursuant to the
agreement, the Founders will receive, in the aggregate,
(a) 937,500 ordinary shares of the Company upon the closing
price of such shares equaling or exceeding $12.00 per share for
any 10 day non-consecutive VWAP trading days within any
30 trading day period, (b) 937,500 ordinary shares of
the Company upon the closing price of such shares equaling or
exceeding $16.00 per share for any 10 day non-consecutive
VWAP trading days within any 30 trading day period, and
(c) 937,500 ordinary shares of the Company upon the closing
price of such shares equaling or exceeding $20.00 per share for
any 10 day non-consecutive VWAP trading days within any
30 trading day period. Such shares issued to the Founders
will be subject to the terms of the Shareholders Agreement and
the Amended and Restated Registration Rights Agreement.
Warrant
Purchase Agreement
Upon the consummation of the Transaction, JNF and the Founders
will execute and deliver the Warrant Purchase Agreement and
related warrant certificates to issue the Class A Warrants
and Class B Warrants to the Founders. Such warrants will
entitled the Founders to purchase an aggregate of
46,875 shares of common stock of JNF at an exercise price
of $75.00, subject to a floating strike price adjustment, and an
aggregate of 46,875 shares of common stock of JNF at an
exercise price of $125.00, also subject to a floating strike
price adjustment. The Class A Warrants are to have an
exercise period of three years and the Class B Warrants are
to have an exercise period of four years. Such warrants may only
be exercised by cashless exercise. The number of common stock
that each Founder may be entitled to purchase pursuant to the
warrants may be adjusted from time to time upon the occurrence
of a merger or reorganization of JNF, a reclassification,
subdivision, combination or redemption of the common stock of
JNF. The exercise price of such warrants may be adjusted upon
the payment of a stock dividend by JNF.
In connection with the execution of the Master Agreement, the
Founders will enter into Amendment No. 1 to the Escrow
Agreement, dated as of January 30, 2008, by and among the
Company, each of the Founders and American Stock
Transfer & Trust Company, as escrow agent
(“Amended Securities Escrow Agreement”). Pursuant to
the Amended Securities Escrow Agreement, the Founder Shares will
be released from escrow upon the repurchase thereof by the
Company.
The Company and the Founders have agreed to amend and restate
the registration rights agreement applicable to the Founder
Shares and the Sponsor Warrants to provide that the demand and
piggy-back registration rights set forth therein commence at any
time and from time to time on or after the expiration of the
Lock up Period pursuant to the certain agreements in place
between the Company and the Founders and to otherwise conform
the terms to the terms set forth in the Registration Rights
Agreement with JNL described above. In addition, a Founder may
have the option to receive or assign its option to receive, an
additional issuance equal to 2 percent of such Founders
current holding of the Company’s Ordinary Shares if the
Company does not use reasonable best efforts to file a
registration statement within 45 days of a demand, or to
make such registration statement effective within 120 days
of a demand, or to maintain the effectiveness of such
registration statement for 180 days, subject to the right of the
Company to defer the filing or effectiveness, or suspend the use
of, a registration statement for a total of 90 days in any
consecutive 12 month period as more fully set forth in the
Registration Rights Agreement. See “Certain
Relationships and Related Transactions — Certain
Relationships and Related Transactions of the
Company — Registration Rights” for a
description of the registration rights agreement between the
Company and the Founders.
Trust Account
Waiver
The Company may only disburse monies from the trust account
only: (i) to pay Transaction fees and expenses;
(ii) to pay the Company’s tax obligations and deferred
underwriting discounts and commissions; (iii) to pay
holders of issued and outstanding Public Shares who properly
exercise their redemption rights; (iv) for working capital
and general corporate purposes of the Company and its
subsidiaries, including, but not limited to, payment of the
Purchase Price; and (v) the funds held in the
Trust Account may be used to purchase Public Shares in
privately negotiated transactions. JNF acknowledged and agreed
it does not have at any time any claim against the funds held in
the trust account and waived any claims it may have against the
trust account at any time; provided, however, JNF will be
entitled to its pro rata portion of the trust account with
respect to any Public Shares it acquires in the open market or
in privately negotiated transactions if the Transaction is not
consummated and the trust fund goes into liquidation.
Access
to Information
Each of JNF and the Company has agreed to give the other, its
counsel, accountants and other representatives, reasonable
access during normal business hours during the period prior to
the closing, to the properties, books, records and personnel of
the other to obtain all information concerning the business,
including the status of product development efforts, properties,
results of operations and personnel of the other, as such party
may reasonably request.
The Company and JNF agreed that no public release or
announcement concerning the Master Agreement or the Transaction
shall be issued by either party or any of their affiliates
without the prior consent of the other party (which consent
shall not be unreasonably withheld, conditioned or delayed),
except such release or announcement as may be required by
applicable law or the rules or regulations of any securities
exchange, in which case the applicable party shall use
commercially reasonable efforts to allow the other party
reasonable time to comment on such release or announcement in
advance of such issuance.
After completion of the Transaction, the Company anticipates:
•
the name of the Company will be “Overture Capital
Corp.” and
•
the corporate headquarters and principal executive offices of
the Company will be located at Emporium Building,
4th Floor, 69 Front Street, Hamilton HM12, Bermuda.
On December 6, 2009 Houlihan Smith made a presentation to
the board of directors of the Company, and delivered a written
opinion dated December 6, 2009, stating that, as of that
date, based upon and subject to the assumptions made, matters
considered, and limitations on Houlihan Smith’s review as
set forth in Houlihan Smith’s opinion (i) the fair
market value of JNL Bermuda in the Transaction contemplated by
the Master Agreement was equal to at least 80% of the balance in
the trust account excluding deferred underwriting discounts and
commissions, and (ii) the total consideration to be paid by
the Company for JNL Bermuda in conjunction with the Transaction
was fair, from a financial point of view, to the shareholders of
the Company.
The full text of Houlihan Smith’s opinion is attached as
Annex V to this proxy statement/prospectus. The opinion
outlines the procedures followed, assumptions made, matters
considered and qualifications and limitations on the review
undertaken by Houlihan Smith in rendering its opinion. The
description of the opinion set forth below is qualified in its
entirety by reference to the full text of the opinion. The
Company’s shareholders are urged to read the entire opinion
carefully in connection with their consideration of the
Transaction.
Houlihan Smith’s opinion speaks only as of the date of the
opinion and was necessarily based upon financial, economic,
market and other conditions as they existed, and could be
evaluated, on that date as well as the consideration to be paid
in connection with the Transaction contemplated by the Master
Agreement. Events occurring after that date could materially
affect its opinion. Houlihan Smith has not undertaken to update,
revise, reaffirm or withdraw its opinion or otherwise comment
upon events occurring after the date of the opinion. Houlihan
Smith received neither specific instructions nor any scope
limitations from the Board of Directors. The Company has not
obtained nor will it obtain an updated fairness opinion from
Houlihan Smith to reflect any amendment to the terms of the
Transaction.
Process
In arriving at its opinion, Houlihan Smith reviewed and analyzed
all the information it deemed necessary and appropriate
including:
•
a draft dated December 5, 2009 of the Master Agreement
prepared by the Company, including publicly available
information concerning JNF that Houlihan Smith believes to be
relevant to its inquiry;
•
financial and operating information with respect to the business
operations and prospects of JNL Bermuda furnished to Houlihan
Smith by JNF’s management;
•
financial and operating information with respect to the business
operations and prospects of the Company furnished to Houlihan
Smith by the Company’s management;
•
a comparison of the financial condition and valuations of other
companies that are similar to JNL Bermuda that Houlihan Smith
deemed relevant and comparable as described below;
•
a comparison of the financial terms of the Transaction
contemplated by the Master Agreement with the terms of certain
other recent transactions which Houlihan Smith deemed relevant
and comparable; and
•
such other financial, strategic and market information that
Houlihan Smith deemed relevant.
In addition, Houlihan Smith held discussions with the management
and staff of the Company and JNF and their respective advisors
concerning the business and operations, assets, present
condition and future prospects of JNL Bermuda and the Company,
and undertook such other studies, analyses and investigations as
Houlihan Smith deemed relevant and appropriate.
In preparing its opinion, Houlihan Smith assumed and relied upon
the accuracy and completeness of, and did not independently
verify, the information (including without limitation the
representations and warranties contained in the Master
Agreement) supplied or otherwise made available to Houlihan
Smith by the Company and JNF and their advisors, discussed or
reviewed by or for Houlihan Smith or publicly available, and did
not assume any responsibility for, nor make any, independent
verification of any such information. Houlihan Smith
further relied on the assurance of management and staff of the
Company and JNF and their advisors that they were unaware of any
facts that would make such information incomplete or misleading.
Houlihan Smith did not subject such information to either
(i) any independent review by Houlihan Smith or a third
party of any kind, or (ii) an audit in accordance with
generally accepted auditing standards or the Statement on
Standards for Prospective Financial Information issued by the
American Institute of Certified Public Accountants. Further, the
preparation of Houlihan Smith’s opinion did not include a
detailed review of any JNF or the Company transactions, and
cannot be expected to identify errors, irregularities or illegal
acts, including fraud or defalcations, that may exist. In
addition, Houlihan Smith assumed and relied upon the
reasonableness and accuracy of any of JNL Bermuda’s and the
Company’s financial projections, forecasts and analyses
provided to Houlihan Smith, and assumed that such projections,
forecasts and analyses were reasonably prepared in good faith
and on a basis reflecting the best available judgments and
estimates of JNF’s or the Company’s respective
management. Accordingly, Houlihan Smith did not express an
opinion or any other form of assurance on, and assumed no
responsibility for, the accuracy, completeness or correctness
(or, in the case of projections, forecasts and analyses or the
assumptions upon which they may be based, the achievability) of
such information.
Houlihan Smith’s opinion was necessarily based upon
economic, market and other conditions and circumstances as they
existed and could be evaluated as of the date thereof. Although
such conditions and circumstances have changed or may change in
the future, Houlihan Smith neither has nor had any obligation to
update, revise or reaffirm its opinion. Further, Houlihan Smith
expressed no opinion as to the fairness of any consideration
paid in connection with any other agreements ancillary to the
Transaction contemplated by the Master Agreement between the
Company and JNF. In addition, Houlihan Smith expressed no
opinion as to the fairness of the amount or nature of the
compensation to any of the Company’s officers, directors or
employees relative to the consideration to be received from the
Company.
In arriving at its opinion, Houlihan Smith did not conduct a
physical inspection of the properties and facilities of JNF nor
the Company, and did not review any of the books and records of
JNF nor the Company. Houlihan Smith neither made nor obtained
any evaluations or appraisals from a third party of the assets
of either JNF or the Company. Houlihan Smith’s opinion
assumed that the Transaction contemplated by the Master
Agreement would be consummated without waiver or modification,
by any party thereto, of any of the material terms or conditions
contained in the Master Agreement and that the final form of the
Master Agreement would be substantially similar in all material
respects to the draft reviewed by Houlihan Smith.
Houlihan Smith did not provide advice concerning the structure
of the Transaction. Houlihan Smith assumed without independent
investigation that the terms of the Transaction contemplated by
the Master Agreement and related transactions were the most
beneficial terms from the Company’s perspective that could
under the circumstances be negotiated among the parties to such
transactions, and Houlihan Smith expressed no opinion as to
whether any alternative transaction might have resulted in terms
and conditions more favorable to the Company or its shareholders
than those contemplated by the Master Agreement.
In connection with rendering its opinion, Houlihan Smith
performed certain financial, comparative and other analyses as
summarized below. Each of the analyses conducted by Houlihan
Smith was carried out to provide a different perspective on the
Transaction contemplated by the Master Agreement and to enhance
the total mix of information available. Houlihan Smith did not
form a conclusion as to whether any individual analysis,
considered in isolation, supported or failed to support an
opinion as to the fairness, from a financial point of view, of
the total consideration to the Company shareholders, but rather
consider such analyses in the aggregate. Further, the summary of
Houlihan Smith’s analyses described below is not a complete
description of the analyses underlying Houlihan Smith’s
opinion. The preparation of a fairness opinion is a complex
process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances
and, therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. In arriving at its
opinion, Houlihan Smith made qualitative judgments as to the
relevance of each analysis and factor that it considered.
In addition, Houlihan Smith may have given various analyses more
or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so
that the range of
valuations resulting from any particular analysis described
above should not be taken to be Houlihan Smith’s view of
the value of JNL Bermuda’s assets. The estimates contained
in Houlihan Smith’s analyses and the ranges of valuations
resulting from any particular analysis are not necessarily
indicative of actual values or actual future results, which may
be significantly more or less favorable than suggested by such
analyses. In addition, analyses relating to the value of
businesses or assets neither purport to be appraisals nor do
they necessarily reflect the prices at which businesses or
assets may actually be sold. Accordingly, Houlihan Smith’s
analyses and estimates are inherently subject to substantial
uncertainty. Houlihan Smith’s analyses must be considered
as a whole. Selecting portions of these analyses or the factors
considered, without considering all analyses and factors
collectively, could create an incomplete and misleading view of
the process underlying the analyses performed by Houlihan Smith
in connection with the preparation of its opinion.
The summaries of the financial reviews and analyses include
information presented in tabular format. In order to fully
understand Houlihan Smith’s financial reviews and analyses,
the tables must be read together with the accompanying text of
each summary. The tables alone do not constitute a complete
description of the financial analyses, including the
methodologies and assumptions underlying the analyses, and, if
viewed in isolation, could create a misleading or incomplete
view of the financial analyses performed by Houlihan Smith.
The opinion of Houlihan Smith was just one of the many factors
taken into account by the Company’s board of directors in
making its determination to approve the Transaction, including
those described elsewhere in this proxy statement.
80%
Test
Pursuant to the Company’s amended and restated memorandum
and articles of association, the Company was required to
complete an acquisition of a target business or businesses,
whether through a merger, share capital exchange, asset
acquisition, share purchase, reorganization or similar business
combination, whose collective fair market value is equal to at
least 80% of the balance in the trust account excluding deferred
underwriting discounts and commissions. As at September 30,2009, 80% of such amount was $114.4 million. Pursuant to
its engagement letter with the Company, Houlihan Smith rendered
its opinion on December 6, 2009, that the fair market value
of JNL Bermuda in the Transaction contemplated by the Master
Agreement exceeded $114.4 million. Such opinion has not and
will not be amended to reflect the subsequent amendment of the
Master Agreement.
Houlihan Smith compared this amount to the valuation ranges
achieved by application of a comparable company analysis, a
comparable transaction analysis and a discounted cash flow
analysis (as each of these analyses is described below).
114.4
80% of net assets held in trust (as at 09/30/09)
Minimum
Maximum
($ in millions)
Indicative Equity Value ranges of JNL Bermuda:
Comparable Company Analysis
114.2
141.0
Comparable Transaction Analysis
129.1
157.0
Discounted Cash Flow Analysis
124.1
177.2
Houlihan Smith noted that the amount of $114.4 million was
within the valuation range produced by the Comparable Company
Analysis. The amount of $114.4 million was lower than the
valuation ranges created by the Comparable Transaction Analysis
and the Discounted Cash Flow Analysis. On this basis, Houlihan
Smith was of the opinion that the fair market value of JNL
Bermuda on a standalone basis was equal to at least
$114.4 million, which represents 80% of the balance in the
trust account excluding deferred underwriting discounts and
commissions.
In arriving at its fairness opinion, Houlihan Smith generated
valuation ranges for JNL Bermuda based on a comparable company
analysis, a comparable transaction analysis and a discounted
cash flow analysis, each as more fully discussed below. Houlihan
Smith compared the total consideration which was proposed for
the Transaction contemplated by the Master Agreement at the time
that Houlihan Smith rendered its opinion of $120.0 million
(as described below) with each of the three distinct valuation
ranges described below under “Comparable Company
Analysis”, “Comparable Transaction Analysis” and
“Discounted Cash Flow Analysis”. Houlihan Smith noted
that the transaction value, as contemplated by the Master
Agreement, was within the valuation range created by the
Comparable Company Analysis described below and less than each
of the three higher valuation ranges created by the Comparable
Company Analysis, Comparable Transaction Analysis, and
Discounted Cash Flow Analysis. On this basis, Houlihan Smith was
of the opinion that the total consideration to be paid in the
Transaction contemplated by the Master Agreement was fair, from
a financial point of view, to the shareholders of the Company.
Consideration
Analysis
Houlihan Smith noted that the total indicated value of the
consideration payable at the closing of the Transaction
contemplated by the Master Agreement, is approximately
$120.0 million in cash.
Comparable
Company Analysis
A selected comparable company analysis reviews the trading
multiples of publicly traded companies that are similar to JNL
Bermuda with respect to business and revenue model, operating
sector and size. In selecting companies comparable to JNL
Bermuda, Houlihan Smith sought organizations whose businesses
were concerned primarily with providing life and health
insurance, reinsurance, or similar services. Public companies
that met these criteria were included without exception.
Houlihan Smith excluded private companies on the basis that
adequate financial information was not available to conduct
analyses of such companies.
Houlihan Smith identified the eighteen public companies listed
below as being comparable to JNL Bermuda with respect to their
industry sector and operating model. The companies selected had
market capitalization values between $11.7 million and
$28.0 billion. The median market capitalization was
$4.2 billion and the mean market capitalization was
$7.5 billion. Houlihan Smith determined the revenue
composition by type of insurance to be the primary determinant
in choosing the comparable companies. Furthermore, given the low
barriers to entry and ability to scale up to a larger size
relatively easily compared to other industries, Houlihan Smith
judged that size is not necessarily a significant competitive
advantage in the insurance industry, therefore leading to a
range of companies with varying market capitalizations. For the
most recent twelve months, the comparable companies generated
earnings of between $1.9 million and $1.5 billion.
Houlihan Smith generated multiples with respect to the
comparable companies by, in each case, dividing the market
capitalization by the book value and forward 2011 earnings which
the comparable company reported or forecasted. Houlihan Smith
selected the median of the resulting multiples, which were as
follows:
Price/Book Value
Price/Earnings
Last Twelve Months
2011
Median
0.9x
6.8x
Houlihan Smith calculated the product of JNL Bermuda’s
projected book value of 150.0 million and year two earnings
of 24.0 million and the respective median multiples stated
above and created a range of equity values for JNL Bermuda based
on the projected book value and forward 2011 earnings multiples.
Houlihan Smith utilized the forecasts provided by JNF’s
management in its Discounted Cash Flow Analysis. Houlihan Smith
then subtracted the capital contributed to Overture Re from the
Company to calculate the indicated equity values of JNL Bermuda
on a standalone basis. The capital contributed to Overture Re
from the Company of $23.0 million was calculated as the
Company’s trust account balance excluding deferred
underwriting discounts and commissions less the purchase price
paid to acquire JNL Bermuda. It is customary for financial
advisors to develop a range for valuations in this manner to
account for the fact that it is not possible to put an exact
value on a company. The resulting range was:
Implied Equity Value Range
Price/Book Value
Price/Earnings
Latest Twelve Months
2011
($ in millions)
Fair Market Value — Equity Value
(Standalone)
$114.2
$141.0
Please be advised that none of the comparable companies have
characteristics identical to JNL Bermuda. An analysis of
publicly traded comparable companies is not mathematical; rather
it involves complex consideration and judgments concerning
differences in financial and operating characteristics of the
comparable companies and other factors that could affect the
public trading of the comparable companies. For purposes of
Houlihan Smith’s analyses, projected book value means total
shareholders’ equity of JNL Bermuda at consummation of the
transaction.
Comparable
Transaction Analysis
A comparable transaction analysis involves a review of merger,
acquisition and asset purchase transactions involving target
companies that are in related industries to JNL Bermuda with
respect to business and revenue model, operating sector and
size. Houlihan Smith also ensured that the selected transactions
were similar in
nature in terms of structure. In selecting transactions
comparable to the Transaction, Houlihan Smith sought
organizations whose businesses were concerned primarily with
providing life and health insurance, reinsurance, or similar
services. Each transaction was strategic in nature and completed
by an operating company within the industry. Fairfax Financial
Holdings, Ltd.’s acquisition of Odyssey Re Holdings Corp.
represents a strategic transaction whereby Fairfax Financial
Holdings, Ltd., an insurance and reinsurance company, expanded
its property and casualty reinsurance business by acquiring the
remaining 27% stake in Odyssey Re Holdings Corp., a property and
casualty reinsurance company. SCOR SE’s acquisition of
Converium Holding AG represents a strategic transaction whereby
SCOR Se, a reinsurance company, expanded its international
position by acquiring the remaining 67.1% stake in Converium
Holding AG, a worldwide multi-line reinsurer. Americo Life
Inc.’s acquisition of Financial Industries Corp. represents
a strategic transaction whereby Americo Life Inc. expanded its
portfolio of life insurance and annuity products and marketing
and underwriting business through its acquisition of Financial
Industries Corp, which markets and underwrites individual life
insurance and annuity products. All transactions that met the
criteria above were included without exception.
Houlihan Smith considered the following comparable transactions
for its analysis:
Implied
Enterprise
Buyer/Investor
Target/Issuer
Value
($ in millions)
Fairfax Financial Holdings, Ltd.
Odyssey Re Holdings Corp.
$
3,432.4
SCOR SE
Converium Holding AG (nka:SCOR Holding (Switzerland) Ltd.)
2,136.8
Americo Life Inc.
Financial Industries Corp.
40.0
Mean
$
1,869.7
Median
$
2,136.8
The multiple implied by the selected transactions was 1.2x price
to book value and 10.7x price to earnings. Houlihan Smith
developed a range of equity values for JNL Bermuda by applying a
1.2x book value multiple on JNL Bermuda’s projected book
value and 10.7x earnings multiple on JNL Bermuda’s
projected year two earnings. Houlihan Smith discounted the
implied equity value derived from JNL Bermuda’s projected
year two earnings based on JNL Bermuda’s cost of equity of
30.0%. Houlihan Smith then subtracted the capital contributed to
Overture Re from the Company to calculate the indicated equity
values of JNL Bermuda on a standalone basis. The capital
contributed to Overture Re from the Company of
$23.0 million was calculated as the Company’s trust
account balance excluding deferred underwriting discounts and
commissions less the purchase price paid to acquire JNL Bermuda.
It is customary for financial advisors to develop a range for
valuations in this manner to account for the fact that it is not
possible to put an exact value on a company. The resulting range
was:
Implied Equity Value Range
Price/
Price/Earnings
Book Value
($ in millions)
Fair Market Value — Equity Value
(Standalone)
$129.1
$157.0
Please be advised that none of the target companies in the
comparable transactions have characteristics identical to JNL
Bermuda. Accordingly, an analysis of comparable business
combinations is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial
and operating characteristics of the target companies in the
comparable transactions and other factors that could affect the
respective acquisition values.
Discounted
Cash Flow Analysis
A discounted cash flow analysis estimates value based upon a
company’s projected future free cash flow, discounted at a
rate reflecting risks inherent in its business and capital
structure. Unlevered free cash flow represents the amount of
cash generated and available for principal, interest and
dividend payments after providing for ongoing business
operations. The discounted cash flow analysis is dependent on
projections and
is further dependent on numerous industry-specific and
macroeconomic factors. Houlihan Smith utilized the forecasts
provided by JNF’s management which set forth projected
future free cash flow. The financial projections provided by JNF
are provided in the following table:
Target
Discounted Cash Flow Analysis
Pro Forma Period(1)
Year 1
Year 2
Year 3
Year 4
Year 5
($ in thousands)
REVENUE
Total Variable Annuity Revenues
$
5,372
$
5,688
$
6,526
$
8,028
$
10,466
Total Reinsurance Revenues
13,402
22,512
32,614
43,235
53,875
Total Interest / Other Income
8,250
8,854
10,175
12,050
14,660
Total Revenue
$
27,024
$
37,054
$
49,315
$
63,313
$
79,000
Revenue Growth %
NM
37.1
%
33.1
%
28.4
%
24.8
%
OPERATING EXPENSES
Operating Expenses
$
13,795
$
11,027
$
13,217
$
13,872
$
8,786
Operating Income
$
13,228
$
26,026
$
36,098
$
49,442
$
70,214
EBIT Margin %
49.0
%
70.2
%
73.2
%
78.1
%
88.9
%
EBIT Margin Growth %
NM
96.7
%
38.7
%
37.0
%
42.0
%
Total Other Expenses
$
2,253
$
2,000
$
2,000
$
2,000
$
2,000
Net Income
10,975
24,026
34,098
47,442
68,214
(1)
Projections are as of Target’s first year of operations.
In order to arrive at a present value, Houlihan Smith began by
applying the
build-up
method to estimate the cost of equity. The
build-up
method is a widely-recognized method of determining the
after-tax net cash flow discount rate, performed by summing the
individual risks such as, the risk-free rate, equity risk
premium, size premium, and company specific risk premium
associated with a particular equity investment. Specifically,
the cost of equity is the rate of return required by holders of
an equity investment to compensate investors for the risks
associated with that particular investment. Within its
application of the
build-up
method, Houlihan Smith included a company-specific premium in
its analysis to account for the fact the Target is a division of
an existing business that has no stand-alone historical publicly
disclosed track record or financial results. On this basis, and
consistent with a conservative view, Houlihan Smith arrived at
30.0% as JNL Bermuda’s cost of equity, otherwise referred
to as discount rate. The cost of equity was then applied as a
discount rate and adjusted plus and minus 5.0% to generate a
range of implied equity values for JNL Bermuda.
Based on guidance from JNF’s management, no dividends would
be issued within the first five years of the business.
Therefore, Houlihan Smith assumed all cash flows would be
reinvested in statutory capital for the projected period.
Utilizing a terminal earnings multiple (a multiple used to
capitalize earnings into perpetuity in the final year of the
projected period) of 7.2x (based on the median forward 2010
price to earnings multiple of the comparable companies) and a
range of discount rates of between 25.0% and 35.0%, Houlihan
Smith calculated the implied equity values. Houlihan Smith then
subtracted the capital contributed to Overture Re from the
Company to calculate the indicated equity values of JNL Bermuda
on a standalone basis. The capital contributed to Overture Re
from the Company of $23.0 million was calculated as the
Company’s trust account balance excluding deferred
underwriting discounts and commissions less the purchase price
paid to acquire JNL Bermuda and resulted in the following range
of implied equity values:
Implied Equity
Value Range
Price/Book
Price/
Value
Earnings
($ in millions)
Fair Market Value — Equity Value
(Standalone)
$
124.1
$
177.2
Houlihan
Smith & Company, Inc.
Houlihan Smith is an investment banking firm that, as part of
its investment banking business, regularly is engaged in the
evaluation of businesses and their securities in connection with
mergers, acquisitions, corporate restructurings, private
placements, and for other purposes. The Company’s board of
directors determined to use the services of Houlihan Smith
because it is a recognized investment banking firm that has
substantial experience in similar matters. Houlihan Smith’s
fee for providing the opinion was $95,000. Houlihan Smith will
be reimbursed for its reasonable
out-of-pocket
expenses, including attorneys’ fees. In addition, the
Company has agreed to indemnify Houlihan Smith for certain
liabilities that may arise out of Houlihan Smith’s
engagement.
THIS SUMMARY IS OF A GENERAL NATURE ONLY, IS LIMITED IN
SCOPE, IS NOT EXHAUSTIVE OF ALL U.S. FEDERAL INCOME TAX
CONSIDERATIONS, AND IS NOT INTENDED TO BE, NOR SHOULD IT BE
CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR
SECURITYHOLDER. EACH SHAREHOLDER AND WARRANTHOLDER IS STRONGLY
URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO HIM OR HER OF THE TRANSACTION CONTEMPLATED
BY THIS PROXY STATEMENT/PROSPECTUS AND THE OWNERSHIP AND
DISPOSITION OF THE SHARES AND/OR WARRANTS, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS IN HIS OR HER PARTICULAR CIRCUMSTANCES.
Set forth below is a summary of certain U.S. federal income
tax considerations relevant to the Company, Overture Re
Holdings, and Overture Re, and to the purchase, beneficial
ownership and disposition of Ordinary Shares, and of the Bermuda
and Cayman Islands taxation of the Company, Overture Re
Holdings, and Overture Re and of the initial purchasers of
Ordinary Shares.
The following discussion of the tax considerations under
(i) “Taxation of Overture Re — Bermuda”
and “Taxation of Shareholders — Bermuda
Taxation” is based upon the advice of Appleby, our special
Bermuda counsel, under (ii) “United States
Taxation” is based upon the advice of our special United
States tax counsel, Cadwalader, Wickersham & Taft LLP,
and under (iii) “Cayman Islands Taxation” is
based upon the advice of Maples and Calder, our Cayman Islands
counsel.
The following summary was not intended or written to be used,
and cannot be used, for the purpose of avoiding
U.S. federal, state, or local tax penalties. The following
summary was written in connection with the promotion or
marketing by Overture Re
and/or
underwriters of the Shares. Each holder should seek advice based
on its particular circumstances from an independent tax advisor.
Bermuda
Under current Bermuda law, there is no income, corporate or
profits tax or withholding tax, capital gains tax or capital
transfer tax, estate or inheritance tax payable by us or our
shareholders, other than shareholders ordinarily resident in
Bermuda, if any. Overture Re and Overture Re Holdings will apply
for and expect to receive from the Minister of Finance under The
Exempted Undertaking Tax Protection Act 1966, as amended, an
assurance that, in the event that Bermuda enacts legislation
imposing tax computed on profits, income, any capital asset,
gain or appreciation, or any tax in the nature of estate duty or
inheritance, then the imposition of any such tax shall not be
applicable to Overture Re, Overture Re Holdings or to any of
their operations or their shares, debentures or other
obligations, until March 28, 2016. Overture Re Holdings and
Overture Re could be subject to taxes in Bermuda after that
date. This assurance is subject to the proviso that it is not to
be construed so as to prevent the application of any tax or duty
to such persons as are ordinarily resident in Bermuda or to
prevent the application of any tax payable in accordance with
the provisions of the Land Tax Act 1967 or otherwise payable in
relation to any property leased to Overture Re or Overture Re
Holdings. Overture Re and Overture Re Holdings will pay annual
Bermuda government fees and Overture Re will pay annual
insurance license fees. In addition, all entities employing
individuals in Bermuda are required to pay a payroll tax and
there are other sundry taxes payable, directly or indirectly, to
the Bermuda government.
Bermuda
Taxation
Currently, there is no Bermuda income, corporate or profits tax
or withholding tax, capital gains tax or capital transfer tax,
estate or inheritance tax or other tax payable by holders of
Overture Re Holdings or Overture Re’s shares, other than
shareholders ordinarily resident in Bermuda, if any.
Cayman
Islands Taxation
The Government of the Cayman Islands will not, under existing
legislation, impose any income, corporate or capital gains tax,
estate duty, inheritance tax, gift tax or withholding tax upon
the Company or the Company’s shareholders. The Cayman
Islands are not party to a double tax treaty with any country
that is applicable to any payments made to or by the Company.
The Company has received an undertaking dated October 9,2007 from the
Governor-in-Cabinet
of the Cayman Islands that, in accordance with section 6 of
the Tax Concessions Law (1999 Revision) of the Cayman Islands,
for a period of 20 years from the date of the undertaking,
no law which is enacted in the Cayman Islands imposing any tax
to be levied on profits, income, gains or appreciations shall
apply to the Company or its operations and, in addition, that no
tax to be levied on profits, income, gains or appreciations or
which is in the nature of estate duty or inheritance tax shall
be payable (i) on or in respect of the shares, debentures
or other obligations of the Company or (ii) by way of the
withholding in whole or in part of a payment of dividend or
other distribution of income or capital by the Company to its
members or a payment of principal or interest or other sums due
under a debenture or other obligation of the Company.
United
States Taxation
For purposes of this summary, a “U.S. Holder” is
a beneficial owner of a Share that is:
•
an individual who is a citizen or resident of the United States
for U.S. federal income tax purposes;
•
a corporation (or other entity that is treated as a corporation
for U.S. federal income tax purposes) that is created or
organized in or under the laws of the United States or any State
thereof (including the District of Columbia);
•
an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
•
a trust if a court within the United States is able to exercise
primary supervision over its administration, and one or more
United States persons have the authority to control all of its
substantial decisions.
An individual may, subject to certain exceptions, be deemed to
be a resident of the United States by reason of being present in
the United States for at least 31 days in the calendar year
and for an aggregate of at least 183 days during a
three-year period ending in the current calendar year (counting
for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year,
and one-sixth of the days present in the second preceding year).
This summary is based on interpretations of the Internal Revenue
Code of 1986, as amended (the ‘‘Code”),
regulations issued thereunder, and rulings and decisions
currently in effect (or in some cases proposed), all of which
are subject to change. Any such change may be applied
retroactively and may adversely affect the U.S. federal
income tax consequences described herein. This summary addresses
only U.S. Holders that purchased shares prior to or
contemporaneously with the Closing Date, and that beneficially
own shares as capital assets and not as part of a
“straddle,”“hedge,”“synthetic
security,” or a “conversion transaction” for
U.S. federal income tax purposes, or as part of some other
integrated investment. This summary does not discuss tax
consequences of an investor that is not a U.S. Holder, or
all of the tax consequences that may be relevant to particular
investors or to investors subject to special treatment under the
U.S. federal income tax laws (such as banks, thrifts, or
other financial institutions; insurance companies; securities
dealers or brokers, or traders in securities electing
mark-to-market
treatment; mutual funds or real estate investment trusts; small
business investment companies; S corporations; investors
that hold their shares through a partnership or other entity
treated as a partnership for U.S. federal income tax
purposes; investors whose functional currency is not the
U.S. dollar; certain former citizens or residents of the
United States; persons subject to the alternative minimum tax;
retirement plans or persons holding the Shares in tax-deferred
or tax-advantaged accounts; or “controlled foreign
corporations” or “passive foreign investment
companies” for U.S. federal income tax purposes). This
summary also does not address the tax consequences to
shareholders, or other equity holders in, or beneficiaries of, a
holder, or any state, local or foreign tax consequences of the
purchase, ownership, or disposition of the Shares. The following
discussion does not address the taxation of investors in the
Shares by any jurisdiction other than the United States, and
such tax consequences may be significantly different from the
tax consequences discussed herein.
PROSPECTIVE PURCHASERS AND HOLDERS OF SHARES SHOULD CONSULT
WITH THEIR TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, AND
OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP, AND
DISPOSITION OF SHARES AS WELL AS ANY CONSEQUENCES ARISING
UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION TO WHICH THEY
MAY BE SUBJECT.
U.S.
Federal Income Tax Treatment of the Company, Overture Re
Holdings, and Overture Re
Trade or Business in the United States. The
Company, Overture Re Holdings, and Overture Re intend to take
the position that they are not engaged in a trade or business in
the United States and that they are therefore not subject to
U.S. federal income tax on a net income basis.
Overture Re Holdings will elect to be disregarded from Overture
for U.S. federal income tax purposes.
Overture (including Overture Re Holdings as a disregarded entity
of Overture) intends to limit its activities to making
investments in subsidiaries and therefore does not intend to be
engaged in a trade or business for U.S. federal income tax
purposes.
Overture Re intends to take the position that it is not engaged
in a trade or business in the United States for federal income
tax purposes and therefore is not subject to U.S. federal
income tax on a net income basis. However, no Treasury
regulation, revenue ruling, or judicial decision has considered
whether a foreign insurance company, such as Overture Re, is
engaged in a trade or business in the United States, and the
determination is highly factual. Therefore, there can be no
assurance that Overture Re will not be treated as engaged in a
trade or business in the United States for U.S. federal
income tax purposes.
An insurance enterprise resident in Bermuda generally is
entitled to the benefits of the income tax treaty between the
United States and Bermuda (the
“U.S.-Bermuda
tax treaty”) if (i) more than 50% of its shares are
owned beneficially, directly, or indirectly, by
U.S. citizens or by individuals who are residents of the
United States or Bermuda under their respective tax laws,
(ii) its income is not used in substantial part, directly
or indirectly, to make disproportionate distributions to, or to
meet certain liabilities of, persons who are neither residents
of either the United States or Bermuda nor U.S. citizens,
and (iii) its income is not derived from a permanent
establishment located in the United States.
If Overture Re is entitled to benefits under the
U.S.-Bermuda
tax treaty, Overture Re would not be subject to
U.S. federal income tax on its insurance income unless that
income is determined to be effectively connected with a
U.S. trade or business that is conducted through a
permanent establishment in the United States. However, because
Overture Re is wholly owned by the Company and the
Company’s shares are publicly-traded, it is uncertain
whether 50% of Overture Re’s shares will be beneficially
owned by U.S. citizens, U.S. residents, and Bermuda
residents, and it is uncertain whether Overture Re could
demonstrate the identity of the beneficial ownership of its
shares to the IRS if the IRS were to challenge its entitlement
to benefits under the
U.S.-Bermuda
tax treaty. Accordingly, no assurance can be given that Overture
Re will be entitled to the benefits of the
U.S.-Bermuda
treaty. Moreover, no assurance can be given that Overture Re
will not be treated as having a permanent establishment in the
United States.
If it is determined that Overture Re is engaged in a trade or
business in the United States for U.S. federal income tax
purposes and does not qualify for the benefits of the
U.S.-Bermuda
tax treaty or has a permanent establishment in the United
States, then Overture Re would be subject to U.S. federal
income tax on a net income basis (and possibly a 30% branch
profits tax, and even if Overture Re does not qualify for the
U.S.-Bermuda
tax treaty, to state and local taxes) on all or a substantial
portion of its income.
The balance of this summary assumes that the Company, Overture
Re Holdings, and Overture Re are not engaged in a trade or
business in the United States and therefore are not subject to
U.S. federal income tax on their net income.
U.S. Withholding
Tax. Non-U.S. corporations
not engaged in a trade or business in the United States are
generally subject to a 30% U.S. income tax imposed by
withholding on certain “fixed or determinable annual or
periodic gains, profits and income” derived from sources
within the United States (such as dividends and certain interest
on investments). However, most capital gains are exempt from
U.S. withholding tax, and most
U.S.-source
interest income is exempt from U.S. withholding tax under a
broad “portfolio interest exemption.” If Overture Re
is not engaged in a trade or business in the United States for
federal income tax purposes, it would still potentially be
subject to this 30% U.S. withholding tax. However, Overture
Re expects that substantially all of Overture Re’s
investment income will consist of capital gains that are exempt
from U.S. federal withholding tax or interest income that
qualifies for the portfolio interest exemption (and therefore
are not subject to the 30% U.S. federal withholding tax).
Federal Excise Tax. The United States imposes
a federal excise tax at a 1% rate on reinsurance premiums (the
“FET”) that are paid to
non-U.S. reinsurers
with respect to “U.S. risk.” For this purpose,
“U.S. risk” refers to (i) risks of a
U.S. entity or individual located wholly or partly within
the United States or (ii) risks of a
non-U.S. entity
or individual engaged in a trade or business in the United
States which are located within the United States. The IRS has
held that the FET is applicable to all to reinsurance cessions
or retrocessions of U.S. risk by U.S. insurers or
reinsurers to
non-U.S. insurers
or reinsurers, as well as to all reinsurance cessions or
retrocessions of U.S. risks by
non-U.S. insurers
or reinsurers to
non-U.S. reinsurers,
even if the FET has been paid on prior cessions or retrocessions
of the same risks. The liability for the FET may be imposed on
either the ceding party or the cedant. Overture Re expects to be
liable for a 1% excise tax on any U.S. risk that is either
ceded to Overture Re, or ceded by Overture Re to a
non-U.S. insurance
or reinsurance company.
Taxation
of the Company, Overture Re Holdings, Overture Re and U.S.
Holders
The Company believes that the consummation of the Transaction
will not give rise to any U.S. federal income tax liability
for the Company, Overture Re Holdings, Overture Re, or on
shareholders of the Company. However, if a U.S. Holders
votes against the Business Combination Proposal and elects to
redeem its Public Shares for cash, the U.S. Holder will
generally recognize a gain or loss on its investment in the
Company’s Public Shares for federal income tax purposes.
All shareholders are urged to consult their tax advisors to
determine their particular tax consequences as a result of the
Transaction.
Taxation
of U.S. Holders
Treatment of the Company, Overture Re Holdings,
and/or
Overture Re as Passive Foreign Investment
Companies. In general, a PFIC is a
non-U.S. corporation
75% or more of the income of which consists of passive income or
50% of the assets of which produce passive income. For these
purposes, income that is treated as derived in the active
conduct of an insurance business is not treated as passive
income. However, if a
non-U.S. insurance
company has reserves that are excessive in proportion to the
insurance risks it has undertaken, it may be treated as not
engaged in the active conduct of an insurance business. Finally,
a foreign corporation is not a PFIC for its first taxable year
in which it has gross income if (i) it has no predecessor
that was a PFIC, (ii) it demonstrates to the satisfaction
of the IRS that it will not be a PFIC for either of the first
two taxable years following the
start-up
year, and (iii) it is in fact not a PFIC corporation for
either of the first two taxable years following the
start-up
year. We refer to this exception from the definition of a PFIC
as the
“start-up
exception”.
Overture is a PFIC in 2009 and, as described below, may be a
PFIC in future years. Overture Re intends to take the position
that (i) it will not be a PFIC for 2010 under the
start-up
exception and (ii) it will not be a PFIC for subsequent
years because it will be engaged in the active conduct of an
insurance business and will not have excessive reserves.
However, no Treasury regulation, revenue ruling, or judicial
decision defines the “active conduct” of an insurance
business or the meaning of “excessive reserves” for
the purposes of the PFIC rules, and therefore no assurance can
be given that Overture Re will be treated as engaged in the
active conduct of an insurance business and that it will not be
deemed to have excessive reserves. Accordingly, no assurance can
be given that Overture Re will not be treated as a PFIC for
U.S. federal income tax purposes.
The PFIC provisions contain a look-through rule under which a
non-U.S. corporation
(such as Overture Re) is treated as if it earns directly its
proportionate share of the income, and holds directly its
proportionate share of the assets, of any other corporation in
which it owns at least 25% of the value of the stock. Because,
as noted above, Overture Re Holdings will elect to be
disregarded from Overture for U.S. federal income tax
purposes, Overture will be treated as owning 100% of Overture Re
and therefore Overture will be deemed to own its proportionate
share of the assets and to have received its proportionate share
of the income of Overture Re. However, it is unclear whether the
look-through rule treats a holding company (such as Overture) as
conducting the insurance business of its subsidiary or otherwise
preserves the active nature of the subsidiary’s income or
assets for the holding company. Accordingly, Overture expects
that it will be a PFIC at least through 2010 and may continue to
be a PFIC in future years. Potential investors should consult
with their tax advisor as to the application of the PFIC rules
to them.
If a U.S. Holder holds the shares while Overture is a PFIC,
the U.S. Holder is not subject to the CFC rules described
below for each such year, and the U.S. Holder does not make
the “qualified electing fund” (“QEF”)
election described below for the U.S. Holder’s first
taxable year it held the Shares (or, with respect to Overture
Re, the first taxable year Overture Re is a PFIC) or otherwise
make the “purging election” described below, the
U.S. Holder will be required to report (i) any gain on
the disposition of any Shares and (ii) any distribution to
the extent it exceeds 125% of the average amount of
distributions in respect thereof during the three preceding
taxable years or, if shorter, the U.S. Holder’s
holding period for the Shares (an “excess
distribution”) as if the gain or excess distribution had
been earned ratably over each day in the U.S. Holder’s
holding period for the Shares. A U.S. Holder will be
subject to tax on the gain or excess distribution at its
applicable tax rate on ordinary income for the portion of the
gain or excess distribution that is treated as having been
earned in the current year, and at the highest ordinary income
tax rate for the items that are treated as having been earned in
prior taxable years, regardless of the rate otherwise applicable
to the U.S. Holder. Further, the U.S. Holder will also
be subject to a nondeductible interest charge (at the
“underpayment rate”) as if the income tax liabilities
had been due with respect to gain or excess distributions
allocable to prior years in each such prior year. For purposes
of these rules, gifts, exchanges pursuant to corporate
reorganizations, and the use of the Shares as security for a
loan, are generally treated as a taxable disposition of Shares.
In addition, if Overture
and/or
Overture Re is a PFIC, a
stepped-up
basis in the Shares will not be available upon the death of an
individual U.S. Holder. These adverse consequences of
owning shares in a PFIC may be avoided by making a QEF election
described below. TO AVOID THESE ADVERSE CONSEQUENCES OF
OWNING STOCK IN A PFIC, ALL U.S. HOLDERS ARE STRONGLY URGED
TO CONSULT WITH THEIR TAX ADVISORS ABOUT MAKING A QEF ELECTION
WITH RESPECT TO OVERTURE.
If a U.S. Holder makes a timely QEF election with respect
to a PFIC, the electing U.S. Holder is required in each
taxable year to include in gross income (i) as ordinary
income, such U.S. Holder’s pro rata share of the
PFIC’s ordinary earnings and (ii) as long term capital
gain, such U.S. Holder’s pro rata share of the
PFIC’s net capital gain, whether or not distributed.
However, a U.S. Holder that makes a timely QEF election
with respect to Overture will not be subject to the
nondeductible interest charge described above, may be entitled
to capital gains treatment upon a sale, and the Shares will
potentially qualify for a
stepped-up
basis upon the death of the individual U.S. Holder.
Regardless of whether a QEF election is made, a U.S. Holder
will not be eligible for the dividends received deduction or,
for as long as Overture is a PFIC, the reduced 15% rate for
certain qualifying dividends with respect to the shares. If a
QEF election is made for Overture, any losses in a taxable year
will not be available to a U.S. Holder and may not be
carried back or forward in computing Overture’s ordinary
earnings and net capital gain in other taxable years.
In general, a U.S. Holder makes a QEF election on IRS
Form 8621 by attaching a copy of such form to its
U.S. federal income tax return for the first taxable year
for which it held shares in the PFIC. Thus, new investors in the
Shares would make a QEF election with respect to Overture for
the taxable year in which the Shares are purchased.
If a U.S. Holder currently owns shares in Overture, is not
a “10% U.S. shareholder” subject to the CFC rules
described below, and the U.S. Holder did not make a timely
QEF election for Overture for the first taxable year in which it
held Shares, the U.S. Holder would be subject to the
adverse consequences described above with respect to Overture
(even for subsequent periods in which Overture is no longer
treated as a PFIC) unless the U.S. Holder makes a
“purging” election by filing an IRS Form 8621
with the U.S. Holder’s tax return for the last year in
which Overture qualified as a PFIC. The purging election causes
the U.S. Holder to be treated as if it sold its shares for
fair market value on the last day of the last taxable year in
which Overture qualified as a PFIC, and to report any gain on
the deemed sale as an excess distribution subject to the
punitive PFIC regime described above. However, a purging
election does not permit the U.S. Holder to recognize a
loss at that time. TO AVOID THE ADVERSE CONSEQUENCES OF
OWNING STOCK IN A PFIC, ALL U.S. HOLDERS THAT CURRENTLY OWN
SHARES ARE STRONGLY URGED TO CONSULT WITH THEIR TAX
ADVISORS ABOUT MAKING A QEF ELECTION OR A PURGING ELECTION WITH
RESPECT TO OVERTURE.
We intend to provide, upon request, all information and
documentation that a U.S. Holder making a QEF election with
respect to Overture is required to obtain for U.S. federal
income tax purposes.
Because of the uncertainty as to whether Overture Re will be a
PFIC in any taxable year, U.S. Holders are strongly urged
to consult with their tax advisors about filing a
“protective QEF election” with respect to Overture Re.
If a protective QEF election is made with respect to Overture Re
and Overture Re is determined to have been a PFIC, the
U.S. Holder is permitted to file a retroactive QEF election
on or before the due date for the U.S. Holder’s tax
return for the tax year in which the U.S. Holder determines
or reasonably should have determined that Overture Re was a
PFIC. In this case, the U.S. Holder would be subject to the
QEF regime described above with respect to the taxable years for
which the retroactive election is made.
In general, a protective QEF election must be attached to the
U.S. Holder’s federal income tax return for the
U.S. Holder’s first tax year to which the protective
election will apply. Accordingly, U.S. Holders that make
the protective QEF election should file the protective QEF
election in 2010. The U.S. Holder must file its return and
a copy of the protective election by the due date, with
extensions, for the return. The protective election is executed
under penalties of perjury, and must contain a statement by the
U.S. Holder that it reasonably believes that the foreign
corporation is not a PFIC and that the U.S. Holder agrees
to extend the statute of limitations period on the assessment of
“PFIC related taxes” for all tax years to which the
protective election applies. The protective election must also
provide the U.S. Holder’s name, address, and taxpayer
identification number, the U.S. Holder’s first tax
year to which the protective election applies, Overture
Re’s name, address, and taxpayer identification number, if
any, and the highest percentage of Shares held directly or
indirectly by the U.S. Holder during the
U.S. Holder’s first tax year to which the protective
election applies. The protective election applies to the
U.S. Holder’s first tax year for which it was filed
and to each subsequent tax year, so long as the U.S. Holder
continues to hold an interest in Overture Re. The protective
election is treated as if it were never made if the
U.S. Holder subsequently has reason to believe that
Overture Re was a PFIC and fails to timely make a retroactive
QEF election, or if certain other conditions are satisfied. The
filing of a protective QEF election is complex and the agreement
to extend the limitations period on the assessment of “PFIC
related taxes” may be detrimental to a U.S. Holder.
WE URGE U.S. HOLDERS TO CONSULT WITH THEIR ADVISORS WITH
RESPECT TO WHETHER TO FILE AND HOW TO FILE A PROTECTIVE QEF
ELECTION WITH RESPECT TO OVERTURE RE.
Application of the PFIC Rules to
Warrantholders. U.S. Holders may not make a
QEF election with respect to warrants. As a result, if Overture
is treated as a PFIC during the period, a U.S. Holder holds
Public warrants, and the U.S. Holder sells the Public
warrants, any gain would be subject to the adverse consequences
described above with respect to any gain. If the
U.S. Holder exercises the Public warrants and properly
makes a QEF election with respect to the newly acquired Ordinary
Shares, the adverse tax consequences relating to PFIC shares
will continue to apply with respect to the pre-QEF election
period, unless the U.S. Holder makes a purging election as
described above. In general, the purging election will result in
a deemed sale of the Ordinary Shares acquired upon exercising
the Public warrants, on the first day of the company’s
first taxable year as a QEF with respect to the
U.S. Holder, but the purging election is available only if
the U.S. Holder holds the Ordinary Shares received from
exercising the Public warrants on that day. The gain recognized
as a result of the purging election would be subject the adverse
consequences described above, as if the gain as were an excess
distribution. As a result of the purging election, the
U.S. Holder will have a new tax basis and holding period in
the Ordinary Shares acquired upon the exercise of the Public
warrants for the purposes of the PFIC rules. U.S. Holders
of Public warrants should consult with their own advisors as to
the advisability and consequences of, and the procedures for,
making a purging election with respect to Shares acquired
through the exercise of the Public warrants.
Classification of Overture, Overture Re Holdings,
and/or
Overture Re as Controlled Foreign Corporations. A
non-U.S. corporation
(such as Overture and Overture Re) will constitute a
“controlled foreign corporation” (a
“CFC”) if more than 50% of the voting power or
value of the equity interests in the
non-U.S. corporation
(or more than 25% if the
non-U.S. corporation
is an insurance company) is owned directly, indirectly
(including through
non-U.S. entities),
or constructively by any U.S. Holder that possesses
directly, indirectly, or constructively 10% or more of the
combined voting power of all classes of equity in the
non-U.S. corporation
(such a shareholder, a “10% U.S. shareholder”).
If, for any given taxable year, Overture
and/or
Overture Re is treated as a CFC for an uninterrupted period of
30 days or more, a 10% U.S. shareholder in Overture
and/or
Overture Re would be required to include as ordinary income an
amount equal to that person’s pro rata share of Overture
and/or
Overture Re’s
“subpart F income” at the end of such taxable year,
even if the subpart F income is not distributed. It is generally
expected that all or substantially all of Overture’s and
Overture Re’s income will consist of subpart F income.
If Overture or Overture Re is treated as a CFC and a
U.S. Holder is treated as a 10% U.S. shareholder of
such company, then the company will not be treated as a PFIC
with respect to the U.S. Holder for the period during which
it remains a CFC and the U.S. Holder is a 10%
U.S. shareholder of it.
Related Person Insurance Income Rules. Special
rules may apply to require any U.S. Holder (i.e., even a
U.S. Holder that owns and is treated as owning less than
10% of the voting stock of Overture Re) to include in income the
U.S. Holder’s pro rata share of any “related
person insurance income” (“RPII”) of Overture Re.
These special RPII rules will not apply unless (i) 25% or
more of the value or voting power of Overture Re is held by
U.S. Holders directly, indirectly, or through attribution,
(ii) at least 20% of Overture Re’s gross insurance
income consists of RPII, and (iii) 20% or more of either
the voting power or value of Overture Re’s equity (as
determined for U.S. federal income tax purposes) is owned
directly (or indirectly through foreign entities) by persons
that are directly or indirectly insured or reinsured by Overture
Re or that are related to such insureds or reinsureds. For these
purposes, RPII is income (including investment income and
premium income) from the direct or indirect insurance or
reinsurance of any U.S. Holder (such as JNL) or a person
related to such U.S. Holder.
We expect that conditions (i) and (iii) above will be
satisfied. However, Overture Re intends to operate in a manner
so that less than 20% of Overture Re’s gross insurance
income consists of RPII. However, because (1) Overture Re
intends to earn a significant amount of premium from risks ceded
to Overture Re by JNL, (2) JNL is a “related
person” with respect to Overture Re, (3) RPII includes
the investment income from reserves associated with reinsuring
JNL’s risks, and (4) the amount of this income may not
be capable of being accurately predicted, no assurance can be
given that Overture Re will not earn RPII income in any taxable
year.
In general, if Overture Re earns RPII, each U.S. Holder
that owns an equity interest in Overture Re (including
indirectly through Overture) will be required to include in its
gross income for U.S. federal income tax purposes its share
of the RPII of Overture Re, determined as if all such RPII were
distributed proportionately only to such U.S. Holders at
that date, but limited by each such U.S. Holder’s
share of Overture Re’s current-year earnings and profits as
reduced by the U.S. Holder’s share of certain
prior-year deficits in earnings and profits.
Computation of RPII. In order to determine the
amount of RPII that Overture Re has earned in each taxable year,
Overture Re may obtain and rely upon information from its
insureds and reinsureds to determine whether any of the
insureds, reinsureds, or persons related to them are
U.S. Holders (directly or indirectly through
non-U.S. entities).
However, Overture Re may not be able to determine the extent to
which any of its direct or indirect insureds are
U.S. Holders or related persons to such U.S. Holders.
Consequently, Overture Re may not be able to determine
accurately the gross amount of RPII it earns in a given taxable
year or whether it qualifies for one of the exceptions to the
RPII rules listed above under “Related Person Insurance
Income Rules.” If Overture Re determines that it does
not satisfy an exception to the RPII rules, it may seek
information from its shareholders as to whether beneficial
owners of Overture Re shares at the end of the year are
U.S. Holders so that the RPII may be determined and
apportioned among those United States persons. If Overture Re is
unable to determine whether a beneficial owner of Overture Re
shares is a U.S. Holder, it may assume that such owner is
not a U.S. Holder, and therefore increase the per share
RPII amount for all known RPII shareholders.
Apportionment of RPII to
U.S. Holders. Every U.S. Holder that
directly or indirectly owns shares of Overture Re on the last
day of any taxable year of Overture Re in which the RPII rules
apply will be required to include in gross income its share of
Overture Re’s RPII for the portion of the taxable year it
held Overture Re shares, whether or not the income is
distributed, and even though the U.S. Holder may not have
owned the shares throughout such period. A U.S. Holder that
owns Overture shares during the taxable year but not on the last
day of the taxable year is not required to include in gross
income any part of Overture Re’s RPII.
Uncertainty as to the Application of the RPII
Rules. The application of the RPII provisions to
Overture Re is uncertain, and we cannot be certain that the
amount of RPII or the amounts of the RPII inclusions for any
particular U.S. Holder, if any, could not be challenged
upon subsequent IRS examination. Potential U.S. Holders
should consult with their tax advisors as to the application and
effect of the RPII rules.
Taxation of Distributions. If
(i) Overture and Overture Re are not CFCs,
(ii) Overture is not a PFIC, (iii) U.S. Holders
make QEF elections or purging elections with respect to
Overture, (iv) Overture and Overture Re Holdings own only
stock in Overture Re, and (v) U.S. Holders are not
required to report their share of Overture Re’s RPII (all
as discussed above), then distributions to U.S. Holders
should be taxable only to the extent that Overture Re makes a
distribution. Any such distribution would be treated as a
dividend to the extent paid out of Overture Re’s current or
accumulated earnings and profits (as computed using
U.S. tax principles). To the extent those distributions
exceed Overture Re’s earnings and profits, the
distributions will be treated first as a return of
Overture’s basis in its shares to the extent thereof and
then as gain from the sale of a capital asset. Dividends paid by
Overture Re to corporate holders (or, for so long as Overture is
a PFIC, QEF inclusions reported by them) will not be eligible
for the dividends received deduction and QEF inclusions reported
by individuals (for so long as Overture is a PFIC) will not
qualify for the reduced 15% rate available for certain qualified
dividend income.
Dispositions of Shares. A U.S. Holder
will generally recognize gain or loss upon the sale, redemption,
or other disposition of a Share equal to the difference between
the amount realized and such U.S. Holder’s adjusted
tax basis in the Share. Initially, a U.S. Holder’s tax
basis will equal the amount paid for their Share. A
U.S. Holder’s basis will be increased by amounts
previously taxable to such U.S. Holder (including by reason
of the CFC, QEF, and RPII rules, as applicable) and decreased by
actual distributions from Overture that are deemed to consist of
such previously taxed amounts or are treated as a nontaxable
return of capital that reduces the U.S. Holder’s tax
basis for the Share.
Code section 1248 provides that if a United States person
(i) sells or exchanges stock in a
non-U.S. corporation,
(ii) the United States person owned, directly, indirectly,
or constructively, 10% or more of the voting power of the
corporation at any time during the five-year period ending on
the date of disposition, and (iii) the corporation was a
CFC during that period, any gain from the sale or exchange of
the shares will be treated as a dividend to the extent of the
CFC’s earnings and profits (determined under
U.S. federal income tax principles) during the period that
the shareholder held the shares and the corporation was a CFC.
Code section 953(c)(7) provides that section 1248 also
applies to the sale or exchange of shares by any shareholder in
a
non-U.S. insurance
company, regardless of whether the shareholder is a 10%
U.S. shareholder or whether the 20% gross income exception
or the 20% ownership exception from the RPII rules apply. It is
unclear whether sections 953(c)(7) and 1248 apply to a
non-U.S. holding
corporation (such as Overture) that is not a CFC and does not
earn RPII but has a subsidiary (such as Overture Re) that is an
insurance company and earns RPII. If Code
sections 953(c)(7) and 1248 do apply to the sale of shares
in Overture and Overture is not otherwise a CFC, then any gain
on the sale would appear to be treated as ordinary income to the
extent of Overture Re’s accumulated earnings and profits,
as reduced by certain deficits from prior years; the balance
would be treated as capital gain. Prospective U.S. Holders
should consult with their tax advisors regarding the effects of
these rules on a disposition of Overture’s shares.
Source of Ordinary Income for U.S. Foreign Tax Credit
Purposes. If U.S. Holders in the aggregate
own at least 50% of the Shares, then only a portion of the
dividends paid by Overture and any other current income
inclusions, if any, under the CFC, RPII, and PFIC rules
(including gain upon the sale of Ordinary Shares that is treated
as a dividend under Code section 1248) will be treated
as foreign source income for purposes of computing a
shareholder’s U.S. foreign tax credit limitation.
U.S. Holders should assume that any foreign source income
will constitute passive category income for foreign tax credit
limitation purposes.
Tax-Exempt
Shareholders
U.S. tax-exempt organizations may recognize unrelated
business taxable income if the tax-exempt organization is deemed
to earn insurance income. In general, a U.S. tax-exempt
organization will earn insurance income if Overture is a CFC and
the tax-exempt organization is a 10% or greater
U.S. shareholder. In addition, as mentioned above, Overture
Re intends to operate in a manner so that less than 20% of
Overture
Re’s gross insurance income consists of RPII, and therefore
does not intend for tax-exempt U.S. Holders to be taxable
under the RPII rules. However, as further mentioned above, no
assurance can be given that Overture Re will not earn income
taxable under the RPII rules in any taxable year. If Overture Re
does earn RPII in any taxable year, tax-exempt entities will
generally be required to treat the RPII as unrelated business
taxable income. Potential investors that are tax-exempt entities
should consult with their tax advisors as to the potential
impact of the unrelated business taxable income provisions.
Warrantholders
Warrantholders whose warrants have appreciated in value may be
required to recognize gain and may suffer adverse tax
consequences under the passive foreign investment company rules
described above, in connection with the Warrant Agreement.
Warrantholders should consult with their tax advisors as to the
potential tax consequences to them in connection with the
Warrant Agreement.
Transfer
and Other Reporting Requirements
A U.S. Holder (including a tax-exempt organization) that
purchases Shares for cash is required to file an IRS
Form 926 or similar form with the IRS, if (i) the
U.S. Holder owns or is treated as owning, directly or by
attribution, immediately after the transfer at least 10% of the
voting stock vote or value of Overture Re or (ii) the
amount of cash transferred by such person (or any related
person) to Overture Re during the
12-month
period ending on the date of such transfer, exceeds $100,000.
Additionally, if Overture Re is treated as a CFC, a 10%
U.S. Shareholder may in certain circumstances be required
to report a disposition of shares in Overture Re by attaching
IRS Form 5471 to the U.S. federal income tax or
information return that it would normally file for the taxable
year in which the disposition occurs. If a 10%
U.S. shareholder is required to file an IRS Form 5471,
Overture Re Holdings will provide the relevant information
necessary to complete the form. A U.S. Holder that
(i) is treated as owning (actually or constructively) at
least 10% by vote or value of the equity of Overture Re for
U.S. federal income tax purposes or (ii) includes RPII
in income as a result of its ownership of an interest in
Overture Re may be required to file an information return on IRS
Form 5471. Holders should consult with their tax advisors
with respect to these and any other reporting requirements that
may apply with respect to their acquisition of the Shares.
Information
Reporting and Backup Withholding
Under certain circumstances, the Code requires “information
reporting” annually to the IRS and to each
U.S. Holder, and “backup withholding” with
respect to certain payments made on or with respect to the
Shares. Backup withholding generally does not apply with respect
to certain shareholders, such as corporations. Backup
withholding will apply to a U.S. Holder only if the
U.S. Holder (i) fails to furnish its taxpayer
identification number (“TIN”), (ii) furnishes an
incorrect TIN, (iii) is notified by the IRS that it has
failed to properly report payments of interest and dividends, or
(iv) under certain circumstances, fails to certify, under
penalty of perjury, that it has furnished a correct TIN and has
not been notified by the IRS that it is subject to backup
withholding for failure to report interest and dividend
payments. The application for exemption is available by
providing a properly completed IRS
Form W-9.
Information reporting and backup withholding may apply to the
proceeds of a sale of a Share made within the United States or
conducted through certain U.S. related financial
intermediaries unless the payor receives the statement described
above. Backup withholding is not an additional tax and may be
refunded (or credited against the U.S. Holder’s
U.S. federal income tax liability, if any), provided that
certain required information is furnished. The information
reporting requirements may apply regardless of whether
withholding is required.
Future
U.S. Tax Legislation or Regulations
It is possible that legislation could be introduced and enacted
by Congress, or U.S. Treasury regulations could be issued,
that could have an adverse effect on the Company, Overture Re
Holdings, or Overture Re or its U.S. Holders. In
particular, a bill was introduced in Congress on
October 27, 2009 that would require certain foreign
corporations, (such as the Company, Overture Re Holdings, and
Overture Re) to enter into an agreement with the IRS to disclose
to the IRS the name, address, and tax identification number of
any U.S. person who owns an interest in the Company,
Overture Re Holdings or Overture Re, and impose a 30%
withholding tax on certain payments of income or capital gains
to the Company, Overture Re Holdings or Overture Re if it fails
to enter into the agreement or satisfy its obligations under the
agreement. If this or similar legislation is enacted, the
Company, Overture Re Holdings and Overture Re intend to satisfy
any obligations imposed on it to avoid the imposition of a
withholding tax. However, if the Company, Overture Re Holdings
or Overture Re is unable to do so (because, for example,
investors fail to provide it with information), payments to it
may be subject to a withholding tax, which could reduce the cash
available for investors.
Additionally, the U.S. federal income tax laws and
interpretations regarding whether a company is engaged in a
trade or business within the United States, is a PFIC, or
whether U.S. Holders would be required to include in their
gross income the subpart F income or the RPII of a CFC are
subject to change, possibly on a retroactive basis.
FBAR
Reporting
U.S. Holders should consider their possible obligation to
file a Form TD F
90-22.1 —
Foreign Bank and Financial Accounts Report — with
respect to the Shares. Holders should consult with their tax
advisors with respect to these and any other reporting
requirements that may apply with respect to their acquisition of
the Shares.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX
IMPLICATIONS OF AN INVESTMENT IN SHARES. PROSPECTIVE INVESTORS
ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS PRIOR TO
INVESTING TO DETERMINE THE TAX IMPLICATIONS OF SUCH INVESTMENT
IN LIGHT OF EACH SUCH INVESTOR’S PARTICULAR CIRCUMSTANCES.
The Business Combination will be accounted for under the
purchase method of accounting as a forward acquisition (term
indicates which merged entity is the surviving entity upon the
consummation of the transaction, in this case Overture Re) in
accordance with U.S. GAAP. The assets and liabilities of
JNL Bermuda will be stated at fair value. JNL Bermuda’s
assets, liabilities and results of operations will be
consolidated with the assets, liabilities and results of
operations of Overture after consummation. The Overture
shareholders will have a controlling voting interest in JNL
Bermuda. Overture will effect this acquisition through the
distribution of cash. Upon acquisition, JNL Bermuda will be
amalgamated (term for merger under Bermuda law) with and into
Overture Re.
The Transaction is subject to additional United States federal
or state regulatory requirements and approvals, including
addressing comments raised by the SEC with respect to this proxy
statement/prospectus, obtaining approval from the Texas
Department of Insurance and the Department of Justice
(“DOJ”) and the Federal Trade Commission
(“FTC”) pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (“HSR Act”),
as discussed below.
The Transaction is subject to the HSR Act. The HSR Act
and related rules prohibit the completion of transactions, such
as the Transaction, unless the parties notify the FTC and the
Antitrust Division of the DOJ, in advance. The Company and JNF
have filed the HSR notification and report form on
December 24, 2009 that was amended on December 28,2009. The HSR Act further provides that a transaction that
is notifiable under the Act, such as the Transaction, may not be
consummated until the expiration of a 30 calendar-day
waiting period, or the early termination of that waiting period
(which the parties have obtained), following the parties’
filing of their respective HSR Act notification forms. The
Transaction is subject to additional Cayman Islands regulatory
requirements or approvals, including for notifying the Cayman
Islands Registrar of Companies if certain of the proposals are
approved at the Extraordinary General Meeting.
The Transaction is not subject to any additional Bermuda
regulatory requirements or approvals, including obtaining the
regulatory approval from the Bermuda Monetary Authority as
discussed below.
JNL is an insurance company primarily regulated by the Texas
Department of Insurance (“TX DOI”). JNL is required to
obtain approval from the TX DOI for various elements of the
Transaction.
Overture Re is seeking approval from the Bermuda Monetary
Authority for approval as a Long Term Life Insurer and a
Segregated Account Company under the Segregated Accounts
Companies Act of 2000, as amended.
The Master Agreement is attached as Annex I to this proxy
statement/prospectus. You are encouraged to read the Master
Agreement in its entirety.
The approval of the Business Combination Proposal requires the
affirmative vote of a majority of the Public Shares voted at the
Extraordinary General Meeting or at an adjourned meeting. If the
holders of 30% or more of the Public Shares vote against the
Transaction and demand that their Public Shares be redeemed for
a pro rata portion of the trust account, the Company will not,
pursuant to the terms of the Articles, be permitted to
consummate the Transaction. The text of the Business Combination
Proposal to be considered at the Extraordinary General Meeting
is set forth in Annex III.
After careful consideration, the Company’s Board of
Directors has determined unanimously that the Business
Combination Proposal is fair to, and in the best interests of,
the Company. The Company’s Board of Directors has approved
and declared advisable the Business Combination Proposal and
unanimously recommends that you vote or give instructions to
vote “FOR” the Business Combination Proposal.
The foregoing discussion of the information and factors
considered by the Company Board of Directors is not meant to be
exhaustive, but includes the material information and factors
considered by the Company’s Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE “FOR” THE BUSINESS COMBINATION
PROPOSAL.
OVERTURE
ACQUISITION CORP. /CARVE-OUT FIXED AND VARIABLE ANNUITY BLOCK
OF
JEFFERSON NATIONAL LIFE INSURANCE COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
The pro forma financial statements included below are being
provided to assist you in your analysis of the financial aspects
of the Business Combination.
The unaudited pro forma combined balance sheet combines the
historical carve-out balance sheets of the fixed and variable
annuity block of Jefferson National Life Insurance Company
(“JNL carve-out” or the “Block”) and
Overture Acquisition Corp. (the “Company”) as of
September 30, 2009 giving effect to the Business
Combination as if it had occurred on September 30, 2009.
The unaudited pro forma combined statements of operations and
comprehensive income (loss) combine JNL carve out historical
statements of operations for the nine months ended
September 30, 2009 and for the year ended December 31,2008 with those of the Company for the nine months ended
September 30, 2009 and for the year ended December 31,2008, giving effect to the Business Combination as if it had
occurred at the beginning of the period on January 1, 2009
and January 1, 2008, respectively.
The Business Combination is being consummated pursuant to the
Master Agreement (the “Master Agreement”) among
Overture Acquisition Corp., Overture Re Holdings, Jefferson
National Financial Corp. (“JNF”), JNL, a wholly
owned subsidiary of JNF, and JNL Bermuda, a newly formed wholly
owned subsidiary of JNL.
Pursuant to the Master Agreement Overture Re and JNL Bermuda
will amalgamate and Overture Re will be the successor entity
acquiring the (i) the option to reinsure 90% of JNL’s
fixed annuities and 50% of JNL’s variable annuities (the
“Reinsurance Option”); (ii) employees of JNL
Bermuda; and (iii) fixed income securities and other assets
of JNL Bermuda. The value of these elements contained in JNL
Bermuda and purchased by Overture Re is anticipated to meet or
exceed $120 million, thus satisfying the Company’s
business combination requirement of an operating business having
a fair market value of at least 80% of the balance held in the
Company’s trust account at the time of such business
combination. Following the amalgamation, Overture Re will
exercise the Reinsurance Option and enter into a Reinsurance
Agreement with JNL.
The pro forma adjustments give effect to events that are
directly attributable to the transactions discussed above that
have a continuing impact on the operations of the Company and
are based on available data and certain assumptions that
management believes are factually supportable.
The unaudited pro forma combined financial statements described
above should be read in conjunction with the Company’s
historical financial statements and the JNL carve-out historical
financial statements and the related notes thereto. The pro
forma adjustments are preliminary and the unaudited pro forma
information is not necessarily indicative of the financial
position or results of operations that may have actually
occurred had the acquisition taken place on the dates noted, or
of continuing entity’s future financial position or
operating results.
The following unaudited pro forma financial statements have been
prepared using two different assumptions with respect to the
number of outstanding shares of the Company immediately
following the Business Combination, as follows:
•
assuming no redemption — this presentation assumes
that no shares of the Company are redeemed as part of the
Business Combination
•
assuming maximum redemption — this presentation
assumes the maximum number of shares are redeemed as part of the
Business Combination resulting in the redemption of
4,499,999 shares.
In the case of both assumptions, the data is based on
(a) information and projections currently available to the
parties, including the estimated adjusted Company trust value of
$150.4 million, and (b) approximately 15 million
shares of the Company common stock outstanding following the
repurchase of Founders’ shares of 3.75 million shares.
Detailed information as to the weighted average shares for each
period presented are provided in Note l to the Unaudited Pro
Forma Combined Statements of Operations and Comprehensive Income
(Loss).
Reinsurance recoverable on paid losses and ceded reserves
52,961
(52,961
)
B
—
—
—
Deferred policy acquisition costs
4,573
(4,573
)
C
—
—
—
Value of business acquired
19,489
(19,489
)
C
—
—
—
Deferred Ceding Commission
—
21,500
H
21,500
21,500
Deferred tax asset
4,121
(4,121
)
D
—
—
—
Separate account assets
839,401
(839,401
)
E
—
—
—
—
—
Total assets
$
1,322,213
$
(975,546
)
$
346,667
$
151,436
$
(4,668
)
$
493,435
$
(26,737
)
$
466,698
(a)
Adjusted JNL Carve-out column reflects the effects of proposed
reinsurance transaction between JNL and Overture as described in
Notes 1 and 2 to the unaudited pro forma combined
financial statements.
See Notes to the Unaudited Pro Forma Combined Financial
Statements.
Net capitalization of deferred policy acquisition cost
349
(349
)
R
—
—
—
Amortization of ceding commission
—
2,210
U
2,210
2,210
Administrative and marketing allowance
—
1,649
V
1,649
1,649
Total benefits and expenses
18,355
(7,923
)
—
10,432
372
7,511
18,315
420
18,735
Income (loss) before federal income taxes
4,037
3,451
—
7,488
(295
)
(7,574
)
(381
)
(434
)
(815
)
Federal income tax expense (benefit)
1,413
—
1,413
—
(1,413
)
W
—
—
Net Income (Loss)
$
2,624
$
3,451
$
6,075
$
(295
)
$
(6,161
)
(381
)
$
(434
)
$
(815
)
Weighted average number of ordinary shares
outstanding — basic and diluted
14,250,001
Y
15,000,000
Z
10,500,001
Basic and diluted net income (loss) per share attributable to
ordinary shares
$
(0.02
)
$
(0.03
)
$
(0.08
)
(a)
Adjusted JNL Carve-out column reflects the effects of proposed
reinsurance transaction between JNL and Overture as described in
Notes 1 and 2 to the unaudited pro forma combined financial
statements.
See Notes to the Unaudited Pro Forma Combined Financial
Statements.
Net capitalization of deferred policy acquisition cost
195
(195
)
R
—
—
—
Amortization of ceding commission
—
2,946
U
2,946
2,946
Administrative and marketing allowance
—
—
2,286
V
2,286
2,286
Total benefits and expenses
28,555
(13,812
)
14,743
421
10,176
25,340
561
25,901
Income (loss) before federal income taxes
(3,040
)
7,611
—
4,571
1,298
(11,586
)
(5,717
)
(870
)
(6,587
)
Federal income tax expense (benefit)
(1,064
)
(1,064
)
—
1,064
W
—
Net Income (Loss)
$
(1,976
)
$
7,611
$
5,635
$
1,298
$
(12,650
)
$
(5,717
)
$
(870
)
$
(6,587
)
Weighted average number of ordinary shares
outstanding — basic and diluted
13,479,453
Y
15,000,000
Z
10,500,001
Basic and diluted net income (loss) per share attributable to
ordinary shares
$
0.10
$
(0.38
)
$
(0.63
)
(a)
Adjusted JNL Carve-out column reflects the effects of proposed
reinsurance transaction between JNL and Overture as described in
Notes 1 and 2 to the unaudited pro forma combined financial
statements.
See Notes to the Unaudited Pro Forma Combined Financial
Statements.
NOTES TO
UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
1.
Description
of Business Combination and Basis of Presentation
The Business Combination is being consummated pursuant to the
Master Agreement (the “Master Agreement”) among
Overture Acquisition Corp., Overture Re Holdings, Jefferson
National Financial Corp. (“JNF”), Jefferson National
Life Insurance Company (“JNL”), a wholly owned
subsidiary of JNF, and JNL Bermuda, a newly formed wholly owned
subsidiary of JNL.
Pursuant to the Master Agreement Overture Re and JNL Bermuda
will amalgamate and Overture Re will be the successor entity
acquiring the (i) the option to reinsure 90% of JNL’s
fixed annuities and 50% of JNL’s variable annuities (the
“Reinsurance Option”); (ii) employees of JNL
Bermuda; and (iii) fixed income securities and other assets
of JNL Bermuda. Following the amalgamation, Overture Re will
exercise the Reinsurance Option and enter into a Reinsurance
Agreement with JNL.
The adoption of the Master Agreement and the transactions
contemplated by the Master Agreement will require (a) the
affirmative vote of a majority of the shares of Company common
stock issued in the Company’s initial public offering
present at the meeting (or an adjournment thereof held for
voting on such approval), and (b) less than 30%, or
4.5 million shares, of the Company’s shares voting in
the negative.
The unaudited pro forma combined financial statements
contemplate two scenarios: 1) The requirements above are
met and, hence, none of the Company’s shares are redeemed;
and 2) the Company redeems 4.5 million shares in order
to meet the requirements above.
2.
Pro Forma
Adjustments
Descriptions of the adjustments included in the unaudited pro
forma balance sheet and statements of operations are as follows:
Note A —
Adjustments to reflect Overture reinsuring 90% of the fixed
reserves of JNL and eliminating JNL’s equity from past
activity on the proposed reinsured business.
Pro Forma Adjustments —
Adjustment related to policy reserves retained by JNL
$
(38,519
)
Adjustment related to removal of remaining JNL Carve-out block
equity
(16,482
)
$
(55,001
)
Note B —
Adjustment to exclude existing reinsurance treaty present on the
carved-out block of business not applicable to the proposed
reinsurance deal between JNL and Overture Re.
Note C —
Adjustment to exclude deferred acquisition costs
(“DAC”) and value of business acquired
(“VOBA”), which will not be transferred under the
proposed reinsurance transaction between JNL and Overture Re,
and therefore is being removed from the pro forma financial
statements with an offsetting adjustment to the block equity
Note D —
Deferred income taxes as calculated on JNL’s carve-out
business is being removed from the pro forma financial
statements due to Overture being exempt from taxes under Cayman
Island law until October 9, 2027.
NOTES TO
UNAUDITED PRO FORMA
COMBINED FINANCIAL
STATEMENTS — (Continued)
Note E —
Reinsurance related to variable annuity block will be under a
modified coinsurance basis in which JNL will continue to hold
the assets and liabilities which will be reported at JNL.
Therefore, the assets and liabilities are excluded from pro
forma financial statements.
Note F —
The following table reflects all of the pro forma cash activity
assuming none of the shareholders exercise their redemption
right.
Beginning Cash Balance — Overture
$
$
801
Pro Forma Adjustments —
Cash transferred from Trust Account (see note G)
150,604
Repurchase of founders’ shares
(25
)
Purchase of securities (see note M)
(98,500
)
Ceding commission (see note H)
(21,500
)
Financial advisory fees
(2,750
)
Underwriter fee — Overture
(1,000
)
Transaction costs
(893
)
Subtotal
25,936
Ending Cash Balance — Pro Forma No Redemption
$
26,737
Note G —
Reflects the transfer of the funds held in the trust account to
the cash operating account as a result of the proposed business
acquisition of JNL Bermuda under the Master Agreement.
Note H —
Represents the $21.5 million ceding commission paid by
Overture to JNL.
Note I —
Represents the reclassification of the ordinary shares subject
to redemption to paid-in capital. (4,499,999 shares at
$10.04 per share) and the repurchase of the founders’
shares for $25,000.
Note J —
Reflects the effects of the following pro forma adjustments on
Overture’s retained earnings.
Beginning retained earnings — Overture
$
998
Pro Forma Adjustments —
Underwriter fee
(1,000
)
Financial advisory fees
(2,750
)
Transaction costs
(893
)
Subtotal
(4,643
)
Ending accumulated deficit — Overture — No
Redemption
NOTES TO
UNAUDITED PRO FORMA
COMBINED FINANCIAL
STATEMENTS — (Continued)
Note K —
Reflects the assumption that the maximum number of shareholders
will exercise their right to redemption (4,499,999 shares
at $10.04 per share) and a reduction in the underwriter fee and
financial advisory fees based on the transaction size.
Redemption of shares (4,499,999 at $10.04 per share)
$
(45,159
)
Reduction in underwriter fee and financial advisory fees
1,150
$
(44,009
)
Note L —
Reflects borrowing $17,272 against the securities portfolio to
satisfy the cash requirements if the maximum shareholders
exercise their right to redeem their shares.
Note M —
Represents the acquisition of JNL Bermuda, a newly formed wholly
owned subsidiary of JNL which will be holding the investment in
securities of $98.5 million.
Note N —
Proposed reinsurance treaty is on a modified coinsurance basis
and investment income is credited in a quarterly net settlement
capturing net investment income received. Pro forma shows
crediting at a rate equal to JNL’s yield on its historical
portfolio including gains and losses and applied to the amount
of fixed annuity reserve ceded to Overture (90% of JNL’s
fixed annuity block).
Note O —
Policy fee income and surrender charges adjusted to allocate 50%
of the activity of variable annuity blocks to be ceded to
Overture Re.
Note P —
Change in policy reserves adjusted to reflect 90% of the
interest credited to the fixed annuity policies incurred by JNL
Note Q —
Commissions paid by JNL on new and existing variable annuity
adjusted to reflect 50% of activity of variable annuity blocks
to be ceded to Overture Re.
Note R —
DAC and VOBA amortization are removed from pro forma financial
statements as these items relate to historical JNL activities
and will not be a part of the reinsurance transaction between
Overture Re and JNL.
Note S —
To eliminate the investment income related to the Overture trust
account.
NOTES TO
UNAUDITED PRO FORMA
COMBINED FINANCIAL
STATEMENTS — (Continued)
Note T —
The following table reflects the General and Administrative
expenses estimated to be incurred by Overture on an ongoing
basis as a result of the formation of Overture Re and its
ongoing business obligations. These costs would be independent
of the size of any redemption of Company shares as part of this
transaction.
YTD
Year Ended
September 30
December 31
2009
2008
Operations/Infrastructure & Technology
$
281
$
375
Legal/Audit/Compliance
1,444
1,925
Finance
1,013
1,350
Executive/Human Res./Administrative
1,286
1,715
General and Administrative
$
4,024
$
5,365
Estimated executive compensation within these amounts is
estimated to be $1,875 and $2,500 for Year to Date
September 30, 2009 and Year Ended December 31, 2008,
respectively.
Note U —
Amortization of the ceding commission is based on the
anticipated gross profits of the block being reinsured.
Note V —
The administrative and marketing allowance paid to JNL by
Overture pursuant to the reinsurance agreement which includes
per policy charges of $35 for fixed and $70 for variable plus
$750 per policy placed Monument Advisor marketing allowance.
Note W —
JNL tax expense eliminated in the pro forma financial statements
due to Overture’s being exempt from taxes under Cayman
Islands laws until October 9, 2027.
Note X —
Reflects the reduction in the underwriter fee and financial
advisory fees based on the transaction size.
Note Y —
Represents the total number of shares outstanding assuming none
of the shareholders’ exercise their right to redeem their
shares.
Total Overture shares outstanding
18,750,000
Founders’ shares redeemed
(3,750,000
)
Number of shares outstanding assuming no redemption
NOTES TO
UNAUDITED PRO FORMA
COMBINED FINANCIAL
STATEMENTS — (Continued)
Note Z —
Represents the number of shares outstanding assuming the maximum
redemption by Overture’s shareholders.
Total Overture shares outstanding
18,750,000
Founders’ shares redeemed
(3,750,000
)
Remaining shares outstanding
15,000,000
Number of shares subject to redemption
(4,499,999
)
Number of shares outstanding assuming maximum redemption
10,500,001
Note AA
Reflects interest expense incurred on the borrowings on
portfolio at 3.25% per annum.
Note BB
Excludes the historical JNL general and administrative expenses
as these will not be incurred by Overture after the proposed
transaction is completed.
3.
Funds
Withheld at Interest and Embedded Derivative
The Company intends to enter into reinsurance agreements with
JNF. Funds withheld at interest represents a receivable balance
equivalent to the Company’s proportionate share of
JNF’s statutory reserves related to policies reinsured by
the Company under reinsurance agreements written on a modified
coinsurance or coinsurance funds withheld basis. A portion of
the Company’s funds withheld at interest receivable asset
contains embedded derivatives, which require bifurcation and
separate accounting under SFAS No. 133 —
Accounting for Derivative Instruments and Hedging Activities,
which the Company adopted as of January 1, 2001. For the
purposes of the pro-forma presentation, the Company did not
calculate the retrospective change in fair value of the embedded
derivative because the underlying portfolio of assets that back
the funds withheld at interest has not yet been identified and
management believes that any assumed change in the fair value of
the embedded derivative would not be meaningful or material to
the pro-forma presentation.
4.
Additional
contingent consideration
The Master Agreement contains an option to the benefit of the
Company to potentially purchase Jefferson National Financial
Asset Management, a business segment of JNF. Management deems
that the exercise of this option is not probable at this time.
Had the option been determined more likely than not to occur,
the financial impact would be reflected in the pro forma
financial statements. If the option is exercised, at such time,
an additional purchase price will be paid.
In consideration of the repurchase of such Founder Shares at
their initial purchase price of $0.006 per share, or an
aggregate of $25,000, the Founders will receive
(i) Class A warrants to purchase an aggregate of
46,875 shares of JNF common stock at an exercise price of
$75.00 per share, subject to adjustment per floating strike
price, and (ii) Class B warrants to purchase an
aggregate of 46,875 shares of JNF common stock at an
exercise price of $125.00 per share, subject to adjustment per
floating strike price, and (iii) a right to receive up to
2,812,500 of the Company’s Ordinary Shares issuable in
three equal tranches in the event the volume weighted average
price of the Company’s Ordinary Shares for ten five days
during a 30 day period equals or exceeds $12, $16 and $20,
respectively.
Pursuant to the provisions of the Master Agreement, the Company
will by special resolution change its corporate name from
“Overture Acquisition Corp.” to “Overture Capital
Corp.” effective upon consummation of the Business
Combination. If the Business Combination Proposal is not
approved, the Name Change Proposal will not be effected.
In the judgment of the Company’s board of directors, the
change of its corporate name is desirable to reflect the
Company’s acquisition of JNL Bermuda and the transition of
the Company from a special purpose acquisition company to a
holding company of Overture Re.
Shareholders will not be required to exchange outstanding share
certificates for new share certificates if the proposal is
adopted.
The approval of the Name Change Proposal requires the
affirmative vote by special resolution of not less than
two-thirds of the votes cast by such shareholders as being
entitled to do so, vote in person or by proxy at the
Extraordinary General Meeting. The Text of the Name Change
Proposal to be considered at the Extraordinary General Meeting
is set forth in Annex III. Pursuant to the Company’s
Articles, the Name Change Proposal cannot be approved at an
adjourned meeting.
The Company’s Board of Directors has approved and is
submitting the Repurchase Amendment Proposal to the Shareholders
for approval. The Repurchase Amendment Proposal is a proposal to
amend the Company’s Articles effective upon consummation of
the Business Combination to approve by special resolution an
amendment to the Company’s Articles to add provisions which
allow the company to authorize the Company to purchase any share
listed on a Designated Stock Exchange including the Over-the
Counter Bulletin Board, the National Market System or the
Capital Market of the Nasdaq Stock Market, Inc., the American
Stock Exchange or the New York Stock Exchange without
shareholder approval in limited circumstances. The maximum
number of publicly traded shares which may be repurchased shall
be equal to the number of issued and outstanding shares of the
Company less one share and shall be effected at such time and
such price and other terms as determined and agreed by the Board
in its sole discretion. In addition, the amendment would
authorize the Company to purchase any share not listed on a
Designated Stock Exchange in accordance with the notice
procedures set forth in the Articles. In either case, the
Company must be able to pay its debts as they fall due in the
ordinary course of business and be solvent immediately before
and after the date on which the payment in respect of the
repurchase transaction is proposed to be made.
In the judgment of the Company’s Board of Directors, the
Repurchase Amendment Proposal is desirable for the following
reasons:
•
The Company’s Articles currently do not provide
authorization for the Company to repurchase its shares without
obtaining prior shareholder approval. However, as disclosed
elsewhere in this proxy statement/prospectus, at any time prior
to the Special Meeting of Warrantholders or Extraordinary
General Meeting, as the case may be, during a period when they
are not then aware of any material nonpublic information
regarding the Company or its securities, the Company or the
Company’s Founders, JNF, JNF’s directors and officers
and/or their
respective affiliates may negotiate arrangements to purchase
Public Shares from institutional and other investors, or execute
agreements to purchase such shares from them in the future, or
they or the Company may enter into transactions with such
persons and others to provide them incentives for acquiring
Public Shares and/or voting such Public Shares in favor of the
Business Combination Proposal.
•
Shareholders who vote in favor of the Transaction and remain
shareholders of the Company will not receive the same incentives
that the sellers of Public Shares will. Such arrangements would
not be fair to those shareholders that do not receive such
consideration. However, to the extent that such purchases will
be made to obtain a favorable vote with respect to the
Transaction, the Company believes such arrangements to be in the
shareholders best interest. The per share purchase price with
respect to such side arrangements will not be limited to the per
share redemption price. The Company will file a Current Report
on
Form 8-K
to disclose the consummation of any such agreements.
•
The institutional holders of Public Shares which are known by
the Company and its advisors to have acquired shares in other
SPACs (Special Purpose Acquisition Companies) and that have
agreed to sell their securities in those other issuers will be
the first holders to be approached to determine their interests
in remaining as holders and supporting the proposed transaction.
If additional holders are required, the Company will further
review the stockholder list based upon the size of each holders
position. Additionally, the Company will monitor the votes
against the proposed business combination and which also
indicate that they are going to cause their Public Shares to be
delivered for Redemption. The Company will seek to enter into
forward contracts with sufficient holders of those Public
Shares, based upon size of holdings and willingness to enter
into forward contracts, to keep the overall amount of the
shareholders wishing to redeem below 30%.
•
It is contemplated that funds released from the trust account
upon consummation of the Transaction may be used to purchase
such Public Shares, provided the Share Repurchase Amendment is
approved.
In addition, from time to time, as permitted by the rules of the
SEC, public corporations are authorized to repurchase in market
transactions certain of its shares pursuant to
Rule 10b-18
under the Securities Act. The Board has determined that adopting
a resolution approving an amendment to the Company’s
Articles that provides for the authorization of the Company to
purchase its Ordinary Shares in connection with the consummation
of the Transaction and from time to time without shareholder
approval in certain limited circumstances provides the Company
flexibility that is commonly afforded to publicly traded
entities with respect to opportunities which may arise to
repurchase its shares and is in the best interests of the
Company.
In summary, we are recommending the adoption of the Repurchase
Amendment Proposal as we believe such purchases will assist the
Company in obtaining a favorable vote with respect to the
Transaction and therefore are in the best interests of those
shareholders who will remain shareholders of the Company
subsequent to the consummation of the Transaction.
The Company is seeking general authority to repurchase its
shares inasmuch as the details of any purchases of Public Shares
are not and will not be known to the Company prior to the
Extraordinary General Meeting of Shareholders. The adoption of
the Repurchase Amendment Proposal would eliminate the need for
specific shareholder approval of any repurchase of its
outstanding shares, including purchases of Public Shares
contemplated in the section entitled “Proposals to be
Considered by Shareholders — The Business CombinationProposal — Actions that May Be Taken to Secure
Approval of the Company’s Shareholders.”
The approval of the Repurchase Amendment Proposal requires the
affirmative vote by special resolution of not less than
two-thirds of the votes cast by such shareholders as being
entitled to do so, vote in person or by proxy at the
Extraordinary General Meeting. The text of the Repurchase
Amendment Resolution to be considered at the Extraordinary
General Meeting is set forth in Annex III. Pursuant to the
Company’s Articles, the Repurchase Amendment Proposal
cannot be approved at an adjourned meeting.
The Company’s Board of Directors has approved and is
submitting the Staggered Board Elimination Proposal to the
Shareholders for approval. The Staggered Board Elimination
Proposal is a proposal to approve by special resolution an
amendment to the Company’s Articles effective upon
consummation of the Business Combination to provide that each
director shall hold office until the next annual general meeting
of shareholders following his or her election and until his or
her successor is duly elected and qualified. If the Business
Combination Proposal is not approved, the Staggered Board
Elimination Proposal will not be effected.
The Company believes that the elimination of the staggered board
is in the shareholders’ best interests for the following
reasons:
•
The election of the members of the Board of Directors is among
the most fundamental rights of the Company’s shareholders.
This weighs in favor of permitting the shareholders to vote with
respect to each director on an annual basis and not be required
to wait up to three years to express a view on a particular
director.
•
Allowing the shareholders to vote annually on the performance of
the entire Board of Directors, as well as individual directors,
would increase the directors’ accountability to the
shareholders, causing an attendant increase in management’s
accountability.
•
A classified Board of Directors structure can diminish Board of
Director accountability because shareholders are able to vote
against only those directors whose terms expire in a given year.
Thus, if in a given year shareholders desire to vote against a
director whose term does not expire until a future year, they
will be unable to express their dissatisfaction and remove the
director promptly through the board election process.
•
Classified Boards of Directors may facilitate management and
board entrenchment even if a majority of shareholders are
dissatisfied with management or Board of Director performance.
This would be a particularly important consideration if a
company’s management and Board of Directors failed to
respond to stockholder concerns arising from sustained poor
performance, excessive compensation practices or similar issues.
•
Classified Boards of Directors may prevent or hinder bidders
from acquiring a company even at a price that is acceptable to a
majority of shareholders.
The Company is committed to strong corporate governance.
Accordingly, the Board considered the various reasons for and
against a classified Board, particularly in light of evolving
corporate governance practices and investor sentiment. The Board
recognizes that the annual elections of directors is emerging as
a “best practice” in the area of corporate governance,
as it provides shareholders the opportunity to hold every member
of the Board accountable for performance every year. The Board
has determined that adopting a resolution approving an amendment
to the Company’s Articles that provides for the annual
election of all Directors is in the best interests of the
Company.
The approval of the Staggered Board Elimination Proposal
requires the affirmative vote by special resolution of not less
than two-thirds of the votes cast by such shareholders as being
entitled to do so, voting in person or by proxy at the
Extraordinary General Meeting. The text of the Staggered Board
Elimination Resolution to be considered at the Extraordinary
General Meeting is set forth in Annex III. Pursuant to the
Company’s Articles, the Staggered Board Elimination
Proposal cannot be approved at an adjourned meeting.
The Company’s Board of Directors has approved and is
submitting the Share Repurchase Proposal to the shareholders for
approval. The Share Repurchase Proposal is a proposal to approve
the resolution to permit the repurchase of the 3,750,000 Founder
Shares in connection with the Transaction. A text of the
resolution is set forth in Annex III.
Pursuant to the Master Agreement, the Founders of the Company
have agreed to allow the Company to repurchase their 3,750,000
Founder Shares in connection with the consummation of the
Transaction as follows:
Shares to be
Founder
Reacquired
John F. W. Hunt
2,345,543
Marc J. Blazer
10
Blazer Investments, LLC
532,989
Marc Blazer 2007 GRAT
74,990
Mark Booth
62,229
Domenico De Sole
62,229
Lawton W. Fitt
385,326
Paul S. Pressler
124,456
Andrew H. Lufkin
162,228
3,750,000
Founders initially paid approximately $0.006 per share for their
Founder Shares prior to the IPO. In consideration of the
repurchase of such Founder Shares at their initial purchase
price of $0.006 per share, or an aggregate of $25,000, the
Founders will receive (i) Class A warrants to purchase
an aggregate of 46,875 shares of JNF common stock at an
exercise price of $75.00 per share, subject to adjustment per
floating strike price, and (ii) Class B warrants to
purchase an aggregate of 46,875 shares of JNF common stock
at an exercise price of $125.00 per share, subject to adjustment
per floating strike price, and (iii) a right to receive up
to 2,812,500 of the Company’s Ordinary Shares issuable in
three equal tranches in the event the volume weighted average
price of the Company’s Ordinary Shares for any
ten days during a 30 day period equals or exceeds $12,
$16 and $20, respectively. As of the record date for the
Extraordinary General Meeting of the Shareholders, the 3,750,000
Founder Shares has an aggregate value of $37,537,500 based on
the closing price of such shares on that date.
The approval of the Share Repurchase Proposal requires the
affirmative vote of a majority of the shareholders as being
entitled to do so, vote in person or by proxy at the
Extraordinary General Meeting or at an adjourned meeting. The
text of the Share Repurchase Resolution to be considered at the
Extraordinary General Meeting is set forth in Annex III.
The Company’s Board of Directors is currently divided into
three classes, each of which generally serves for a term of
three years, with only one class of directors being elected in
each year. The term of office of the first class of directors,
consisting of Paul Pressler, will expire at our first annual
general meeting of shareholders. The term of office of the
second class of directors, consisting of Andrew H. Lufkin and
Lawton W. Fitt, will expire at the second annual general meeting
of shareholders. The term of office of the third class of
directors, consisting of John F. W. Hunt and Marc Blazer, will
expire at the third annual general meeting of shareholders. One
of the closing conditions to the Business Combination is the
resignation of the directors of the Company from all of their
positions effective as of the Closing Date, and at and after the
Closing Date, the Company shall cause the board of directors to
consist of seven (7) members of which (i) four
(4) members shall be designated as nominees by JNL and
(ii) three (3) members shall be designated as
nominees by the Company and the Founders. In addition, pursuant
to the Staggered Board Elimination Proposal, shareholders are
being asked to approve the removal of the staggered board
provision set forth in the Company’s Amended and Restated
Memorandum and Articles of Association. As a result, the
following seven persons have been nominated as candidates for
election to the Board of Directors: David Smilow, Mitchell H.
Caplan, Antoine Schwartz, John F. W. Hunt, Marc Blazer, Dean C
Kehler and Andrew Lufkin. In the event these seven directors are
elected at the Extraordinary General Meeting, they will hold
office for a term expiring at the next Extraordinary General
Meeting of shareholders. Each director serves from the date of
his election until the end of his term and until his successor
is elected and qualified. Four of the directors standing for
election pursuant to the Director Proposal, John W. Hunt, Marc
Blazer, Antoine Schwartz and Andrew Lufkin, will be
“independent” directors under the director
independence standards of NYSE Amex. Although we are not
required to adopt director independence standards, in order to
identify our directors
and/or
director-nominees who may qualify as independent directors, we
have adopted the director independence standards of NYSE Amex.
The election of the foregoing as directors is conditional upon
approval of the Business Combination. Except as set forth below
with respect to the Shareholders Agreement, there are not now,
nor have there ever been, any other arrangements, agreements or
understandings regarding the selection and nomination of the
Company’s directors. Unless authority is withheld, the
proxies solicited by the Board of Directors will be voted
“FOR” the election of these nominees. In case any of
the nominees becomes unavailable for election to the Board of
Directors, an event that is not anticipated, the persons named
as proxies, or their substitutes, will have full discretion and
authority to vote or refrain from voting for any other candidate
in accordance with their judgment.
Assuming the election of the individuals set forth above, the
Board of Directors and management positions of the Company
following the Transaction will be as follows:
Name
Age
Position
David Smilow
47
Executive Chairman
Mitchell H. Caplan
52
Chief Executive Officer and Director
Michael Girouard
43
Chief Financial Officer
Brian Heaphy
37
General Counsel and Secretary
John W. Hunt
45
Director
Marc Blazer
41
Director
Antoine Schwartz
47
Director
Andrew Lufkin
46
Director
Dean C. Kehler
52
Director
Assuming the Business Combination Proposal is approved, at the
effective time of the Business Combination, the Company will
wholly own Overture Re. Assuming the Business Combination is
consummated, each of JNF and the Founders will have the right to
nominate and cause the appointment and election of members to
the Board of Directors of the Company as discussed here.
David Smilow — Chairman of the
Board. Mr. Smilow is currently Chairman and
CEO of JNF, the intermediate holding company of JNL, and has
held this position since 2003. From 2000 to 2003, he held the
position of Co-Chairman of Inviva, Inc., the predecessor firm to
JNF. From 1988 to 2000, he was the Founder, Chairman and CEO of
Telebank, an internet-based retail bank that is now part of
E*Trade Group. From 1987 to 1988, Mr. Smilow was an
Associate at Goldman Sachs. Mr. Smilow holds a BA from
Johns Hopkins University and an MBA from Harvard Business School.
Mitchell H. Caplan joined JNF as a Executive Advisor in
September, 2009. Prior to joining JNF, Mr. Caplan served as
an Executive Advisor with Aquiline Capital Partners. From
2003-2007
Mr. Caplan held the position of CEO and a Director of
E*TRADE Financial Corporation. Before assuming the role of CEO,
Mr. Caplan was Chief Banking Officer
(2000-2002)
and President & COO
(2002-2003).
Under Mr. Caplan’s leadership at E*TRADE, revenue grew
from under $1 billion to $3 billion annually, with net
income growth from a loss to $1.6 billion annually.
Mr. Caplan served as Vice-Chairman, President and CEO of
Telebanc Financial Corporation from 1990 until its merger with
E*TRADE in 2000. After E*TRADE’s mortgage loan portfolio
was severely impacted by the real estate crisis and financial
market turmoil that began in mid-2007, several shareholder and
derivative actions were filed against E*TRADE and its executive
officers and directors (including Mr. Caplan) alleging
violations of federal securities laws and breaches of fiduciary
duties. The cases are pending in New York federal and state
courts. Further information with respect to these cases may be
found in E*TRADE’s Exchange Act filings with the SEC
at www. sec.gov. All such information and disclosure is
expressly not incorporated by reference herein and we assume no
liability therefor. From
1985-1990,
Mr. Caplan was an associate of the law firm of
Shearman & Sterling. Mr. Caplan holds a JD and
MBA from Emory University and a BA in history from Brandeis
University.
Antoine Schwartz was Co-Chairman, Co-Chief Executive
Officer and Co-Founder of Telebank, a manufacturer and direct
marketer of low cost banking products, founded in 1989 and
renamed E*Trade Bank following the acquisition by E*Trade in
1999. After moving to London in 1992, he joined Goldman Sachs
International as Executive Director in Investment Banking
Division. Later he became Executive Director in Equity Capital
Markets Department (1993), head of the European Equity-linked
Group and partner in Equity Capital Markets Division (1996),
partner in Principal Investment Area and Member of Goldman Sachs
Investment Committee (1999). In 2004 he was founding partner of
The Black Ant Group, where he is currently Chief Investment
Officer. Mr. Schwartz received a graduate degree in
sciences at Ecole Polytechinque (Paris, France) and completed
his studies with a MBA from Harvard Graduate School of Business
Administration (Cambridge, MA).
John F. W. Hunt has been our Chief Executive Officer,
Secretary and Chairman of the Board since our inception in
September 2007. Since 1994, Mr. Hunt founded or co-founded
six companies, including Oriel LLC, a wine company he currently
oversees,
Amanyaratm,
a resort in the Turks & Caicos Islands, The Seattle
Coffee Company, a chain of espresso bars in England ultimately
acquired by Starbucks, Syzygy AG, an internet professional
services firm listed on the Frankfurt stock exchange, and Obongo
Inc., a payment processing technology firm that was acquired by
AOL Time Warner. Mr. Hunt also co-founded and helped
develop iGabriel, an investment club, which later merged with
PiCapital to form one of the UK’s leading private investor
networks, and First Tuesday, a financial networking forum that
was subsequently acquired by an Israeli investment bank.
Mr. Hunt began his career in marketing. From 1987 to 1992,
he held positions of increasing responsibility at
Procter & Gamble, ultimately becoming the European
Brand Manager responsible for integrating the acquisition of the
Max Factor brand across Europe. From 1992 to 1994, Mr. Hunt
was Head of Marketing at Kraft Jacobs Suchard (a division of
Philip Morris) for the Middle East & Africa.
Mr. Hunt received an Honors degree in Economics and Public
Administration from the London University in 1987.
Marc J. Blazer has been our President, Treasurer and a
Director since our inception in September 2007. Mr. Blazer
is also a co-founder of Ahimsa Partners, a venture that
licenses, owns, and operates hospitality businesses, the CEO of
Blazer & Co., both investment partnerships, and a
managing director of BTIG, an institutional trading firm. From
November 2000 to August 2007, Mr. Blazer was a partner, and
until May 2007, the global head of investment banking at Cantor
Fitzgerald. While at Cantor Fitzgerald, Mr. Blazer served
on the advisory board of Enertech Capital III, a venture capital
fund from March 2006 to July 2007. Prior to joining Cantor
Fitzgerald, Mr. Blazer spent six years at ChaseMellon
Financial Corp. (now Mellon Investor Services), a joint-venture
between Chase Manhattan Corporation and Mellon Financial Group
LLC from 1994 to 2000. In this capacity, he advised clients on
governance and shareholder related issues including accessing
the capital markets, investor relations, and proxy solicitation
matters and structural defenses. Prior to his career on Wall
Street, Mr. Blazer was an advisor to members of Congress in
both the House and Senate on tax matters, banking and securities
legislation, international trade policy, and foreign relations.
Mr. Blazer earned a graduate degree from the London School
of Economics in 1992, and a BA from the University of Maryland
in 1990.
Andrew H. Lufkin a Director and founder since January
2008, is the portfolio manager for the Delafield Hambrecht
MicroCap Value Fund, a fund which invests in undervalued growing
micro-cap companies and the Chief Financial Officer and a
director of Delafield Hambrecht which he joined in September
2003. From August 2002 to August 2003, Mr. Lufkin was Chief
Operating Officer and Chief Financial Officer of Monadnock
Valley Asset Management, a New York-based hedge fund
specializing in global healthcare equities. From 2001 to 2002 he
served as a Managing Director in investment banking for WR
Hambrecht + Co. Prior to this, he spent 10 years in
corporate finance at Donaldson Lufkin & Jenrette
before starting his own broker dealer. Mr. Lufkin received
a BA from Colby College and an MBA from Harvard Business School.
Dean C. Kehler is a Managing Partner of Trimaran Capital
Partners, L.L.C., a manager of alternative investment funds. Mr
Kehler has held this position since 2006. Mr. Kehler
currently serves on the board of directors of Inviva, Inc.,
Jefferson National Financial Corp., Charlie Brown’s
Acquisition Corp., a restaurant chain, Urban Brands, Inc., a
clothing retailer, El Pollo Loco, Inc. and related companies..
Mr. Kehler also serves as Treasurer and a director of CARE
USA, one of the worlds largest private humanitarian
organizations, and is Vice Chair of the Board of Overseers of
University of Pennsylvania School of Nursing. Prior to Trimaran
Capital Partners L.L.C. Mr. Kehler was a Managing Director,
Vice Chairman at CIBC World Markets from
1990-2006.
Mr. Kehler graduated from the Wharton School, University of
Pennsylvania in 1978.
Board members are elected annually by the shareholders and the
officers are appointed annually by the Board of Directors.
Compliance
With Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our directors and executive officers and
persons who own more than 10% of a registered class of our
equity securities, to file with the
Securities and Exchange Commission initial reports of ownership
and reports of changes in beneficial ownership of shares and
other equity securities of ours. Directors, officers and greater
than 10% shareholders are required by SEC regulations to furnish
us with all Section 16(a) forms they file.
To our knowledge, based solely upon our review of the copies of
such reports furnished to us, we believe all of our directors,
officers and greater than 10% shareholders have complied with
the applicable Section 16(a) reporting requirements in a
timely fashion.
Our Board of Directors held two formal meetings during the last
full fiscal year. Each member of the Board participated in all
Board meetings held during the period for which he or she was a
director.
Director
Independence
The NYSE Amex requires that a majority of our Board of Directors
must be composed of “independent directors,” which is
defined generally as a person other than an officer or employee
of the Company or its subsidiaries or any other individual
having a relationship, which, in the opinion of the board of
directors would interfere with the director’s exercise of
independent judgment in carrying out the responsibilities of a
director.
The Board of Directors has determined that each of
Messrs. Hunt, Blazer, Schwartz and Lufkin are independent
directors as such term is defined under the rules of the NYSE
Amex and as such term is defined under
Rule 10A-3
of the Exchange Act. The independent directors will have
regularly scheduled meetings at which only independent directors
are present.
We will not enter into an initial business combination with an
entity which is affiliated with any of our executive officers,
directors, Founders, initial shareholders or special advisors,
including an entity that has received a material financial
investment from our initial shareholders, Founders or special
advisors or any entity affiliated with our initial shareholders,
Founders, officers, directors or special advisors.
We have established an audit committee of the Board of
Directors, consisting of Ms. Fitt, Messrs. Lufkin and
Pressler, each of whom has been determined to be
“independent” as defined in
Rule 10A-3
of the Exchange Act and the rules of the NYSE Amex. Subsequent
to the Business Combination, the members of the audit committees
of the Company will not be appointed until the Board of
Directors is fully constituted and holds its initial meeting. At
that time, the Board of Directors will make determinations with
respect to each audit committee member’s independence in
accordance with the NYSE Amex listing standards and SEC rules
and regulations. The audit committee’s duties, which will
be specified in an Audit Committee Charter, include, but are not
limited to:
•
reviewing and discussing with management and the independent
auditor the annual audited financial statements, and
recommending to the Board of Directors whether the audited
financial statements should be included in our Annual Report on
Form 10-K;
•
discussing with management and the independent auditor
significant financial reporting issues and judgments made in
connection with the preparation of our financial statements;
•
discussing with management major risk assessment and risk
management policies;
•
monitoring the independence of the independent auditor;
•
verifying the rotation of the lead (or coordinating) audit
partner having primary responsibility for the audit and the
audit partner responsible for reviewing the audit as required by
law;
•
inquiring and discussing with management our compliance with
applicable laws and regulations;
pre-approving all audit services and permitted non-audit
services to be performed by our independent auditor, including
the fees and terms of the services to be performed;
•
appointing or replacing the independent auditor;
•
determining the compensation and oversight of the work of the
independent auditor (including resolution of disagreements
between management and the independent auditor regarding
financial reporting) for the purpose of preparing or issuing an
audit report or related work;
•
establishing procedures for the receipt, retention and treatment
of complaints received by us regarding accounting, internal
accounting controls or reports which raise material issues
regarding our financial statements or accounting policies;
•
monitoring compliance on a quarterly basis with the terms of our
IPO and, if any noncompliance is identified, immediately taking
all action necessary to rectify such noncompliance or otherwise
causing compliance with the terms of our IPO;
•
reviewing and approving all payments made to our initial
shareholders, Founders, officers or directors and their
respective affiliates. Any payments made to members of our audit
committee will be reviewed and approved by our Board of
Directors, with the interested director or directors abstaining
from such review and approval; and
•
the members of the audit committee will act as the liquidator of
the Company in the event we do not consummate our initial
business combination by January 30, 2010.
Financial
Experts on Audit Committee
The audit committee will at all times be composed exclusively of
“independent directors” who, as required by the NYSE
Amex, are able to read and understand fundamental financial
statements, including a company’s balance sheet, income
statement and cash flow statement.
In addition, we must have certified to the stock exchange that
the audit committee has, and will continue to have, at least one
member who has past employment experience in finance or
accounting, requisite professional certification in accounting,
or other comparable experience or background that results in the
individual’s financial sophistication. The Board of
Directors has determined that Mr. Lufkin satisfies the NYSE
Amex’s definition of financial sophistication and also
qualifies as an “audit committee financial expert,” as
defined under rules and regulations of the SEC.
Nominating
Committee
We have established a nominating committee of the Board of
Directors, currently consisting of Ms. Fitt,
Messrs. Lufkin and Pressler, each of whom is an independent
director under the NYSE Amex’s listing standards.
Subsequent to the Business Combination, the members of the
nominating committees of the Company will not be appointed until
the Board of Directors is fully constituted and holds its
initial meeting. At that time, the Board of Directors will make
determinations with respect to each nominating committee
member’s independence in accordance with the NYSE Amex
listing standards and SEC rules and regulations. The nominating
committee is responsible for overseeing the selection of persons
to be nominated to serve on our Board of Directors. The
nominating committee considers persons identified by its
members, management, shareholders, investment bankers and others.
Guidelines
for Selecting Director Nominees
The guidelines for selecting director nominees, which are
specified in the Nominating Committee Charter, generally provide
that persons to be nominated:
•
should have demonstrated notable or significant achievements in
business, education or public service;
should possess the requisite intelligence, education and
experience to make a significant contribution to the board of
directors and bring a range of skills, diverse perspectives and
backgrounds to its deliberations; and
•
should have the highest ethical standards, a strong sense of
professionalism and intense dedication to serving the interests
of the shareholders.
The nominating committee will consider a number of
qualifications relating to management and leadership experience,
background and integrity and professionalism in evaluating a
person’s candidacy for membership on the Board of
Directors. The nominating committee may require certain skills
or attributes, such as financial or accounting experience, to
meet specific needs of the board of directors that arise from
time to time. The nominating committee does not distinguish
among nominees recommended by shareholders and other persons.
Code
of Ethics
We have adopted a code of ethics that applies to our executive
officers, directors and employees and have filed copies of our
code of ethics and our board committee charters as exhibits to
the registration statement in connection with our IPO. You will
be able to review these documents by accessing our public
filings at the SEC’s website at www.sec.gov. In addition, a
copy of the code of ethics will be provided without charge upon
request to us in writing at
c/o Maples
Corporate Services Limited, Ugland House, Grand Cayman,
KY1-1104, Cayman Islands. We intend to disclose any amendments
to or waivers of certain provisions of our code of ethics in a
Current Report on
Form 8-K.
Compensation
Arrangements for Directors
The Company’s directors do not currently receive any cash
compensation for their service as members of the Board of
Directors. Upon consummation of the Business Combination,
non-employee directors of the Company will receive varying
levels of compensation for their services as directors,
including additional amounts based on their eligibility as
members of the Company’s audit and compensation committees.
The Company anticipates determining director compensation in
accordance with industry practice and standards.
No founding executive officer of the Company has received any
cash or non-cash compensation for services rendered to the
Company. Each founding executive officer has agreed not to take
any compensation prior to the consummation of a business
combination. However, the Company’s executive officers are
reimbursed for any
out-of-pocket
expenses incurred in connection with activities on the
Company’s behalf such as identifying potential merger
partners and performing due diligence on suitable business
combinations. As of September 30, 2009, an aggregate of
$151,000 has been reimbursed to them for travel-related expenses.
Overture
Re
The compensation of Overture Re officers has not yet been
determined.
Summary
Compensation Table
The following table sets forth compensation information for each
of JNL’s named executive officers during the years ended
December 31, 2007 and 2008 and the estimated compensation
for 2009, including: (i) the dollar value of base salary
and bonus earned during each year; (ii) for awards of stock
and awards of options, the dollar amount recognized for
financial statement reporting purposes with respect to each year
in accordance with Statement of Financial Accounting Standards
(“SFAS”) No. 123R, “Share-based
Payments” (“SFAS 123(R)”); (iii) the
dollar value of earnings for services pursuant to awards granted
during each year under non-equity incentive plans; (iv) the
non-qualified deferred compensation earnings during each year;
(v) all other compensation for each year; and
(vi) the dollar value of total compensation for each year.
With the exception of Michael Girouard, none of the named
executive officers listed in the following table will become
executive officers of the combined company following the
Business Combination.
Nonqualified
Non-Equity
Deferred
Stock Awards/
Option
Incentive
Compensation
All Other
Name and Position of Principal(a)
Year(b)
Salary(3)(c)
Bonus(3)(d)
Price(1)(e)
Awards(2)(f)
Plans(g)
Earnings(h)
Compensation(i)
Total(j)
David Smilow,
2009
$420,000
$0
0
0
—
—
—
$
420,000
Chairman of the Board
2008
$420,000
$0
*
0
—
—
—
$
1,302,368
2007
$429,000
$193,750
0
0
—
—
—
$
622,750
Larry Greenberg,
2009
$300,000
$0
0
0
—
—
—
$
300,000
President and CEO
2008
$300,000
$89,999
0
10000/$54.54
—
—
—
$
412,233
10000/$81.81
2007
$300,000
$325,000
526313/$.285
0
—
—
—
$
774,999
Timothy Rogers,
2009
N/A
N/A
N/A
N/A
—
—
—
N/A
CFO (2007 -8/2008)
2008
$300,000
$45,007
0
0
—
—
—
$
345,007
2007
$300,000
$485,000
0
0
—
—
—
$
785,000
Joe Vap,
2009
$155,000
$0
0
0
—
—
—
$
155,000
CFO JNF
2008
$147,945
$0
0
5000/$54.54
—
—
—
$
157,943
2500/$81.81
2007
$135,687
$25,000
0
0
—
—
—
$
160,687
David Lau,
2009
$295,000
$0
0
0
—
—
—
$
295,000
COO
2008
$295,000
$27,018
0
10000/$54.54
—
—
—
$
346,489
15000/$81.81
2007
$295,000
$295,000
158000/$.285
0
—
—
—
$
635,030
Michael Girouard,
2009
$280,000
$0
0
0
—
—
—
$
280,000
CIO
2008
$256,250
$6,797
0
0
—
—
—
$
263,047
2007
$250,000
$0
39750/$.285
0
—
—
—
$
261,329
(1)
2007 Stock awards = Inviva Series C Preferred —
restricted shares that vested over 2 years
(2)
2008 Options = JNF Base Options strike price of current value
($54.54) JNF Premium Options strike price 50% over current value
($81.81)
Options vest 20% on issue date and 20% each anniversary
thereafter. On changes of control, 50% of any unvested options
vest immediately.
(3)
2009 Salary and bonus amounts are projected earnings
*
David Smilow received warrants for 7.5% of the outstanding stock
of JNF at a strike price of $54.54.
Bonus
Awards
Amounts included in column (d) in the Summary Compensation
Table represent amounts paid to each of JNL’s named
executive officers in accordance with our employee bonus
program. Amounts awarded under the bonus program are a function
of our financial and overall business performance as well as the
employee’s contribution to that performance as determined
at the end of each fiscal year by our Board of Directors.
401(k)
Profit Sharing Plan
The Company adopted a tax-qualified profit sharing 401(k) plan
that covers all employees that have completed 90 days of
service, except for nonresident aliens with no U.S. source
income. Pursuant to the 401(k) plan, participants may elect to
make pre-tax contributions up to the lesser of 15% of
compensation or the statutorily prescribed annual limit. The
401(k) also provides for employer matching contributions equal
to 100% of the first 5% of compensation deferred into the plan.
Contributions made by employees or by the Company to the 401(k)
plan, and the income earned on plan contributions, are not
taxable to employees until withdrawn from the 401(k) plan, and
Company can deduct the employees’ contributions and its
contributions, if any, for the fiscal year in which they are
made.
The Company has not determined compensation to be received by
each of the directors who will become directors of the combined
company following the business combination. However, the Company
intends to compensate its independent directors in stock and
cash at customary rates for their role as a director. The
Company’s non-independent directors may receive monitoring
fees.
Benchmarking
of Cash and Equity Compensation
The Company believes it is important when making
compensation-related decisions to be informed as to current
practices of similarly situated publicly held companies in the
insurance industry. The Company expects the compensation
committee will stay apprised of the cash and equity compensation
practices of publicly held companies in the insurance industry
through the review of such companies’ public reports and
through other resources. It is expected any companies chosen for
inclusion in any benchmarking group would have business
characteristics comparable to the Company, including revenues,
financial growth metrics, stage of development, employee
headcount and market capitalization. While benchmarking may not
always be appropriate as a stand-alone tool for setting
compensation due to the aspects of the Company post-acquisition
business and objectives that may be unique to the Company, the
Company generally believes gathering this information will be an
important part of its compensation-related decision-making
process.
Compensation
Components
Base Salary. Generally, the Company, working
with the compensation committee, anticipates setting executive
base salaries at levels comparable with those of executives in
similar positions and with similar responsibilities at
comparable companies. The Company will seek to maintain base
salary amounts at or near the industry norms while avoiding
paying amounts in excess of what the Company believes is
necessary to motivate executives to meet corporate goals. It is
anticipated base salaries will generally be reviewed annually,
subject to terms of employment agreements, and that the
compensation committee and board will seek to adjust base salary
amounts to realign such salaries with industry norms after
taking into account individual responsibilities, performance and
experience.
Annual Bonuses.The Company intends to design
and utilize cash incentive bonuses for executives to focus them
on achieving key operational and financial objectives within a
yearly time horizon. Near the beginning of each year, the board,
upon the recommendation of the compensation committee and
subject to any applicable employment agreements, will determine
performance parameters for appropriate executives. At the end of
each year, the board and compensation committee will determine
the level of achievement for each corporate goal.
The Company will structure cash incentive bonus compensation so
that it is taxable to its employees at the time it becomes
available to them. At this time, it is not anticipated that any
executive officer’s annual cash compensation will exceed
$1 million, and the Company has accordingly not made any
plans to qualify any cash compensation for the performance based
compensation to the deduction limitation under
Section 162(m) of the Internal Revenue Code.
Equity Awards.The Company also may use stock
options and other stock-based awards to reward long-term
performance. The Company believes providing a meaningful portion
of its executives’ total compensation package in stock
options and other stock-based awards will align the incentives
of its executives with the interests of the Company’s
shareholders and with the Company’s long-term success. The
compensation committee and board will develop their equity award
determinations based on their judgments as to whether the
complete compensation packages provided to the Company’s
executives, including prior equity awards, are sufficient to
retain, motivate and adequately award the executives.
Other Compensation.The Company will establish
and maintain various employee benefit plans, including medical,
dental, life insurance and 401(k) plans. These plans will be
generally available to all salaried employees and will not
discriminate in favor of executive officers. The Company may
extend other perquisites to its executives that are not
available to our employees generally.
Provided that a quorum of shareholders is present at the meeting
in person, or is represented by proxy, and is entitled to vote
thereon, the slate of directors will be elected if the Board of
Directors Proposal is approved by a majority of the shareholders
as, being entitled to do so, vote in person or by proxy at the
Extraordinary General Meeting or at an adjourned meeting. The
text of the Board of Directors Resolution to be considered at
the Extraordinary General Meeting is set forth in
Annex III. For the purposes of election of directors,
although abstentions will count toward the presence of a quorum,
they will not be counted as votes cast and will have no effect
on the result of the vote.
The Board of Directors recommends a vote FOR
Messrs. Smilow, Caplan, Hunt, Blazer, Schwartz, Lufkin and
Kehler. Unless otherwise instructed or unless authority to vote
is withheld, the enclosed proxy will be voted FOR the election
of the above listed nominees.
The Company’s Incentive Plan has been adopted by the
Company’s Board of Directors subject to approval and
consummation of the Transaction and further subject to the
approval of the Company’s shareholders. The approval of the
Business Combination Proposal and the consummation of the
Transaction are conditions to the effectiveness of the Incentive
Plan, assuming the Incentive Plan Proposal is approved by the
shareholders, and will only be presented at the Extraordinary
General Meeting of Shareholders if the Business Combination
Proposal is approved. If the Business Combination Proposal is
not approved or the Transaction is not consummated, the
Incentive Plan will not become effective.
The Incentive Plan is intended to aid the Company in recruiting
and retaining employees, officers, directors and consultants
capable of assuring the future success of the Company. The
Company expects that the awards of share-based compensation
under the Incentive Plan and opportunities for share ownership
in the Company will provide incentives to participants to exert
their best efforts for the success of the Company and also align
their interests with those of the Company’s shareholders.
The full text of the Incentive Plan is attached to this proxy
statement/prospectus as Appendix IV. The following summary
of the Incentive Plan is qualified in its entirety by the
provisions of such text.
General. The board of directors adopted the
Incentive Plan, subject to shareholder approval. The Incentive
Plan is intended to benefit our shareholders by assisting the
Company in recruiting and retaining the services of directors,
employees and consultants and motivating such persons through
the granting of share-based incentive awards. The shares to be
issued under the Incentive Plan are our Ordinary Shares. The
shares may be shares that have been authorized but not yet
issued. Additional information about the Incentive Plan follows.
Purpose.The Company, by means of the Plan,
seeks to retain the services of the group of persons eligible to
receive Awards, to secure and retain the services of new members
of this group and to provide incentives for such persons to
exert maximum efforts for the success of the Company and its
Affiliates.
The Incentive Plan provides for the granting of stock options,
stock bonuses and restricted stock (including restricted stock
units) to employees, directors and consultants of the Company
and its affiliates.
Administration. The Incentive Plan may be
administered by the board or by a committee consisting of two
(2) or more non-employee directors of the board. The entire
board may comprise the committee or the board may delegate
administration of the Incentive Plan to a committee which, if
required under applicable law, shall consist of two (2) or
more non-employee directors. In such event, the term
“committee” shall apply to any person or persons to
whom such authority has been delegated. Furthermore, unless a
committee has been appointed by the board, any reference to the
committee in the Incentive Plan shall mean the board. If
administration is delegated to a committee, the committee shall
have, in connection with the administration of the Incentive
Plan, the powers theretofore possessed by the board (and
references in this Incentive Plan to the board shall thereafter
be to the committee) subject, however, to such resolutions, not
inconsistent with the provisions of the Incentive Plan, as may
be adopted from time to time by the board. The board may abolish
the Committee at any time and re-vest in the board the
administration of the Incentive Plan. The board may also
(A) delegate to a committee of one or more members of the
board who are not “outside directors” within the
meaning of Section 162(m) of the U.S. Internal Revenue
Code the authority to grant Awards to eligible persons who are
either (1) not then covered employees and are not expected
to be covered employees at the time of recognition of income
resulting from such Award or (2) not persons with respect
to whom the Company wishes to comply with Section 162(m) of
the Code or (B) delegate to a committee of one or more
members of the board who are not “non-employee
directors” within the meaning of
Rule 16b-3
the authority to grant awards to eligible persons who are not
then subject to Section 16 of the U.S. Exchange Act of
1934.
Share Limit. The total number of Ordinary
Shares that may be issued under the Incentive Plan is the lesser
of (i) 1.5 million Ordinary Shares or (ii) 10% of
the outstanding Ordinary Shares at the closing of the
Transaction. Shares that are subject to awards that are
forfeited, cancelled, expire, terminate or lapse without having
been exercised or realized in full shall again become available
to be made subject to awards under the Incentive Plan. In the
event of any share split, share dividend, reorganization,
recapitalization, merger, consolidation, spin-off or other such
change in our capitalization, the committee has the discretion
to make adjustments to (i) the number or kind of shares
authorized for issuance or covered by outstanding awards,
(ii) the exercise price of options, (iii) the maximum
number of shares for which options may be granted in any
calendar year
and/or
(iv) any other affected terms of such awards in order to
prevent dilution or enlargement of benefits. . The shares
subject to the Plan may be authorized but unissued shares or
shares required by the Company in any manner.
No employee may be granted options to acquire more than 250,000
Ordinary Shares under the Incentive Plan during any calendar
year.
Change in Control. Unless otherwise provided
in an option agreement and except as otherwise provided in the
Incentive Plan, a change in control shall not effect any awards
granted under the Incentive Plan.
Limitation on Transferability of
Awards. Awards under the Incentive Plan shall be
transferred by the participant only upon such terms and
conditions as are set forth in the award agreement.
The Company’s directors may grant awards under the
Incentive Plan to themselves as well as the Company’s
officers and consultants, in addition to granting awards to the
Company’s other employees.
The approval of the Incentive Plan Proposal requires the
affirmative vote of a majority of the shareholders as being
entitled to do so, voting in person or by proxy at the
Extraordinary General Meeting or at an adjourned meeting. The
text of the Incentive Plan Resolution to be considered at the
Extraordinary General Meeting is set forth in Annex III.
The Shareholder Adjournment Proposal, if adopted, will allow our
Board of Directors to adjourn the Extraordinary General Meeting
of Shareholders to a later date or dates to permit further
solicitation and vote of proxies if at the time of the meeting
it appears that we do not have sufficient votes on the Business
Combination Proposal. In no event will we adjourn the
Extraordinary General Meeting or consummate the transactions
contemplated by the Master Agreement beyond the date by which we
may properly do so under our Articles. The purpose of the
Adjournment Proposal is to provide more time for us to solicit
proxies, make purchases of Public Shares or other arrangements
that would increase the likelihood of obtaining a favorable vote
on the Business Combination Proposal, to meet the requirement
that the holders of fewer than 30% of the Public Shares vote
against the Business Combination Proposal and demand that their
Public Shares be redeemed or to permit further solicitation for
other reasons.
If the Shareholder Adjournment Proposal is not approved by our
shareholders, our board of directors may not be able to adjourn
the Extraordinary General Meeting of Shareholders to a later
date. In such event, the transactions contemplated by the Master
Agreement would not be completed and, unless we are able to
consummate a “Business Combination” (as defined in our
Articles) no later than January 30, 2010 we will be
required to liquidate and dissolve.
The approval of the Shareholder Adjournment Proposal requires
the affirmative vote of a majority of the shareholders as being
entitled to do so, vote in person or by proxy at the
Extraordinary General Meeting or at an adjourned meeting. The
text of the Shareholder Adjournment Resolution to be considered
at the Extraordinary General Meeting is set forth in
Annex III.
Approval of the Shareholder Adjournment Proposal is not
conditioned upon the adoption of any of the other proposals.
In connection with the Transaction, the Company is proposing to
amend the terms of the Warrant Agreement, dated January 30,2008, by and between the Company and American Stock
Transfer & Trust Company, as Warrant Agent, referred
to herein as the Warrant Agreement, to provide that (i) the
exercise price of the Company Warrants will be increased from
$7.00 to $11.00 per share, (ii) the expiration date of the
Company Warrants will be extended from January 30, 2013 to
January 30, 2015, and (iii) the price at which our
Ordinary Shares must trade before we are able to redeem the
Company Warrants will be increased from $14.25 to $20.00.
There are currently 19,380,000 warrants outstanding, 15,000,000
of which were issued in our IPO and 4,380,000 of which were
issued to our Founders in a private placement.
The foregoing description of the Warrant Amendment Proposal is
only a summary. A full text of the Warrant Agreement amendment,
a copy of which is attached as Annex II to this proxy
statement/prospectus, is incorporated by reference into this
proxy statement/prospectus. Our rights and obligations are
governed by the express terms and conditions of the Warrant
Agreement amendment which implements the Warrant Amendment
Proposal and not by this summary. This summary and the summaries
of the Warrant Amendment Proposal elsewhere in this proxy
statement/prospectus may not contain all of the information
about the Warrant Amendment Proposal that is of importance to
you and are qualified in their entirety by reference to the
complete text of the Warrant Agreement amendment which
implements the Warrant Amendment Proposal. We encourage you to
read the Warrant Agreement amendment which implements the
Warrant Amendment Proposal carefully and in its entirety for a
more complete understanding of the Warrant Amendment Proposal.
We believe the amendment to the Company Warrants is appropriate
given the proposed change in our structure following completion
of the transactions contemplated by the Master Agreement. We
believe one of the effects of increasing the exercise price of
the Warrants is that the exercise of the Company Warrants will
result in a transaction that is less dilutive to our
shareholders in that we will receive more consideration per
share than the net asset value per share immediately following
the consummation of the transactions contemplated by the Master
Agreement. Additionally, if the transactions contemplated by the
Master Agreement are not consummated and we do not complete a
business combination by January 30, 2010, the Company
Warrants will expire worthless. If the Warrant Amendment
Proposal is approved, all other terms of the Company Warrants
will remain the same. It is anticipated that one of the likely
effects of increasing the prices at which our Ordinary Shares
must trade before we are able to redeem our Warrants is that the
amount of time we would have to wait before we can redeem the
Company Warrants will increase, thereby giving our
warrantholders more time to exercise their Company Warrants.
The Company’s Founders have informed us that they intend to
vote in favor of the Warrant Amendment Proposal at the special
meeting. As described in the section entitled “Proposals
to be Considered by Shareholders — The BusinessCombination Proposal — Certain Benefits of the
Company’s Directors and Officers and Others in the
Transactions,”the holders of the founder warrants may
have interests that differ from those of our other
warrantholders.
If the Warrant Amendment Proposal is not approved by our
warrantholders, the proposed amendments to the warrants will not
take effect. In such event, the transactions contemplated by the
Master Agreement would not be completed and, unless we are able
to consummate a “Business Combination” no later than
January 30, 2010, we will be required to liquidate and
dissolve and the Company Warrants will expire worthless.
Approval of the Warrant Amendment Proposal requires the
affirmative vote of a majority in interest of the Ordinary
Shares issuable upon exercise of the outstanding Company
Warrants as of the record date represented in person or by proxy
at the Special Meeting of Warrantholders and entitled to vote
thereon.
The Warrantholder Adjournment Proposal, if adopted, will allow
the Company’s board of directors to adjourn the Special
Meeting of Warrantholders to a later date or dates to permit
further solicitation of proxies in the event, based on the
tabulated votes, there are not sufficient votes at the time of
the Special Meeting of Warrantholders to approve the
consummation of the Warrant Amendment. The Warrantholder
Adjournment Proposal will only be presented to the Company
warrantholders in the event, based on the tabulated votes, there
are not sufficient votes at the time of the Special Meeting of
Warrantholders to approve the Warrant Amendment Proposal. In no
event will the Company adjourn the Special Meeting of
Warrantholders or consummate the Warrant Amendment beyond the
date by which it may properly do so under its Articles.
If the Warrantholder Adjournment Proposal is not approved by the
warrantholders, the Company’s board of directors may not be
able to adjourn the Special Meeting of Warrantholders to a later
date in the event, based on the tabulated votes, there are not
sufficient votes at the time of the Special Meeting of
Warrantholders to approve the Warrant Amendment Proposal. In
such event, the Warrant Amendment Proposal would not be approved
and, unless the Company were able to consummate a business
combination by January 30, 2010, it would be required to
liquidate and dissolve and the warrants would expire worthless.
Approval of the Warrantholder Adjournment Proposal requires the
affirmative vote of a majority in interest of the Ordinary
Shares issuable upon exercise of the outstanding Company
Warrants as of the record date represented in person or by proxy
at the Special Meeting of Warrantholders and entitled to vote
thereon. Approval of the Warrantholder Adjournment Proposal is
not conditioned upon the adoption of any of the other proposals.
THE COMPANY’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE COMPANY’S WARRANTHOLDERS VOTE “FOR” THE
APPROVAL OF THE WARRANTHOLDER ADJOURNMENT PROPOSAL.
The Company was incorporated under the laws of the Cayman
Islands as an exempted company with limited liability on
September 25, 2007. Exempted companies are Cayman Islands
companies that conduct business outside the Cayman Islands and
are required to be registered as such. We were incorporated for
the purpose of acquiring, through a merger, share capital
exchange, asset acquisition, share purchase, reorganization or
any other similar business combination, an operating business,
which the Company refers to as its initial business combination,
with a fair market value of at least 80% of the balance held in
the Company’s trust account (exclusive of the
underwriters’ deferred underwriting compensation plus
interest thereon held in the trust account) at the time of such
business combination and resulting in ownership by the Company
of at least 51% of the voting equity interests of the operating
business. To date, the Company’s efforts have been limited
to organizational activities, the IPO and the search for a
suitable business combination.
Master
Agreement
On December 10, 2009, the Company entered into the Master
Agreement with Overture Re Holdings, JNF, JNL and JNL Bermuda
and certain officers and directors of the Company. Pursuant to
the Master Agreement:
STEP 1
•
JNL to on the Closing Date beneficially own or have commitments
to acquire 24.5% of the Ordinary Shares of Overture Acquisition
Corp., as of the Closing Date, taking into account the Public
Share redemptions, the obligation of Overture Acquisition Corp.
to repurchase the Founder Shares and any issuance of Ordinary
Shares to JNL pursuant to the Master Agreement, by (a) open
market purchases, (b) negotiated purchases or
(c) private placement.
JNL Bermuda will have an option to reinsure 90% of the fixed
annuities and 50% of the variable annuities of JNL ($21.5M)
pursuant to Reinsurance Option and Contribution Agreement, plus
a securities portfolio ($98.5M), certain other assets and will
enter into an Investment Management Agreement with JNFAM. JNL
Bermuda will dividend a portion of the securities back to JNL to
reflect any decreases in the purchase price of JNL Bermuda.
•
Overture Re and JNL Bermuda will amalgamate with Overture Re
being the surviving entity — and obtain the option,
securities portfolio, certain other assets and the Investment
Management Agreement.
•
Overture Acquisition Corp. will have an option to acquire JNFAM.
STEP 2
•
Overture Re will exercise option and enter into Quota Share
Reinsurance Agreement with JNL pursuant to which an annuity life
insurance block of JNL is to be quota share reinsured by
Overture Re on a modified coinsurance basis.
•
Overture Re will assume the Investment Management Agreement with
JNFAM. Pursuant to this agreement, initially JNFAM will manage
20% of the regulatory capital of Overture Re and going forward,
will also manage 20% of any additional reinsurance assets
acquired by Overture Re.
•
Directors, management and Founders of Overture Acquisition Corp.
to acquire warrants in JNF pursuant to Warrant Subscription
Agreement.
•
Overture Acquisition Corp. may exercise the option to acquire
JNFAM.
On February 5, 2008, the Company consummated its IPO of
15,000,000 units at the offering price of $10.00 per unit
and received net proceeds of $145,988,526. Pursuant to a second
amended and restated Founders’ warrant securities purchase
agreement, dated as of January 18, 2008, our Founders, John
F. W.
Hunt, Marc J. Blazer (and certain entitles controlled by Marc J.
Blazer), Lawton W. Fitt, Paul S. Pressler, Mark Booth, Domenico
De Sole and Andrew H. Lufkin, purchased from us, in the
aggregate, 4,380,000 founder warrants for $4,380,000. The
purchase and issuance of the founder warrants occurred
immediately prior to the consummation of our IPO on a private
placement basis.
If the Transaction is consummated, the funds held in the trust
account will be released (i) to purchase JNL Bermuda,
(ii) to pay transaction fees and expenses; (ii) to pay
the Company’s tax obligations and deferred underwriting
discounts and commissions, including investment banking and
advisory fees; (iv) to pay holders of Public Shares who
properly exercise their redemption rights; and (v) for
working capital and general corporate purposes of the Company
and its subsidiaries. In addition, the funds held in the trust
account may be used to purchase Public Shares in privately
negotiated transactions.
The holders of Public Shares will be entitled to receive funds
from the trust account only in the event of the Company’s
liquidation or if they properly exercise their redemption rights
and the Transaction is actually completed. In no other
circumstances will a shareholder have any right or interest of
any kind to or in the trust account.
Pursuant to the prospectus for the Company’s IPO and the
Company’s Articles, the initial target business the Company
acquires must be an operating business and have a fair market
value equal to at least 80% of the balance held in the trust
account (exclusive of the underwriters’ deferred
underwriting compensation). Based in part on standards generally
accepted by the financial community and on the fairness opinion,
the Company believes the Transaction meets the operating
business and 80% threshold requirements.
The Company will proceed with the Transaction only if a majority
of the Public Shares present and entitled to vote at the
Extraordinary General Meeting, or an adjournment thereof,
approve the Business Combination and the Transaction. The
Company’s Founders agreed with the representative of the
underwriters of the IPO pursuant to a letter agreement to vote
its Founder Shares on the Business Combination Proposal in
accordance with the vote of holders of a majority of the Public
Shares. In addition, in connection with the IPO, the Founders of
the Company agreed to vote any Ordinary Shares they acquire in
the open market in favor of the Business Combination Proposal.
If the holders of 30% or more of the Public Shares vote against
the Business Combination Proposal and properly demand that the
Company redeem their Public Shares for a pro rata portion of the
trust account, the Company will not consummate the Transaction.
In that case, the Company will be forced to liquidate and
dissolve.
Our articles provide that if after 24 months from the date
of our final prospectus we have not consummated an initial
business combination we will immediately go into voluntary
liquidation. This provision may not be amended except with
consent of two-thirds of the issued and outstanding Ordinary
Shares voting, by way of special resolution, at a meeting in
which the holders of 100% of the issued and outstanding Ordinary
Shares must be present in order to constitute a quorum, or in
connection with the consummation of a business combination,
unless certain other conditions are satisfied. We will follow
the same procedures as if our shareholders had formally voted to
approve our voluntary winding up under the Companies Law. As a
result, no vote would be required from our shareholders to
commence such a voluntary winding up. Upon the appointment of
the liquidators, the directors’ powers are suspended. The
liquidators will give at least 21 days’ notice to
creditors of the liquidators’ intention to make a
distribution by notifying known creditors (if any) and by
placing a public advertisement in the Cayman Islands Official
Gazette and taking such further steps as the liquidators
consider appropriate after which the assets of the company would
be distributed. The proceeds of the trust account will not be
distributed until at least 21 days after the publication of
such advertisement (or such longer period as the liquidator in
the exercise of his or her discretion considers appropriate. As
soon as the affairs of the Company are fully
wound-up,
the liquidators must lay their final report and accounts before
a final general meeting, which must be called by a public notice
at least 21 days before such meeting takes place. After the
final meeting, the liquidators must make a return to the
registrar confirming the date on which the meeting was held, and
three months after the date of such filing, the Company is
dissolved. Pursuant to articles members of our audit committee
have been appointed to serve as the liquidators in the event we
do not complete an initial business combination by
January 30, 2010.
If we are unable to complete an initial business combination by
January 30, 2010, the liquidators will instruct the trustee
to distribute to all of our public shareholders, in proportion
to their respective equity interests, an aggregate sum equal to
the amount in the trust account, inclusive of any interest, plus
any remaining net assets (subject to our obligations under
Cayman Islands law to provide for claims of creditors). We
anticipate that the liquidators will notify the trustee of the
trust account to begin liquidating such assets promptly after
expiration of the 21 day period and anticipate it will take
no more than 10 business days to effectuate such distribution.
Our initial shareholders have waived their rights to participate
in any liquidation distribution with respect to their Founders
Shares. There will be no distribution from the trust account
with respect to our warrants, which will expire worthless. The
costs of liquidation will be met from our remaining assets
outside of the trust account. If such funds are insufficient,
Messrs. Hunt and Blazer have contractually agreed to
advance us the funds necessary to complete such liquidation
(currently anticipated to be no more than $15,000) and have
contractually agreed not to seek repayment of such expenses.
If we are unable to complete an initial business combination and
expend all of the net proceeds of our IPO, other than the
proceeds deposited in the trust account, and without taking into
account interest and dividends, if any, earned on the trust
account, the initial per-share liquidation price would be
approximately $10.04. The per-share liquidation price includes
$7.5 million in deferred underwriting discounts and
commissions that would also be distributable to the holders of
our Public Shares.
In any liquidation of the Company under Cayman Islands’
law, the proceeds deposited in the trust account could become
subject to the claims of our creditors (which could include
vendors and service providers we have engaged to assist us in
any way in connection with our search for a target business and
that are owed money by us, as well as target businesses
themselves) which could have higher priority than the claims of
our public shareholders. To the extent any such claims deplete
the trust account, we cannot assure you we will be able to
return to our public shareholders the liquidation amounts
payable to them. Furthermore, in certain limited circumstances,
the liquidators of the Company might seek to hold a shareholder
liable to contribute to our estate to the extent of
distributions received by them pursuant to the dissolution of
the trust account beyond the date of dissolution of the trust
account. Additionally, we cannot assure you that third parties
will not seek to recover from our shareholders amounts paid to
them by us. We cannot assure you that claims will not be brought
against you for these reasons.
John F. W. Hunt and Marc J. Blazer have agreed that they will be
personally liable by means of direct payment to the trust
account, to ensure that the proceeds in the trust account are
not reduced by the claims of target businesses, claims of
vendors or other entities that are owed money by us for services
rendered or contracted for or products sold to us or lenders for
borrowed money. However, the agreement entered into by
Messrs. Hunt and Blazer specifically provides there will be
no liability as to any claimed amounts owed to a third party who
executed a valid and enforceable waiver. However, in the event
that Messrs. Hunt and Blazer have liability to us under
these indemnification arrangements, we cannot assure you that
they will have the assets necessary to satisfy those
obligations. Accordingly, the actual per-share liquidation price
could be less than approximately $10.04, plus interest and
dividends, due to claims of creditors. Additionally, if we
become insolvent or a petition to wind up the Company is filed
against us which is not dismissed, the proceeds held in the
trust account could be subject to applicable insolvency law, and
may be included in our insolvent estate and subject to the
claims of third parties with priority over the claims of our
shareholders. To the extent any third-party claims arising out
of our insolvency deplete the trust account, we cannot assure
you we will be able to return to our public shareholders at
least $10.04 per share.
Our public shareholders will be entitled to receive funds from
the trust account only in the event of our liquidation or if
they seek to redeem their respective shares into cash upon an
initial business combination
which the shareholder voted against and which is completed by
us. In no other circumstances will a shareholder have any right
or interest of any kind to or in the trust account.
If the Company becomes insolvent
and/or is
forced to seek court supervision in respect of its liquidation,
or a petition to wind up the Company is filed against us which
is not dismissed, any distributions received by shareholders
could, in certain circumstances, be viewed under applicable
debtor/creditor
and/or
insolvency laws as either a preferential payment or a fraudulent
transfer or may otherwise be regarded as an improper
distribution to shareholders. As a result, a liquidator of the
Company or defrauded creditor of the Company may apply to the
Cayman Islands court seeking to recover amounts received by our
public shareholders. We cannot assure you that claims will not
be brought against public shareholders for these reasons.
The Company currently maintains its registered office at Maples
Corporate Services Limited, Ugland House, Grand Cayman,
KY1-1104, Cayman Islands. The Company intends to maintain
executive offices in Bermuda following consummation of the
Transaction.
The Company has two executive officers: John F. Hunt and Marc
Blazer. Neither of these officers, each of whom the Company is
dependent upon, has entered into employment agreements with the
Company and neither is obligated to devote any specific number
of hours to the Company’s matters and both intend to devote
only as much time as they deem necessary to the Company’s
affairs. Accordingly, because a target business has been
selected, the executive officers will spend more time
investigating such target business and negotiating and
processing the initial business combination (and consequently
spend more time on the Company’s affairs) than they did
prior to locating a suitable target business. The Company does
not intend to have any full time employees prior to the
consummation of the Transaction.
The Company has registered its Ordinary Shares and Public
Warrants under the Exchange Act, as amended, and has reporting
obligations, including the requirement to file annual, quarterly
and current reports with the SEC. In accordance with the
requirements of the Exchange Act, the Company’s annual
reports on
Form 10-K
contain financial statements audited and reported on by its
independent registered public accountants. The Company currently
make available materials it files with or furnishes to the SEC
on its website. The Company’s reports filed with the SEC
can be inspected and copied at the SEC’s public reference
room at 100 F Street, N.E., Washington, D.C.
20549. The public may obtain information about the operation of
the public reference room by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains a Web site at
http://www.sec.gov
which contains the registration statements, reports, proxy and
information statements and information regarding issuers that
file electronically with the SEC. The Company will provide
electronic or paper copies of such materials free of charge upon
request.
The Company is currently required to comply with the internal
control requirements of the Sarbanes-Oxley Act; however, it is
not yet required to be audited for compliance with these
provisions.
The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with the Company’s consolidated financial
statements and related notes appearing elsewhere in this proxy
statement/prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and
assumptions. The actual results may differ materially from those
anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, those which are
not within our control.
The Company was incorporated under the laws of the Cayman
Islands as an exempted company with limited liability on
September 25, 2007. Exempted companies are Cayman Islands
companies that conduct business outside the Cayman Islands and
are required to be registered as such. We were incorporated for
the purpose of effecting a merger, share capital exchange, asset
acquisition, share purchase, reorganization or any other similar
business combination with one or more operating businesses. The
Company intends to utilize cash derived from the proceeds of its
IPO and the private placement of our founder warrants, our share
capital, debt or a combination of cash, capital shares and debt
in effecting an initial business combination.
On February 5, 2008, the Company completed its initial
public offering of 15,000,000 units at $10.00 per unit. In
conjunction with the consummation of the initial public offering
it sold an aggregate of 4,380,000 sponsors’ warrants to
certain existing shareholders pursuant to a sponsors’
warrant purchase agreement dated January 18, 2008 on a
private placement basis at a price of $1.00 per warrant, for an
aggregate price of $4,380,000. The total gross proceeds from the
initial public offering, excluding the warrants sold on a
private placement basis amounted to $150,000,000. After the
payment of offering expenses, the net proceeds to the Company
amounted to $145,988,526. Each unit consists of one ordinary
share, $0.0001 par value per share, and one redeemable
warrant. Each warrant entitles the holder to purchase from the
Company one ordinary share at an exercise price of $7.00
commencing the later of the completion of an initial business
combination or fifteen months from the effective date of the
initial public offering (or April 30, 2009) and
expiring five years from the effective date of the initial
public offering (or January 30, 2013). The warrants will be
redeemable by the Company, at a price of $0.01 per warrant upon
30 days notice after the warrants become exercisable, only
in the event that the last sale price of the ordinary shares
equals or exceeds $14.25 per share for any 20 trading days
within a 30 trading day period ending on the third day prior to
the date on which notice of redemption is given. See
page 154 “Proposals to be Considered by the
Warrantholders — The Warrant Amendment Proposal”
for the proposed revisions to the terms of the Warrants.
Developments
in Finding a Suitable Business Combination
Following the initial public offering, the Company spent
18 months identifying and evaluating prospective target
businesses. In mid-2009, the Company commenced discussions with
JNF on possible transaction structures which would allow for the
establishment of an independent reinsurer while meeting the
business acquisition requirements of the SPAC.
On December 10, 2009, the Company entered into a Master
Agreement with JNF, JNL, JNFAM, JNL Bermuda, Overture Re
Holdings and certain sponsors of the Company (the “Master
Agreement”), pursuant to which the parties agreed to
consummate the Transaction. If the Transaction is consummated,
the Company will own 100% of a holding company, Overture Re
Holdings, which owns 100% of a Bermuda-based reinsurer, Overture
Re. Reinsurance is an arrangement under which an insurance
company known as the reinsurer agrees in a contract called a
treaty to assume specified risks of another insurance company
known as the ceding company (or cedant). The reinsurer assumes
all or a portion of the insurance underwritten by the ceding
company. The reinsurer agrees to indemnify the ceding insurer on
the risk so transferred. In exchange for assuming the risks of
the ceding company, the reinsurer may receive compensation in
the form of income derived from the underlying reinsured
policies.
We have neither engaged in any operations nor generated any
revenues to date. Our entire activity since inception has been
to prepare for and consummate our initial public offering and to
identify and investigate targets for a potential business
combination. We will not generate any operating revenues until
consummation of a business combination. We will generate
non-operating income in the form of interest and dividend income
on cash and cash equivalents from the funds held in our trust
account which we invested mainly in U.S. Treasury Bills.
For the period from September 25, 2007 (inception) through
December 31, 2007, we had a net loss of $4,500. We incurred
$4,500 in formation and operating costs during the period from
September 25, 2007 (inception) through December 31,2007. All of those costs related to incorporation fees.
For the year ended December 31, 2008, we had net income of
$1,297,848, consisting of approximately $1,720,000 of interest
and dividend income on the trust fund offset by approximately
$420,000 formation and operating cost. The main components of
the formation and operating cost included approximately $235,000
for professional fees, approximately $88,000 of travel expenses,
approximately $70,000 of insurance, approximately $22,000 of
printing and reproduction costs and $5,000 for miscellaneous
expenses.
Interest income in 2008 was earned on the net proceeds from our
initial public offering and the sale of sponsor warrants which
was placed in a trust account. During the fiscal year ended
December 31, 2008, $1,656,930 was released from the trust
account for working capital purposes.
Results of Operations and Known Trends or Future Events for
the nine months ended September 30, 2009 and 2008
For the nine months ended September 30, 2009 and 2008, for
the three months ended September 30, 2009 and 2008, and for
the period from September 25, 2007 (inception) through
September 30, 2009, we had a net (loss) income of
$(295,379), $1,281,019, $(72,518), $407,107 and $997,969,
respectively. Our income was all derived from interest and
dividends on the net proceeds of our initial public offering
offset by formation and operating costs.
During the three months ended September 30, 2009 and 2008,
these expenses consisted of approximately $46,000 and $22,000 of
legal and accounting, respectively, insurance of approximately
$19,000 and $19,000, respectively, administrative services of
approximately $11,000 and $16,000, respectively, travel related
costs of approximately $35,000 and $54,000, respectively and
approximately $1,000 and $1,000, respectively, for other
miscellaneous expenses incurred. For the nine months ended
September 30, 2009 and 2008, expenses consisted of
approximately $193,000 and $171,000 of legal and accounting,
respectively, approximately $58,000 and $51,000 of insurance,
respectively, approximately $37,000 and $35,000 for
administrative services, respectively, approximately $62,000 and
$85,000 of travel related costs, respectively, and approximately
$21,000 and $11,000, respectively, for other miscellaneous
expenses incurred. For the period from September 25, 2007
(inception) through September 30, 2009, approximately
$405,000 of those expenses consisted of legal and accounting,
approximately $129,000 for director and officer insurance,
approximately $87,000 for administrative services, approximately
$151,000 for travel related costs and the balance of
approximately $26,000 for other miscellaneous expenses.
All activity from September 25, 2007 (inception) through
February 5, 2008 relates to our formation and our initial
public offering described above. Since February 6, 2008, we
have been searching for a target company to acquire.
We have no obligations, assets or liabilities which would be
considered off-balance sheet arrangements. We do not participate
in transactions that create relationships with unconsolidated
entities or financial partnerships, often referred to as
variable interest entities, which would have been established
for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing
arrangements and have never established any special purpose
entities. We have not guaranteed any debt or commitments of
other entities or entered into any options on non-financial
assets.
We do not have any long-term debt, capital lease obligations,
operating lease obligations, purchase obligations or other
long-term liabilities.
Income
Taxes
Under current Cayman Islands law, Overture is not obligated to
pay any taxes in the Cayman Islands on either income or capital
gains. The
Governor-in-Cabinet
of Cayman Islands has granted us an exemption from the
imposition of any such tax for twenty years from October 9,2007 until October 9, 2027. We cannot be assured that after
such date we would not be subject to any such tax. If we were to
become subject to taxation in the Cayman Islands, our financial
condition and results of operations could be significantly and
negatively affected.
As of September 30, 2009 and December 31, 2008, we had
cash of $800,943 and $1,112,952 in our operating account and
$73,522 and $62,148 in our trust account which is available for
us to use for working capital and taxes. Restricted cash of
$150,530,000 and $150,530,000 as of September 30, 2009 and
December 31, 2008 was held in trust for holders of our
publicly traded shares. Until our initial public offering, as
described above, our only source of liquidity was the proceeds
from the initial private sale of our ordinary shares and the
subsequent loans made by two initial shareholders. As of
December 31, 2008, the loans were repaid in full. Since our
initial public offering, our only source of revenue has been
from the interest and dividends earned on our cash accounts. The
proceeds from our initial public offering that were placed in a
trust account were invested in United States “government
securities” within the meaning of Section 2(a)(16) of
the Investment Company Act of 1940 having a maturity of
180 days or less or in money market funds meeting certain
conditions under
rule 2a-7
promulgated under the Investment Company Act of 1940. The funds
placed in the trust account were earning interest at a rate of
approximately .02% and .02% as of September 30, 2009 and
December 31, 2008.
We will have used substantially all of the net proceeds of our
initial public offering and sale of Founder warrants in
connection with acquiring one or more target businesses,
including identifying and evaluating prospective target
businesses, selecting one or more target businesses, and
structuring, negotiating and consummating the business
combination. While not expected, to the extent that our share
capital is used in whole or in part as consideration to effect
an initial business combination, the proceeds held in the trust
account as well as any other net proceeds not expended will be
used to finance the operations of the target business. Such
working capital funds could be used in a variety of ways
including continuing or expanding the target business’
operations, for strategic acquisitions and for marketing,
research and development of existing or new products. Such funds
could also be used to repay any operating expenses or
finder’s fees which we had incurred prior to the completion
of our business combination if the funds available to us outside
of the trust account were insufficient to cover such expenses.
We expect that in connection with acquiring the target
businesses related to the Transaction and identifying and
evaluating prospective target businesses, we will have expended
approximately $1,000,000 for expenses for the due diligence and
investigation of a target business or businesses; $550,000 for
legal and
accounting fees relating to our SEC reporting obligations;
$150,000 for insurance; and approximately $100,000 for general
working capital that have been used for miscellaneous expenses.
We may need to obtain additional financing either to consummate
our initial business combination or because we become obligated
to convert into cash a significant number of shares of public
shareholders voting against our initial business combination, in
which case we may issue additional securities or incur debt in
connection with such business combination. Following our initial
business combination, if cash on hand is insufficient, we may
need to obtain additional financing in order to meet our
obligations. We have not taken any steps to obtain such
financing and there is no assurance we would be able to obtain
such financing.
Our funds may not be sufficient to maintain us until a business
combination is consummated. In addition, there can be no
assurance that we will enter into a business combination prior
to January 30, 2010. Pursuant to our Articles, if we are
unable to consummate a timely business combination, we will go
into automatic liquidation and return the funds held in the
trust account to the holders of shares issued in the IPO as
previously described. These factors raise substantial doubt
about the Company’s ability to continue as a going concern.
Related
Party Transactions
On October 3, 2007, John F. W. Hunt and Marc J. Blazer (and
certain entities controlled by Marc J. Blazer) advanced on
our behalf a total of $175,000 for payment of expenses related
to our initial public offering. This advance was non-interest
bearing, unsecured and was due at the earlier of October 1,2008 or the consummation of our initial public offering. We
repaid the loans on February 6, 2008 from the proceeds of
our initial public offering not placed in the trust account.
John F. W. Hunt, Lawton W. Fitt, Andrew H. Lufkin, Marc J.
Blazer, Paul S. Pressler, Mark Booth and Domenico De Sole
purchased 2,380,000, 800,000, 500,000, 300,000, 200,000, 100,000
and 100,000 sponsors’ warrants, respectively, at $1.00 per
warrant (for a total purchase price of $4.38 million), from
us. These purchases took place on a private placement basis on
February 5, 2008 immediately prior to the consummation of
our initial public offering.
Our financial statements and the notes to our financial
statements contain information that is pertinent to
management’s discussion and analysis. The preparation of
financial statements in conformity with accounting principles
generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities. Management bases its estimates on historical
experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. On a continual basis, management reviews its estimates
utilizing currently available information, changes in facts and
circumstances, historical experience and reasonable assumptions.
After such reviews, and if deemed appropriate, those estimates
are adjusted accordingly. Actual results may vary from these
estimates and assumptions under different
and/or
future circumstances. Management considers an accounting
estimate to be critical if:
a. it requires assumptions to be made that were uncertain
at the time the estimate was made; and
b. changes in the estimate, or the use of different
estimating methods that could have been selected, could have a
material impact on the Company’s results of operations or
financial condition.
The following critical accounting policies have been identified
that affect the more significant judgments and estimates used in
the preparation of the financial statements. We believe that the
following are some of the more critical judgment areas in the
application of our accounting policies that affect our financial
condition and results of operations. We have discussed the
application of these critical accounting policies with our
Audit Committee. The following critical accounting policies are
not intended to be a comprehensive list of all of the
Company’s accounting policies or estimates.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities and
disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
In June 2009, the FASB issued FASB ASC 105, “Generally
Accepted Accounting Principles”, which establishes the FASB
Accounting Standards Codification as the sole source of
authoritative generally accepted accounting principles. Pursuant
to the provisions of FASB ASC 105, the Company has updated
references to GAAP in its financial statements issued for the
period ended September 30, 2009. The adoption of FASB ASC
105 did not impact the Company’s financial position or
results of operations.
In September 2006, the FASB issued guidance, included in FASB
ASC 820, “Fair Value Measurements and Disclosures”,
which was to be effective for fiscal years beginning after
November 15, 2007. This guidance defines fair value,
establishes a frame work for measuring fair value in accordance
with Generally Accepted Accounting Principles, and expands
disclosures about fair value measurements. The Statement
codifies the definition of fair value as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date. The standard clarifies the principle that fair
value should be based on the assumptions market participants
would use when pricing the asset or liability and establishes a
fair value hierarchy that prioritizes the information used to
develop those assumptions. The adoption of these requirements
did not have a material effect on the Company’s financial
position or results of operations.
In February 2007, the FASB issued guidance which permits
entities to choose to measure many financial instruments and
certain other items at fair value. This guidance is included in
FASB ASC 820, “Fair Value Measurements and
Disclosures”. The fair value option established by this
guidance permits all entities to choose to measure eligible
items at fair value at specified election dates. A business
entity shall report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each
subsequent reporting date. The adoption of these requirements
did not have a material effect on the Company’s financial
position or results of operations.
In December 2007, the FASB issued requirements which changes
accounting for acquisitions that close beginning in 2009 in a
number of areas including the treatment of contingent
consideration, contingencies, acquisition costs, in-process
research and development and restructuring costs. These
requirements are included in FASB ASC 805, “Business
Combinations”. More transactions and events will qualify as
business combinations and will be accounted for at fair value
under the new standard. The new requirements promote greater use
of fair values in financial reporting. In addition, under the
new requirements, changes in deferred tax asset valuation
allowances and acquired income tax uncertainties in a business
combination after the measurement period will impact income tax
expense. Some of the changes will introduce more volatility into
earnings. Per FASB ASC 805, these requirements are effective for
fiscal years beginning on or after December 15, 2008. The
adoption of these requirements did not have a material effect on
the Company’s financial position or results of operations.
In December 2007, the FASB issued requirements that will change
the accounting and reporting for minority interests, which will
be recharacterized as noncontrolling interests (NCI) and
classified as a component of equity. These requirements are
included in FASB ASC 810, “Consolidation”. This new
consolidation method will significantly change the accounting
for transactions with minority interest holders. Per FASB ASC
810, these requirements are effective for fiscal years beginning
after December 15, 2008.
These revised requirements would have an impact on the
presentation and disclosure of the noncontrolling interests of
any non-wholly owned business acquired in the future.
In February 2008, the FASB issued guidance which removed leasing
transactions from the scope of FASB ASC 820, “Fair Value
Measurements and Disclosures”, and defer its effective date
for one year relative to certain nonfinancial assets and
liabilities. As a result, the application of the definition of
fair value and related disclosures of FASB ASC 820 (as impacted
by the additional guidance) was effective for the Company
beginning January 1, 2008 on a prospective basis with
respect to fair value measurements of (a) nonfinancial
assets and liabilities that are recognized or disclosed at fair
value in the Company’s financial statements on a recurring
basis (at least annually) and (b) all financial assets and
liabilities. This adoption did not have a material impact on the
Company’s results of operations or financial condition.
In October 2008, the FASB issued guidance which clarifies the
application of FASB ASC 820, “Fair Value Measurements and
Disclosures”, which the Company adopted as of
January 1, 2008, in cases where a market is not active. The
Company has considered this guidance in its determination of
estimated fair values as of September 30, 2009 and
December 31, 2008, and the impact was not material.
In March 2008, the FASB issued requirements to enhance
disclosures about an entity’s derivative and hedging
activities and thereby improves the transparency of financial
reporting. These requirements are included in FASB ASC 815,
“Derivatives and Hedging”. Disclosing the fair values
of derivative instruments and their gains and losses in a
tabular format provides a more complete picture of the location
in an entity’s financial statements of both the derivative
positions existing at period end and the effect of using
derivatives during the reporting period. Entities are required
to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for, and
(c) how derivative instruments and related hedged items
affect an entity’s financial position, financial
performance, and cash flows. The requirements included in FASB
ASC 815 are effective for financial statements issued for fiscal
years and interim periods beginning after November 15,2008. Early adoption is permitted, but not expected. The
adoption of these requirements did not have a material effect on
the Company’s financial position or results of operations.
In May 2008, the FASB issued guidance intended to improve
financial reporting by identifying a consistent hierarchy for
selecting accounting principles to be used in preparing
financial statements that are prepared in conformance with
generally accepted accounting principles. This guidance is
included in FASB ASC 105, “Generally Accepted Accounting
Principles”. This guidance, unlike prior standards is
directed to the entity rather than the auditor. Per FASB ASC
105, the guidance is effective for reporting periods (annual or
interim) after September 15, 2009, and is not expected to
have any impact on the Company’s results of operations,
financial condition or liquidity.
In June 2008, FASB issued requirements for unvested share-based
payment awards that contain rights to receive nonforfeitable
dividends (whether paid or unpaid) are participating securities,
and should be included in the two- class method of computing
Earnings Per Share (“EPS”) which is included in FASB
ASC 260, “Earnings Per Share”. Per FASB ASC 260 the
requirements are effective for fiscal years beginning after
December 15, 2008, and interim periods within those years.
The adoption of these requirements did not have a material
effect on the Company’s financial position or results of
operations.
In April 2009, FASB issued requirements for disclosures about
the fair value of financial instruments for interim reporting
periods which are included in FASB ASC 825, “Financial
Instruments”. Per FASB ASC 825, the requirements are
effective for interim reporting periods ending after
June 15, 2009. The adoption of these requirements did not
have a material effect on the Company’s condensed financial
position or results of operations.
In April 2009, FASB issued additional guidance for Fair Value
Measurements when the volume and level of activity for the asset
or liability has significantly decreased which is included in
FASB ASC 820, “Fair Value Measurements and
Disclosures.” The requirements are effective for interim
reporting periods ending after June 15, 2009. The adoption
of these requirements did not have a material effect on the
Company’s financial position or results of operations.
In April 2009 FASB issued additional clarification on the
initial recognition and measurement of assets acquired and
liabilities assumed in a business combination that arise from
contingencies which is included in FASB ASC 805, “Business
Combinations”. The adoption of these requirements did not
have a material effect on the Company’s financial position
or results of operations, but will effect any future business
combinations.
In May 2009, FASB issued guidance that establishes general
standards of accounting for, and disclosure of events that occur
subsequent to the balance sheet date but before the financial
statements are issued, which is included in FASB ASC 855,
“Subsequent Events”. The requirements are effective
for all reporting periods ending after June 15, 2009. The
adoption of these requirements did not have a material effect on
the Company’s financial position or results of operations.
Management does not believe that any other recently issued, but
not yet effective, accounting standards if currently adopted
would have a material effect on the accompanying financial
statements.
POSSIBLE
FUTURE IMPLICATIONS OF THE TRANSACTION ON OUR FINANCIAL
STATEMENTS
Overview
Our wholly owned subsidiary Overture Re will be a Bermuda-based
long term reinsurer with an emphasis on annuity blocks and is
being used to effectuate the amalgamation in connection with the
Transaction.
Overture Re is obtaining its initial reinsurance contracts from
JNL. While JNL’s historical carve-out financial statements
(“JNL Carve-Out Financial Statements”) relate only to
the JNL carve-out block, Overture Re’s strategy going
forward will be to acquire blocks of annuity and life insurance
policies from third parties, acquire additional blocks (or flow)
of fixed and variable annuity policies from JNL, and to seek
investors desiring segregated accounts focused on discrete
reinsurance opportunities. Therefore,
period-to-period
comparisons of JNL’s carve-out underwriting results to
Overture Re’s expected results going forward may not be
meaningful. In addition, due to the nature of Overture Re’s
reinsurance and investment strategies, its operating results
will likely fluctuate from period to period.
A portion of Overture Re’s business will be characterized
by reinsurance contracts of blocks of annuities and their
related assets. Cedants generally enter reinsurance contracts:
•
to transfer policy and balance sheet risk;
•
to increase their own underwriting capacity; and
•
to meet capital requirements of the regulators of insurance
companies.
The categories of annuities being acquired from JNL are fixed
annuities, which carry a general account portfolio that requires
it to manage typically fixed income assets and variable
annuities, which carry a separate account portfolio where the
market risk of the investments remain with the annuity holder.
Some variable annuities carry fixed feature riders which
generate general account assets. It is anticipated that
acquisitions of future fixed annuity business will come from
third parties. Overture Re’s management currently
anticipates that the variable annuity contracts will initially
be reinsured from existing blocks of JNL originated policies
(“Already Originated Basis”), but Overture Re expects
that in the future it will reinsure variable annuity contracts
originated by JNL with the intention of reinsuring them with
Overture Re (“Flow Basis”).
Overture Re’s primary business will be annuity reinsurance,
which involves reinsuring annuity policies, while in the
accumulation phase, that are often in force for the underlying
individual contract holders. Each year, however, a portion of
the business under existing treaties terminates due to, among
other things, lapses or voluntary surrenders of underlying
policies, and deaths of contract holders.
As is customary in the reinsurance business, cedants continually
update, refine, and revise reinsurance information provided to
the reinsurer. Such revised information will be used by Overture
Re in preparation of its financial statements and Overture Re
anticipates that the financial effects resulting from the
incorporation of revised data will be reflected in Overture
Re’s financial statements going forward.
Overture Re also intends to file in January 2010 with the
Bermuda Monetary Authority for approval as a segregated accounts
company (“SAC”) under the Segregated Accounts
Companies Act of 2000, as amended. As a SAC, Overture Re can
create separate accounts with assets and liabilities that are
segregated from the assets and liabilities of other accounts and
are held for the beneficial interest of the account holder.
Those segregated accounts would not form part of Overture
Re’s or our general assets and liabilities in the event of
a liquidation or sale.
Critical
Accounting Policies for the Company Going Forward
Overture Re will have its own significant accounting policies
tailored to it as a reinsurer after the Transaction occurs and
Overture Re begins operations as a foreign reinsurer. While it
is anticipated that its critical accounting policies will be
substantially similar to those described in Note 2 to the
JNL Carve-Out Financial Statements, it is expected that there
will be some notable differences as Overture Re will be
operating generally more as a reinsurer, and not as much as an
exclusive insurance company as JNL. Therefore the descriptions
of Overture Re’s anticipated accounting policies below are
forward-looking and may differ materially from those accounting
policies which are actually implemented.
Deferred
Acquisition Costs
It is anticipated that in the future Overture Re will enter into
reinsurance contracts on fixed annuity business from third
parties. It is also anticipated that the variable annuity
contracts will initially be reinsured from JNL or its affiliates
on an Already Originated Basis, but it is expected that in the
future Overture Re may reinsure variable annuity contracts on a
Flow Basis from JNL. Deferred policy acquisition costs
(“DAC”) are costs which relate to and vary with the
purchase of new business, and are deferred to the extent that
such costs are deemed recoverable from future profits. For
Overture Re, DAC consists solely of deferred ceding commissions.
DAC is amortized in relation to the associated gross margins as
promulgated by Statement of Financial Accounting Standards
(“SFAS”) No. 97, “Accounting and Reporting
by Insurance Enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from the Sale of
Investments”. Revisions to estimates result in changes to
the amounts expensed in the reporting period in which the
revisions are made and could result in the impairment of the
asset and charge to income if estimated future profits are less
than unamortized deferred amounts. In the JNL Carve-Out
Financial Statements, DAC amortization is based on the
anticipated gross profits of the blocks being reinsured.
Use of
Estimates and Assumptions
It is anticipated that the preparation of Overture Re’s
financial statements in conformity with GAAP will require
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements, and income and expenses during the reporting period.
It is anticipated that Overture Re’s principal estimates
will include deferred policy acquisition costs, value of
business acquired, and policy and contract reserves. In
developing the estimates and assumptions, it is expected that
Overture Re’s management will use all available evidence.
Because of uncertainties associated with estimating the amounts,
timing and likelihood of possible outcomes, actual results could
differ from these estimates.
Income
Taxes
Under current Bermuda and Cayman Islands law, it is anticipated
that Overture Re will not be obligated to pay any taxes in
Bermuda or the Cayman Islands on either income or capital gains.
Assets
Held by JNL
Receivable from JNL will represent assets held by Jefferson
National Life Insurance Company assuming no carve-out (the
“JNL Entire Entity”) related to the fixed annuity
policy and contract reserves related to the Block. Cash and
invested assets related to the carve-out Block were co-mingled
with other business of JNL
Entire Entity since it has historically managed and accounted
for its cash and investment portfolio as a single pool. As such,
specific assets supporting the policy liabilities of the Block
contemplated in the JNL Carve-Out Financial Statements cannot be
separately identified. However, at the time of closing of the
Transaction, a pool of assets will be segregated by JNL Entire
Entity, placed in trust and deemed to support the Overture Re
receivable from JNL on a going forward basis.
Separate
Account Assets and Liabilities
Overture Re’s interest in separate account assets and
liabilities, if any, will be reported at estimated fair value
and represent segregated funds that are invested on behalf of
and at the direction of policyholders. Overture Re expects the
assets will consist principally of common stocks, fixed
maturities and short-term investments. The assets of each
account will be legally segregated and will generally not
subject to claims that arise out of any other business of the
Company. Investment risks associated with market value changes
will be borne by the customers, except to the extent of minimum
guarantees made by JNL with respect to certain accounts. The
investment income and gains and losses for separate accounts
generally accrue to policyholders. Fees for administering these
policies and mortality and risk charges will be included in
policyholder fee income. Because the initial reinsurance
transactions with JNL will be on a modified coinsurance basis,
the separate account reserves will be maintained 100% on
JNL’s balance sheet and thus will not appear on Overture
Re’s balance sheet for GAAP purposes.
In accordance with the provisions of SFAS No. 97,
reserves held for annuities in the accumulation phase will be
held at fund value.
Policyholder
Fee Income
Overture Re anticipates policyholder fee income will consist
primarily of fees associated with investment management,
administration and contract guarantees from separate accounts
and will be recognized as income when charged to the underlying
account. For the initial Transaction, Overture Re’s
policyholder fee income will be allocated to Overture Re based
on the percentage of the Block reinsured under the reinsurance
contract.
Surrender
Charges
Surrender charges will consist of fees billed to contract
holders for withdrawal of annuity deposits before the expiration
of the surrender charge period. Surrender charges will be
recognized as income when deducted from the underlying account.
For the initial Transaction, Overture Re’s surrender
charges will be allocated to Overture Re based on the percentage
of the Block reinsured under the reinsurance contract.
Valuation
of Embedded Derivatives
Reinsurance treaties written on a modified coinsurance or funds
withheld basis are subject to the provisions of SFAS 133
Implementation Issue No. B36, “Embedded Derivatives:
Modified Coinsurance Arrangements and Debt Instruments That
Incorporate Credit Risk Exposures That Are Unrelated or Only
Partially Related to the Creditworthiness of the Obligor under
Those Instruments” (“Issue B36”). Overture
Re’s modified coinsurance receivable or funds withheld at
interest balances, associated with its reinsurance of annuity
contracts, will be subject to the provisions of Issue B36.
Management believes the embedded derivative feature in each of
these reinsurance treaties is similar to a total return swap on
the assets held by the ceding companies. The valuation of the
Issue B36 embedded derivative is sensitive to the credit spread
environment. Increases in credit spreads result in a decrease in
value of the embedded derivative and therefore an increase in
investment related losses.
Liabilities
for Future Policy Benefits and Other Policy
Liabilities
Liabilities for future policy benefits under annuity policies
(policy reserves) will be computed based upon expected
investment yields, mortality and withdrawal (lapse) rates, and
other assumptions, including a provision for adverse deviation
from expected claim levels. Overture Re will rely primarily on
its own valuation and administration systems to establish policy
reserves. The policy reserves established may differ from those
established by the ceding companies due to the use of different
mortality and other assumptions. However, Overture Re will rely
upon its ceding company clients to provide accurate data,
including policy-level information, premiums and claims, which
is the primary information used to establish reserves. Overture
Re anticipates its administration departments will work directly
with its clients to help ensure information is submitted by them
in accordance with the reinsurance contracts. Additionally,
Overture Re will perform periodic audits of the information
provided by ceding companies. Overture Re anticipates it will
establish reserves for processing backlogs with a goal of
clearing all backlogs within a
ninety-day
period. The backlogs are typically due to data errors discovered
or computer file compatibility issues, since much of the data
reported to Overture Re will be in electronic format and will be
uploaded to its computer systems.
Overture Re expects to periodically review actual historical
experience and relative anticipated experience compared to the
assumptions used to establish aggregate policy reserves.
Further, Overture Re will establish premium deficiency reserves
if actual and anticipated experience indicates that existing
aggregate policy reserves, together with the present value of
future gross premiums, will not be sufficient to cover the
present value of future benefits, settlement and maintenance
costs and to recover unamortized acquisition costs. The premium
deficiency reserve will be established through a charge to
income, as well as a reduction to unamortized acquisition costs
and, to the extent there are no unamortized acquisition costs,
an increase to future policy benefits. Because of the many
assumptions and estimates used in establishing reserves and the
long-term nature of Overture Re’s reinsurance contracts,
the reserving process, while based on actuarial science, will be
inherently uncertain. If Overture Re’s assumptions,
particularly on mortality, are inaccurate, its reserves may be
inadequate to pay claims and there could be a material adverse
effect on its results of operations and financial condition.
Other policy claims and benefits include claims payable for
incurred but not reported losses, which will be determined using
case-basis estimates and lag studies of past experience. These
estimates will be periodically reviewed and any adjustments to
such estimates, if necessary, will be reflected in current
operations. The time lag from the date of the claim or death to
the date when the ceding company reports the claim to Overture
Re can be several months and can vary significantly by ceding
company and business segment. Overture Re anticipates it will
update its analysis of incurred but not reported claims,
including lag studies, on a periodic basis and adjusts its claim
liabilities accordingly. The adjustments in a given period will
generally not be significant relative to the overall policy
liabilities.
Liquidity
and Capital Resources
It is anticipated that Overture Re’s principal cash inflows
from its reinsurance operations will be premiums and deposit
funds received from ceding companies. The primary liquidity
concern with respect to these cash flows would be early
recapture of the reinsurance contract by the ceding company and
lapses of annuity products reinsured by Overture Re. It is
expected that Overture Re’s principal cash inflows from its
investing activities will result from investment income,
maturity and sales of invested assets, and repayments of
principal. The primary liquidity concern with respect to those
cash inflows will relate to the risk of default by debtors and
interest rate volatility. It is anticipated that Overture Re
will manage these risks very closely.
It is anticipated that Overture Re’s principal cash
outflows will primarily relate to the payment of claims
liabilities, interest credited, operating expenses, income
taxes, and principal and interest under debt and other financing
obligations. Overture Re will seek to limit its exposure to loss
on any single insured and to recover a portion of benefits paid
by ceding reinsurance to other insurance enterprises or
reinsurers under excess coverage and coinsurance contracts It is
anticipated that Overture Re will perform annual financial
reviews of its retrocessionaires to evaluate financial stability
and performance; however, no assurance can be given as to the
future performance of such retrocessionaires or as to the
recoverability of any such claims. It is anticipated
that Overture Re’s current sources of liquidity, as of the
Closing Date of the Transaction, will be adequate to meet its
cash requirements for the next 12 months.
Letters
of Credit
After the Transaction, it is expected that Overture Re will try
to obtain letters of credit, issued by banks, in favor of
various affiliated and unaffiliated insurance companies from
which Overture Re would assume future business. These letters of
credit would represent guarantees of performance under the
reinsurance agreements Overture Re intends to enter into, and
allow ceding companies to take statutory reserve credits.
Certain of these letters of credit would most likely contain
financial covenant restrictions. Additionally, it is anticipated
that Overture Re would utilize letters of credit to secure
statutory reserve credits if and when appropriate.
Management believes that other insurers will want to cede
business to Overture Re, which is an offshore reinsurer that
will have a reduced amount of regulatory capital required in
certain jurisdictions such as the U.S. The capital required
to support the business in offshore reinsurers reflects more
realistic expectations than the original jurisdiction of the
business, where capital requirements are often considered to be
quite conservative.
Asset/Liability
Management
It is anticipated that Overture Re will manage its assets using
an approach that is intended to balance quality,
diversification, asset/liability matching, liquidity and
investment return. The goals of the investment process are to
optimize after-tax, risk-adjusted investment income and
after-tax, risk-adjusted total return while managing the assets
and liabilities on a cash flow and duration basis.
It is anticipated that Overture Re will establish target asset
portfolios for each major insurance product, which represent the
investment strategies intended to profitably fund its
liabilities within acceptable risk parameters. These strategies
include objectives for effective duration, yield curve
sensitivity and convexity, liquidity, asset sector concentration
and credit quality.
Overture Re will enter into sales of investment securities under
agreements to repurchase the same securities. These arrangements
will be used for purposes of short-term financing. Overture Re
may also occasionally enter into arrangements to purchase
securities under agreements to resell the same securities.
Amounts outstanding, if any, will be reported in cash and cash
equivalents. These agreements will be primarily used as yield
enhancement alternatives to other cash equivalent investments.
Further, Overture Re may enter into securities lending
agreements whereby certain securities are loaned to third
parties, primarily major brokerage firms, in order to earn
additional yield. The cash collateral for the loaned securities
would be reported in cash and the offsetting collateral
repayment obligation would be reported in other liabilities.
It is anticipated that Overture Re’s asset-intensive
products will be primarily supported by investments in fixed
maturity securities reflected on the Company’s balance
sheet and under modified coinsurance or funds withheld
arrangements with the ceding company. Investment guidelines will
be established to structure the investment portfolio based upon
the type, duration and behavior of products in the liability
portfolio so as to achieve targeted levels of profitability.
Overture Re will manage the asset-intensive business to provide
a targeted spread between the interest rate earned on
investments and the interest rate credited to the underlying
interest-sensitive contract liabilities. Overture Re intends to
periodically review models projecting different interest rate
scenarios and their effect on profitability. Certain of these
asset-intensive agreements will be generally funded by fixed
maturity securities that are withheld by the ceding companies.
The Company is entering into a reinsurance transaction in which,
pursuant to a reinsurance agreement, JNL is ceding the annuity
policies Block to Overture Re on a “modified
coinsurance” basis. In these types of transactions, the
ceding insurance company (in this case, JNL) places the assets
supporting the ceded business in trust and manages them for the
account of Overture Re. Under modified coinsurance agreements,
Overture Re will receive interest income earned on funds held by
the ceding company as the reinsurer’s share of reserves.
The funds represent the statutory reserves of the ceding company
with the assets supporting these reserves retained by the ceding
company and managed for Overture Re’s account. Interest
accrues to these assets at rates defined by the reinsurance
treaty terms. This results in a receivable balance equivalent to
Overture Re’s proportionate share of JNL’s statutory
reserves related to policies reinsured by Overture Re. The
premiums received by JNL on the policies underlying these types
of reinsurance agreements are used to purchase investment
securities that are managed by JNL or investment managers
appointed by it. Net investment income will include Overture
Re’s proportionate share of the investment income and
realized, capital gains and losses on the sale of investments
purchased with those premiums.
Since the JNL receivable from the JNL Entire Entity reflected in
the JNL Carve-Out Financial Statements is not yet backed by a
specific pool of segregated assets, it is not possible to
present the typical disclosures of the qualities and
characteristics of the portfolio effectively supporting the
account of JNL. It is important to note however, the following.
•
At the time of the closing of the Transaction, a pool of assets
will be segregated by JNL Entire Entity, placed in trust and
deemed to support the Overture Re receivable from JNL; and
•
The qualities and characteristics of the assets supporting the
Overture Re receivable will be specifically set forth in the
Investment Policy and Guidelines provided by the Company to JNL.
The primary investment objective is to maximize current income,
consistent with the long-term preservation of capital. The
overall investment strategy is required to be executed within
the context of prudent asset/liability management. The
investment guidelines permit investments in fixed maturity
securities, and include marketable securities, commercial
mortgages, private placements and cash. The guidelines limit
exposure to credit risks, including the maximum percentage of
securities rated below investment grade, ensure issuer and
industry diversification and maintain liquidity and overall
portfolio credit quality.
The risks inherent in the management of the assets which will
support the receivable to Overture Re include:
•
market risk, which is the risk that Overture Re’s invested
assets will decrease in value due to a change in the yields
realized on its assets and prevailing market yields for similar
assets, including changes in credit spreads, or an unfavorable
change in the liquidity of the investment. Estimated fair value
decreases for trust assets used to obtain reserve credit may
result in loss of reinsurance reserve credit to the extent the
estimated fair value of assets is less than the statutory
reserves;
•
credit risk, which is the risk that invested assets will
decrease in value due to a deterioration in the
creditworthiness, downgrade in the credit rating, or default of
the issuer of the investment;
•
reinvestment risk, which is the risk that interest rates will
decline and funds reinvested will earn less interest than
expected;
•
liquidity risk, which is the risk that investments must be
liquidated at an undesirable time to satisfy liability cash
outflows due to a mismatch of the timing of asset and liability
cash flows; and
•
selection of the specific investments or the timing of the
purchase or sale of investments made by JNL.
Overture Re anticipates that it will maintain a corporate risk
management framework which will be responsible for assessing,
measuring and monitoring risks facing the enterprise. This
includes development and implementation of mitigation strategies
to reduce exposures to these risks to acceptable levels. Risk
management will be an integral part of Overture Re’s
culture and every day activities. Overture Re will include
guidelines and controls in areas such as pricing, underwriting,
currency, administration, investments, asset liability
management, counterparty exposure, financing, regulatory change,
business continuity planning, human resources, liquidity,
sovereign risks and technology development.
Overture Re anticipates that the corporate risk management
framework will be directed by the corporate actuarial
department, which reports to the chief financial officer. It is
anticipated that one or more risk management officers will
provide quarterly risk management updates to the board of
directors, executive management and the internal risk management
officers.
Risk
of Fluctuating Interest Rates
Interest rate fluctuations could negatively affect the income
Overture Re derives from the difference between the interest
rates Overture Re may earn on its investments and the interest
Overture Re may pay under its reinsurance contracts.
Surrender
Risk
The policyholders of the policies that Overture Re may reinsure
may “surrender” or voluntarily terminate the policies,
causing the Company to return the policies cash surrender value
to the policyholder, in numbers different than anticipated. If
the amount of surrenders is significantly less than anticipated,
Overture Re may have to pay greater than expected death benefits
in future years. If the amount of surrenders is significantly
greater than anticipated, Overture Re may fail to recoup certain
costs, the amount of premiums received may decrease, and
policies with cash surrender benefits may constrain Overture
Re’s liquidity. In the variable annuity business without
guaranteed death benefits, mortality risk (i.e. death of an
annuity holder earlier than anticipated) is not a risk with
independent impact; rather, it will be a component of Overture
Re’s surrender risk in that it will impact the timing and
amount of policies surrendered.
Lapse
Risk
The policyholders of the policies that Overture Re may reinsure
may defer or cease paying premiums on the policies, causing the
“lapse” or termination of such policies, in numbers
different than anticipated. If the amount of lapses is
significantly less than anticipated, Overture Re may have to pay
greater than expected death benefits in future years. If the
amount of lapses is significantly greater than anticipated,
Overture Re may fail to recoup certain costs and the amount of
premiums received may decrease.
Expense
Risk
Overture Re’s actual expenses related to the reinsurance
coverage it provides may be higher than anticipated.
Credit
Quality Risk
Overture Re’s invested assets that support its reserve
liabilities will be subject to general credit, liquidity, market
and interest rate risks, exposing Overture Re to such risks on
its portfolio. The invested assets supporting the business of
Overture Re may decrease in value if the assets default or
decrease in earning power.%
If interest rates fall, funds reinvested (coupon payments or
monies received upon asset maturity or call) will earn less than
expected, because rates on such new investments are likely to
have declined with the market interest rates. If asset durations
are less than liability durations, the mismatch will increase.
Disintermediation
If interest rates rise, policyholders may increasingly request
loans from Overture Re, request withdrawals or voluntarily
terminate the policies, enabling the policyholders to invest
their funds in new products offering higher interest rates. This
activity may result in cash payments by Overture Re, and
Overture Re may have to sell assets to provide for these
withdrawals at a time when the prices of those assets are
affected adversely by the increase in market interest rates,
which may result in realized investment losses.
Counterparty
Risk
In the normal course of business, it is expected that Overture
Re will seek to limit its exposure to reinsurance contracts by
ceding a portion of its business to other insurance companies or
reinsurers, known as retrocessionaires. If these
retrocessionaires fail to pay claims due to Overture Re,
Overture Re will still be responsible for paying that claim to
the ceding company which could impact Overture Re’s
financial condition and results of operations.
The following discussion and analysis of the financial
condition and results of operations pertains to the JNL
Carve-Out Financial Statements of a block of fixed and variable
policies (subject to reinsurance) and should be read in
conjunction with its financial statements and related notes
appearing elsewhere in this proxy statement/prospectus. This
discussion and analysis contains forward-looking statements that
involve risks, uncertainties and assumptions. The actual results
may differ materially from those anticipated in these
forward-looking statements as a result of certain factors,
including, but not limited to, those which are not within
JNL’s control.
JNL is a life insurance company founded in 1937 and domiciled in
the State of Texas. JNL is licensed in all states (except New
York) and the District of Columbia. Upon closing of the
Transaction, JNL will enter into a reinsurance agreement with
its subsidiary, JNL Bermuda, whereby JNL Bermuda will maintain
the right to reinsure up to 50% of JNL’s variable annuity
business, and 90% of JNL’s fixed annuity business. The
proposed treaty will be on a modified coinsurance, or modco
basis, in which a segregated trust account will hold for the
benefit and use of JNL and the assets support in the reserves.
In a separate transaction, Overture Re, an independent, special
purpose acquisition company will purchase from JNL the newly
formed subsidiary (JNL Bermuda) and its right to execute the
reinsurance treaty. The accompanying JNL Carve-Out Financial
Statements present the fixed and variable annuity block subject
to the contemplated reinsurance treaty.
The JNL carve-out operates as one annuity insurance segment with
two lines of business:
•
fixed annuities; and
•
variable annuities.
Fixed annuities carry a general account portfolio that requires
it to manage typically fixed income assets. Variable annuities
carry a separate account portfolio where the market risk of the
investments remain with the annuity holder.
JNL faces strong competition in its businesses. JNL believes
that its ability to compete is based on a number of factors,
including product features, investment performance, service,
price, distribution capabilities, scale, name recognition and
financial strength ratings. While there is no single company
that JNL has identified as a dominant competitor in its business
overall, its actual and potential competitors include a large
number of insurance companies and other financial services
firms, many of which have advantages over it in one or more of
the above competitive factors. While JNL’s rating from
A.M. Best is B- (Fair) with a negative outlook, it is
important to note two primary points: (a) the economic
environment in 2008 and 2009 led to numerous ratings downgrades
due to the ensuing liquidity crisis, continuing market
volatility and ongoing pressure placed on ratings agencies, with
the entire insurance industry given a negative outlook and
(b) key measures of JNL’s financial strength,
including reserves, risk based capital, cash and liquidity,
remain healthy. Recent domestic and international consolidation
in the financial services industry, driven by regulatory action
and other opportunistic transactions in response to adverse
economic and market developments, has resulted in an environment
in which larger competitors with better financial strength
ratings, greater financial resources, marketing and distribution
capabilities may be better positioned competitively. Larger
firms may be better able to withstand further market disruption,
able to offer more competitive pricing, and have superior access
to debt and equity capital. In addition, some of JNL’s
competitors are regulated differently, which may give them a
competitive advantage. If JNL fails to compete effectively in
this environment, JNL’s profitability and financial
condition could be materially and adversely affected.
JNL carve out block derives revenues from two sources,
policyholder fee income, primarily as a percent of separate
account asset balances, and net spread from policy and contract
reserve balances.
Policyholder fee income was $8,511, $9,885, and $8,784 for the
years ended December 31, 2008, 2007, and 2006,
respectively. Changes in policyholder fee income from year to
year are a direct result of changes in the separate account
asset balances. Average separate account assets were
$785 million, $807 million and $671 million for
2008, 2007 and 2006, respectively. The decrease from 2007 to
2008 was primarily a result of the decline in the overall equity
markets. The increase from 2006 to 2007 was due to an increase
in the equity market and sales of JNL’s flagship product,
Monument Advisor.
Net spread from policy and contract reserve balances was $818
for the year ended December 31, 2008 compared to $5,737 and
$4,586 for the years ended December 31, 2007 and 2006,
respectively, and is calculated as follows:
Allocated investment income decreased $5.8 million, or 26%,
and decreased $.2 million in 2008 and 2007, respectively.
The decrease in 2008 is primarily due to impairment losses
realized on corporate bonds and preferred stocks in JNL’s
general account during the U.S. economic crisis in late
2008. The average yield earned on allocated investments was
4.10%, 5.29% and 4.86% in 2008, 2007 and 2006, respectively. JNL
expects the average yield to vary from year to year depending on
a number of variables, including the prevailing interest rate
and credit spread environment, changes in the mix of the
underlying investments, and the timing of dividends and
distributions on certain investments. Policy and contract
reserves have credited an average rate of approximately 3.9%
which has stayed fairly constant over time. The average policy
and contract reserve balances decreased $19.2 million or 5%
and $40.9 million or 9%, respectively in 2008 and 2007.
These declines are due to surrenders on the blocks of business
and minimal new premium as JNL no longer actively markets fixed
annuity products.
Policyholders of the JNL carve out Block may voluntarily
terminate the policies (such voluntary termination by a
policyholder is called a “surrender”). Withdrawals
from fixed annuity policyholder accounts, which primarily
consist of surrenders, were $50,194, $64,762, and $72,514 during
2008, 2007 and 2006, representing between 10% and 15% of account
value each year. Such withdrawals are funded by proceeds from
sales of investments from the JNL carve out block’s
investment pool, upon which there is investment risk to JNL.
Withdrawals from variable annuity policyholder accounts were
$138,938, $131,519 and $103,477 during 2008, 2007, and 2006,
representing between 16% and 18% of account value each year.
Such withdrawals are funded directly by sales of the underlying
mutual fund investments in a separate account, upon which there
is no investment risk to JNL and all such risk is assumed by the
policyholder. Historical withdrawals as a percent of account
value have remained consistent and management anticipates a
similar pattern in the future.
Policyholder fee income was $5,181 and $6,774 for the nine
months ended September 30, 2009 and 2008, respectively.
Changes in policyholder fee income from year to year are a
direct result of changes in the separate account asset balances.
Average Separate account assets were $759 million and
$839 million for the
nine months ended September 30, 2009 and 2008,
respectively. The decrease from 2008 to 2009 was primarily a
result of the decline in the overall equity markets.
Net spread from policy and contract reserve balances was $5,476
and $2,243 for the nine months ended September 30, 2009 and
2008, respectively, and is calculated as follows:
Allocated investment income was $16,810 and $13,861 for the nine
months ended September 30, 2009 and 2008 respectively. The
increase in 2009 is primarily due to allocated capital gains in
2009 compared to allocated impairment losses realized on
corporate bonds and preferred stocks in JNL’s general
account during the U.S. economic crisis in the second half
of 2008. The average yield earned on allocated investments was
5.71% and 4.59% for the nine months ended September 30,2009 and 2008, respectively. JNL expects the average yield to
vary from year to year depending on a number of variables,
including the prevailing interest rate and credit spread
environment, changes in the mix of the underlying investments,
and the timing of dividends and distributions on certain
investments. Policy and contract reserves have credited an
average rate of approximately 3.9% which has stayed fairly
constant over time. The average policy and contract reserve
balances decreased $10.6 million from September 30,2008 to September 30, 2009 due to surrenders on the blocks
of business and minimal new premium as JNL no longer actively
marketed fixed annuity products.
Withdrawals from fixed annuity policyholder accounts were
$33,491 and $35,240 during the nine months ended
September 30, 2009 and 2008, representing between 10% and
15% of account value each period. Withdrawals from variable
annuity policyholder accounts were $75,913 and $110,981 during
the nine months ended September 30, 2009 and 2008,
representing between 11% and 13% of account value each period.
Historical withdrawals as a percent of account value have
remained consistent and management anticipates a similar pattern
in the future.
JNL carve-out block’s accounting policies are described in
Note 2 — “Summary of Significant Accounting
Policies” in the Notes to the JNL Carve-Out Financial
Statements. JNL believes its most critical accounting policies
include the capitalization and amortization of DAC; the
establishment of liabilities for future policy benefits, other
policy claims and benefits,; accounting for income taxes;. The
balances of these accounts require extensive use of assumptions
and estimates, particularly related to the future performance of
the underlying business.
Basis
of Presentation
The JNL Carve-Out Financial Statements include JNL’s
accounts pertaining to the block of fixed and variable annuity
policies subject to the contemplated reinsurance transaction
between JNL and Overture Re. The Block’s accounting and
reporting policies conform to accounting principles generally
accepted in the United States of America (“GAAP”). The
Block is an integrated business of JNL that operates as a single
business and is not a stand-alone entity. The JNL Carve-Out
Financial Statements of the Block reflect the assets,
liabilities, revenues and expenses directly attributable to the
Block, as well as allocations deemed reasonable by management,
to present the financial position, results of operations,
changes in Block equity and cash flows of the Block on a
stand-alone basis. The allocation methodologies have been
described in the
following summary of accounting policies. The financial
information included herein may not necessarily reflect the
financial position, results of operations, changes in Block
equity and cash flows of the Block in the future or what they
would have been had the Block been a separate, stand-alone
entity during the periods presented.
Use of
Estimates and Assumptions
The preparation of JNL’s Carve-Out Financial Statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and income and expenses
during the reporting period.
JNL’s principal estimates include deferred policy
acquisition costs, value of business acquired, policy and
contract reserves and allocated investment income. In developing
the estimates and assumptions, management uses all available
evidence. Because of uncertainties associated with estimating
the amounts, timing and likelihood of possible outcomes, actual
results could differ from these estimates.
Receivable
from JNL
Receivable from JNL represents assets held by JNL related to
fixed annuity policy and contract reserves and net cash related
to the Block’s operation. Cash and invested assets related
to the carve-out Block were
co-mingled
with other business of JNL since it has historically managed and
accounted for its cash and investment portfolio as a single
pool. Specific assets supporting the policy liabilities of the
Block contemplated in JNL’s Carve-Out Financial Statements
cannot be separately identified. As such, changes in fair value
of investments held by JNL are not reflected in the carve-out
financial statements. However, at the time of closing, a pool of
assets will be segregated by JNL, placed in trust and deemed to
support the Overture Re receivable from JNL on a going forward
basis.
Deferred
Policy Acquisition Costs
Deferred policy acquisition costs (“DAC”) are costs
which relate to and vary with the production of new business and
are deferred to the extent that such costs are deemed
recoverable from future profits. These costs include certain
commissions, costs of policy issuance and other sales related
operating costs. DAC is subject to recoverability testing at the
time of policy issue and loss recognition testing at the end of
each accounting period. DAC is amortized in relation to the
associated gross margins as promulgated by Accounting Standards
Codification “ASC”
944-20,
formerly, Statement of Financial Accounting Standards
(“SFAS”) No. 97, “Accounting and Reporting
by Insurance Enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from the Sale of
Investments”. Revisions to estimates result in changes to
the amounts expensed in the reporting period in which the
revisions are made and could result in the impairment of the
asset and charge to income if estimated future profits are less
than unamortized deferred amounts.
In the accompanying JNL Carve-Out Financial Statements, DAC and
the related deferral and amortization were recognized based on
the proportionate share of account values of fixed and variable
annuities block reflected in the accompanying JNL Carve-Out
Financial Statements compared to the total block of JNL.
Value
of Business Acquired
JNL initially recorded Value of Business Acquired
(“VOBA”) of $53,632 at September 30, 2002 upon
its acquisition by JNL’s parent. Initial fair value of VOBA
was estimated based on the projections used in the appraisal of
the purchased inforce business. In the accompanying JNL
Carve-Out Financial Statements, VOBA and the related
amortization were recognized based on the proportionate share of
account values of the Block’s fixed and variable annuities
to the total account values of fixed and variable annuities
pertaining to the purchased inforce business. VOBA is being
amortized in proportion to the estimated gross profits.
Separate account assets and liabilities are reported at
estimated fair value and represent segregated funds that are
invested on behalf of and at the direction of policyholders. The
assets consist principally of common stocks, fixed maturities
and short-term investments. The assets of each account are
legally segregated and are generally not subject to claims that
arise out of any other business of JNL. Investment risks
associated with market value changes are borne by the customers,
except to the extent of minimum guarantees made by JNL with
respect to certain accounts. The investment income and gains and
losses for separate accounts generally accrue to policyholders.
Fees for administering these policies and mortality and risk
charges are included in policyholder fee income.
In accordance with the provisions of ASC
944-20,
reserves held for annuities in the accumulation phase are held
at fund value.
Allocated
Investment Income
Net investment income was allocated to the Block using a pro
rata share of the actual investment income including realized
gains and losses produced by JNL’s total investment
portfolio applied to the net assets held by JNL in support of
the Block’s fixed annuity policy and contract reserves.
Income was allocated based on the actual rate of return
experienced by JNL’s investment portfolio.
Policyholder
Fee Income
Policyholder fee income consists primarily of fees associated
with investment management, administration and contract
guarantees from separate accounts and is recognized as income
when charged to the underlying account. JNL’s policyholder
fee income was allocated to the Block based on the percentage of
the Block’s separate account values to the total separate
account values of JNL, for the variable annuity products that
generated such income.
Surrender
Charges
Surrender charges consist of fees billed to contract holders for
withdrawal of annuity deposits before the expiration of the
surrender charge period. Surrender charges are recognized as
income when deducted from the underlying account. JNL’s
surrender charges were allocated to the Block based on the
percentage of the Block’s separate account values to the
total separate account values of JNL, for the variable annuity
products that generated surrender charges.
General
and Administrative Expenses
The general and administrative expenses allocated to the Block
exclude certain corporate expenses of JNL related to strategic
initiatives, restructuring and other costs not related to the
administration of JNL’s insurance operations. The
administration costs that pertain to JNL’s insurance
operations were allocated based on the percentage of the
Block’s revenues to the total revenues of JNL.
Income
Taxes
Deferred income taxes are generally recognized, based on enacted
tax rates, when assets and liabilities have different values for
financial statement and tax purposes. A valuation allowance is
recorded to reduce any portion of the deferred tax asset that is
expected to more likely than not be realized. Adjustments to the
valuation allowance will be made if there is a change in
management’s assessment of the amount of the deferred tax
asset that is realizable.
JNL primarily invests in fixed maturity securities, including
bonds and redeemable preferred stocks. These securities are
classified as
available-for-sale
and accordingly are carried at fair value on the consolidated
balance sheets. The difference between amortized cost and fair
value is reflected as an unrealized gain or loss, less
applicable deferred taxes as well as related adjustments to
deferred acquisition costs, if applicable, in accumulated other
comprehensive income (“AOCI”) in shareholders’
equity. The determinations of fair value may require extensive
use of assumptions and inputs.
JNL performs regular analysis and review of the various
methodologies, assumptions and inputs utilized in determining
fair value to ensure that the valuation approaches utilized are
appropriate and consistently applied, and that the various
assumptions are reasonable. JNL also utilizes information from
third parties, such as pricing services and brokers, to assist
in determining fair values for certain assets and liabilities;
however, management is ultimately responsible for all fair
values presented in JNL’s financial statements. JNL
performs analysis and review of the information and prices
received from third parties to ensure that the prices represent
a reasonable estimate of the fair value. This process involves
quantitative and qualitative analysis and is overseen by
JNL’s investment and accounting personnel. Examples of
procedures performed include, but are not limited to, initial
and ongoing review of third party pricing services and
methodologies, review of pricing trends and monitoring of recent
trade information. In addition, JNL utilizes both internal and
external cash flow models to analyze the reasonableness of fair
values utilizing credit spread and other market assumptions,
where appropriate. As a result of the analysis, if JNL
determines there is a more appropriate fair value based upon the
available market data, the price received from the third party
is adjusted accordingly.
When available, fair values are based on quoted prices in active
markets that are regularly and readily obtainable. Generally,
these are very liquid investments and the valuation does not
require management judgment. When quoted prices in active
markets are not available, fair value is based on market
standard valuation techniques, primarily a combination of a
market approach, including matrix pricing and an income
approach. The assumptions and inputs used by management in
applying these methodologies include, but are not limited to:
interest rates, credit standing of the issuer or counterparty,
industry sector of the issuer, coupon rate, call provisions,
sinking fund requirements, maturity, estimated duration and
assumptions regarding liquidity and future cash flows.
The significant inputs to the market standard valuation
methodologies for certain types of securities with reasonable
levels of price transparency are inputs that are observable in
the market or can be derived principally from or corroborated by
observable market data. Such observable inputs include
benchmarking prices for similar assets in active, liquid
markets, quoted prices in markets that are not active and
observable yields and spreads in the market.
When observable inputs are not available, the market standard
valuation methodologies for determining the estimated fair value
of certain types of securities that trade infrequently, and
therefore have little or no price transparency, rely on inputs
that are significant to the estimated fair value that are not
observable in the market or cannot be derived principally from
or corroborated by observable market data. These unobservable
inputs can be based in large part on management judgment or
estimation, and cannot be supported by reference to market
activity. Even though unobservable, these inputs are based on
assumptions deemed appropriate given the circumstances and are
consistent with what other market participants would use when
pricing such securities.
The use of different methodologies, assumptions and inputs may
have a material effect on the estimated fair values of
JNL’s securities holdings.
Additionally, JNL evaluates its intent and ability to hold
securities, along with factors such as the financial condition
of the issuer, payment performance, the extent to which the
market value has been below amortized cost, compliance with
covenants, general market and industry sector conditions, and
various other factors. Securities, based on management’s
judgments, with an
other-than-temporary
impairment in value are written down to management’s
estimate of fair value.
Income taxes represent the net amount of income taxes that JNL
carve-out block expects to pay to or receive from various taxing
jurisdictions in connection with its operations. JNL carve-out
block provides for federal income taxes currently payable, as
well as those deferred due to temporary differences between the
financial reporting and tax bases of assets and liabilities. JNL
carve-out block’s accounting for income taxes represents
management’s best estimate of various events and
transactions.
Deferred tax assets and liabilities resulting from temporary
differences between the financial reporting and tax bases of
assets and liabilities are measured at the balance sheet date
using enacted tax rates expected to apply to taxable income in
the years the temporary differences are expected to reverse.
Due to the recent turmoil in the financial markets, the ability
of JNL carve-out block to realize its deferred tax assets has
taken on heightened importance. The realization of deferred tax
assets depends upon the existence of sufficient taxable income
within the carryback or carryforward periods under the tax law
in the applicable tax jurisdiction. JNL carve-out block has
significant deferred tax assets related to net operating and
capital losses. JNL carve-out block has projected its ability to
utilize its net operating losses and has determined that all of
these losses will be utilized prior to their expiration. JNL
carve-out block has also done extensive analysis of its capital
losses and has determined that sufficient unrealized capital
gains exist within its investment portfolios that would offset
any capital loss realized. It is also JNL carve-out block’s
intention to hold all unrealized loss securities until maturity
or until their market value recovers.
JNL carve-out block will establish a valuation allowance when
management determines, based on available information, that it
is more likely than not that deferred income tax assets will not
be realized. Significant judgment is required in determining
whether valuation allowances should be established as well as
the amount of such allowances. When making such determination,
consideration is given to, among other things, the following:
(i) future taxable income exclusive of reversing temporary
differences and carryforwards;
(ii) future reversals of existing taxable temporary
differences;
(iii) taxable income in prior carryback years; and
(iv) tax planning strategies.
JNL carve-out block may be required to change its provision for
income taxes in certain circumstances. Examples of such
circumstances include when the ultimate deductibility of certain
items is challenged by taxing authorities or when estimates used
in determining valuation allowances on deferred tax assets
significantly change or when receipt of new information
indicates the need for adjustment in valuation allowances.
Additionally, future events such as changes in tax legislation
could have an impact on the provision for income tax and the
effective tax rate. Any such changes could significantly affect
the amounts reported in the consolidated financial statements in
the year these changes occur.
During 2008, the capital and credit markets experienced extreme
volatility and disruption. Since September 2008, the volatility
and disruptions intensified significantly with a severity and
speed that was not anticipated. This was driven by, among other
things, heightened concerns over conditions in the
U.S. housing and mortgage markets, the availability and
cost of credit, the health of U.S. and global financial
institutions, a decline in business and consumer confidence and
increased unemployment. Turmoil in the U.S. and global
financial markets resulted in bankruptcies, consolidations and
government interventions. JNL believes this disruption continued
throughout the first half of 2009 but has been followed by
improvement in the third quarter of 2009 in the pricing in some
asset sectors.
The market conditions in 2008 adversely affected JNL carve-out
block’s results of operations and financial position.
During 2008, JNL incurred significant investment related losses.
In addition, results of operations in 2008 reflected a
significant increase in unrealized losses. In 2009, with the
significant recovery of credit spreads and easing of monetary
policy by the Federal Reserve, on a pooled basis these
unrealized losses reversed.
JNL continues to be in a position to hold its investment
securities until recovery, provided it remains comfortable with
the credit of the issuer. JNL carve-out block’s operations
do not rely on short-term funding or commercial paper, and
therefore, to date, it has experienced no material liquidity
pressure, nor does it anticipate such pressure in the
foreseeable future.
JNL carve-out block has selectively reduced its exposure to
distressed security issuers through security sales. In addition,
the U.S. government, and governments in many foreign
markets where JNL operates, have responded to address market
imbalances and taken meaningful steps intended to eventually
restore confidence. Although management believes JNL’s
current capital base is adequate to support its business at
current operating levels, it continues to monitor new business
opportunities and any associated new capital needs that could
arise from the changing financial landscape.
The JNL cash flows from operations from the Block are primarily
driven by allocated investment income and policyholder fee
income less general and administrative expenses. This activity
is included in the cash flow statement as a component of
“net income (loss)”. Cash provided by operating
activities was $15,572, $16,433 and $17,765 for the years 2008,
2007 and 2006, respectively and $11,334 and $11,617 for the nine
months ended September 30, 2009 and 2008, respectively.
The JNL carve-out block does not contain investments, as the
reinsurance agreement with Overture Re is modified coinsurance
allowing JNL to continue to hold and manage the assets of the
Block. However, a component of Due from JNL includes cash
provided by or used in investing activities related to the
assets backing the Block. Included in Due from JNL were cash
provided by (used in) investing activities of $(413), $38,891,
and $42,959 for the years 2008, 2007 and 2006, respectively and
$14,605 and $(2,221) for the nine months ended
September 30, 2009 and 2008, respectively. A nominal amount
of cash was used in 2008 compared to more substantial cash
provided during the nine months ended September 30, 2009
and years 2007 and 2006 from investing activities due to less
cash required to fund withdrawals from policyholder accounts and
larger deposits to policyholder accounts in 2008. This 2008
activity reflected policyholder response to the overall economic
volatility and disruption, with fewer withdrawals and more
deposit allocations to fixed accounts.
Cash used in financing activities reflects deposits to
policyholder accounts, a source of cash, net of withdrawals from
policyholder accounts, a use of cash. Cash used in financing
activities was $15,159, $55,324, and $60,724 for the years 2008,
2007 and 2006, respectively and $25,939 and $9,396 for the nine
months ended September 30, 2009 and 2008, respectively. The
decrease in cash used in financing activities during 2008
reflected policyholder response to the overall economic
volatility and disruption, with fewer withdrawals and more
deposit allocations to fixed accounts.
JNL carve-out block has no obligations, assets or liabilities
which would be considered off-balance sheet arrangements. JNL
carve-out block does not participate in transactions that create
relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities,
which would have been established for the purpose of
facilitating off-balance sheet arrangements.
JNL carve-out block has not entered into any off-balance sheet
financing arrangements and have never established any special
purpose entities. JNL carve-out block has not guaranteed any
debt or commitments of other entities or entered into any
options on non-financial assets.
Inasmuch as the JNL Carve-Out Financial Statements are based on
a carve-out approach as it relates to the annuities to be
reinsured, as opposed to a separate operating business, JNL does
not have any long-term debt, capital lease obligations,
operating lease obligations, purchase obligations or other
long-term liabilities, other than those related to the
Transaction and described in this proxy statement/prospectus,
except as follows (in thousands):
Interest-sensitive contract liabilities include amounts related
to JNL’s carve-out reinsurance of asset-intensive products,
primarily deferred fixed annuities. Amounts presented in the
table above represent the estimated obligations as they become
due both to and from JNL carve-out related to activity of the
underlying
policyholders. Amounts presented in the table above represent
the estimated obligations under such contracts undiscounted as
to interest, including assumptions related to surrenders,
withdrawals, premium persistency, partial withdrawals, surrender
charges, annuitizations, mortality, future interest credited
rates and policy loan utilization. The sum of the obligations
shown for all years in the table of $540,043 exceeds the
liability amount of $455,594 included on the consolidated
balance sheet principally due to the lack of discounting and
accounting for separate account contracts.
JNL manages its assets using an approach that is intended to
balance quality, diversification, asset/liability matching,
liquidity and investment return. The goals of the investment
process are to optimize after-tax, risk-adjusted investment
income and after-tax, risk-adjusted total return while managing
the assets and liabilities on a cash flow and duration basis.
JNL has established target asset portfolios for each major
insurance product, which represent the investment strategies
intended to profitably fund its liabilities within acceptable
risk parameters. These strategies include objectives for
effective duration, yield curve sensitivity and convexity,
liquidity, asset sector concentration and credit quality.
JNL has entered into sales of investment securities under
agreements to repurchase the same securities. These arrangements
are used for purposes of short-term financing. There were no
securities subject to these agreements outstanding at
December 31, 2008 or at September 30, 2009. JNL also
occasionally enters into arrangements to purchase securities
under agreements to resell the same securities. Amounts
outstanding, if any, are reported in cash and cash equivalents.
These agreements are primarily used as yield enhancement
alternatives to other cash equivalent investments. There were no
agreements outstanding at December 31, 2008 and 2007 or at
September 30, 2009. Further, JNL often enters into
securities lending agreements whereby certain securities are
loaned to third parties, primarily major brokerage firms, in
order to earn additional yield.
JNL’s asset-intensive products are primarily supported by
investments in fixed maturity securities reflected on JNL’s
balance sheet and under modified coinsurance or funds withheld
arrangements with reinsurers. Investment guidelines are
established to structure the investment portfolio based upon the
type, duration and behavior of products in the liability
portfolio so as to achieve targeted levels of profitability. JNL
manages the asset-intensive business to provide a targeted
spread between the interest rate earned on investments and the
interest rate credited to the underlying interest-sensitive
contract liabilities. JNL periodically reviews models projecting
different interest rate scenarios and their effect on
profitability. Certain of these asset-intensive agreements,
primarily in the U.S. operating segment, are generally
funded by fixed maturity securities that are withheld by the
ceding company.
JNL historically manages its General Account Portfolio of
Investments on a pooled basis. Specific assets are not
segregated to support each individual annuity product. Since the
JNL receivable from the JNL Entire Entity reflected in the JNL
Carve-Out Financial Statements is based upon a portion of the
General Accounts which would support the Block, it is not backed
by a specific pool of segregated assets. As such, it is not
possible to present the typical disclosures of the qualities and
characteristics of the portfolio effectively supporting this
asset. It is important to note however, the following:
•
At the time of closing, a pool of assets will be segregated by
JNL Entire Entity, placed in trust and deemed to support the
Overture Re receivable from JNL; and
•
The qualities and characteristics of the assets supporting the
Overture Re receivable will be specifically set forth in the
Investment Policy and Guidelines provided by Overture Re to JNL.
The primary investment objective is to maximize current income,
consistent with the long-term preservation of capital. The
overall investment strategy is required to be executed within
the context of prudent asset/liability management. The
investment guidelines permit investments in fixed maturity
securities, and include marketable securities, commercial
mortgages, private placements and cash. The guidelines limit
exposure to credit risks, including the maximum percentage of
securities rated below investment grade, ensure issuer and
industry diversification and maintain liquidity and overall
portfolio credit quality.
The risks inherent in the management of the assets which will
support the receivable to Overture Re include:
•
market risk, which is the risk that Overture Re’s invested
assets will decrease in value due to a change in the yields
realized on its assets and prevailing market yields for similar
assets, including changes in credit spreads, or an unfavorable
change in the liquidity of the investment. Estimated fair value
decreases for trust assets used to obtain reserve credit may
result in loss of reinsurance reserve credit to the extent the
estimated fair value of assets is less than the statutory
reserves;
•
credit risk, which is the risk that invested assets will
decrease in value due to a deterioration in the
creditworthiness, downgrade in the credit rating, or default of
the issuer of the investment;
•
reinvestment risk, which is the risk that interest rates will
decline and funds reinvested will earn less interest than
expected;
•
liquidity risk, which is the risk that investments must be
liquidated at an undesirable time to satisfy liability cash
outflows due to a mismatch of the timing of asset and liability
cash flows; and
•
selection of the specific investments or the timing of the
purchase or sale of investments made by JNL.
Securities
Lending and Other
During the year, JNL participated in a securities lending
program whereby blocks of securities, which were included in
investments, were loaned to third parties, primarily major
brokerage firms. JNL required a minimum of 102% of the fair
value of the loaned securities to be separately maintained as
collateral for the loans. JNL terminated the program and all
loaned securities were returned prior to December 31, 2008.
There were no securities loaned to third parties as of
December 31, 2007 or at September 30, 2009. JNL also
occasionally enters into arrangements to purchase securities
under agreements to resell the same securities. Amounts
outstanding, if any, are reported in cash and cash equivalents.
These transactions are primarily used as yield enhancement
alternatives to other cash equivalent investments. There were no
agreements outstanding at December 31, 2008 and 2007 or at
September 30, 2009. Both securities lending and securities
purchase arrangements under agreements to resell are accounted
for as investing activities on JNL’s consolidated balance
sheets and consolidated statements of cash flow, and the income
associated with the program is reported in net investment income
since such transactions are entered into for income generation
purposes, not funding purposes.
JNL maintains a corporate risk management framework which is
responsible for assessing, measuring and monitoring risks facing
the enterprise. This includes development and implementation of
mitigation strategies to reduce exposures to these risks to
acceptable levels. Risk management is an integral part of
JNL’s culture and every day activities. JNL includes
guidelines and controls in areas such as pricing, underwriting,
currency, administration, investments, asset liability
management, counterparty exposure, financing, regulatory change,
business continuity planning, human resources, liquidity,
sovereign risks and technology development.
The corporate risk management framework is directed by the
corporate actuarial department, which reports to the chief
financial officer. Risk management officers from all areas of
JNL support the corporate actuarial department in this effort.
The corporate actuarial department provides quarterly risk
management updates to the board of directors, executive
management and the internal risk management officers.
Risk
of Fluctuating Interest Rates
Interest rate fluctuations could negatively affect the income
JNL derives from the difference between the interest rates JNL
may earn on its investments and the interest JNL may pay under
its reinsurance contracts.
The policyholders of the policies in JNL’s annuity business
may “surrender” or voluntarily terminate the policies,
causing JNL to return the policies cash surrender value to the
policyholder, in numbers different than anticipated. If the
amount of surrenders is significantly less than anticipated, JNL
may have to pay greater than expected death benefits in future
years. If the amount of surrenders is significantly greater than
anticipated, JNL may fail to recoup certain costs, the amount of
premiums received may decrease, and policies with cash surrender
benefits may constrain JNL’s liquidity. In the variable
annuity business without guaranteed death benefits, mortality
risk (i.e., death of an annuity holder earlier than anticipated)
is not a risk with independent impact; rather, it is a component
of JNL’s surrender risk in that it impacts the timing and
amount of policies surrendered.
Lapse
Risk
Lapse risk is the risk that policyholders may defer or cease
paying premiums on the policies, causing the “lapse”
or termination of such policies, in numbers different than
anticipated. If the amount of lapses is significantly less than
anticipated, JNL may have to pay greater than expected death
benefits in future years. If the amount of lapses is
significantly greater than anticipated, JNL may fail to recoup
certain costs and the amount of premiums received may decrease.
Expense
Risk
JNL’s actual expenses related to the coverage it provides
may be higher than anticipated.
Credit
Quality Risk
JNL’s invested assets that supports its reserve liabilities
are subject to general credit, liquidity, market and interest
rate risks, exposing JNL to such risks on its portfolio. The
invested assets supporting the business of JNL may decrease in
value if the assets default or decrease in earning power.
Reinvestment
Risk
If interest rates fall, funds reinvested (coupon payments or
monies received upon asset maturity or call) will earn less than
expected, because rates on such new investments are likely to
have declined with the market interest rates. If asset durations
are less than liability durations, the mismatch will increase.
Disintermediation
If interest rates rise, policyholders may increasingly request
loans from JNL, request withdrawals or voluntarily terminate the
policies, enabling the policyholders to invest their funds in
new products offering higher interest rates. This activity may
result in cash payments by JNL, and JNL may have to sell assets
to provide for these withdrawals at a time when the prices of
those assets are affected adversely by the increase in market
interest rates, which may result in realized investment losses.
Counterparty
Risk
In its normal course of business, JNL limits its exposure to
insurance contracts by ceding a portion of its business to
reinsurers. If these reinsurers fail to pay claims due to JNL,
JNL will still be responsible for paying that claim to the
insurance contract holder, which could impact JNL’s
financial condition and results of operations.
The primary, direct effect on JNL of inflation is the increase
in operating expenses. A large portion of JNL’s operating
expenses consists of salaries, which are subject to wage
increases at least partly affected by the rate of inflation. The
rate of inflation also has an indirect effect on JNL. To the
extent that a government’s policies to control the level of
inflation result in changes in interest rates, JNL’s
investment income is affected.
In June 2009, the FASB issued SFAS No. 168, “The
FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles — a
replacement of FASB Statement No. 162 (“ASC” or
“Codification”). The Codification supersedes all
existing U.S. accounting standards issued by the FASB and
other related private sector standard setters into a single
source of authoritative accounting principles arranged by topic
and will serve as the single source of authoritative
non-governmental U.S. Generally Accepted Accounting
Principles. The Codification was effective on a prospective
basis for interim and annual reporting periods ending after
September 15, 2009. The adoption of the Codification
changed the Company’s references to U.S. GAAP
accounting standards but did not impact the JNL’s results
of operations, financial position or liquidity.
In June 2006, the FASB issued FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109”
(“FIN 48”), which is now a part of ASC 740.
FIN 48 provides guidance on the financial statement
recognition and measurement of a tax position taken or expected
to be taken in a tax return. FIN 48 requires that the
companies recognize in the financial statements the impact of a
tax position if that position more-likely-than-not will be
sustained on an audit, based on the technical merits of the
position. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim
periods, disclosures, and transition provisions. During 2008,
FASB issued FASB Staff Position
FIN 48-3,
“Effective Date of FASB Interpretation No. 48 for
Certain Nonpublic Enterprises”, which delayed the
effectiveness of FIN 48 until fiscal years beginning after
December 15, 2008. As such, JNL adopted FIN 48 as of
January 1, 2009. The adoption of FIN 48 did not have a
material impact on JNL’s Carve-Out Financial Statements.
In September 2006, FASB issued SFAS No. 157,
“Fair Value Measurements”, which is now a part of ASC
820. This statement defines fair value, establishes a framework
for measuring fair value in GAAP, and expands disclosures about
fair value measurements. This statement applies under other
accounting pronouncements that require or permit fair value
measurements. Accordingly, this statement does not require any
new fair value measurements, but required additional disclosures
regarding the existing fair value measurements JNL currently
reports. This statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. JNL adopted
SFAS No. 157 on January 1, 2008 and it did not
have a material impact on JNL carve-out financial statements.
In March 2008, the FASB issued SFAS No. 161,
“Disclosures about Derivative Instruments and Hedging
Activities”, which is now a part of ASC 815.
SFAS No. 161 amends and expands the disclosure
requirements of SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities”. It requires
qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about fair value
amounts of gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in
derivative agreements. This statement is effective for financial
statements issued for fiscal years beginning after
November 15, 2008. The adoption of SFAS No. 161
did not have a material impact on JNL’s Carve-Out Financial
Statements.
In October 2008, the Financial Accounting Standards Board
(“FASB”) issued FSP
FAS 157-3,
“Determining the Fair Value of a Financial Asset When the
Market For That Asset Is Not Active” (“FSP
FAS 157-3”),
which is now a part of ASC 820, with an immediate effective
date, including prior periods for which financial statements
have not been issued. FSP
FAS 157-3
amends FAS 157 to clarify the application of fair value in
inactive markets and allows for the use of management’s
internal assumptions about future cash flows with appropriately
risk-adjusted discount rates when relevant observable market
data does not exist. The objective of FAS 157 has not
changed and continues to be the determination of the price that
would be received in an orderly transaction that is not a forced
liquidation or distressed sale at the measurement date. The
adoption of FSP
FAS 157-3
did not have a material effect on JNL carve-out’s results
of operations, financial position or liquidity.
In December 2007, the FASB issued SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51”, which is now
a part of ASC 810. SFAS No. 160 amends Accounting
Research Bulletin No. 51 to establish accounting and
reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary. In addition, it clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as a component of
equity in the consolidated financial statements.
SFAS No. 160 is effective on a prospective basis
beginning January 1, 2009, except for presentation and
disclosure requirements which are applied on a retrospective
basis for all periods presented. The adoption is not expected to
have a material impact on JNL carve-out’s financial
condition or results of operations.
In December 2007, the FASB issued SFAS No. 141(R),
“Business Combinations”, which is now a part of ASC
805. SFAS No. 141(R) establishes principles and
requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the
acquired and recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase.
SFAS No. 141(R) also sets forth the disclosures
required to be made in the financial statements to evaluate the
nature and financial effects of the business combination.
SFAS No. 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or
after December 15, 2008. Accordingly,
SFAS No. 141(R) will be applied by JNL to business
combinations occurring on or after January 1, 2009.
In April 2008, the FASB issued FSP
No. 142-3,
“Determination of the Useful Life of Intangible
Assets”
(“FSP 142-3”),
which is now a part of ASC 350.
FSP 142-3
amends the factors that should be considered in developing
assumptions about renewal or extension used in estimating the
useful life of a recognized intangible asset under
SFAS No. 142, “Goodwill and Other intangible
Assets”. This standard is intended to improve the
consistency between the useful life of a recognized intangible
asset under SFAS No. 142 and the period of expected
cash flows used to measure the fair value of the asset under
SFAS No. 141R and other GAAP.
FSP 142-3
is effective for financial statements issued for fiscal years
beginning after December 15, 2008. The measurement
provisions of this standard will apply only to intangible assets
of JNL acquired after the effective date.
In April 2009, the FASB issued FASB Staff Position
(“FSP”)
No. 115-2
and FSP
No. 124-2,
“Recognition and Presentation of
Other-Than-Temporary
Impairments”, which is now a part of ASC 820. Under the new
guidance, an other than temporary impairment is recognized when
an entity has the intent to sell a debt security or when it is
more likely than not an entity will be required to sell the debt
security before its anticipated recovery. Additionally, the new
guidance changes the presentation and amount of
other-than-temporary
losses recognized in the income statement for instances when JNL
determines that there is a credit loss on a debt security but it
is more likely than not that the entity will not be required to
sell the security prior to the anticipated recovery of its
remaining cost basis. For these debt securities, the amount
representing the credit loss will be reported as an impairment
loss in the consolidated statement of income and the amount
related to all other factors will be reported in accumulated
other comprehensive income. The new guidance also requires the
presentation of
other-than-temporary
impairments separately from realized gains and losses on the
face of the income statement. In addition to the changes in
measurement and presentation, the new guidance is intended to
enhance the existing disclosure requirements for
other-than-temporary
impairments and requires all disclosures related to
other-than-temporary
impairments in both interim and annual periods. The new guidance
was effective for interim periods ended after June 15,2009, with early adoption permitted for periods ended after
March 15, 2009. The adoption of this FSP is not expected to
have a material impact on JNL carve-out’s results of
operations, financial position, or liquidity.
In April 2009, the FASB issued FSP
No. 157-4,
“Determining Fair Value When Volume and Level of Activity
for the Asset or Liability Have Significantly Decreased and
Identifying Transactions that are Not Orderly”. The new
guidance, which is now part of ASC 820, “Fair Value
Measurements and Disclosures”, requires the disclosure of
the inputs and valuation techniques used, as well as any changes
in valuation techniques and inputs used during the period, to
measure fair value in interim and annual periods. The provisions
of the new guidance were effective for interim periods ended
after June 15, 2009, with early adoption permitted for
periods ended after March 15, 2009. The adoption of this
FSP as of April 1, 2009 did not have a material effect on
JNL carve-out’s results of operations, financial position
or liquidity.
In April 2009, the FASB issued
FSP 107-1
and APB
28-1,
“Interim Disclosures about Fair Value of Financial
Instruments”, which is now a part of ASC 820. The new
guidance requires disclosure about fair value of financial
instruments in interim and annual financial statements. The new
guidance is effective for periods ended after June 15,2009, with early adoption permitted for periods ended after
March 15, 2009. The adoption of this FSP as of
April 1, 2009 did not have a material effect on JNL
carve-out’s results of operations, financial position or
liquidity.
In May 2009, the FASB issued new guidance for accounting for
subsequent events, which is now a part of ASC 855. The new
guidance, which was issued as SFAS No. 165,
“Subsequent Events”, is consistent with existing
auditing standards in defining subsequent events as events or
transactions that occur after the balance sheet date but before
the financial statements are issued or are available to be
issued, but it also requires the disclosure of the date through
which an entity has evaluated subsequent events and the basis
for that date. The new guidance defines two types of subsequent
events: “recognized subsequent events” and
“non-recognized subsequent events.” Recognized
subsequent events provide additional evidence about conditions
that existed at the balance sheet date and must be reflected in
JNL’s financial statements. Non-recognized subsequent
events provide evidence about conditions that arose after the
balance sheet date and are not reflected in the financial
statements of a company. Certain non-recognized subsequent
events may require disclosure to prevent the financial
statements from being misleading. The new guidance was effective
on a prospective basis for interim or annual periods ending
after June 15, 2009. The adoption of the new guidance on
April 1, 2009 had no effect on JNL carve-out’s results
of operations, financial position or liquidity.
In June 2009, the FASB issued new guidance on the accounting for
the transfers of financial assets. The new guidance, which was
issued as SFAS No. 166, “Accounting for Transfers
of Financial Assets, an Amendment of FASB Statement
No. 140”, has not yet been adopted into Codification.
SFAS No. 166 requires additional disclosures for
transfers of financial assets, including securitization
transactions, and any continuing exposure to the risks related
to transferred financial assets. SFAS No. 166
eliminates the concept of a qualifying special-purpose entity
and changes the requirements for derecognizing financial assets.
SFAS No. 166 is effective on a prospective basis for
the annual periods beginning after November 15, 2009 and
interim and annual periods thereafter. JNL does not expect that
the provisions of SFAS No. 166 to have a material
effect on JNL carve-out’s results of operations, financial
position or liquidity.
In June 2009, the FASB issued revised guidance on the accounting
for variable interest entities. The revised guidance, which was
issued as SFAS No. 167, “Amendments to FASB
Interpretation No. 46(R)”, has not yet been adopted
into Codification. The revised guidance requires an analysis of
whether a company has: (1) the power to direct the
activities of a variable interest entity that most significantly
impact the entity’s economic performance and (2) the
obligation to absorb the losses that could potentially be
significant to the entity or the right to receive benefits from
the entity that could potentially be significant to the entity.
The revised guidance also requires an entity to be re-evaluated
as a variable interest entity when the holders of the equity
investment at risk, as a group, lose the power from voting
rights or similar rights to direct the activities that most
significantly impact the entity’s economic performance. The
revised guidance requires additional disclosures about a
company’s involvement in variable interest entities and an
ongoing assessment of whether a company is the primary
beneficiary. The revised guidance is effective on a prospective
basis for the annual period beginning after November 15,2009 and interim and annual periods thereafter. JNL does not
expect that the revised guidance will have a material effect on
JNL carve-out’s results of operations, financial position
or liquidity.
Our current directors and executive officers are as follows:
Name
Age
Position
John F. W. Hunt
45
Chairman of the Board, Chief Executive Officer, Secretary and
Director
Marc J. Blazer
41
President, Treasurer and Director
Lawton W. Fitt
56
Director
Andrew H. Lufkin
46
Director
Paul S. Pressler
53
Director
John F. W. Hunt has been our Chief Executive Officer,
Secretary and Chairman of the Board since our inception in
September 2007. Since 1994, Mr. Hunt founded or co-founded
six companies, including Oriel LLC, a wine company he currently
oversees,
Amanyaratm,
a resort in the Turks & Caicos Islands, The Seattle
Coffee Company, a chain of espresso bars in England ultimately
acquired by Starbucks, Syzygy AG, an internet professional
services firm listed on the Frankfurt stock exchange, and Obongo
Inc., a payment processing technology firm that was acquired by
AOL Time Warner. Mr. Hunt also co-founded and helped
develop iGabriel, an investment club, which later merged with
PiCapital to form one of the UK’s leading private investor
networks, and First Tuesday, a financial networking forum that
was subsequently acquired by an Israeli investment bank.
Mr. Hunt began his career in marketing. From 1987 to 1992,
he held positions of increasing responsibility at
Procter & Gamble, ultimately becoming the European
Brand Manager responsible for integrating the acquisition of the
Max Factor brand across Europe. From 1992 to 1994, Mr. Hunt
was Head of Marketing at Kraft Jacobs Suchard (a division of
Philip Morris) for the Middle East & Africa.
Mr. Hunt received an Honors degree in Economics and Public
Administration from the London University in 1987.
Marc J. Blazer has been our President, Treasurer and a
Director since our inception in September 2007. Mr. Blazer
is also a co-founder of Ahimsa Partners, a venture that
licenses, owns, and operates hospitality businesses, the CEO of
Blazer & Co., both investment partnerships, and a
managing director of BTIG, an institutional trading firm. From
November 2000 to August 2007, Mr. Blazer was a partner, and
until May 2007, the global head of investment banking at Cantor
Fitzgerald. While at Cantor Fitzgerald, Mr. Blazer served
on the advisory board of Enertech Capital III, a venture capital
fund from March 2006 to July 2007. Prior to joining Cantor
Fitzgerald, Mr. Blazer spent six years at ChaseMellon
Financial Corp. (now Mellon Investor Services), a joint-venture
between Chase Manhattan Corporation and Mellon Financial Group
LLC from 1994 to 2000. In this capacity, he advised clients on
governance and shareholder related issues including accessing
the capital markets, investor relations, and proxy solicitation
matters and structural defenses. Prior to his career on Wall
Street, Mr. Blazer was an advisor to members of Congress in
both the House and Senate on tax matters, banking and securities
legislation, international trade policy, and foreign relations.
Mr. Blazer earned a graduate degree from the London School
of Economics in 1992, and a BA from the University of Maryland
in 1990.
Lawton W. Fitt has been a Director since October 2007.
Ms. Fitt is currently a director on the boards of Ciena
Corporation, Frontier Communications Company, Thomson Reuters
Corporation (formerly Reuters Group PLC prior to its merger with
The Thomson Corporation in April 2008) and The Progressive
Corporation. . From October 2002 to March 2005, Ms. Fitt
served as Secretary (Chief Executive) of the Royal Academy of
Arts in London. From 1979 to October 2002, Ms. Fitt worked
at Goldman Sachs, becoming a partner in 1994 and a managing
director in 1996. During her career at Goldman Sachs,
Ms. Fitt held leadership positions in investment banking,
equity capital markets and asset management and was a senior
member of that firm’s High Technology investment banking
team in New York and London. Ms. Fitt earned an A.B. from
Brown University in 1974 and received an M.B.A. from the Darden
School of Business Administration of the University of Virginia
in 1979.
Andrew H. Lufkin a Director and founder since January
2008, is the portfolio manager for the Delafield Hambrecht
MicroCap Value Fund, a fund which invests in undervalued growing
micro-cap companies and the Chief Financial Officer and a
director of Delafield Hambrecht which he joined in September
2003. From August 2002 to August 2003, Mr. Lufkin was Chief
Operating Officer and Chief Financial Officer of Monadnock
Valley Asset Management, a New York-based hedge fund
specializing in global healthcare equities. From 2001 to 2002 he
served as a Managing Director in investment banking for WR
Hambrecht + Co. Prior to this, he spent 10 years in
corporate finance at Donaldson Lufkin & Jenrette
before starting his own broker dealer. Mr. Lufkin received
a BA from Colby College and an MBA from Harvard Business School.
Paul S. Pressler has been a Director since October 2007.
Mr. Pressler was president and chief executive officer of
Gap, Inc. from September 2002 to January 2007. He also served on
Gap, Inc.’s Board of Directors from October 2002 until
January 2007. Prior to joining Gap, Inc., Mr. Pressler
spent fifteen years with The Walt Disney Company where he was
Chairman of the company’s Global Theme Park and Resorts
Division. Mr. Pressler previously served as President of
Disneyland, President of The Disney Stores and Senior Vice
President of Consumer Products. Prior to his time at Disney, he
was Vice President of Marketing and Design for Kenner-Parker
Toys. He is a director of Avon Products, Inc. and OpenTable,
Inc. Mr. Pressler holds a Bachelor of Science degree in
business economics from the State University of New York at
Oneonta in 1978.
Our Board of Directors currently consists of five persons and is
divided into three classes with only one class of directors
being elected at each annual general meeting of shareholders and
each class serving a three-year term. The term of office of the
first class of directors, consisting of Paul S. Pressler, will
expire at our first annual general meeting of shareholders. The
term of office of the second class of directors, consisting of
Andrew H. Lufkin and Lawton W. Fitt, will expire at the second
annual general meeting of shareholders. The term of office of
the third class of directors, consisting of John F. W. Hunt and
Marc Blazer, will expire at the third annual general meeting of
shareholders. See “Directors and Management of the
Company Following the Transaction” for information
relating to the directors and executive officers following the
Transaction.
The NYSE Amex requires that a majority of our board of directors
must be composed of “independent directors,” which is
defined generally as a person other than an officer or employee
of the Company or its subsidiaries or any other individual
having a relationship, which, in the opinion of the board of
directors would interfere with the director’s exercise of
independent judgment in carrying out the responsibilities of a
director.
The board of directors has determined that each of
Ms. Fitt, Messrs. Lufkin and Pressler are independent
directors as such term is defined under the rules of the NYSE
Amex and that Ms. Fitt and Mr. Pressler are
independent directors as such term is defined under
Rule 10A-3
of the Exchange Act. The independent directors will have
regularly scheduled meetings at which only independent directors
are present.
We will not enter into an initial business combination with an
entity which is affiliated with any of our executive officers,
directors, Founders, initial shareholders or special advisors,
including an entity that has received a material financial
investment from our initial shareholders, Founders or special
advisors or any entity affiliated with our initial shareholders,
Founders, officers, directors or special advisors.
We have established an audit committee of the Board of
Directors, consisting of Ms. Fitt, Messrs. Lufkin and
Pressler, each of whom has been determined to be
“independent” as defined in
Rule 10A-3
of the
Exchange Act and the rules of the NYSE Amex. The audit
committee’s duties, which are specified in our Audit
Committee Charter, include, but are not limited to:
•
reviewing and discussing with management and the independent
auditor the annual audited financial statements, and
recommending to the Board of Directors whether the audited
financial statements should be included in our Annual Report on
Form 10-K;
•
discussing with management and the independent auditor
significant financial reporting issues and judgments made in
connection with the preparation of our financial statements;
•
discussing with management major risk assessment and risk
management policies;
•
monitoring the independence of the independent auditor;
•
verifying the rotation of the lead (or coordinating) audit
partner having primary responsibility for the audit and the
audit partner responsible for reviewing the audit as required by
law;
•
inquiring and discussing with management our compliance with
applicable laws and regulations;
•
pre-approving all audit services and permitted non-audit
services to be performed by our independent auditor, including
the fees and terms of the services to be performed;
•
appointing or replacing the independent auditor;
•
determining the compensation and oversight of the work of the
independent auditor (including resolution of disagreements
between management and the independent auditor regarding
financial reporting) for the purpose of preparing or issuing an
audit report or related work;
•
establishing procedures for the receipt, retention and treatment
of complaints received by us regarding accounting, internal
accounting controls or reports which raise material issues
regarding our financial statements or accounting policies;
•
monitoring compliance on a quarterly basis with the terms of our
IPO and, if any noncompliance is identified, immediately taking
all action necessary to rectify such noncompliance or otherwise
causing compliance with the terms of our IPO;
•
reviewing and approving all payments made to our initial
shareholders, Founders, officers or directors and their
respective affiliates. Any payments made to members of our audit
committee will be reviewed and approved by our Board of
Directors, with the interested director or directors abstaining
from such review and approval; and
•
the members of the audit committee will act as the liquidator of
the Company in the event we do not consummate our initial
business combination by January 30, 2010.
Financial
Experts on Audit Committee
The audit committee will at all times be composed exclusively of
“independent directors” who, as required by the NYSE
Amex, are able to read and understand fundamental financial
statements, including a company’s balance sheet, income
statement and cash flow statement.
In addition, we must have certified to the NYSE Amex that the
audit committee has, and will continue to have, at least one
member who has past employment experience in finance or
accounting, requisite professional certification in accounting,
or other comparable experience or background that results in the
individual’s financial sophistication. The board of
directors has determined that Mr. Lufkin satisfies the NYSE
Amex’s definition of financial sophistication and also
qualifies as an “audit committee financial expert,” as
defined under rules and regulations of the SEC.
Nominating
Committee
We have established a nominating committee of the Board of
Directors, consisting of Ms. Fitt, Messrs. Lufkin and
Pressler, each of whom is an independent director under the NYSE
Amex’s listing
standards. The nominating committee is responsible for
overseeing the selection of persons to be nominated to serve on
our Board of Directors. The nominating committee considers
persons identified by its members, management, shareholders,
investment bankers and others.
Guidelines
for Selecting Director Nominees
The guidelines for selecting director nominees, which are
specified in the Nominating Committee Charter, generally provide
that persons to be nominated:
•
should have demonstrated notable or significant achievements in
business, education or public service;
•
should possess the requisite intelligence, education and
experience to make a significant contribution to the board of
directors and bring a range of skills, diverse perspectives and
backgrounds to its deliberations; and
•
should have the highest ethical standards, a strong sense of
professionalism and intense dedication to serving the interests
of the shareholders.
The nominating committee will consider a number of
qualifications relating to management and leadership experience,
background and integrity and professionalism in evaluating a
person’s candidacy for membership on the Board of
Directors. The nominating committee may require certain skills
or attributes, such as financial or accounting experience, to
meet specific needs of the board of directors that arise from
time to time. The nominating committee does not distinguish
among nominees recommended by shareholders and other persons.
We have adopted a code of ethics that applies to our executive
officers, directors and employees and have filed copies of our
code of ethics and our board committee charters as exhibits to
the registration statement in connection with our IPO. You will
be able to review these documents by accessing our public
filings at the SEC’s website at www.sec.gov. In addition, a
copy of the code of ethics will be provided without charge upon
request to us in writing at
c/o Maples
Corporate Services Limited, Ugland House, Grand Cayman,
KY1-1104, Cayman Islands. We intend to disclose any amendments
to or waivers of certain provisions of our code of ethics in a
Current Report on
Form 8-K.
None of our executive officers or directors has received any
cash compensation for services rendered. No compensation of any
kind, including finder’s and consulting fees, will be paid
to any of our initial shareholders, Founders, executive officers
or directors, or special advisors in each case in any capacity,
or to any of their respective affiliates, for any services
rendered prior to or in connection with the consummation of an
initial business combination. However, these individuals have
been and will continue to be reimbursed for any
out-of-pocket
expenses incurred in connection with activities on our behalf
such as identifying potential target businesses and performing
due diligence on suitable business combinations. There is no
limit on the amount of
out-of-pocket
expenses that could be incurred; provided, however, that to the
extent such
out-of-pocket
expenses exceed the available proceeds not deposited in the
trust account and interest and dividend income of up to
$1.8 million on the balance in the trust account, such
out-of-pocket
expenses would not be reimbursed by us unless we consummate an
initial business combination.
Compensation
Committee Interlocks and Insider Participation
As of the date of this proxy statement/prospectus, Overture Re
Holdings Ltd. has two officers and directors, as identified
below:
Name
Age
Position
John F. W. Hunt
45
Chairman, President and Chief Executive Officer Overture Re
Holdings Ltd and Overture Re Ltd.
Marc J. Blazer
41
Chief Financial Officer, Executive Vice President, Secretary,
Treasurer and Director Overture Re Holdings Ltd and Overture Re
Ltd.
None of the officers or directors have received any compensation
from Overture Re Holdings Ltd., which we recently incorporated
by the Company for the purpose of forming a Bermuda subsidiary,
to be called “Overture Re Ltd.” which will amalgamate
with JNL Bermuda LLC.
Following the Business Combination, it is anticipated that the
directors and executive officers of the Company will be the
individuals indicated below.
Name
Age
Position
David Smilow
47
Executive Chairman of the Board
Mitchell H. Caplan
52
Director, Vice Chairman and Chief Executive Officer
John F. W. Hunt
45
Director
Marc J. Blazer
41
Director
Antoine Schwartz
47
Director
Andrew Lufkin
46
Director
Dean C. Kehler
52
Director
Michael Girouard
43
Chief Financial Officer
Brian Heaphy
37
General Counsel and Secretary
For the biographical information on the board members of the
Company, see the section entitled “Proposals to be
Considered by Shareholders — The Board of DirectorsProposal.”
The members of the committees of the Company’s board of
directors will not be appointed until the Company’s board
of directors is fully constituted and holds its initial meeting.
At that time, the Company’s board of directors will make
determinations with respect to each committee member’s
independence in accordance with the NYSE Amex listing standards
and SEC rules and regulations and each committee will adopt its
committee charter.
Following the Transaction, the Company intends to post the
committee charters on its website.
Audit
Committee
The audit committee will be at all times composed of exclusively
independent directors who are “financially literate,”
meaning they are able to read and understand fundamental
financial statements, including the Company’s balance
sheet, income statement and cash flow statement. In addition,
the committee will have at least one member who qualifies as an
“audit committee financial expert” as defined in rules
and regulations of the SEC. Immediately following the
Transaction, the Company’s board of directors will also
make determinations regarding the financial literacy and
financial expertise of each member of the audit committee in
accordance with the NYSE Amex listing standards and SEC
Rule 10A-3.
The principal duties and responsibilities of the Company’s
audit committee will be to engage the Company’s independent
auditors, oversee the quality and integrity of the
Company’s financial reporting and the audit of the
Company’s financial statements by its independent auditors
and in fulfilling its obligations, the Company’s audit
committee will review with the Company’s management and
independent auditors the scope and result of the annual audit,
the auditors’ independence and the Company’s
accounting policies.
The audit committee will be required to report regularly to the
Company’s board of directors to discuss any issues that
arise with respect to the quality or integrity of the
Company’s financial statements, its compliance with legal
or regulatory requirements, the performance and independence of
the Company’s independent auditors, or the performance of
the internal audit function.
Prior to the date of the Extraordinary Special Meeting of
Shareholders, the Company will identify which members of the
Board of Directors will serve on the audit committee and which
member of the audit committee will be designated as the audit
committee financial expert.
The compensation committee will be at all times composed of
exclusively independent directors. Among other functions, the
compensation committee will oversee the compensation of the
Company’s chief executive officer and other executive
officers and senior management, including plans and programs
relating to cash compensation, incentive compensation,
equity-based awards and other benefits and perquisites and
administers any such plans or programs as required by the terms
thereof.
Compensation
Committee Interlocks and Insider Participation
Prior to the date of the Extraordinary Special Meeting of
Shareholders, the Company will identify which, if any, members
of the compensation committee have had any relationships with
the Company of the type required to be disclosed by
Item 404 of
Regulation S-K
of the SEC rules and regulations. None of the individuals who
will be an executive officer of the Company following the
Transaction has served as a member of the board of directors, or
as a member of the compensation or similar committee, of any
entity that has one or more executive officers who will serve on
the Company’s board of directors immediately following the
Transaction.
Corporate
Governance Committee
The corporate governance committee will be at all times composed
of exclusively independent directors. The principal duties and
responsibilities of the Company’s corporate governance
committee will be to identify qualified individuals to become
board members, recommend to the board of directors individuals
to be designated as nominees for election as directors at the
annual general meetings of shareholders, and develop and
recommend to the board of directors the Company’s corporate
governance guidelines.
Prior to the date of the Extraordinary Special Meeting of
Shareholders, the Company will identify which members of the
Board of Directors will serve on the corporate governance
committee.
Following the Transaction, the Company intends to post its code
of ethics on its website and to post any amendments to or any
waivers from a provision of its code of ethics on its website.
Overture Re will have a senior management team with significant
life insurance and reinsurance operating experience. Initially,
Overture Re will have a CEO, Chief Actuary and Underwriting
Officer who will be in place prior to closing of the
transaction, Chief Financial Officer and Chief Risk Officer,
Michael Girouard, who will run Overture Re’s
day-to-day
operations, and Brian Heaphy, the General Counsel and Secretary.
Such persons will be responsible for building the team, creating
market awareness, identifying and underwriting business
opportunities, raising capital, building the investment
portfolio, and liaising with rating agencies, among other things.
Overture Re is in discussions with several candidates to fill
the position of CEO and Chief Underwriter/Actuary Officer. Given
the depth of talent on the island, we expect to hire all
positions locally in Bermuda. Until such time that the team is
fully staffed, Overture Re will utilize the services of various
outsourcing companies, including the investment management
capability of JNF and the administration capacity of JNF along
with research firms and underwriting services firms, such as
Horseshoe Group located in Bermuda. Management of Overture Re
would expect to be fully staffed in the underwriting department
within twelve to twenty-four months of incorporation. This vital
function will be augmented by a specific subset group of the
actuarial team (see below), which will assist the underwriting
group with various pricing exercises.
The actuarial team will consist of the chief actuary and one or
two assistants. This team will focus on pricing and providing
support to the underwriting team and perform the reserving
function of Overture Re. Until such time that the team is fully
identified, Overture Re expects to utilize local actuarial
consulting firms in an outsourcing capacity; this would include
hiring a local Bermudian actuarial consulting firm. We would
expect to be fully staffed internally within twelve months of
having received a license to operate in Bermuda. This critical
department will be instrumental in driving both the
profitability and the underlying financial strength of Overture
Re.
Overture Re will also establish an enterprise risk management
team that will be responsible for monitoring its overall areas
of risk exposure. This will be led by the chief risk officer and
will eventually include one or two additional staff. The
objective of the group will be to identify and monitor any
sources of risk within the Company that might result in some
form of financial impairment. Given the multitude of potential
risks facing any particular financial services company, this
function will be vital in order for the Company to maintain a
strong reputation amongst its peers as a solid and creditworthy
financial services institution.
The Board of Directors of Overture Re will consist initially of
Michael Girouard, Brian Heaphy and the CEO of Overture Re.
Biographical information on certain of the management team/board
members is set forth below:
Mike
Girouard — Director, Chief Financial Officer and Chief
Risk Officer
Mr. Girouard is currently the Chief Financial Officer,
Treasurer and Chief Investment Officer of JNF. Prior to joining
in 2005, Mr. Girouard was a Senior Vice President and head
of Equity Capital Markets with HSBC Equity Capital Markets, in
London and New York. From 1997 to 2001, Mr. Girouard was an
Executive Director with Goldman Sachs International in Equity
Capital Markets based in London. Mr. Girouard was Chief
Investment Officer of Telebank (now part of E*Trade Group) where
he worked from 1990 to 1997. Mr. Girouard holds a BA in
Economics from Columbia College, Columbia University and an MBA
from the Wharton School of Business.
Brian
Heaphy — Director, General Counsel,
Secretary
Mr. Heaphy is currently the Director of Mergers and
Acquisitions at JNF. Most recently he was an associate at Davis
Polk & Wardwell specializing in acquisitions,
divestitures, joint venture arrangements and shareholder
agreements for a wide range of global clients, including several
Fortune 500 companies. Previously he was a Financial
Analyst for JP Morgan Securities, Inc. and Goldman,
Sachs & Co. in the Fixed Income Division.
Mr. Heaphy holds a BA in Accounting from Queens College and
a JD from Brooklyn Law School.
Actuary/Underwriter
Initially, the Company will utilize the services of an actuary
located in Bermuda to provide actuarial and underwriting
capability until it finalizes negotiations with potential
candidates. Additionally Overture Re is in discussions with
potential candidates to fill the Chief Underwriter and Chief
Actuary positions.
Overture Re Holdings Ltd. (“Overture Re Holdings”) is
a newly formed holding company, incorporated under the laws of
Bermuda and a wholly owned subsidiary of the Company. Overture
Re Holdings is in the process of forming a wholly owned
insurance subsidiary, Overture Re Ltd. (“Overture
Re”), a Bermuda long term reinsurer to be registered as a
segregated accounts company under the Segregated Accounts
Companies Act of 2000, as amended, (the “SAC Act”).
The executives at Overture Re Holdings have significant
insurance industry expertise.
The executive slate of Overture Re Holdings will be the same as
the executive slate at the Company, having David Smilow as its
Executive Chairman, Mitchell Caplan as CEO, Michael Girouard as
CFO and Brian Heaphy as General Counsel. These executives have
significant financial industry experience and have combined for
nearly 20 years experience in the insurance industry.
(See “Directors and Management of the Company Following the
Transaction” on page 196).
Additionally Jefferson National Life Insurance Company,
(“JNL) and JNF Asset Management, LLC, will provide
technology and administration processing support and asset
management services respectively. JNFAM and JNL are controlled
by David Smilow, Chairman of the Board of Directors of JNF.
Overture Re will reinsure standard life and annuity insurance
policies and acquire mostly fixed income investments thereby
creating long term cash flows and a stable capital base.
Overture Re intends to specialize in managing a specific set of
insurance and capital market risks. Overture Re plans to direct
all its resources towards a limited number of activities and
create the focus needed to develop and maintain industry leading
knowledge, best in class risk management and investment
practices. Overture Re believes that an attractive business
opportunity exists for a new reinsurer to provide reinsurance to
life insurance companies and acquire investments at attractive
prices thereby achieving a substantial return on equity.
Additionally, as Overture Re’s affiliate, JNL is a US
domiciled life insurance subsidiary with a fully functioning and
proven operating platform providing technology and processing
support, Overture Re will offer a fully integrated reinsurance
platform allowing for financial reinsurance and administration
reinsurance utilizing its administrative and asset management
service providers.
Annuity
and Life Reinsurance
Reinsurance is an arrangement under which an insurance company
known as the reinsurer agrees in a contract called a treaty to
assume specified risks of another insurance company known as the
ceding company. The reinsurer may assume all or a portion of the
insurance underwritten by the ceding company. In exchange for
assuming the risks of the ceding company, the reinsurer receives
some or all of the premium and investment income derived from
the assets supporting the reserves of the reinsured policies.
Reinsurance permits primary insurers to diversify their risks
over larger pools of risks, and to write insurance policies in
amounts larger than they are willing or able to retain. Also,
reinsurers have the ability to structure treaties that allow the
ceding companies to achieve other business and financial
objectives such as:
•
decreasing the volatility of their earnings;
•
improving their capital position by reducing the financial
strain associated with new business production or by increasing
their risk-based capital ratio;
•
entering new lines of business and offering new
products; and
•
exiting discontinued lines of business.
In addition, reinsurers may also purchase reinsurance, or
“retrocession” coverage, to limit their own risk
exposure.
Overture Re will not focus on reinsuring property or casualty
risk, any policies with market based or economy based exposures
such as Guaranteed Minimum Death Benefit (“GMDB”) or
Guaranteed Minimum Income Benefit (“GMIB”), any
financial reinsurance of default risk, or any special mortality
risk.
Overture Re will focus on several categories of life reinsurance
products including:
•
Reinsuring the mortality risk on life and annuity insurance
policies written by primary insurers. This business is often
referred to as traditional life reinsurance. Overture Re will
not have such business upon commencement, but may seek
appropriate opportunities for such business in the future.
•
Reinsurance solutions that improve the financial position of our
clients by increasing their effective capital base and reducing
leverage ratios through the assumption of reserves.
•
Providing clients with exit strategies for discontinued lines,
closed blocks in run-off, or lines not providing a good fit for
a company’s growth strategies. With Overture Re’s
ability to manage and administer these contracts, our clients
will be able to concentrate their efforts and resources on core
strategies.
Financial
Services Industry Dislocation
The financial markets have experienced nearly un-precedented
volatility and de-leveraging over the past two years beginning
with the
sub-prime
mortgage crisis but spreading through out the financial markets,
to include other fixed income markets, equities, bank debt, and
private placements. The decline in global asset valuations as of
the end of 2008 is estimated at more than $20 trillion.
The reduction in liquidity and deleveraging has also been of
enormous scale estimated to consist of a several trillion dollar
reduction in debt outstanding. Sources of long term financing
and capital are extremely limited.
Insurance
Industry in Transition
The financial services market dislocation has caused insurers
and reinsurers to face several challenges requiring them to
change their strategic focus creating opportunities for newly
formed reinsurers. These challenges have included:
•
The continuing deterioration in the U.S. residential
housing market in general and the market for
sub-prime
and Alt-A residential mortgage-backed securities specifically.
These conditions have had, and will likely continue to have, a
material adverse effect on insurers and reinsurers, specifically
on the value of their investment portfolios, and capital and
liquidity positions; and
•
The negative outlooks placed on the financial strength ratings,
actions taken by ratings agencies on insurers and reinsurers and
the seeming lack of relevance of such ratings having material
negative impacts on their abilities to grow their reinsurance
businesses and maintain core competitive capabilities.
Several insurers and reinsurers have begun addressing the new
industry realities implementing plans involving:
•
Disposition of assets or lines of business to raise needed
capital; and
•
Exploring strategic alliances or other means of maximizing value
including mortality assessment and existing treaty
administration.
Overture Re as a new and well capitalized entrant to the
reinsurance market should benefit from the change in strategic
focus of its insurance company clients and its competitors.
Competition
Competition in the annuity and life reinsurance industry is
intense. Reinsurers compete on the basis of many factors,
including financial strength, pricing and other terms and
conditions of reinsurance agreements, reputation, service, and
experience in the types of business underwritten. Annuities
represent the largest segment of life reinsurance premiums. For
annuity issuers, there are a limited number of players providing
reinsurance. The Company believes that the dynamics of the
reinsurance market has created opportunities for smaller
reinsurers who are actively pursuing smaller annuity carriers.
While the Company believes there is a demand for reinsurance
from primary insurers seeking to free up capital, especially as
the industry has experienced investment losses which have
impaired capital, industry consolidation among reinsurers has
effectively limited capacity. Reinsurers have been facing the
same economic challenges as the broader
financial services industry, creating opportunities for firms
with capital. The U.S. annuity and life reinsurance markets
are served by numerous international and domestic reinsurance
companies. Overture Re will focus on the smaller policy block
market where competition is less intense and it can leverage its
capabilities more fully. The Company believes that its primary
competitors in the North American annuity and life reinsurance
market are currently the following, or their affiliates: Athene
Re, Max Capital and Wilton Re. However, within the reinsurance
industry, this can change from year to year.
Management believes that two converging events —
capital losses caused by investments and capital losses caused
by product design — will require life insurers, both
in the U.S. and in Europe, to reduce their now greatly
increased operating leverage. They will accomplish this through
either the raising of new capital or through the purchase of
reinsurance. We believe that a unique opportunity exists for the
life reinsurance industry to provide capacity at favorable
pricing to those primary insurers operating in this sector that
need to reduce their operating leverage and similarly unique
opportunity presents itself on the asset side of the balance
sheet for undervalued illiquid investments which can also be
acquired at favorable prices. We believe that a similar
opportunity exists for life insurers operating in Europe. We
also believe that Bermuda is ideally positioned both
geographically and as an established reinsurance market with a
global view on the insurance and reinsurance markets.
Overture Re will be headquartered in Bermuda with top
executives, underwriting and actuarial functions located there.
Overture Re believes that Bermuda is an attractive location for
conducting Overture Re’s operations due to Bermuda’s
strong locally based insurance and reinsurance infrastructure.
Bermuda has a flexible regulatory system with limited government
involvement for those reinsurance companies that meet certain
solvency and liquidity requirements. It is the Company’s
expectation that Overture Re will meet all such requirements. In
addition, Bermuda currently has no corporate income or capital
gains tax and we expect that Overture Re will receive an
assurance from the Bermuda Minister of Finance under the
Exempted Undertakings Tax Protection Act 1966 of Bermuda, as
amended, that it will not be subject to any such tax until at
least March 28, 2016. Moreover, Bermuda has a satisfactory
availability of cost effective third-party services providers.
To the extent required or desirable, the Company intends to
utilize such service providers. Bermuda’s excellent
insurance and reinsurance infrastructure, political and economic
stability and easy access from major east coast U.S. cities
compare favorably with alternative offshore reinsurance company
domiciles. Overture Re will not be an admitted
U.S. insurer, although its affiliate, JNL, will be. The
insurance laws of each state of the United States and of many
other countries regulate or prohibit the sale of reinsurance
within their jurisdictions by non-domestic insurers and
reinsurers that are not admitted to do business within such
jurisdictions. We do not intend to allow Overture Re to maintain
an office or solicit, advertise, settle claims or conduct other
insurance activities in any jurisdiction without a license.
Overture Re will contract on an arms length basis with both JNL
and JNFAM. It will utilize the proprietary insurance technology
platform of JNL which offers significant and demonstrated cost
advantages and block management as well as enabling rapid policy
block conversion and risk assessment capabilities and have a
portion of its portfolios managed by JNFAM.
All aspects of the initial transaction pricing were done based
on negotiations between the current management of the Company
and JNF using third party analysis as a basis. For example the
basis of negotiations for the ceding commission was based on
actuarial analysis provided by a third party. Also, the ongoing
administration expenses per policy being charged by JNL to the
Company were compared against the Annuity Contract Expense
Benchmarking study prepared by Deloitte in 2008, existing
reinsurance treaties with Scottish Re and market comparables for
outsourced policy administration services and were found to be
in-line with pricing accepted in the industry. Sales and
marketing expenses being shared by Overture for any future
reinsurance of annuity products was based on policy economics
and JNL’s current acquisition cost per policy data and also
found to be in-line with pricing acceptable in the industry.
Additionally the charges for ongoing investment management
expense were compared to similar providers in the industry and
found to be competitive.
On a going forward basis Overture will ensure that any material
amendments to the ongoing contract arrangements between the
Company and JNF and any of its affiliates, along with any new
arrangements that each of the parties may enter into are
approved by independent members of the Company’s board of
directors and considered by such members to be comparable to
similar transactions done on an arms-length basis with third
parties.
Management believes that Overture Re itself will be
well-positioned to provide reinsurance capacity to the global
life insurance community during this period of extreme
dislocation in the marketplace. We believe that the presence of
other life reinsurance companies in Bermuda will actually
enhance our business opportunities as a great deal of capacity
collaboration will be required in the coming months and years.
The full impact of the overall financial markets turmoil has yet
to work its way through the life industry and the impact could
result in a significant demand for both capital and reinsurance.
Overture Re’s target products will include a wide range of
annuity and life reinsurance products, such as yearly renewable
term, coinsurance and modified coinsurance for term, universal
and whole life policies. The Company would also offer block
reinsurance structures that would enable clients to transfer
previously underwritten groups of policies from their balance
sheet to ours. This would further enable companies to better
manage their capital requirements and allocations.
The strategy for each product will be contingent on the
objectives of the clients. For example, a particular life
insurer may be seeking to reduce the ‘statutory
strain’ associated with a new type of term life insurance
that it has recently introduced to its agency force and needs to
reduce the impact of high demand for the product on its capital
and surplus. Overture Re would work with the client to create a
coinsurance program that would enable them to roll out the new
product without needing to worry about reducing their sales
efforts.
Overture Re intends to exclude by way of carve-out any exposure
to any guaranty elements of variable annuity policies, such as
GMDB, GMIB and minimum investment return or face value
guarantees. We believe that life insurance companies with such
exposures will result in an increase in demand for reinsurance
by third parties, such as Overture Re, in order to provide
capital relief to the cedants. This is an important product
demand element, given the recent experiences of certain major
U.S. life insurers in this space that have recently taken
large losses due to these guaranty features. We expect this
trend to continue.
Overture Re will target life insurers who meet established
criteria and standards set by Overture Re, which are based upon:
•
Perceived need and objective for reinsurance;
•
Qualitative factors such as the ability to submit quality data;
•
Overall management and corporate governance;
•
Historical financial performance, including volatility of
earnings and capital; and
•
Distribution channels.
Once sufficient data has been gathered, it is anticipated that
representatives of Overture Re generally will contact the chief
executive officers, chief financial officers, chief actuaries
and risk officers of the target life insurers to discuss the
potential for a reinsurance transaction. The following target
clients will comprise Overture Re’s initial focus:
•
Mid-Sized and Small Insurance Companies. Overture Re can partner
with mid-sized and smaller writers not only to reinsure their
business, but also to aid in designing, pricing and assessing
the risk of new products. These types of arrangements will be
favorable to both Overture Re and the mid-sized and smaller
writers.
•
Insurers Exiting Specific Business Lines. Overture Re can
provide reinsurance solutions to companies that used to provide
certain products but have since stopped providing such service
and that are looking to effectively reduce or eliminate risks
associated with a legacy block of business.
It is anticipated that each reinsurance agreement will be the
result of a process lasting several weeks, or months as the case
may be, of analysis and negotiations between the ceding company
and Overture Re. In negotiating such agreements, Overture
Re’s goal will be to strike the proper balance between risk
transfer and cost from the perspective of both the ceding
company and Overture Re.
Modeling
of Reinsured Products
The specific insurance block (or subset thereof) to be reinsured
will be modeled using a comprehensive software platform. For
existing blocks, each risk is modeled on a seriatim (i.e.
contract by contract) basis. Other important inputs include the
specific asset allocation of the ceding company block, as well
as the ceding company’s actual experience with respect to
lapses, benefit utilization and mortality, among other things.
Pricing
and Monitoring Actuarial Risk
To appropriately price actuarial risk, Overture Re will model
numerous scenarios where lapse, mortality and contract holder
behavior assumptions are varied. Overture Re will then analyze
the sensitivity of results to provide an indication of the risk
being assumed. If uncertainties arise, provisions for adverse
deviations may be reflected in the actuarial assumptions or
additional risk capital will be allocated (impacting the
required risk margin) to determine a final price. Overture Re
may negotiate certain maximum limits on claims or other
provisions to balance its overall risk exposure and generate a
reasonable price for the cedant.
Set
the Final Price
Once Overture Re has determined the risk neutral cost,
transaction costs and has analyzed the actuarial risks, Overture
Re will then set the overall price. Overture Re intends to set
the margin at a level that will provide Overture Re with the
appropriate rate of return on its capital for the type of
business and risks being reinsured (including operational,
actuarial and basis risks).
Overture Re intends to implement and maintain an enterprise risk
management (“ERM”) framework to ensure a comprehensive
assessment of its current risks, control effectiveness and
capital position. Risk management will be a continuous process
applied across the entire organization. Overture Re’s ERM
framework will provide a comprehensive and consistent enterprise
view of risk exposures and opportunities. Additionally, Overture
Re does not intend to view risk management simply as how to
avoid losses, but also as a key part of how to best take
advantage of market opportunities.
One of the most critical factors in a successful risk management
process is having a culture in which risk management is both
supported and valued from senior leadership. In addition to the
appropriate “tone from the top,” risk management must
be a core element of every employee’s
day-to-day
job responsibilities. Overture Re intends to maintain a culture
that promotes risk management together with open communication
of potential risks so that they are addressed before becoming
significant. Overture Re’s senior leadership has extensive
experience in risk management from both a direct writer and
reinsurance perspective. Overture Re believes that one advantage
that Overture Re has relative to many companies is that it will
have the ability to react quickly to changes in risk exposure
due to the Company’s small size. Management believes this
will lead to Overture Re being able to make quicker decisions in
order to either reduce risk exposure or to exploit potential
opportunities.
Overture Re’s primary investment objective is to protect
and build its capital base in order to continue to support the
risks to be underwritten. Overture Re will contract with its
affiliate, JNFAM, among others, as third party managers of the
portfolio. Overture Re will invest to achieve a stable return
while preserving capital. The investment committee will approve
all of the below procedures, namely the responsibilities of the
chief investment officer, the role of the investment plan,
monitoring procedures and exceptions protocol. Additionally,
they will review at least quarterly the performance of the
investment portfolio versus the investment plan.
Overture Re currently intends to employ a conservative
investment strategy for investable funds that will support its
reserves and its capital assets. The investment plan will set
forth, among other things, (i) credit limits, (ii) the
targeted asset allocation (including permitted guidelines or
boundaries), (iii) duration and convexity limits,
(iv) corporate sector limits and (v) single issuer
limits. Specifically, the plan will set limits and leeways for
the following asset classes: treasury and agency bonds, cash and
equivalents, investment grade corporate bonds, below investment
grade corporate bonds, asset backed securities, commercial
mortgage backed securities, residential mortgage pass through
notes, collateralized mortgage obligation bonds, non-publically
traded securities and bank loans. JNFAM and other third party
investment managers will be responsible for daily monitoring of
the portfolio and adherence to all guidelines for their
respective management allocations of Overture Re’s
portfolio.
Given the longer-term nature of the anticipated liabilities, we
expect that the duration of our investment portfolio will also
be long to match the payments of those liabilities as they come
due. In addition, Overture Re plans to have sufficient
short-term cash and cash equivalents on hand to meet all near
term operating expenses and outlays.
JNL Bermuda will enter into an investment management agreement
with JNFAM, which will be assumed by Overture Re upon completion
of the merger of JNL Bermuda and Overture Re. Pursuant to the
terms of the investment management agreement, JNFAM will manage
at least 20% of the investment assets of JNL Bermuda, subject to
the investment guidelines adopted by its Board of Directors, for
so long as the agreement is in effect.
The investment management agreement provides that the assets of
JNL Bermuda will be held by a custodian and not on the books of
or in the name of any accounts maintained at JNFAM.
JNFAM receives a management fee of 0.25% per annum payable
quarterly in arrears based on the net asset value of JNL
Bermuda’s investment account managed by JNFAM, subject to
increase for certain asset classes and subject to discount at
certain breakpoints on the amount of assets under management.
The investment management agreement requires that JNFAM follow
the investment guidelines of JNL Bermuda and act in a manner
that it considers equitable in allocating investment
opportunities to JNL Bermuda, but does not otherwise impose any
specific obligations or requirements concerning the allocation
of time, effort or investment opportunities to JNL Bermuda or
any restrictions on the nature or timing of investments for its
account and for JNFAM’s own account or other accounts which
JNFAM or its affiliates may manage.
The investment management agreement provides that JNFAM and its
principals, employees or agents are not liable to JNL Bermuda or
its shareholder for any acts or omissions in the performance of
their services:
•
in the absence of fraud, misconduct, negligence, willful
violation of any applicable statute or reckless disregard for
its duties. Additionally, the investment management agreement
contains provisions for the indemnification of JNFAM by JNL
Bermuda against certain liabilities to third parties arising in
connection with the performance of its services to JNL Bermuda;
as a result of changes in market value, additions to or
withdrawals from JNL Bermuda’s investment account,
investment account rebalancing or other non-volitional acts of
JNFAM; or
•
as a result of JNFAM’s reliance on any instruction,
direction or approval provided on JNL Bermuda’s behalf by
certain of its officers and employees.
The investment management agreement provides that JNL Bermuda is
liable to JNFAM for any acts or omissions in connection with
JNFAM’s services that are the result of JNL Bermuda’s
fraud, misconduct, negligence, willful violation of any
applicable statute or reckless disregard for its duties.
The investment management agreement has no fixed term but may be
terminated by JNFAM or JNL Bermuda for any reason or no reason
upon nine months prior written notice.
Loss
Payment and Reserving Philosophy
Overture Re intends to adhere to a strict policy of conservative
reserve balance establishment and maintenance. This will include
multiple levels of redundancy and protective measures to ensure
that Overture Re has adequate cash and liquidity to make timely
payments of claims to policyholders. These reserves will be
balance sheet liabilities representing estimates of future
obligations to pay benefit claims and claims payment expenses
for reinsured policies, and will be determined and confirmed
actuarially. We will establish and maintain our life and annuity
reinsurance reserves at a level that we estimate will, when
taken together with future premium payments and interest and
investment income expected to be earned in respect of reserves,
be sufficient to support all future cash flow benefit and third
party servicing obligations as they become payable. Overture Re
intends to employ both internal actuaries and third party
actuaries, in this case, an independent appraiser, to ensure
that both the pricing of the liabilities are accurate and that
the reserve estimates are set conservatively. In all cases, the
reserving actuarial function and the pricing actuarial function
will be completely separate functions with no overlap. In
addition, Overture Re will seek to conduct most of the reserving
activities and all of the underwriting activities in Bermuda.
Since the development of our reserves will be based upon cash
flow projection models, we must make estimates and assumptions
regarding mortality, morbidity, lapse, expense and investment
experience. We and our service providers will establish these
estimates based upon transaction specific historical experience,
information provided by ceding companies and industry experience
studies. The Company will also periodically work with its
auditors as part of its strategy to ensure that the
actuaries’ analyses and assumptions are reasonable. Actual
results could differ materially from these estimates. We intend
to monitor actual experience and, where circumstances warrant,
revise our assumptions and the related life and annuity
reinsurance reserve estimates.
JNL, the direct parent of JNL Bermuda, operating primarily in
the U.S., has been in the life insurance business for over
50 years. The principals and executive officers have
aggregated decades of experience in the financial services
sector and will be applying this experience to the operations of
Overture Re after the merger with JNL Bermuda. Overture Re will
have strict operating and risk management controls that will
ensure that the reserving methodology employed by it is
up-to-date
and that it appropriately reflects the underlying risks in the
life insurance or annuity products that comprise the blocks of
business in the portfolio.
Cash flow management in general, and as it relates to claim
payments will have strict controls in place. Overture Re will
endeavor to maintain an efficient claim payment system, with an
emphasis on making sure that claims are paid in a timely manner
and that the appropriate amount is paid. This is an important
notion, given that many companies with poor controls often make
extra claim payments or untimely payments. Overture Re intends
to maintain policies that will ensure internal security with
many levels of checks and balances.
In summary, the reserving and claim payment philosophy will seek
to conservatively estimate future claim payments. To that end,
Overture Re intends that those future payments are made with the
appropriate controls in place. We believe this will enable
Overture Re to operate more efficiently than some of its
creditors and will provide for greater long-term growth and
stability.
JNL and JNL Bermuda will enter into the Reinsurance Option and
Contribution Agreement. Pursuant to the terms of the Reinsurance
Option and Contribution Agreement, JNL (x) will assign to
JNL Bermuda the employment agreements or arrangements of those
employees set forth on a schedule to the Reinsurance Option and
Contribution Agreement and (y) will contribute to JNL
Bermuda those assets set forth on a schedule to the Reinsurance
Option and Contribution Agreement, and JNL Bermuda will accept
such employment agreements and assets.
Also pursuant to the terms of the Reinsurance Option and
Contribution Agreement, JNL will grant to JNL Bermuda an option,
which may be exercised by JNL Bermuda or any permitted successor
or assign, to enter into a Quota Share Reinsurance Agreement
with JNL, pursuant to which JNL Bermuda or any such successor or
assign may reinsure 90% of the fixed annuity block of JNL and
50% of the variable annuity block of JNL, upon JNL Bermuda or
any such successor or assign obtaining all necessary licenses
required to operate as a reinsurer in Bermuda. JNL Bermuda paid
a purchase price for the option, as specified in the Reinsurance
Option and Contribution Agreement. The option will expire on
January 30, 2010.
JNL Bermuda or any successor to or assign of JNL Bermuda may not
exercise the option until it has obtained all necessary licenses
and permits that are required to lawfully operate as a reinsurer
in Bermuda. In the event that JNL Bermuda or any successor to or
assign of JNL Bermuda wishes to exercise the option, it will
give written notice to JNL specifying a date, which will be no
later than five (5) business days following the date of
notice, for the execution and delivery of the Quota Share
Reinsurance Agreement.
The following summary describes the material provisions of
the Quota Share Reinsurance Agreement. The provisions of the
Quota Share Reinsurance Agreement are complicated and not easily
summarized. This summary may not contain all of the information
about the Quota Share Reinsurance Agreement that is important to
you. The following summary is qualified in its entirety by
reference to the complete text of the Quota Share Reinsurance
Agreement. The Quota Share Reinsurance Agreement is attached to
this proxy statement as an exhibit to Annex I and is
incorporated by reference into this proxy statement, and we
encourage you to read it carefully in its entirety for a more
complete understanding of the Quota Share Reinsurance Agreement
and the Transaction.
Overture Re (as successor to JNL Bermuda by amalgamation) will
enter into a Quota Share Reinsurance Agreement (the
“Reinsurance Agreement”) with JNL on the Transaction
Closing Date. JNL Bermuda, which is to be acquired by and
amalgamated with Overture Re, has the contractual option (under
the Reinsurance Option and Contribution Agreement) to reinsure
specific JNL annuity policies and Overture Re, as successor to
JNL Bermuda, will be able to exercise such option and enter into
the Reinsurance Agreement with JNL. The material terms of the
Reinsurance Agreement are described below.
Parties. The parties to the Reinsurance
Agreement will be Overture Re as the “Reinsurer” and
JNL as the “Ceding Company.”
Effective Date and Term. The reinsurance cover
provided by Overture Re under the Reinsurance Agreement will be
effective on January 1, 2010, for Overture Re’s
specified quota share, as described below, of the obligations
and liabilities of JNL payable on and after such date with
respect to the annuity blocks specified in the Reinsurance
Agreement. The reinsurance will continue in full force and
effect until the extinguishment of all liabilities of Overture
Re with respect to the Covered Annuities or termination under
the provisions of the Reinsurance Agreement described below.
Cover. As of the effective date of the
Reinsurance Agreement, (1) JNL will cede on a
“modified coinsurance” basis, and Overture Re will
accept as indemnity reinsurance, on such basis, and will agree
to indemnify JNL for, ninety percent (90%) of all risks and
obligations arising under JNL’s fixed annuity block (which
constitutes those fixed Covered Annuities that do not have any
variable options, and the fixed options of the variable
annuities included in the Covered Annuities), and (2) JNL
will cede on a “modified coinsurance” basis, and
Overture Re will accept as indemnity reinsurance, on such basis,
and will agree to indemnify JNL for, fifty percent (50%) of all
risks and obligations arising under JNL’s variable annuity
block
(which constitutes those variable Covered Annuities that do not
have any fixed options, and the variable options of the other
annuities included in the Covered Annuities).
“Covered Annuity” as used herein means each and
every annuity reinsured pursuant to foregoing (excluding the
exclusions described below). The annuities included in the
reinsurance coverage pursuant to the Reinsurance Agreement also
include certain annuities issued by JNL following the effective
date of the Reinsurance Agreement (such annuities are herein
called “future annuities”).
Furthermore, Overture Re will reinsure 90% of any and all loans,
including principal and accrued interest thereon, made by JNL to
the owners of the Covered Annuities pursuant to the terms of the
Covered Annuities. Such loans will generally be treated like the
other assets supporting the reserve attributable to the fixed
annuity block: (i) repayments of principal amounts will be
treated like the liquidation of a security constituting an asset
supporting the reserve attributable to the fixed annuity block
and will not be reflected in the quarterly net settlement,
(ii) the funding of such loans will be treated like the
purchase of a security constituting an asset supporting the
reserve attributable to the fixed annuity block and will not be
reflected in the quarterly net settlement, (iii) interest
on such loans will be treated as investment income, and
(iv) the amount by which any defaulted loan exceeds the
cash surrender value of the relevant Covered Annuity will be
treated as a capital loss.
Overture Re’s reinsurance coverage for any Covered Annuity
begins on the later of (a) the effective date of the
Reinsurance Agreement, which will be January 1, 2010 and
(b) the date of commencement of JNL’s contractual
liability for the Covered Annuity, and will terminate
simultaneously with the termination of JNL’s contractual
liability for the Covered Annuity unless otherwise terminated in
accordance with the terms of the Reinsurance Agreement.
Notwithstanding its identification in or by reference in a
schedule to the Reinsurance Agreement that specifies the annuity
blocks, an annuity will cease to be an annuity subject to the
Reinsurance Agreement if it is determined by JNL, subsequent to
the effective date of the Reinsurance Agreement and on or before
the date that is 60 days following the effective date of
the Reinsurance Agreement (as used herein, the “adjustment
date”), that, as of the effective date of the Reinsurance
Agreement, such annuity was not in force; provided that if an
annuity is designated as not in force as of the adjustment date
due to an error in such designation, upon correction of such
error such annuity will be restored to the list of Covered
Annuities. JNL and Overture Re will make appropriate adjustment
between each other in order to put each other in the economic
position as of only in-force annuities were included in the
Covered Annuity list on the effective date of the Reinsurance
Agreement. Furthermore, the Reinsurance Agreement does not apply
to, and specifically excludes from the reinsurance coverage,
(i) any liabilities and obligations arising under insurance
or annuity contracts issued by JNL that are not identified in or
by reference in a schedule to the Reinsurance Agreement and do
not constitute future annuities, (ii) any guaranteed
benefits or income withdrawal benefits, other than payments due
upon partial or full surrenders and death benefits not excluded
pursuant to clause (iii) below, that may be provided by JNL
under riders or endorsements attached to the annuities
(including without limitation any medical and hospital expense
coverage or other types of benefits, provided that waiver of
surrender of nursing home and hospitalization are not excluded
from coverage), (iii) any benefits paid as a result of
“guaranteed death benefit” provisions under any
annuity, (iv) any Excess of Limit Payments or Extra
Contractual Liabilities (as defined below) liability based on
acts, errors or omissions by JNL or any of its officers or
employees, agents, subcontractors or representatives and not
attributable to a written direction or a request by a designated
officer of Overture Re, and (v) any and all liabilities,
causes of action, including regulatory action, lawsuits,
penalties, claims and demands that arise out of or result from
the fact that any annuity was issued and delivered in a
jurisdiction where issuance and delivery of the annuity
constituted the doing of business where JNL was not licensed.
If the amount of insurance under any Covered Annuity increases,
the increase will automatically be reinsured under the
Reinsurance Agreement.
If the amount of insurance under any Covered Annuity is reduced
or terminated, reinsurance under the Reinsurance Agreement on
such Covered Annuity will be similarly reduced or terminated.
Reinsurance coverage will be reinstated for a terminated Covered
Annuity if JNL reinstates such Covered Annuity using
conventional underwriting and issue practices.
“Extra Contractual Obligations”and
“Excess of Limit Payments”represent payments
that JNL may make or become liable for that represent payments
not required by the terms of a Covered Annuity but which may be
made in connection with a settlement of claims under a Covered
Annuity, Benefit Payments (as described below) made in excess of
limits in the documents governing the Covered Annuities due to
failure to handle or settle claims in a manner consistent with
the administration guidelines specified in the Reinsurance
Agreement, or which represent liabilities for compensatory,
consequential, exemplary, punitive or similar damages or losses
which directly relate to any alleged or actual act, error,
omission, fraud or misrepresentation by any person, whether
intentional or otherwise, or which arise from any actual or
alleged reckless conduct or bad faith by any person, in each
case, in connection with such person’s handling of any
claim under any of the Covered Annuities (including the
settlement, defense of, or appeal of any claim) or in connection
with the issuance, offer, sale, delivery, cancellation or
administration by any person of any of the Covered Annuities.
By entering into the Reinsurance Agreement, Overture Re will be
subject in all respects to all of the terms and conditions,
general and specific stipulations, clauses, waivers, extensions,
modifications, alterations, cancellations, interpretations, and
endorsements of the Covered Annuities.
The reinsurance cover provided under the Reinsurance Agreement
is indemnity reinsurance solely between JNL and Overture Re, and
performance of the obligations of each party under the
Reinsurance Agreement is to be rendered solely to the other
party. No person other than JNL or Overture Re is to have any
rights under the Reinsurance Agreement, and JNL will be and
remain the only party under the Reinsurance Agreement that will
be liable to any insured, policyowner, annuityholder or
beneficiary under any Covered Annuity.
Reinsurer Payments. Upon execution and
delivery of the Reinsurance Agreement, Overture Re will pay to
JNL a ceding commission in the amount of $21,500,000. Overture
Re will also agree to pay during the term of the Reinsurance
Agreement an expense allowance for all Covered Annuities to JNL
as of the close of each quarterly accounting period through the
quarterly net settlement as follows:
(a) either a one-time fee, or a percentage of commissions
payable by JNL, each as specified in the Reinsurance Agreement,
for each future annuity issued during such accounting period,
depending on the type of future annuity;
(b) an administration fee for the Covered Annuities as set
forth on a schedule to the Reinsurance Agreement;
(c) a fee for managing the assets in the modified
coinsurance trust relating to the fixed annuities equal to 0.25%
per annum, calculated on a quarterly basis;
(d) a premium tax reimbursement equal to 2% of the
reinsurance premiums; and
(e) an excise tax reimbursement equal to 100% of the
U.S. federal insurance excise tax, if any, imposed on the
reinsurance premiums paid to Overture Re by JNL.
Furthermore, during the term of the Reinsurance Agreement,
Overture Re will pay through the net settlement described below
(i) 90% of the Benefit Payments attributable to the fixed
annuity block and (ii) 50% of the Benefit Payments
attributable to the variable annuity block as of the close of
each quarterly accounting period.
“Benefit Payments” as used herein means the
payments during any given accounting period in respect of cash
surrender value, partial surrenders, full surrenders, annuity
payments, certain out of pocket expenses (net of any
recoveries), and death benefits under the Covered Annuities
payable by JNL net of any payments payable by reinsurers under
any reinsurance agreements that JNL has entered into with third
parties in respect of the Covered Annuities.
Reinsurance Premium. During the term of the
Reinsurance Agreement, Overture Re will be entitled to payment
of reinsurance premiums through the net settlement described
below equal to: (a) 90% of the premiums received by JNL
(and attributable to periods) on and after the effective date of
the Reinsurance Agreement that are attributable to the fixed
annuity block, and (b) 50% of the premiums received by JNL
and the mortality and expense risk charges, administrative,
subscription and other fees and charges deducted by JNL from the
specified separate accounts supporting the variable annuity
block (without duplication of
premiums) (and attributable to periods) on and after the
effective date of the Reinsurance Agreement that are
attributable to the variable annuity block.
Asset Transfer. In consideration for the
reinsurance provided by Overture Re under the Reinsurance
Agreement, on the date of execution and delivery of the
Reinsurance Agreement, JNL will transfer to a trust arrangement
for the benefit of Overture Re assets and cash with a total
statutory admitted value equal to (i) 90% of the reserve
attributable to the fixed annuity block and (ii) 50% of the
reserve attributable to the variable annuity block as of the
effective date of the Reinsurance Agreement by
(a) transferring to the modified coinsurance trust relating
to the fixed annuities assets listed on a schedule to the
Reinsurance Agreement and cash with a statutory admitted value
in an aggregate amount equal to 90% of the result of the
(1) reserve attributable to the fixed annuity block less
(2) the loans made by JNL to the owners of the Covered
Annuities outstanding on the Covered Annuities, in each case as
of the effective date of the Reinsurance Agreement;
(b) withholding 90% of the loans made by JNL to the owners
of the Covered Annuities on JNL’s books for the account of
Overture Re; and (iii) retaining assets supporting 50% of
the reserve attributable to the variable annuity block as of the
effective date of the Reinsurance Agreement in JNL’s
separate accounts.
Net Settlement. A net settlement is due as of
the close of each quarterly accounting period. If the amount of
the net settlement is positive, JNL will pay such amount in cash
to Overture Re, and if the amount of the net settlement is
negative, Overture Re will pay the absolute value of such amount
in cash to JNL. The net settlement for each accounting period is
equal to the following:
(a) the reinsurance premiums payable to Overture Re; minus
(b) the expense allowance payable to JNL; minus
(c) the applicable quota share percentage of the Benefit
Payments for the fixed annuity block and the variable annuity
block payable to JNL; plus
(d) the variable annuities modified coinsurance adjustment
(described below); plus
(e) the fixed annuities modified coinsurance adjustment
(described below).
If the amount of the net settlement for an accounting period is
positive, JNL will pay such amount to Overture Re at the time it
delivers the quarterly accounting and net settlement statement
for such accounting period to Overture Re, and if the amount of
the net settlement for an accounting period is negative,
Overture Re will pay the absolute value of such amount to JNL
within 15 days of its receipt of the quarterly accounting
statement for such accounting period. If a net settlement
remains outstanding longer than 45 days after the end of a
calendar quarter, interest will be charged at a rate specified
in the Reinsurance Agreement.
Modified Coinsurance Reserve for the Fixed Annuity
Block. As of the date of the execution and
delivery of the Reinsurance Agreement, JNL will establish a
modified coinsurance trust for the fixed annuity block, which
will at all times be maintained separate and apart from any
other assets of JNL, and JNL will deposit in such trust cash and
invested assets with an aggregate statutory admitted value equal
to not less than the required balance, which is 90% of the
excess of the reserve attributable to the fixed annuity block
over the loans made by JNL to the owners of the Covered
Annuities, as of the effective date of the Reinsurance Agreement.
During the term of the Reinsurance Agreement, JNL will own,
manage and maintain the assets in the modified coinsurance trust
for the fixed annuity block and 90% of the loans made by JNL to
the owners of the Covered Annuities supporting 90% of the
reserve attributable to the fixed annuity block.
The investment of the assets in the modified coinsurance trust
for the fixed annuity block will initially be managed by JNL or
its affiliates in accordance with the investment guidelines set
forth in a schedule to the Reinsurance Agreement, and taking
into account investment and reinvestment recommendations made by
Overture Re.
JNL will estimate (i) the aggregate statutory admitted
value of the assets in the modified coinsurance trust for the
fixed annuity block and (ii) the amount of the required
balance in each case as of the end of each accounting period
within ten days after the end of the relevant accounting period.
If the estimated aggregate statutory admitted value of the
assets in the modified coinsurance trust for the fixed annuity
block is less than the required estimated balance, Overture Re
will within eleven days after of the end of the relevant
accounting
period, transfer to the modified coinsurance trust for the fixed
annuity block as cash or other assets which meet the
requirements of the investment guidelines in an amount
sufficient to increase the aggregate statutory admitted value of
the assets in the modified coinsurance trust for the fixed
annuity block to an amount that equals the estimated required
balance as of the end of such accounting period. If the
aggregate statutory admitted value of the assets in the modified
coinsurance trust for the fixed annuity block exceeds the
required balance as shown in the net settlement statements
delivered by JNL, Overture Re may request JNL to, and JNL will,
withdraw from the modified coinsurance trust for the fixed
annuity block cash or other assets in an amount equal to such
excess and pay them over to Overture Re; provided that, after
any such withdrawal, the aggregate statutory admitted value of
the remaining assets in the modified coinsurance trust for the
fixed annuity block equals or exceeds the required balance as of
the end of such accounting period.
For each accounting period, JNL will pay to Overture Re net
investment income on the reserve attributable to the fixed
annuity block, in accordance with Overture Re’s 90% quota
share percentage.
For each accounting period, a modified coinsurance adjustment
for the fixed annuity block will be calculated as follows:
(i) the modified coinsurance investment income for the
fixed annuity block; minus
(ii) 90% of the reserve attributable to the fixed annuity
block as of the close of the current accounting period less 90%
of the reserve attributable to the fixed annuity block as of the
close of the preceding accounting period (provided that for the
purposes of this clause, any reduction of the reserve
attributable to the fixed annuity block resulting from transfers
by holders of Covered Annuities from fixed investment options to
variable investment options during the accounting period will be
added back to the reserve attributable to the fixed annuity
block as of the close of the current accounting period); plus
(iii) 50% of the aggregate amount of transfers by holders
of Covered Annuities from fixed investment options to variable
investment options during the accounting period.
Modified Coinsurance Adjustment for the Variable Annuity
Block. A modified coinsurance adjustment will be
calculated for the variable annuity block for each accounting
period as follows:
(i) 0.15% of market value of the assets in JNL’s
separate accounts supporting the variable annuity block that
generate revenue sharing and certain fees, less
(ii) 50% of the transfers from JNL’s general account
to the separate account assets funding the variable annuity
block, including premiums and fund transfers, for the accounting
period; plus
(iii) 90% of the transfers from the separate account assets
funding the variable annuity block to JNL’s general
account, including benefits and fund transfers, for the
accounting period; plus
(iv) 50% of any gain or loss of JNL to separate account
assets funding the variable annuity block resulting from pricing
errors, expense calculation errors or missing fund activity, for
the accounting period.
For any accounting period in which the modified coinsurance
adjustment for the variable annuity block is positive, JNL will
owe Overture Re such amount, and for any accounting period in
which the modified coinsurance adjustment for the variable
annuity block is negative, Overture Re will owe JNL the absolute
value of such amount. Settlement will be made through net
settlement for each accounting period.
JNL will own, manage and maintain the assets supporting 50% of
the reserve attributable to the variable annuity block in its
separate accounts in accordance with the terms of the variable
annuity block annuities.
Termination Rights. Upon the occurrence of any
of the events specified in clause (i), (ii) or
(v) below, JNL will have the right, in its sole discretion,
to terminate the Reinsurance Agreement immediately upon a notice
of termination to Overture Re setting forth the termination
effective date, and upon the occurrence of any of the events in
clause (iii) or (iv) below, JNL will have the right in
its sole discretion, to terminate the Reinsurance Agreement
after Overture Re fails to remedy any of such events within
90 days notice by JNL:
(i) Overture Re is declared insolvent by a court of
competent jurisdiction, or a conservator, rehabilitator,
liquidator or statutory successor is appointed for Overture Re;
(ii) Overture Re’s total adjusted capital is less than
the threshold specified in the Reinsurance Agreement;
(iii) Overture Re fails to receive or maintain all licenses
and permits necessary to operate as a reinsurer in Bermuda;
(iv) Overture Re fails to pay when due any net settlement
payment to be made by it under the Reinsurance Agreement, or the
effectuation of any offset of or deduction from any amount
payable to Overture Re is delayed or prohibited by operation of
law, other than any payment that is to be made on behalf of
Overture Re by JNL in performance of the administrative
services; or
(v) JNL fails to receive full credit on its financial
statements filed with the Texas Department of Insurance for the
reinsurance under the Reinsurance Agreement.
If JNL elects to terminate the Reinsurance Agreement pursuant to
the foregoing, JNL will recapture all, but not less than all, of
the liability with respect to all Covered Annuities ceded under
the Reinsurance Agreement, effective on the date of termination
of the Reinsurance Agreement, and subject to a terminal
settlement between JNL and Overture Re as set forth below,
Overture Re will have no further liability with respect to the
Covered Annuities subsequent to the date of termination of the
Reinsurance Agreement.
Termination of the Reinsurance Agreement for reinsurance
coverage in force is subject to a terminal settlement, which is
due as of the date of termination of the Reinsurance Agreement,
payable within forty-five (45) days after the date of
termination of the Reinsurance Agreement. The terminal
settlement consists of:
(i) payment by the appropriate party of the quarterly net
settlement, computed as of the date of termination of the
Reinsurance Agreement;
(ii) to the extent the fair market value of the assets in
the modified coinsurance trust for the fixed annuity block
exceeds the required balance, in each case as of the date of
termination of the Reinsurance Agreement, JNL will pay such
excess to the Company and Overture Re will accordingly establish
and maintain on its statutory financial statements an interest
maintenance reserve with respect to such transfer;
(iii) to the extent the fair market value of the assets in
the modified coinsurance trust for the fixed annuity block is
less than the required balance, in each case as of the date of
termination of the Reinsurance Agreement, Overture Re will pay
JNL such shortfall and Overture Re will accordingly establish
and maintain on its statutory financial statements a negative
amount of interest maintenance reserve as a non-admitted asset
with respect to such transfer; and
(iv) in the case of termination as a result of a material
amount due to Overture Re not being timely paid, a termination
value not in excess of the ceding commission calculated by JNL
in good faith as of the date of termination of the Reinsurance
Agreement according to “best practices” (as described
in the Reinsurance Agreement) that are appropriate to valuing
annuities and related cash flows and consistent with the terms
of the Reinsurance Agreement (with a right of Overture Re to
object). If termination value is positive, the amount of such
termination value will be paid to Overture Re by JNL.
Furthermore, the Reinsurance Agreement may be terminated, for
the acceptance of future annuities after 90 days’
written notice of termination by either JNL or Overture Re to
the other. Unless mutually agreed, Overture Re will continue to
accept reinsurance during such
90-day
period. Overture Re’s acceptance will be subject to both
the terms of the Reinsurance Agreement and JNL’s payment of
applicable reinsurance premiums. In addition, either JNL or
Overture Re may terminate the Reinsurance Agreement immediately
for the reinsurance of future annuities if either Overture Re or
JNL, respectively, materially breaches the Reinsurance
Agreement, or becomes insolvent or financially impaired.
Termination of the Reinsurance Agreement for future annuities
does not affect the existing reinsurance coverage of the Covered
Annuities in force at the effective date of such termination.
If any material amount of net settlement due Overture Re is not
paid within sixty (60) days after the due date, Overture Re
has the right to terminate the Reinsurance Agreement. If
Overture Re elects to terminate the Reinsurance Agreement, it
will give JNL 90 days written notice of its intention. If
the amounts due Overture Re in arrears, including any that
become in arrears during the 90 day notice period, are not
paid before the
expiration of the notice period, Overture Re will be relieved of
all liability under the Covered Annuities as of the last date
for which amounts due Overture Re have been paid for each
Covered Annuity. Terminated reinsurance coverage for failure to
pay amounts due Overture Re in arrears may be reinstated,
subject to approval by Overture Re, within 60 days of the
date of termination of the Reinsurance Agreement, and upon
payment of all amounts in arrears.
Reporting. Within 30 days following the
end of each calendar quarter, JNL will render or cause to be
rendered to Overture Re a summary report and accounting of all
transactions for the Covered Annuities, including premiums
earned, benefits paid, claims received, denied
and/or paid,
amounts loaned by JNL to owners of Covered Annuities, reserve
increases or decreases, the amount of assets in the modified
coinsurance accounts, par/exposure drawdowns, refundings,
terminations, any subrogation, salvage or reimbursement, and
other matters that have occurred during the preceding quarter
with respect to the Covered Annuities. Within 45 days
following the end of each calendar year, JNL will furnish to
Overture Re any other information that the parties may
reasonably require for their annual financial statements.
Administrative Services. JNL will retain the
obligation of administering the Covered Annuities, in accordance
with guidelines set forth in the Reinsurance Agreement. In
consideration for JNL performing administrative services,
Overture Re will pay to JNL, on a quarterly basis, the fees set
forth in the Reinsurance Agreement for each Covered Annuity in
force for any portion of the quarterly accounting period, which
fees will be on a per-annuity basis. JNL will not be required to
take any action that will be in violation of any law, and may
take any action required by, or necessary to be in compliance
with, any applicable law. Actions taken (or failed to be taken)
by JNL as contemplated by and in accordance with the guidelines
set forth in the Reinsurance Agreement will not constitute a
breach by Overture Re of any of Overture Re’s obligation
under the Reinsurance Agreement. Overture Re will not deny
coverage, or seek to avoid the provision of reinsurance under
the Reinsurance Agreement, on the ground of any act, error or
omission in the provision of administrative services by JNL as
contemplated by such guidelines. See “Business of
Overture Re — The Quota Share ReinsuranceAgreement — Administrative Services
Guidelines.”
In the event that JNL is unable to provide or cause to be
provided services as required by the Reinsurance Agreement for
any reason for a period of time that can reasonably be expected
to exceed thirty (30) calendar days, JNL will provide
notice to Overture Re of its inability to perform the services
and will cooperate with Overture Re in providing or otherwise
obtaining alternative means of providing such services at
JNL’s sole cost and expense.
JNL will at all times during the term of the Reinsurance
Agreement keep and maintain in force all necessary licenses,
authorizations, permits and qualifications from governmental
authorities under applicable laws and regulations as may be
necessary to perform the administrative services in the manner
required by the Reinsurance Agreement.
Contested Claims. JNL will advise Overture Re
of its intention to contest, compromise or litigate any Benefit
Payments with respect to any Covered Annuities. Overture Re will
pay its share of the expenses and costs of such contests
(according to the applicable quota share percentage), or it may
choose not to participate. If Overture Re chooses not to
participate, it will discharge its liability by payment to JNL
of the full amount of its liability on such Covered Annuities
reinsured under the Reinsurance Agreement.
Finality of Settlements; Following the
Fortunes. All settlements made by or on behalf of
JNL will be final, conclusive and unconditionally binding upon
Overture Re. Overture Re’s liability under the Reinsurance
Agreement will follow from, and be incurred simultaneously with
and be identical (subject to the relevant quota share
percentage) to any and all liabilities of JNL on the Covered
Annuities. Overture Re will be bound, without limitation, by all
payments and settlements entered into by or on behalf of JNL.
Financial Statement Credit for
Reinsurance. Overture Re will be obligated under
the Reinsurance Agreement to take all steps necessary to comply
with all applicable laws and regulations or as required under
the terms of National Associated of Insurance
Commissioners’ practices and procedures manual so as to
permit JNL to receive full credit under the manual as admitted
reinsurance for Overture Re’s share of the reserves and any
other liabilities ceded, and to obtain full financial statement
credit for the reinsurance provided by the Reinsurance Agreement
in all applicable United States jurisdictions in which JNL is
licensed to transact business, to the extent credit is not
otherwise available under applicable law or regulations. JNL
will be obligated, at least annually, to release contingency
reserves in respect of Covered Annuities to the maximum extent
permitted under applicable law (and will seek regulatory
approval to do so where necessary).
Access to Records. JNL will as soon as
practicable following the effective date of the Reinsurance
Agreement provide to Overture Re copies (which may be in
electronic form) of reports, records, claim files and other
information relating to the Covered Annuities requested by
Overture Re. In addition, Overture Re and JNL will, at all
reasonable times during the term of the Reinsurance Agreement
and thereafter, have access to, and be permitted to copy, the
books, records, files and documents (including computer files,
retrieval programs and similar documentation) of the other party
with respect to the Covered Annuities. The foregoing rights of
access to records are subject to a right to redact, on a
reasonable basis, materials which are protected by
attorney/client privilege or the attorney work product doctrine
or that contain information unrelated to the Covered Annuities
or that are not material to the Covered Annuities.
Insolvency. In the event of the insolvency of
JNL or the appointment of a conservator, rehabilitator,
liquidator or statutory successor of JNL, the reinsurance under
the Reinsurance Agreement will be payable directly to its
liquidator, receiver, conservator or statutory successor, on the
basis of the liability of JNL without diminution because of the
insolvency of JNL or because the liquidator, receiver,
conservator or statutory successor of JNL has failed to pay all
or a portion of any claim. The reinsurance under the Reinsurance
Agreement will be payable by Overture Re to JNL’s
liquidator, receiver, conservator or statutory successor, except
as provided by applicable law. Overture Re will have certain
rights to investigate and interpose defenses against claims
against JNL that may give rise to a possible liability under the
Reinsurance Agreement, in the event of the insolvency of JNL.
Amendment of Covered Annuities. Except with
the prior written consent of Overture Re, which consent will not
be unreasonably withheld, delayed or conditioned, JNL will not
amend or modify the terms or conditions of any Covered Annuity
(including to any contract riders or endorsements thereto) other
than those amendments or modifications entered into in the
ordinary course of business or required by applicable law. In
the event that any such amendments or modifications are made in
any Covered Annuity other than in accordance with the
Reinsurance Agreement, the Reinsurance Agreement will cover
liability incurred by JNL for Benefit Payments as if such
changes, amendments or modifications had not been made.
Confidentiality. JNL and Overture Re will
agree pursuant to the Reinsurance Agreement to maintain the
confidentiality of confidential information (which includes any
information concerning the disclosing party or its business, the
Reinsurance Agreement, any Covered Annuity or proposed annuity,
as well as all underlying transactions relating thereto, and all
communications, documents and other information of any sort
relating to the foregoing). However, information will not be
deemed confidential if it is in the public domain, if it was
lawfully possessed at the time of disclosure, if it was lawfully
received from a third party that, to the receiving party’s
knowledge, was not under an obligation of confidentiality, if
the disclosing party has consented to its disclosure or if it
was independently developed. In addition, if the receiving party
is requested or required in connection with a judicial,
regulatory, administrative, governmental or other legal
proceeding or by applicable law or court order, subpoena or
similar legal process, to disclose any confidential information,
the receiving party will provide the disclosing party with
timely notice of such request so that the disclosing party may
seek an appropriate protective order, but in any event the
receiving party may disclose whatever confidential information
it is advised by counsel it is required to disclose.
Certain Representations of JNL. JNL will make
certain representations with respect to the Covered Annuities,
as specified in the Reinsurance Agreement.
Indemnification. JNL will indemnify and hold
harmless Overture Re and its affiliates from and against
monetary damages, liabilities, obligations, costs and expenses
which may include but are not limited to plaintiff’s
litigation-related costs and fees, together with Overture
Re’s reasonable attorney’s fees, costs and expenses,
resulting from or relating to (i) a breach of any
representation or warranty of JNL in the Reinsurance Agreement,
disregarding for purposes of this clause any materiality or
material adverse effect qualification contained in such
representation or warranty (and the indemnification pursuant to
this clause will be limited as set forth in the Reinsurance
Agreement), (ii) any actions taken or omissions made by JNL
or JNL’s employees or agents in the solicitation, sale,
issuance or administration of any Covered Annuity including,
without limitation, any extra-contractual obligation or
liability in excess of policy limits arising out of or relating
to
any such actions taken or omissions made, and not attributable
to a written direction or a request by a designated officer of
Overture Re, (iii) any future annuity issued on a basis
inconsistent with the current underwriting standards of JNL,
(iv) the failure of any Covered Annuity to have complied in
all material respects with applicable laws and regulations at
the time of its issuance or thereafter due to facts or
circumstances extant on or before the effective date of the
Reinsurance Agreement, (v) any breach or nonfulfillment by
JNL of, or any failure by JNL to perform, any of the terms or
conditions of, or any duties or obligations under, the
Reinsurance Agreement (including the administration of the
Covered Annuities), (vi) any liability of JNL with respect
to the excluded coverage, (vii) any successful enforcement
of this indemnity or (viii) any failure by JNL to obtain
the approval of any applicable governmental authority, to the
extent required under applicable legal requirements, of any
application, brochure or marketing materials pertaining to the
Covered Annuities or failure to have any such application,
brochure or marking materials filed with and not objected to by
such governmental authority within the period provided by
applicable law for objection. JNL will not be obligated to
indemnify Overture Re or its affiliates as to any claim arising
from Overture Re’s willful or negligent misconduct or
breach of the terms of the Reinsurance Agreement or any
agreement contemplated thereby.
Overture Re will indemnify and hold harmless JNL and its
affiliates from and against monetary damages, liabilities,
obligations, costs and expenses which may include but are not
limited to plaintiff’s litigation-related costs and fees,
together with JNL’s reasonable attorney’s fees, costs
and expenses, resulting from or relating to (i) any
liabilities or obligations arising out of or relating to the
Covered Annuities (according to the applicable quota share
percentage) whether incurred before or after the effective date
of the Reinsurance Agreement, (ii) any other breach or
nonfulfillment by Overture Re of, or any other failure by
Overture Re to perform, any of the terms or conditions of, or
any duties or obligations or agreements under, the Reinsurance
Agreement, or (iii) any successful enforcement of this
indemnity; provided, however, that in no event will such losses
include any contractual liability under any Covered Annuity
arising prior to the effective date of the Reinsurance
Agreement. Overture Re will not be obligated to indemnify JNL or
its affiliates as to any claim arising from JNL’s willful
or negligent misconduct or breach of the terms of the
Reinsurance Agreement or any agreement contemplated thereby.
The party seeking indemnification agrees to deliver written
notice to the other party as set forth in the Reinsurance
Agreement.
Governing Law. The Reinsurance Agreement will
be governed by the laws of the State of New York (without regard
to conflict of laws principles), except to the extent that the
insurance laws and regulations of the State of Texas are
specifically applicable.
Arbitration. JNL and Overture Re agree
pursuant to the Reinsurance Agreement that any dispute or other
matter in question between Overture Re and JNL arising out of,
or relating to, the formation, interpretation, performance or
breach of the Reinsurance Agreement, whether such dispute arises
before or after termination of the Reinsurance Agreement, and
whether in contract or in tort, will be settled by arbitration.
Overture Re and JNL agree that, prior to resorting to
arbitration, they will negotiate diligently and in good faith,
in an effort to resolve any dispute, and at the end of sixty
(60) days (or such longer period as the parties may agree),
either party may initiate arbitration.
There will be three (3) arbitrators who will have a level
of experience as specified in the Reinsurance Agreement. Each
party appoints one arbitrator, and the two party-selected
arbitrators jointly appoint the third arbitrator. The
arbitrators will decide all substantive and procedural issues by
a majority of votes. The panel is authorized to award any remedy
or sanctions by applicable law, including, but not limited to,
monetary damages, equitable relief, pre or post award interest,
costs of arbitration, attorneys fees, and other final or interim
relief. The decision of the arbitrators will be made by majority
rule, and will be final and binding on both parties. There will
be no appeal from the decision, except that the parties retain
the right to challenge under the Federal Arbitration Act. Either
party to the arbitration may petition the United States District
Court for the Southern District of New York having jurisdiction
over the parties to reduce the decision to judgment.
Taxes. Overture Re will pay any tax, interest,
penalties, fees or other costs imposed by any taxing authority
on Overture Re or on any payments made to Overture Re under the
Reinsurance Agreement.
Amendment of Agreement. The Reinsurance
Agreement may be amended only by the written agreement of JNL
and Overture Re.
Assignment of Agreement. No party to the
Reinsurance Agreement may assign the Reinsurance Agreement or
any of its rights or obligations thereunder without the prior
written consent of the other party thereto, and any attempt to
make any such assignment (by operation of law or otherwise)
without such consent will be null and void. Notwithstanding the
foregoing, JNL may without consent of Overture Re assign its
rights and obligations relating to the provision of
administrative services with respect to the Covered Annuities to
any affiliate of JNL that shall assume such obligations of JNL
in writing, and upon notification of such assignment to Overture
Re, JNL will be relieved from such obligations.
Administrative Services Guidelines. The
Reinsurance Agreement contains guidelines for the performance of
administrative services by JNL as administrator with respect to
the Covered Annuities. The guidelines describe in general the
services to be performed and the standards to be met by JNL in
performing such services:
Standards: JNL will perform the administrative services, in
accordance (i) in all material respects, with applicable
law, (ii) in all material respects, with the terms and
conditions of the Covered Annuities, and (iii) with
substantially the same standards, guidelines and procedures
pursuant to which it performs similar functions with respect to
its own annuities. JNL as administrator further agrees to adhere
to any written guidelines and procedures regarding the
administrative services as may reasonably be agreed to by JNL
and Overture Re from time to time.
Administrative Services: JNL as administrator will provide, as
deemed reasonably necessary by JNL as administrator, all
services with respect to the Covered Annuities, including
without limitation:
(i) paying out Benefit Payments;
(ii) collecting installments of premiums;
(iii) monitoring and reporting on the performance of the
Covered Annuities;
(iv) generating reports on the Covered Annuities;
(v) processing requests for amendments or changes,
including evaluating and processing waivers and consents as
deemed appropriate by JNL as administrator, to the terms or
conditions of any Covered Annuities;
(vi) managing work-out and claim situations, including
evaluating and processing waivers and consents as deemed
appropriate by JNL as administrator;
(vii) presenting analyses and recommendations regarding
reserves;
(viii) reporting on risk characteristics of the Covered
Annuities;
(ix) investigating, mitigating, negotiating, defending or
working out any Benefit Payments or other claims involving any
of the Covered Annuities;
(x) settling Benefit Payments and paying such claims;
(xi) protecting, perfecting and exercising any subrogation,
salvage or reimbursement rights or security interests with
respect to any Covered Annuities;
(xii) collecting any and all premiums owing on the Covered
Annuities and paying, returning or refunding any premiums owing
to the annuityholders;
(xiii) taking such action as may be deemed appropriate to
enforce any rights or remedies in respect of the Covered
Annuities, and retain and direct counsel and advisors from time
to time as deemed appropriate by JNL as administrator in its
sole discretion in connection with the enforcement of any such
rights and remedies;
(xiv) providing usual and customary services for
annuityholders;
(xv) preparing accounting and actuarial information related
to the Covered Annuities as required to timely satisfy statutory
or tax reporting requirements applicable to JNL and Overture Re;
(xvi) maintaining appropriate books and records related to
the Covered Annuities in accordance with applicable law;
(xvii) making regulatory filings relating to the Covered
Annuities; and
(xviii) making all routine tax filings of JNL relating to
the Covered Annuities.
JNL as administrator will have the right to take any actions
that it deems appropriate in connection with its performance of
administrative services, provided, however, that
in no event may it increase the obligations or risks covered
under a Covered Annuity, extend the term of any Covered Annuity
or accelerate the payment of claims under a Covered Annuity,
except as otherwise provided in the Reinsurance Agreement.
JNL as administrator is expected to utilize its proprietary
software and systems in performing administrative services.
Overture Re intends initially to have three employees. Michael
Girouard will be the Chief Financial Officer and Brian Heaphy
will be the General Counsel and Secretary. In addition, Overture
Re is in the process of identifying a Chief Executive Officer
with actuarial experience.
The following table sets forth information known to the Company
regarding the beneficial ownership of its Ordinary Shares as of
December 10, 2009 (pre-Transaction) and, immediately
following consummation of the Transaction (post-Transaction),
ownership of Ordinary Shares by:
•
each person known by the Company to be the beneficial owner of
more than 5% of the Company’s outstanding Ordinary Shares
either on December 8, 2009 (pre-Transaction) or of Ordinary
Shares outstanding after the consummation of the Transaction
(post-Transaction);
•
each of the Company’s current officers and directors;
•
each person who will become an executive officer or director of
the Company upon consummation of the Transaction; and
•
all executive officers and directors of the Company as a group
pre-Transaction and post-Transaction.
Unless otherwise indicated, the Company believes all persons
named in the table below have sole voting and investment power
with respect to all Ordinary Shares beneficially owned by them.
Information (pre-Transaction) does not reflect beneficial
ownership of the Ordinary Shares issuable upon exercise of the
Public Warrants or the founder warrants as these warrants are
not currently exercisable. Information (post-Transaction)
(i) assumes that the Public Warrants are not exercisable
immediately after the Transaction as proposed in the Warrant
Amendment Proposal; (ii) assumes the repurchase of all of
the Founder Shares as proposed in the Founder Share Repurchase
Proposal; (iii) assumes the issuance of 19.99% of the
outstanding Ordinary Shares to JNL by the Company pursuant to a
private placement upon consummation of the Transaction and the
acquisition by JNL of an additional 4.6% of the outstanding
Ordinary Shares in Open Market Purchases or pursuant to the JNL
Private Share Purchases; and (iv) does not reflect exercise
of the Founder warrants as the Founder warrants are not
exercisable for one year following the consummation of the
Transaction; and (v) does not reflect the 2,812,500 of the
Company’s Ordinary Shares issuable in three equal tranches
to the Founders in the event the volume weighted average price
of the Company’s Ordinary Shares for any ten days during a
30 day period equals or exceeds $12, $16 and $20,
respectively, as these shares are not expected to be issued
within 60 days following the consummation of the
Transaction.
All pre-Transaction directors and executive officers of the
Company as a group (five individuals)
3,750,000
20.0
%
—
—
All post-Transaction directors and executive officers of the
Company as a group (seven individuals)
—
—
—
—
*
Less than one percent (1%).
(1)
Unless otherwise indicated, the business address of each of the
individuals is
c/o Overture
Acquisition Corp., South Church Street, George Town, Grand
Cayman KY1-1104 Cayman Islands
(2)
Assumes that none of the Company’s Public Shares were
redeemed for a pro rata portion of the trust account in
connection with the Transaction.
(3)
Does not include warrants to purchase 2,345,543 Ordinary Shares,
which are not exercisable.
(4)
Based on a Schedule 13G/A filed on August 11, 2009
with the SEC jointly by Integrated Core Strategies (US) LLC
(“Integrated”), Millennium Management LLC
(“Millennium Management”) and Israel A. Englander
(“Mr. Englander”). Integrated holds 1,632,094
Ordinary Shares and 3,511,044 warrants to purchase Ordinary
Shares which are not exercisable. Millennium Management is the
general partner of Integrated Holding Group LP, the managing
member of Integrated and consequently may be deemed to have
shared voting control and investment discretion over securities
owned by Integrated. Mr. Englander is the managing member
of Millennium Management and consequently may be deemed to be
the beneficial owner of any shares deemed to be beneficially
owned by Millennium Management. The filing of the
Schedule 13G should not be construed in and of itself as an
admission by Millennium Management or Mr. Englander as to
beneficial ownership of the shares owned by Integrated. The
business address for the filers is
c/o Millennium
Management LLC, 666 Fifth Avenue, New York, New York10103.
QVT Financial LP (“QVT Financial”) is the investment
manager for QVT Fund LP (the “Fund”), which
beneficially owns 1,348,927 Ordinary Shares. QVT Financial is
the investment manager for Quintessence Fund L.P.
(“Quintessence”), which beneficially owns 136,703
Ordinary Shares. QVT Financial is also the investment manager
for a separate discretionary account managed for Deutsche Bank
AG (the “Separate Account”), which holds 123,620
Ordinary Shares. QVT Financial has the power to direct the vote
and disposition of the Common Stock held by each of the Fund,
Quintessence and the Separate Account. Accordingly, QVT
Financial may be deemed to be the beneficial owner of an
aggregate amount of 1,609,250 Ordinary Shares, consisting of the
shares owned by the Fund and Quintessence and the shares held in
the Separate Account. QVT Financial GP LLC, as General Partner
of QVT Financial, may be deemed to beneficially own the same
number of Ordinary Shares reported by QVT Financial. QVT
Associates GP LLC, as General Partner of the Fund, may be deemed
to beneficially own the aggregate number of Ordinary Shares
owned by the Fund and Quintessence, and accordingly, QVT
Associates GP LLC may be deemed to be the beneficial owner of an
aggregate amount of 1,485,630 Ordinary Shares. Each of QVT
Financial and QVT Financial GP LLC disclaims beneficial
ownership of the Ordinary Shares owned by the Fund. QVT
Associates GP LLC disclaims beneficial ownership of all Ordinary
Shares owned by the Fund, except to the extent of its pecuniary
interest therein. Daniel Gold, who is managing member of QVT
Financial and its affiliates, may be deemed to have investment
and/or voting power with respect to securities owned by QVT
Financial and its affiliates, since he is the managing member
and a signatory to that certain Schedule 13G filed by QVT
and its affiliates on October 14, 2009. Please be advised
that our conclusion that Mr. Gold has investment and/or
voting power is based solely on (i) our review of such
Schedule 13G filing (ii) the assumption that the
information provided in such Schedule 13G is true and
complete and (iii) the assumption that as managing member
and signatory to such Schedule 13G, he, and not anyone
else, has investment and/or voting power over the securities.
(6)
Based on a Schedule 13G filed on July 11, 2008 with
the SEC jointly by Hartz Capital Investments, LLC and Hartz
Capital Inc. Hartz Capital Investments, LLC and Hartz Capital
Inc. may be deemed to have voting control and investment
discretion over the 1,447,367 Ordinary Shares owned by them.
Ronald J. Bangs, who is COO of Hartz Capital, Inc., may be
deemed to have investment and/or voting power with respect to
securities owned by Hartz Capital, since he is the COO and the
signatory to that certain Schedule 13G filed by Hartz
Capital on July 11, 2008. Please be advised that our
conclusion that Mr. Bangs has investment and/or voting
power is based solely on (i) our review of such
Schedule 13G filing (ii) the assumption that the
information provided in such Schedule 13G is true and
complete and (iii) the assumption that as COO and signatory
to such Schedule 13G, he, and not anyone else, has
investment and/or voting power over the securities. The business
address of the filers is 400 Plaza Drive, Secaucus, NJ07094.
(7)
Based on a Schedule 13G filed on November 12, 2009,
with the SEC jointly by Arrowgrass Capital Partners (US) LP, a
Delaware limited partnership (“ACP”) and Arrowgrass
Capital Services (US) Inc., a Delaware corporation
(“ACS”). ACS serves as the general partner of ACP and
as such has the power to direct the affairs of ACP including
disposition of the proceeds from the sale of the shares. Sean
Flynn, who is director of ACS and director of the general
partner of ACP may be deemed to have investment and/or voting
power with respect to securities owned by ACP and ACS, since he
is the signatory to that certain Schedule 13G filed by ACP
and ACS on November 6, 2009. Please be advised that our
conclusion that Mr. Flynn has investment and/or voting
power is based solely on (i) our review of such
Schedule 13G filing (ii) the assumption that the
information provided in such Schedule 13G is true and
complete and (iii) the assumption that as director of ACS
and director of the general partner of ACP and signatory to such
Schedule 13G, he, and not anyone else, has investment
and/or voting power over the securities. The business address of
the filers is 245 Park Avenue, New York, NY10167.
(8)
Marc J. Blazer beneficially owns 10 Ordinary Shares directly,
and indirectly beneficially owns 74,990 Ordinary Shares via the
Marc Blazer 2007 GRAT and 532,989 Ordinary Shares through Blazer
Investments, LLC. Does not include warrants to purchase 607,989
Ordinary Shares which are not exercisable within 60 days.
(9)
Does not includes warrants to purchase 385,326 Ordinary Shares,
which are not exercisable within 60 days.
Does not include warrants to purchase 162,228 Ordinary Shares,
which are not exercisable within 60 days.
(11)
Does not include warrants to purchase 124,456 Ordinary Shares,
which are not exercisable within 60 days.
(12)
Does not include warrants to purchase 62,229 Ordinary Shares,
which are not exercisable within 60 days.
(13)
Does not include warrants to purchase 62,229 Ordinary Shares,
which are not exercisable within 60 days.
(14)
Assumes the issuance by the Company of 3,747,657 shares to
JNL and the acquisition by JNL of 845,519 shares in either
open market purchases or privately negotiated purchases from
third parties.
JNL has agreed to beneficially own or has made commitments to
acquire up to 24.5% of the Company’s Ordinary Shares taking
into account the shareholders redemptions, the obligation of the
Company to repurchase the Founders Shares and any issuance of
Ordinary Shares to JNL pursuant to the Master Agreement as of
the Closing Date, in Open Market Purchases prior to the Record
Date of the Extraordinary General Meeting. To the extent that
JNL is unable to on the Closing Date beneficially own or have
commitments to acquire 24.5% of the Company’s Ordinary
Shares in the Open Market Purchases, it may enter into privately
negotiated share purchase transactions with record holders of
the Company’s Ordinary Shares subsequent to the Record Date
but prior to the Extraordinary General Meeting. In addition, JNL
has agreed to purchase such additional number of Ordinary Shares
from the Company such that it will on the Closing Date
beneficially own or have commitments to acquire in the aggregate
24.5% of the Company’s Ordinary Shares outstanding as of
the closing date of the Transaction, taking into account the
shareholders redemptions, the obligation of the Company to
repurchase the Founders Shares and any issuance of Ordinary
Shares to JNL pursuant to the Master Agreement and the
repurchase of the Founder Shares.
Upon consummation of the Transaction, the current Company
shareholders will hold approximately 75.5% of the Company’s
Ordinary Shares (assuming (i) no holders of Public Shares
elect to exercise their redemption rights, (ii) the Founder
Shares are repurchased by the Company, and (iii) an
aggregate of up to 3,747,657 shares (or 19.99% of the
outstanding) are issued to JNL in a private placement and
845,519 shares are purchased by JNL from third parties) or
80.01% (assuming (i) holders of one share less than 30% of
the Public Shares elect to exercise their redemption rights,
(ii) the Founder Shares are repurchased by the Company, and
(iii) an aggregate of up to 2,623,360 shares (or
19.99% of the outstanding) are issued to JNL in a private
placement and JNL purchases no shares from third parties), in
each case assuming none of the Warrants are exercised and the
Company purchases no Public Shares.
The Founder Shares have been placed in escrow with American
Stock Transfer & Trust Company, as escrow agent,
pursuant to an escrow agreement described below under the
section entitled “Certain Relationships and Related
Person Transactions — Certain Relationships and
Related Transactions of the Company.”
The Company’s Code of Ethics requires it to avoid, wherever
possible, all related party transactions that could result in
actual or potential conflicts of interest, except under
guidelines approved by the Board of Directors. Related party
transactions with respect to companies such as the Company are
defined under SEC rules as transactions in which (1) the
aggregate amount involved will or may be expected to exceed the
lesser of $120,000 or one percent of the average of the
company’s total assets at year end for the last two
completed years, (2) the Company or any of its subsidiaries
is a participant, and (3) any (a) executive officer,
director or nominee for election as a director, (b) greater
than 5% beneficial owner of shares, or (c) immediate family
member, of the persons referred to in clauses (a) and (b),
has or will have a direct or indirect material interest (other
than solely as a result of being a director or a less than 10%
beneficial owner of another entity). A conflict of interest
situation can arise when a person takes actions or has interests
that may make it difficult to
perform his or her work objectively and effectively. Conflicts
of interest may also arise if a person, or a member of his or
her family, receives improper personal benefits as a result of
his or her position.
Sale
of Founder Shares
On September 28, 2007, the Company issued 4,312,500
Ordinary Shares for $25,000 in cash. This includes an aggregate
of 562,500 Ordinary Shares held by our initial shareholders that
were redeemed by us on March 4, 2008 due to the expiration
of the underwriters’ over-allotment option so that our
initial shareholders would continue to collectively own 20% of
our issued and outstanding shares after our IPO (assuming none
of them purchased units in our IPO). We recorded the aggregate
fair value of the shares redeemed and reacquired to treasury
shares and a corresponding credit to additional paid-in capital
based on the difference between the fair market value of the
Ordinary Shares redeemed and the price paid to us for such
redeemed shares (which was an aggregate total of approximately
$3,261 for all 562,500 Ordinary Shares). Upon receipt, such
redeemed shares were then immediately cancelled, resulting in
the retirement of the treasury shares and a corresponding charge
to additional paid-in capital. These Founders Shares are being
repurchased as part of the Transaction.
Escrow
of Founder Shares
All of the Founder Shares were placed in escrow upon
consummation of the IPO with American Stock Transfer &
Trust Company, as escrow agent, until the earlier of:
•
one year following consummation of a business
combination; or
•
the consummation of a liquidation, merger, stock exchange or
other similar transaction which results in all of the
Company’s shareholders having the right to exchange their
shares for cash, securities or other property subsequent to the
Company consummating a business combination with a target
business.
During the escrow period, the Founders will not be able to sell
or transfer their securities except to their spouses and
children or trusts established for their benefit, but will
retain all other rights as the Company’s shareholders
including, without limitation, the right to vote their shares
and the right to receive cash dividends, if declared. If
dividends are declared and payable in shares, such dividends
will also be placed in escrow. If the Company is unable to
effect a business combination and liquidate, none of the
Founders will receive any portion of the liquidation proceeds
with respect to Ordinary Shares owned by them prior to the IPO.
For a description of the terms of the amendment to the escrow
agreement to be entered into pursuant to the Master Agreement,
see “Proposals to be Considered by
Shareholders — The Master Agreement.”
Sale
of Founder Warrants
John F. W. Hunt, Marc J. Blazer, Lawton W. Fitt, Paul S.
Pressler, Mark Booth, Domenico De Sole and Andrew H. Lufkin
agreed to purchase an aggregate of 4,380,000 warrants at a price
of $1.00 per warrant ($4.38 million in the aggregate) in a
private placement that occurred immediately prior to the
consummation of our IPO. The proceeds from the sale of the
Founders’ warrants in the private placement were deposited
into the trust account and subject to a trust agreement and will
be part of the funds distributed to our public shareholders in
the event we are unable to complete an initial business
combination. The Founders’ warrants are identical to the
warrants included in the units sold in our IPO, except that
(i) the Founders’ warrants are non-redeemable and are
exercisable on a cashless basis at the election of the holder,
in each case, so long as they are held by any of the Founders or
their permitted transferees and (ii) will not be
exercisable while they are subject to certain transfer
restrictions described in more detail below. The Founders have
agreed not to sell or otherwise transfer any of the
Founders’ warrants until the date that is 30 days
after the date we complete our initial business combination;
provided however that transfers can be made before such time to
permitted transferees who agree in writing to be bound by such
transfer restrictions. For so long as the Founders’
warrants are subject to such transfer restrictions they will be
held in an escrow account maintained by American Stock
Transfer & Trust Company.
Registration
Rights
The holders of the majority of the Founder Shares and holders of
a majority of the founder warrants will be entitled to require
the Company, on up to two occasions, to register these
securities pursuant to an
agreement signed prior to the IPO. The holders of the majority
of these securities may elect to exercise these registration
rights at any time after the date on which these shares are
released from escrow, which, except in limited circumstances, is
not before one year from the consummation of a business
combination. In addition, these shareholders have certain
“piggy-back” registration rights on registration
statements filed subsequent to the date on which these shares of
shares are released from escrow. In addition, a Founder may have
the option to receive, or assign its option to receive, an
additional issuance equal to 2 percent of such
Founder’s current holding of the Company’s Ordinary
Shares if the Company does not use reasonable best efforts to
file a registration statement within 45 days of a demand,
or to make such registration statement effective within
120 days of a demand, or to maintain the effectiveness of
such registration statement for 180 days, subject to the
right of the Company to defer the filing or effectiveness, or
suspend the use of, a registration statement for a total of
90 days in any consecutive 12 month period as more
fully set forth in the Registration Rights Agreement. For a
description of the terms of the amendment to the registration
rights agreement to be entered into pursuant to the Master
Agreement, see “Proposals to be Considered by
Shareholders — The Master Agreement.”
Reimbursable
Expenses
The Company will reimburse its officers and directors for any
reasonable
out-of-pocket
business expenses incurred by them in connection with certain
activities on behalf of the Company such as identifying and
investigating possible target businesses and business
combinations. There is no limit on the amount of accountable
out-of-pocket
expenses reimbursable by the Company, which will be reviewed
only by the board or a court of competent jurisdiction if such
reimbursement is challenged.
Other than the reimbursable
out-of-pocket
expenses payable to the Company’s officers and directors,
no compensation or fees of any kind, including finders and
consulting fees, will be paid to any of the Company’s
founder, officers or directors or the Founders, or to any of
their respective affiliates for services rendered to the Company
prior to or with respect to the Transaction.
None of the Company’s officers, directors or Founders will
receive reimbursement for any
out-of-pocket
expenses incurred by them to the extent such expenses exceed the
working capital allowance from the trust account unless the
business combination is consummated and there are sufficient
funds available for reimbursement after such consummation. The
financial interest of such persons could influence their
motivation in selecting a target business and thus, there may be
a conflict of interest when determining whether a particular
business combination is in the shareholders’ best interest.
Future
Transactions
All ongoing and future transactions between the Company and any
of its officers and directors or their respective affiliates
will be on terms believed by the Company to be no less favorable
than are available from unaffiliated third parties and such
transactions or loans will require prior approval in each
instance by a majority of the Company’s uninterested
“independent” directors or the members of the
Company’s board who do not have an interest in the
transaction, in either case who had access, at the
Company’s expense, to the Company’s attorneys or
independent legal counsel.
Review,
Approval or Ratification of Transactions with Related
Persons
Overture Re’s board of directors is responsible for
approving all related party transactions between Overture Re and
any officer or director that would potentially require
disclosure. The board expects that any transactions in which
related persons have a direct or indirect interest will be
presented to the board for review and approval but Overture Re
has no written policy in place at this time.
Founders
Fully Diluted Interest of Approximately 10% in JNF
The Founders have agreed to receive warrants to purchase common
stock of JNF, the parent of JNL and JNFAM, that would, on a
fully diluted basis, as of the date of this prospectus represent
approximately 10% of JNF. Two of the founders are also directors
of the Company.
Review,
Approval or Ratification of Transactions with Related
Persons
JNF’s board of directors is responsible for approving all
related party transactions between JNF and any officer or
director that would potentially require disclosure. The board
expects that any transactions in which related persons have a
direct or indirect interest will be presented to the board for
review and approval but JNFAM has no written policy in place at
this time.
Pursuant to the Master Agreement, Overture Re will enter into
the Quota Share Reinsurance Agreement and assume the
Investment Management Agreement, and as a result, JNFAM, an
affiliate of JNF, will provide administrative services to
Overture Re and JNF will provide investment services to Overture
Re.
Offering
to Existing Shareholders
On November 5, 2009, JNF commenced an offering of
Series A Preferred Stock to existing shareholders in the
company, whereby existing shareholders may invest in
Series A Preferred Stock pro rata to their current
ownership of Common Stock of the company. Under the terms of
offering, each share of Series A Stock is convertible into
18.3 shares of Common Stock (subject to antidilution
adjustments) at any time at the option of the holder and such
stock automatically converts into Common Stock at the election
of a majority of the outstanding Series A Stock holders, or
the consummation of an underwritten public offering of JNF with
minimum aggregate proceeds in excess of $100 million. The
holders of Series A Preferred Shares shall have no voting
rights, prior to conversion, other than those provided under
Delaware law but shall, subject to receipt of any required
approvals, be entitled to appoint one director and will have
other voting rights customary for a convertible preferred
security. Holders of Series A Preferred Stock shall have
customary demand and piggy-back registration rights, and right
of first refusal and co-sale rights on all transfers of shares
made by holders owning more than 9.9% of outstanding shares, on
a pro rata basis. The minimum amount to be raised in the rights
offering is $5 million and the maximum is $21 million.
Mitchell Caplan, our proposed Chief Executive Officer and a
proposed officer of JNF, or his designee, is a standby purchaser
for $5 million of the Series A Preferred Stock.
JNFAM
Option
On the Closing Date, the Company will be granted an option to
purchase the membership interest of JNFAM exercisable anytime
during the period beginning on or after the date that is six
months after the Closing Date and terminating twelve months
later, upon an exercise purchase price of up to
$3.5 million. The parties anticipate that JNFAM will be a
registered investment advisor upon the date that is six months
after the Closing Date or another entity indirectly or directly
owned by JNF will become a registered investment advisor and
will become the subject of this option.
In connection with the closing of the Transaction, JNL has
agreed to beneficially own or have made commitments to acquire
on the Closing Date 24.5% of the Company’s Ordinary Shares,
taking into account the Public Share redemptions, the obligation
of the Company to repurchase the Founder Shares and any issuance
of Ordinary Shares to JNL pursuant to the Master Agreement, by
(i) Open Market Purchases prior to the record date of the
Extraordinary General Meeting, (ii) privately negotiated
share purchase transactions with record holders of the
Company’s Ordinary Shares subsequent to the record date but
prior to the Extraordinary General Meeting
and/or
(iii) purchase of such number of Ordinary Shares from the
Company, not to exceed 19.9%, such that it will hold in the
aggregate 24.5% of the Company’s outstanding Ordinary
Shares following the closing date of the Transaction.
Accordingly, following consummation of the Transaction, JNL will
on the Closing Date beneficially own or have commitments to
acquire approximately 24.5% of the issued and (taking into
account any redemptions and the repurchase of the Founder Shares
and the obligation of the Company to issue any shares to JNL)
outstanding Ordinary Shares, assuming the Company repurchases
the 3,750,000 Founder Shares and that the Public Warrants and
founder warrants are not exercised. In addition, subsequent to
the closing of the Transaction, the Company will be required to
issue 2,812,500 Ordinary Shares to the Founders in three equal
tranches in the event the volume weighted average price of the
Company’s Ordinary Shares for any ten days during a
30 day period equals or exceeds $12, $16 and $20,
respectively. Consequently, the ability of the current Company
shareholders following the
Transaction to influence management of the Company through the
election of directors will be substantially reduced.
Registration
Rights
On the Closing Date, the Company will enter into a registration
rights agreement with JNL with respect to securities of the
Company held by JNL from time to time. The registration rights
agreement will provide that, in certain instances, JNL may
require the Company to register any of its securities held by
JNL on a registration statement filed under the Securities Act,
provided that such registration statement can not become
effective until termination of the applicable
lock-up
period as set forth in the Shareholders Agreement. The Company
will bear the expenses incurred in connection with filing any
such registration statement. In an underwritten offering, all
selling shareholders and the Company shall bear the expenses of
the underwriter pro rata in proportion to the respective amount
of securities each is selling in such offering.
JNL will be entitled to demand that the Company register of the
shares of common stock of the Company that JNL may purchase on
the open market, in privately negotiated transfers or that are
issued to JNL pursuant to the Securities Purchase Agreement
(described above). JNL may elect to exercise these registration
rights at any time following the expiration of the
lock-up
period, which will commence one year after the closing of the
Transaction. JNL is entitled to make up to two demands that the
Company register such securities. In addition, JNL has certain
“piggy-back” registration rights with respect to
registration statements filed by the Company. In addition, JNL
may have the option to receive or assign its option to receive,
an additional issuance equal to 2 percent of JNL’s
current holding of the Company’s Ordinary Shares if the
Company does not use reasonable best efforts to file a
registration statement within 45 days of a demand, or to
make such registration statement effective within 120 days
of a demand, or to maintain the effectiveness of such
registration statement for 180 days, subject to the right
of the Company to defer the filing or effectiveness, or suspend
the use of, a registration statement for a total of 90 days
in any consecutive 12 month period as more fully set forth
in the Registration Rights Agreement.
Shareholders
Agreement
JNL shall have the right to designate as nominees (four)
4 members of the board of directors of the Company,
pursuant to a shareholders agreement to be entered into by the
Company, JNL and the Founders after the Closing Date. The
Company and the Founders shall have the right to designate as
nominees three (3) members to the board of directors of the
Company. The representatives that JNL nominates to the board of
directors of the Company shall be obliged to present corporate
opportunities relating to reinsurance which they encounter to
the board of directors of the Company first for consideration.
If any officer or director of Overture who also serves as an
officer or director of JNL becomes aware of any other potential
transaction outside of the reinsurance business and/or related
to JNL’s current lines of business, such officer or
director shall present such opportunity to JNL first for
consideration. The Shareholders Agreement also sets forth a
lock-up
period of one year from the closing which is to apply to
Ordinary Shares of the Company owned by JNL (Similar
lock-up
provisions are set forth in separate agreements with the
Founders.) The Shareholders Agreement may terminate at any time
that JNL’s or the Founders’ holders in the Company are
less than 10% of the Company’s securities on a fully
diluted basis.
Our authorized share capital is US$10,100 consisting of
100,000,000 Ordinary Shares, $0.0001 par value each, and
1,000,000 preferred shares, $0.0001 par value each. The
following description summarizes the material terms of our share
capital. Because it is only a summary, it may not contain all
the information that is important to you. For a complete
description you should refer to our Articles. See “Where
You Can Find More Information.”
The Company issued 15,000,000 units in its IPO. Each unit
consists of one Ordinary Share and one warrant, each as
described elsewhere herein. The securities comprising the units
are now traded separately.
On the record date, there were 18,750,000 Ordinary Shares
outstanding held by 11 shareholders of record.
Our shareholders have no redemption, preemptive or other
subscription rights and there are no sinking fund or redemption
provisions applicable to the Ordinary Shares, except that public
shareholders have the right to have their Ordinary Shares
redeemed for cash equal to their pro rata share of the trust
account plus any interest earned thereon, net of income taxes
payable on such interest and net of interest income of up to
$1.80 million on the trust account balance previously
released to us to fund our working capital requirements (subject
to the tax holdback), if they vote against the Transaction and
the Transaction is approved and completed. Public shareholders
who redeem their Ordinary Shares into their pro rata share of
the trust account will retain the right to exercise any warrants
they own if they previously purchased units or warrants.
The payment of dividends, if ever, on the Ordinary Shares will
be subject to the prior payment of dividends on any outstanding
preferred shares, of which there is currently none.
In September of 2007, John F.W. Hunt and Marc J. Blazer
purchased 4,312,500 Ordinary Shares for an aggregate purchase
price of $25,000. This includes an aggregate of 562,500 Ordinary
Shares that were redeemed by the Company due to the expiration
of the underwriters’ over-allotment option so that our
initial shareholders would continue to collectively own 20% of
our issued and outstanding shares after the IPO (assuming none
of them purchased units in the IPO). In October of 2007, Marc J.
Blazer transferred 86,250 Ordinary Shares to the Marc J. Blazer
2007 GRAT and Messrs. Hunt and Blazer transferred an
aggregate of 418,125 Ordinary Shares to Lawton W. Fitt, 118,125
Ordinary Shares to Paul S. Pressler and 21,563 Ordinary Shares
to Mark Booth. In a series of transactions in December 2007 and
January 2008, our executive officers transferred an aggregate of
71,563 to Domenico De Sole for $0.006 per share. In a series of
transactions in January 2008, Mr. Blazer transferred his
existing shares for no consideration to Blazer Investments, LLC,
a single member limited liability company, and John F.W. Hunt
transferred for $0.006 per share an aggregate of
100,000 shares to our other directors and a special
advisor. Subsequently Blazer Investments, LLC sold an aggregate
of 186,563 shares to Andrew H. Lufkin for $0.006 per share.
The Founder Shares are identical to the shares included in the
units sold in the IPO, except that:
•
the Founders Shares are subject to the transfer restrictions
described below;
•
the initial shareholders have agreed to vote the Founder Shares
in the same manner as a majority of the public shareholders who
vote at the Extraordinary General Meeting called for the purpose
of approving our initial business combination; and as a result,
will not be able to exercise shareholder redemption rights (as
described above) with respect to the Founder Shares; and
•
the initial shareholders have agreed to waive their rights to
participate in any liquidation distribution with respect to the
Founder Shares if we fail to consummate an initial business
combination.
The initial shareholders have agreed not to sell or otherwise
transfer any of the Founder Shares until one year after the date
of the completion of an initial business combination or earlier
if, subsequent to our initial
business combination, (i) the closing price of our Ordinary
Shares equals or exceeds $14.25 per share for any 20 trading
days within any 30-trading day period or (ii) we consummate
a subsequent liquidation, merger, share exchange or other
similar transaction which results in all of our shareholders
having the right to exchange their Ordinary Shares for cash,
securities or other property other than to permitted transferees.
Permitted transferees means a person or entity that receives
securities pursuant to a transfer (i) by our officers or
directors to any affiliates or family members of any of our
officers or directors, (ii) in the case of an initial
shareholder or Founder, by gift to a member of the initial
shareholder’s or Founder’s immediate family or a
trust, the beneficiary of which is a member of the initial
shareholder’s or Founder’s immediate family, an
affiliate of the initial shareholder or Founder or to a
charitable organization, (iii) in the case of an initial
shareholder or Founder, by virtue of the laws of descent and
distribution upon death of the initial shareholder or Founder,
or (iv) in the case of an initial shareholder or Founder,
pursuant to a qualified domestic relations order,
provided, however, that these permitted transferees
must enter into a written agreement agreeing to be bound by
these transfer restrictions and to vote in accordance with the
majority of the Ordinary Shares voted by our public shareholders
in connection with our initial business combination and waive
any rights to participate in any liquidation distribution if we
fail to consummate an initial business combination and in the
case of the Ordinary Shares subject to redemption, agree to
redeem such Ordinary Shares to the extent that the
underwriters’ over-allotment option is not exercised in
full. For so long as the Founder Shares are subject to such
transfer restrictions they will be held in an escrow account
maintained by American Stock Transfer &
Trust Company.
In addition, the initial shareholders or their permitted
transferees are entitled to registration rights with respect to
Founder Shares under an agreement entered into upon consummation
of the IPO.
Our Articles provide that preferred shares may be issued from
time to time in one or more series. Our board of directors will
be authorized to fix the voting rights, if any, designations,
powers, preferences, the relative, participating, optional or
other special rights and any qualifications, limitations and
restrictions thereof, applicable to the shares of each series.
Our board of directors will be able to, without shareholder
approval, issue preferred shares with voting and other rights
that could adversely affect the voting power and other rights of
the holders of the Ordinary Shares and could have anti-takeover
effects. The ability of our board of directors to issue
preferred shares without shareholder approval could have the
effect of delaying, deferring or preventing a change of control
of us or the removal of existing management by diluting the
share ownership or voting rights of a person seeking to obtain
control of our company or remove existing management. Our
Articles prohibit us, prior to an initial business combination,
from issuing share capital, including preferred shares, which
participate in any manner in the proceeds of the trust account,
or which votes as a class with the Ordinary Shares on an initial
business combination. We may issue some or all of the preferred
shares to effect an initial business combination. We have no
preferred shares outstanding at the date hereof. Although we do
not currently intend to issue any preferred shares, we cannot
assure you that we will not do so in the future.
On the record date there were 19,380,000 Company Warrants
outstanding held by 10 warrantholders of record.
Public
warrants
Each warrant entitles the registered holder to purchase one
ordinary share at a price of $7.00 per share, subject to
adjustment as discussed below, at any time commencing on the
later of:
•
the completion of an initial business combination; or
•
fifteen months from the date of the IPO prospectus.
However, the warrants will be exercisable only if a registration
statement relating to the Ordinary Shares issuable upon exercise
of the warrants is effective and current. The warrants will
expire January 30, 2013, or earlier upon redemption or
liquidation of the trust account.
At any time while the warrants are exercisable and there is an
effective registration statement covering the Ordinary Shares
issuable upon exercise of the warrants available and current
throughout the
30-day
redemption period, we may call the outstanding warrants (except
as described below with respect to the founder warrants) for
redemption:
•
in whole and not in part;
•
at a price of $0.01 per warrant;
•
upon not less than 30 days’ prior written notice of
redemption (the 30 day redemption period) to each
warrantholder; and
•
if, and only if, the reported last sale price of the Ordinary
Shares equals or exceeds $14.25 per share for any 20 trading
days within a 30 trading day period ending on the third business
day prior to the notice of redemption to warrant holders.
If we call the warrants for redemption, we will have the option
to require all holders that wish to exercise warrants to do so
on a “cashless basis,” though the public shareholders
are not eligible to do so at their own option. In such event,
each holder would pay the exercise price by surrendering the
warrants for that number of Ordinary Shares equal to the
quotient obtained by dividing (x) the product of the number
of Ordinary Shares underlying the warrants, multiplied by the
difference between the exercise price of the warrants and the
“fair market value” (defined below) by (y) the
fair market value. The “fair market value” shall mean
the average reported last sale price of the Ordinary Shares for
the 10 trading days ending on the third trading day prior to the
date on which the notice of redemption is sent to the holders of
warrants.
The exercise price and number of Ordinary Shares issuable on
exercise of the warrants may be adjusted in certain
circumstances including in the event of a share dividend, or our
recapitalization, reorganization, merger or consolidation.
However, the exercise price and number of Ordinary Shares
issuable on exercise of the warrants will not be adjusted for
issuances of Ordinary Shares at a price below the warrant
exercise price except in certain circumstances.
The warrants may be exercised upon surrender of the warrant
certificate on or prior to the expiration date at the offices of
the warrant agent, with the exercise form on the reverse side of
the warrant certificate completed and executed as indicated,
accompanied by full payment of the exercise price, by certified
check payable to us, for the number of warrants being exercised.
On the exercise of any warrant, the warrant exercise price will
be paid directly to us and not placed in the trust account. In
no event may the warrants be net cash settled. Warrant holders
do not have the rights or privileges of holders of Ordinary
Shares, including voting rights, until they exercise their
warrants and receive Ordinary Shares. After the issuance of
Ordinary Shares upon exercise of the warrants, each holder will
be entitled to one vote for each share held of record on all
matters to be voted on by shareholders.
No warrants will be exercisable and we will not be obligated to
issue Ordinary Shares unless at the time a holder seeks to
exercise such warrant, a prospectus relating to the Ordinary
Shares issuable upon exercise of the warrants is current and the
Ordinary Shares has been registered or qualified or deemed to be
exempt under the securities laws of the state of residence of
the holder of the warrants. Under the terms of the warrant
agreement, we have agreed to use our best efforts to meet these
conditions and to maintain a current prospectus relating to the
Ordinary Shares issuable upon exercise of the warrants until the
expiration of the warrants. However, we cannot assure you that
we will be able to do so and, if we do not maintain a current
prospectus relating to the Ordinary Shares issuable upon
exercise of the warrants, holders will be unable to exercise
their warrants and we will not be required to net cash settle
any such warrant exercise. If the prospectus relating to the
Ordinary Shares issuable upon the exercise of the warrants is
not current or if the Ordinary Shares are not qualified or
exempt from qualification in the jurisdictions in which the
holders of the warrants reside, the warrants may have no value,
the market for the warrants may be limited and the warrants
may expire worthless and, as a result, an investor may have paid
the full unit price solely for the Ordinary Shares included in
the units.
No fractional shares will be issued upon exercise of the
warrants. If a holder exercises warrants and would be entitled
to receive a fractional interest of a share, we will round up
the number of Ordinary Shares to be issued to the warrant holder
to the nearest whole number of shares.
Founder
warrants
The founder warrants are identical to the warrants included in
the units sold in the IPO, except that the founder warrants:
•
are subject to the transfer restrictions described below;
•
are non-redeemable and are exercisable on a cashless basis at
the election of the holder, in each case, so long as they are
held by any of the Founders or their permitted
transferees; and
•
will not be exercisable while they are subject to the transfer
restrictions described below.
Although the Ordinary Shares issuable pursuant to the
Founders’ warrants will not be issued pursuant to a
registration statement so long as they are held by our Founders
and their permitted transferees, our warrant agreement provides
that the founder warrants may not be exercised unless we have an
effective registration statement relating to the Ordinary Shares
issuable upon exercise of the Public Warrants and a related
current prospectus is available. We will not be required to net
cash settle any such warrant exercise.
If holders of the founder warrants elect to exercise them on a
cashless basis, they would pay the exercise price by
surrendering his warrants for that number of Ordinary Shares
equal to the quotient obtained by dividing (x) the product
of the number of Ordinary Shares underlying the warrants,
multiplied by the difference between the exercise price of the
warrants and the “fair market value” (defined below)
by (y) the fair market value. The “fair market
value” shall mean the average reported last sale price of
the Ordinary Shares for the 10 trading days ending on the third
trading day prior to the date on which the notice of redemption
is sent to the holders of warrants.
The Founders have agreed not to sell or otherwise transfer any
of the founder warrants until the date that is 30 days
after the date we complete our initial business combination;
provided however that the transfers can be made to permitted
transferees who agree in writing to be bound by such transfer
restrictions. For so long as the Founders’ warrants are
subject to such transfer restrictions they will be held in an
escrow account maintained by American Stock Transfer &
Trust Company.
The transfer agent for our securities and warrant agent for our
warrants is American Stock Transfer &
Trust Company. The address of the transfer agent is 59
Maiden Lane, Plaza Level, New York, New York10038, Attn: Felix
Orihuela.
The Company’s Ordinary Shares and Public Warrants are
quoted on the NYSE Amex under the symbols “NLX” and
“NLX -WS”, respectively. The Ordinary Shares and
Public Warrants commenced public trading on March 3, 2008.
The table below sets forth, for the calendar quarter indicated,
the high and low bid prices of the Company’s units,
Ordinary Shares and Public Warrants as reported on the NYSE
Amex. The following table sets forth the high and low sales
information for the units for the period from January 30,2008 through December 31, 2009 and the Ordinary Shares and
Public Warrants for the period from March 3, 2008 through
December 31, 2009.
On December 9, 2009, the business day before the public
announcement of the execution of the Master Agreement, the
Company’s Ordinary Shares and Public Warrants closed at
$9.96 and $0.23, respectively. On January 7, 2010, the
Company’s Ordinary Shares and Public Warrants closed at
$10.01 and 0.33, respectively.
On the record date, there were 1 and 2 holders of record of
Public Warrants and holders of Public Shares, respectively.
Dividend
Policy
The Company has not paid any dividends on its Ordinary Shares to
date and does not intend to pay cash dividends prior to the
completion of an initial business combination. The payment of
dividends in the future will depend on the Company’s
revenues and earnings, if any, capital requirements and general
financial condition after an initial business combination is
completed. The payment of any dividends subsequent to an initial
business combination will be within the discretion of the
Company’s then-board of directors. It is the present
intention of the Board of Directors to retain any earnings for
use in business operations and, accordingly, the Company does
not anticipate the board declaring any dividends in the
foreseeable future.
Dividend
Policy Upon Completion of the Transaction
There is no current intention to pay any dividends to any
holders of equity of the Company.
Historical market price information regarding Overture Re’s
common stock is not provided because there is no public market
for Overture Re’s common stock or other securities.
As of December 2009, there was one holder of Overture Re’s
common stock.
Overture
Re Dividend Policy
Overture Re has not paid any dividends on its common stock since
inception.
No appraisal rights are available under the Companies Law (2009
Revision) of the Cayman Islands to the shareholders of the
Company in connection with the Transaction.
Ellenoff Grossman & Schole LLP, 150 East
42nd Street, New York, New York10017, will pass upon
certain legal matters related to this proxy statement/prospectus
and the validity of the warrants. Validity of the ordinary
shares under Cayman Islands law and Cayman Islands taxation will
be passed upon for us by Maples and Calder,
Attorneys-at-Law,
P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman
Islands Appleby, Clifton House, 75 Fort Street, P.O.
Box 190, Grand Cayman, KY1-1104, Cayman Islands.
Cadwalader, Wickersham & Taft LLP, One World Financial
Center, New York, NY10281 has acted as counsel for
Jefferson National Financial Corp.
The audited financial statements of Overture Acquisition Corp.
(a development stage company) as of December 31, 2008 and
2007, and for the year ended December 31, 2008, and for the
periods from January 26, 2007 (inception) through
December 31, 2007 and 2008, included in this proxy
statement/prospectus have been so included in the reliance on a
report (which includes an explanatory paragraph relating to
substantial doubt about the ability of Overture Acquisition
Corp. to continue as a going concern as described in Note 1
to the financial statements) of Marcum LLP (formerly
Marcum & Kliegman LLP), an independent registered
public accounting firm, appearing elsewhere herein given on the
authority of said firm, as experts in auditing and accounting.
The financial statements of the Fixed and Variable Annuity Block
of Jefferson National Life Insurance Company as of
December 31, 2008 and 2007, and for the years ended
December 31, 2008, 2007 and 2006, included in this proxy
statement/prospectus have been so included in the reliance on a
report of BDO Seidman, LLP, an independent registered public
accounting firm, appearing elsewhere herein given on the
authority of said firm, as experts in auditing and accounting.
With respect to the unaudited interim financial information for
the periods ended September 30, 2009 and 2008, BDO Seidman
LLP, an independent registered public accounting firm, reported
that they have applied limited procedures in accordance with
standards established by the Public Company Accounting Oversight
Board for a review of such information. However, their separate
report appearing elsewhere herein states that they did not audit
and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their report
on such information should be restricted in light of the limited
nature of the review procedures applied. The accounting firm is
not subject to the liability provisions of Section 11 of
the Securities Act of 1933 for their report on the unaudited
interim financial information because that report is not a
“report” or a “part” of the registration
statement prepared or certified by the accounting firm within
the meaning of Sections 7 and 11 of the Act.
Pursuant to the rules of the SEC, the Company and services that
it employs to deliver communications to its shareholders are
permitted to deliver to two or more shareholders sharing the
same address a single copy of the proxy statement. Upon written
or oral request, the Company will deliver a separate copy of the
proxy statement/prospectus to any shareholder at a shared
address to which a single copy of the proxy statement/prospectus
was delivered and who wishes to receive separate copies in the
future. Shareholders receiving multiple copies of the proxy
statement/prospectus may likewise request that the Company
deliver single copies of its proxy statement, in the future.
Shareholders may notify the Company of their requests by calling
or writing the Company at its registered office at care of
Maples Corporate Services Limited, Ugland House, Grand
Cayman, KY1-1104, Cayman Islands; telephone
(646) 736-1376.
If the Transaction is not consummated prior to January 30,2010, the Company will go into automatic liquidation and will
conduct no annual general meetings thereafter. The
Company’s next annual general meeting of shareholders will
be held on or about June 1, 2010 unless the date is changed
by the Company’s Board of Directors. Proposals to be
included in the proxy statement for the 2010 annual meeting must
be provided to the Company no earlier than the 120th day
prior to the first anniversary of the date of the preceding
year’s annual general meeting and not later than the later
of the close of business on the 90th day before the meeting or
the 10th day following the day on which public announcement
of the date of such meeting is first made by the Company. You
should direct any proposals to the Company’s Secretary at
the Company’s principal executive office.
If the Transaction is consummated, the Company expects to hold
its 2010 annual general meeting on or before June 1, 2010,
and proxy materials in connection with that meeting are expected
to be mailed on or about May 6, 2010. In order to be
included in the Company’s proxy materials for the 2010
annual general meeting, we must receive shareholder proposals on
or before March 26, 2010.
Any such proposal should be addressed to Secretary,
c/o Maples
Corporate Services Limited, Ugland House, Grand Cayman,
KY1-1104, Cayman Islands; telephone
(646) 736-1376.
Upon receipt of any such proposal, the Company will determine
whether or not to include such proposal in the proxy
statement/prospectus for its 2010 annual general meeting in
accordance with its Articles. The Company suggests that such
proposals be sent by certified mail, return receipt requested.
If the Company receives notice after March 26, 2010 of any
proposal which a shareholder intends to present at the 2010
annual general meeting, then under the proxy rules, the persons
named in the proxy solicited by the Board of Directors for our
2010 annual general meeting may exercise discretionary voting
with respect to such proposal.
In addition, if the Transaction is consummated, the
Company’s Articles will provide that, in order for a
shareholder to properly bring business before an annual general
meeting, the shareholder must have given timely notice of such
proposed business in a writing delivered to the Company’s
Secretary not less than one hundred twenty (120) nor more
than ninety (90) days prior to the annual general meeting;
provided, however, that if no annual general meeting was held in
the previous year (which will be the case for the Company’s
2010 annual general meeting) or the date of the annual general
meeting has been changed by more than 30 calendar days from the
date contemplated at the time of the previous year’s proxy
statement, the notice must be received by the Company not
earlier than the close of business on the 120th day prior
to annual general meeting and not later than the later of the
close of business on the 90th day before the meeting or the
10th day following the day on which public announcement of
the date of such meeting is first made by the Company.
The Company files reports, proxy statements and other
information with the SEC as required by the United States
Exchange Act. You may read and copy reports, proxy statements
and other information filed by the Company with the SEC at the
SEC public reference room located at 100 F Street,
N.E., Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
You may also obtain copies of the materials described above at
prescribed rates by writing to the SEC, Public Reference
Section, 100 F Street, N.E., Washington, D.C.
20549. You may access information on the Company at the SEC Web
site containing reports, proxy statements and other information
at:
http://www.sec.gov.
Information and statements contained in this proxy
statement/prospectus are qualified in all respects by reference
to the copy of the relevant contract or other document included
as an annex to this proxy statement.
If you would like additional copies of this proxy
statement/prospectus or if you have questions about the
Transaction, you should contact via phone or in writing:
Marc Blazer, President
Overture Acquisition Corp.
c/o Maples
Corporate Services Limited
Ugland House
Grand Cayman KY1-1104
Cayman Islands
Telephone:
(646) 736-1376
We are incorporated as an exempted company with limited
liability under the laws of the Cayman Islands. In addition,
some of our directors and officers reside outside the United
States and a significant portion of their and our assets are
located outside of the United States. As a result, it may be
difficult for persons purchasing Ordinary Shares to effect
service of process within the United States upon us or to
enforce judgments against us or judgments obtained in United
States courts predicated upon the civil liability provisions of
the federal securities laws of the United States or any state of
the United States. However, we may be served with process in the
United States with respect to actions against us arising out of
or in connection with violations of United States federal
securities laws relating to offers and sales of Ordinary Shares
made hereby by serving Corporation Service Company, 1133 Avenue
of the Americas, Suite 3100, New York, New York
10036-6710,
our U.S. agent irrevocably appointed for that purpose.
Maples and Calder, our Cayman Islands counsel, has advised us
that although there is no statutory enforcement in the Cayman
Islands of judgments obtained in the United States, the Grand
Court of the Cayman Islands will without a review of the merits
of the action recognize and enforce a foreign judgment of a
court of competent jurisdiction if such judgment is final and
for a liquidated sum, provided it is not in respect of taxes or
a fine or penalty, is not inconsistent with a Cayman Islands
judgment in respect of the same matters, and was not obtained in
a manner which is contrary to the public policy of the Cayman
Islands. It is unclear whether the courts of the Cayman Islands
will, in an original action in the Cayman Islands, recognize or
enforce judgments of United States courts predicated upon the
civil liability provisions of the securities laws of the United
States or any state of the United States on the grounds that
such provisions may be penal in nature.
A Cayman Islands court may stay proceedings if concurrent
proceedings are being brought elsewhere.
INDEX TO
FINANCIAL STATEMENTS
OF
FIXED AND VARIABLE ANNUITY BLOCK OF
JEFFERSON NATIONAL LIFE INSURANCE COMPANY
(A CARVE OUT OF FIXED AND VARIABLE ANNUITY BLOCK SUBJECT TO
REINSURANCE)
To the Audit Committee of the Board of Directors and Shareholders
Overture Acquisition Corp.
We have audited the accompanying balance sheets of Overture
Acquisition Corp. (a development stage company) (the
“Company”) as of December 31, 2008 and 2007, and
the related statements of operations, changes in
shareholders’ equity and cash flows for the year ended
December 31, 2008, and for the periods from
September 25, 2007 (inception) through December 31,2007 and 2008. These financial statements are the responsibility
of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the
Company’s articles of association provides for mandatory
liquidation of the Company in the event that the Company does
not consummate a business combination (as defined) prior to
January 30, 2010. This condition raises substantial doubt
about its ability to continue as a going concern.
Management’s plans regarding those matters are described in
Note 1. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Overture Acquisition Corp. (a development stage company) as
of December 31, 2008 and 2007, and the results of its
operations and its cash flows for the year ended
December 31, 2008 and for the periods from
September 25, 2007 (inception) through December 31,2007 and 2008, in conformity with United States generally
accepted accounting principles.
Cash held in Trust Account, interest and dividend income
available for working capital and taxes (including accrued
interest receivable of $3,368 and $0 at December 31, 2008
and December 31, 2007, respectively)
62,148
—
Prepaid expenses and miscellaneous receivables
83,568
—
Total current assets
1,258,668
76,954
Cash held in trust account, restricted
150,530,000
—
Deferred offering costs
—
448,619
Total assets
$
151,788,668
$
525,573
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses
$
101,794
$
4,500
Accrued offering costs
—
325,573
Notes payable to shareholders
—
175,000
Total current liabilities
101,794
505,073
Ordinary shares subject to possible redemption
(4,499,999 shares at redemption value)
45,158,990
—
Commitments and contingencies
Shareholders’ equity
Preferred shares, $0.0001 par value, authorized
1,000,000 shares; none issued
—
—
Ordinary shares, $0.0001 par value; authorized
100,000,000 shares; issued and outstanding
18,750,000 shares (less 4,499,999 shares subject to
possible redemption) and 4,312,500 shares at
December 31, 2008 and December 31, 2007, respectively
1,425
431
Additional paid-in capital
105,233,111
24,569
Earnings (deficit) accumulated during development stage
1,293,348
(4,500
)
Total shareholders’ equity
106,527,884
20,500
Total liabilities and shareholders’ equity
$
151,788,668
$
525,573
The accompanying notes are an integral part of these financial
statements.
Sale of 15,000,000 units at $7.00 per unit, net of
underwriters’ discount and offering expenses (includes
4,499,999 shares subject to possible redemption)
15,000,000
1,500
145,987,026
—
145,988,526
Proceeds subject to possible redemption of 4,499,999 shares
—
(450
)
(45,158,540
)
—
(45,158,990
)
Proceeds from issuance of sponsor’s warrants
—
—
4,380,000
—
4,380,000
Forfeiture of 562,500 ordinary shares from initial shareholders
ORGANIZATION,
BUSINESS OPERATIONS, SIGNIFICANT ACCOUNTING POLICIES AND GOING
CONCERN CONSIDERATIONS
Overture Acquisition Corp. (the “Company”) was
incorporated in the Cayman Islands on September 25, 2007 as
a blank check company formed for the purpose of effecting a
merger, share capital exchange, asset acquisition, share
purchase, reorganization or similar business combination, with
one or more businesses (a “Business Combination”).
The registration statement for the Offering was declared
effective on January 30, 2008. The Company consummated the
Offering on February 5, 2008 and received net proceeds of
$145,988,526 and $4,380,000 from the sale of the sponsor
warrants on a private placement basis (the “Sponsor
Warrants”) (see Note 2). The Company’s management
has broad discretion with respect to the specific application of
the net proceeds of the Offering, although substantially all of
the net proceeds of the Offering are intended to be generally
applied toward consummating a Business Combination. There is no
assurance that the Company will be able to successfully effect a
Business Combination. An amount of $150,530,000 (or
approximately $10.04 per unit sold in the IPO, (the
“Unit”)) of the net proceeds of the Offering and the
sale of the Sponsor Warrants (see Note 2) is being
held in a trust account (“Trust Account”) and
will be invested in United States “government
securities” within the meaning of Section 2(a)
(16) of the Investment Company Act of 1940 having a
maturity of 180 days or less or in money market funds
meeting certain conditions under
Rule 2a-7
promulgated under the Investment Company Act of 1940 until the
earlier of (i) the consummation of its first Business
Combination and (ii) liquidation of the Company. The
placing of funds in the Trust Account may not protect those
funds from third party claims against the Company. Although the
Company is required to have all third parties (including any
vendors or other entities the Company engages after the
Offering) and any prospective target businesses enter into valid
and enforceable agreements with the Company waiving any right,
title, interest or claim of any kind in or to any monies held in
the Trust Account, there is no guarantee that they will
execute such agreements. John F. W. Hunt and Marc J. Blazer have
agreed that they will be personally liable, to ensure that the
proceeds in the Trust Account are not reduced by the claims
of target businesses, or claims of vendors or other entities
that are owed money by the Company for services rendered or
contracted, for products sold to the Company or lenders for
borrowed money. The agreement entered into by Messrs. Hunt
and Blazer specifically provides there will be no liability as
to any claimed amounts owed to a third party who executed a
valid and enforceable waiver. However, there can be no assurance
that they will be able to satisfy those obligations. The
remaining net proceeds (not held in the Trust Account) may
be used to pay for business, legal and accounting due diligence
on prospective acquisitions and continuing general and
administrative expenses. Except with respect to interest and
dividend income that may be released to the Company of
(i) up to $1,800,000 of the income earned on the amounts
held in the Trust Account that will be released to the
Company in monthly installments to fund expenses related to
investigating and selecting a prospective target business and
the Company’s other working capital requirements and
(ii) any additional amounts needed to pay income or other
tax obligations. The proceeds held in trust will not be released
from the Trust Account until the earlier of the completion
of a Business Combination or the Company’s liquidation.
The Company, after signing a definitive agreement for a Business
Combination with a target business or businesses, is required to
submit such transaction for shareholder approval. Pursuant to
the Company’s amended and restated memorandum and articles
of association, in the event that the shareholders owning 30% or
more of the shares sold in the Offering vote against the
Business Combination and exercise their shareholder redemption
rights described below, the Business Combination will not be
consummated. All of the
OVERTURE
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS —
(Continued)
Company’s shareholders prior to the Offering, including all
of the Initial Shareholders have agreed to vote all of their
Founders Ordinary Shares in accordance with the vote of the
majority in interest of all other shareholders of the Company
(“Public Shareholders”) with respect to any Business
Combination. After consummation of a Business Combination, these
voting safeguards will no longer apply.
With respect to a Business Combination which is approved and
consummated, any Public Shareholder who votes against the
Business Combination may demand that the Company redeem his or
her shares into cash from the Trust Account established
pursuant to the Offering. The per share redemption price will
equal the amount in the Trust Account, calculated as of two
business days prior to the consummation of the proposed Business
Combination, divided by the number of ordinary shares held by
Public Shareholders at the consummation of the Offering.
Accordingly, Public Shareholders holding up to 30% of the
aggregate number of shares owned by all Public Shareholders
(minus one share) may seek conversion of their shares in the
event of a Business Combination. Such Public Shareholders are
entitled to receive their per share interest in the
Trust Account computed without regard to the shares held by
Initial Shareholders.
Each of the Initial Shareholders has agreed to (i) waive
any right to receive a liquidation distribution with respect to
the Founders Ordinary Shares in the event we fail to consummate
a Business Combination and (ii) vote the Founders Ordinary
Shares in accordance with the majority of the ordinary shares
voted by our Public Shareholders in connection with the vote on
any Business Combination.
The Company’s Memorandum and Articles of Association were
amended on January 30, 2008 to provide that the Company
will immediately go into voluntary liquidation if the Company
has not completed a Business combination within 24 months
from the effective date of the registration statement relating
to the Offering (“Effective Date”) or January 30,2010. If the Company has not completed a Business Combination by
such date, its corporate existence will cease except for the
purposes of liquidating and winding up its affairs. In the event
of liquidation, it is possible that the per share value of the
residual assets remaining available for distribution (including
Trust Account assets) will be less than the initial public
offering price per unit in the Offering.
Going
Concern and Management’s Plan and Intentions
Pursuant to its Amended Articles of Association, if the Company
is unable to consummate a Business Combination prior to
January 30, 2010, the Company would have to liquidate
pursuant to a dissolution plan and return the funds held in the
Trust Account to the holders of shares issued in the
Offering. There can be no assurance that the Company will enter
into a Business Combination prior to January 30, 2010. This
condition raises substantial doubt about the Company’s
ability to continue as a going concern. These audited financial
statements do not include any adjustments that might result from
the outcome of these uncertainties
Earnings
Per Share
The Company follows the provisions of Statements of Financial
Accounting Standards (“SFAS”) No. 128,
“Earnings Per Share”. In accordance with
SFAS No. 128, earnings per ordinary share amounts
(“Basic EPS”) are computed by dividing earnings by the
weighted average number of ordinary shares outstanding for the
period. Ordinary shares subject to possible redemption of
4,499,999 have been excluded from the calculation of basic
earnings per share since such shares, if redeemed, only
participate in their pro rata share of the trust earnings.
Earnings per ordinary share amounts, assuming dilution
(“Diluted EPS”), gives effect to dilutive options,
warrants, and other potential ordinary shares outstanding during
the period. SFAS No. 128 requires the presentation of
both Basic EPS and Diluted EPS on the face of the statements of
operations. In accordance with SFAS No. 128, the
Company has not considered the effect of its outstanding
warrants in the calculation of diluted earnings per share since
the exercise of the warrants is contingent upon the occurrence
of future events.
OVERTURE
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS —
(Continued)
Fair
Value of Financial Instruments
The carrying value of cash, and accrued expenses are reasonable
estimates of the fair values due to their short-term maturity.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of expenses
during the reporting period. Actual results could differ from
those estimates.
Income
Taxes
Deferred income taxes, if applicable, are provided for the
differences between the basis of assets and liabilities for
financial reporting and income tax purposes. A valuation
allowance is established when necessary to reduce deferred tax
assets to the amount expected to be realized. Management did not
record the impact of deferred income taxes as they were deemed
immaterial.
On September 25, 2007, the Company adopted the provisions
of Financial Accounting Standards Board (“FASB”)
Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement
No. 109” (“FIN 48”). FIN 48
clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in
accordance with SFAS No. 109, “Accounting for
Income Taxes,” and prescribes a recognition threshold and
measurement process for financial statement recognition and
measurement of a tax position taken or expected to be taken in a
tax return. For those benefits to be recognized, a tax position
must be more-likely-than-not to be sustained upon examination by
taxing authorities. FIN 48 also provides guidance on
derecognition, classification, interest and penalties,
accounting in interim period, disclosure and transition.
The Company has identified the Grand Cayman Islands as its only
“major” tax jurisdiction, as defined. Based on the
Company’s evaluation, it has been concluded that there are
no significant uncertain tax positions requiring recognition in
the Company’s financial statements. Since the Company was
incorporated on September 25, 2007 the evaluation was
performed for the 2008 and 2007 tax year which will be the only
period subject to examination. The Company believes that its
income tax positions and deductions would be sustained on audit
and does not anticipate any adjustments that would result in a
material change to its financial position. In addition, the
Company did not record a cumulative effect adjustment related to
the adoption of FIN 48.
The Company’s policy for recording interest and penalties
associated with audits is to record such items as a component of
income tax expense. There were no amounts accrued for penalties
or interest as of or during the period from September 25,2007 (inception) through December 31, 2008. The Company
does not expect its unrecognized tax benefit position to change
during the next twelve months. Management is currently unaware
of any issues under review that could result in significant
payments, accruals or material deviations from its position. The
adoption of the provisions of FIN 48 did not have a
material impact on the Company’s financial position,
results of operations and cash flows.
Cash
and Cash Equivalents
The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents. There were no cash equivalents at December 31,2008.
OVERTURE
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS —
(Continued)
Concentration
of Credit Risk
SFAS No. 105, “Disclosure of Information about
Financial Instruments with Off-Balance Sheet Risk and Financial
Instruments with Concentration of Credit Risk”, requires
disclosure of significant concentrations of credit risk
regardless of the degree of risk. At December 31, 2008,
financial instruments that potentially expose the Company to
credit risk consist of cash. and cash held in the
Trust Account.
At December 31, 2008, the Company’s Trust Account
was invested in US Treasury Bills and US Treasury money market
funds at one financial institution. At times, the Company’s
cash and cash held in trust account may be uninsured or in
deposit accounts that exceed the Federal Deposit Insurance
Corporation (“FDIC”) insurance limit.
Cash
held in Trust Account — restricted
The Company considers the restricted portion of the funds held
in the Trust Account as being a non-current asset. A
current asset is one that is reasonably expected to be used to
pay current liabilities, such as accounts payable or short-term
debt or to pay current operating expenses, or will be used to
acquire other current assets. Since the acquisition of a
business is principally considered to be a long-term purpose,
with long-term assets such as property and intangibles,
typically being a major part of the acquired assets, the Company
has reported the funds anticipated to be used in the acquisition
as a non-current asset.
Accretion
of Trust Account relating to ordinary shares subject to
possible redemption
The Company records accretion, if any, of the income earned in
the trust account relating to the ordinary share subject to
possible redemption based on the excess of the earnings for the
period over the amount which is available to be used for working
capital and taxes. Since 30% (less one share) of the shares
issued in the Offering are subject to possible redemption, the
portion of the excess earnings related to those shares will be
reflected on the balance sheet as part of “Ordinary Share
subject to possible conversion” and is deducted from
“Additional paid-in capital”. The portion of the
excess earnings will also be presented as a deduction from the
net income on the Statements of Operations to appropriately
reflect the amount of net income which would remain available to
the common shareholders who did not elect to convert their
shares to cash. At December 31, 2008 there was no accretion
of income due to shareholders.
Share
Based Compensation
The Company accounts for share options and warrants using the
fair value recognition provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 123 (Revised
2004), “Share-Based Payment,”
(“SFAS 123(R)”). SFAS 123(R) addresses all
forms of share based compensation awards including shares issued
under employment share purchase plans, share options, restricted
shares and share appreciation rights. Under SFAS 123(R),
share based payment awards will be measured at fair value on the
awards grant date, based on estimated number of awards that are
expected to vest and will be reflected as compensation expense
in the financial statements.
The Company will only record compensation expense in connection
with its share based payments upon the satisfaction of any
contingencies associated therewith.
Offering
Costs
Offering costs consist of legal fees, accounting fees, and
registration fees incurred through the balance sheet date that
are related to the Offering and were charged to capital at the
time of the closing of the Offering.
OVERTURE
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS —
(Continued)
Recently
Issued Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board
(“FASB”) issued Statement of Financial Accounting
Standards (“SFAS”) No. 157, “Fair Value
Measurements,” which is effective for fiscal years
beginning after November 15, 2007. The Statement defines
fair value, establishes a frame work for measuring fair value in
accordance with Generally Accepted Accounting Principles, and
expands disclosures about fair value measurements. The Statement
codifies the definition of fair value as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date. The standard clarifies the principle that fair
value should be based on the assumptions market participants
would use when pricing the asset or liability and establishes a
fair value hierarchy that prioritizes the information used to
develop those assumptions. The Company has assessed
SFAS No. 157 and has concluded that it did not have a
material impact on its financial position and results of
operations.
In February 2007, the FASB issued SFAS No. 159
“The Fair Value Opinion for Financial Assets and Financial
Liabilities — Including an amendment of FASB Statement
No. 115” (“SFAS No. 159”), which
permits entities to choose to measure many financial instruments
and certain other items at fair value. The fair value option
established by this Statement permits all entities too choose to
measure eligible items at fair value at specified election
dates. A business entity shall report unrealized gains and
losses on items for which the fair value option has been elected
in earnings at each subsequent reporting date. The adoption of
SFAS No. 159 did not have a material impact on the
Company’s financial position and results of operations.
In December 2007, the FASB issued SFAS No. 141
(revised 2007) “Business Combinations”
(“SFAS 141R”). SFAS 141R changes accounting
for acquisitions that close beginning in 2009 in a number of
areas including the treatment of contingent consideration,
contingencies, acquisition costs, in-process research and
development and restructuring costs. More transactions and
events will qualify as business combinations and will be
accounted for at fair value under the new standard.
SFAS 141R promotes greater use of fair values in financial
reporting. In addition, under SFAS 141R, changes in
deferred tax asset valuation allowances and acquired income tax
uncertainties in a business combination after the measurement
period will impact income tax expense. Some of the changes will
introduce more volatility into earnings. SFAS 141R is
effective for fiscal years beginning on or after
December 15, 2008. SFAS 141R will have an impact on
accounting for any business acquired after the effective date of
this pronouncement.
In December 2007, the FASB issued SFAS No. 160
“Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51”
(“SFAS 160). SFAS 160 will change the accounting
and reporting for minority interests, which will be
recharacterized as noncontrolling interests (NCI) and classified
as a component of equity. This new consolidation method will
significantly change the accounting for transactions with
minority interest holders. SFAS 160 is effective for fiscal
years beginning after December 15, 2008. SFAS 160
would have an impact on the presentation and disclosure of the
noncontrolling interests of any non-wholly owned business
acquired in the future.
In February 2008, the FASB issued FSP
No. 157-1,
“Application of FASB Statement No. 157 to FASB
Statement No. 13 and other Pronouncements that Address Fair
Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13”
(“FSP 157-1”)
and
No. 157-2,
“Effective Date of FASB Statement No. 157”
(“FSP 157-2”),
which respectively, remove leasing transactions from the scope
of SFAS 157 and defer its effective date for one year
relative to certain nonfinancial assets and liabilities. As a
result, the application of the definition of fair value and
related disclosures of SFAS 157 (as impacted by these two
FSP’s) was effective for the Company beginning
January 1, 2008 on a prospective basis with respect to fair
value measurements of (a) nonfinancial assets and
liabilities that are recognized or disclosed at fair value in
the Company’s financial statements on a recurring basis (at
least annually) and (b) all financial assets and
liabilities. This adoption did not have a material impact on the
Company’s results of operations or financial condition. The
remaining aspects of SFAS 157 for which the effective date
was deferred under
FSP 157-2
are
OVERTURE
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS —
(Continued)
currently being evaluated by the company. Areas impacted by the
deferral relate to nonfinancial assets and liabilities that are
measured at fair value, but are recognized or disclosed at fair
value on a nonrecurring basis. This deferral applies to such
items as nonfinancial assets and liabilities initially measured
at fair value in a business combination (but not measured at
fair value in subsequent periods) or nonfinancial long-lived
asset groups measured at fair value for an impairment
assessment. The effects of these remaining aspects of
SFAS 157 are to be applied to fair value measurements
prospectively beginning January 1, 2009. The Company does
not expect them to have a material impact on the Company’s
results of operations or financial condition. In October 2008,
the FASB issued FSP
No. 157-3,
“Determining the Fair Value of a Financial Asset When the
Market for That Asset is Not Active”
(“FSP 157-3”).
FSP 157-3
clarifies the application of SFAS 157, which the Company
adopted as of January 1, 2008, in cases where a market is
not active. The Company has considered
FSP 157-3
in its determination of estimated fair values as of
December 31, 2008, and the impact was not material.
In March 2008, the FASB issued SFAS No. 161,
“Disclosures about Derivative Instruments and Hedging
Activities — an amendment of FASB Statement
No. 133,” (SFAS “161”) as amended and
interpreted, which requires enhanced disclosures about an
entity’s derivative and hedging activities and thereby
improves the transparency of financial reporting. Disclosing the
fair values of derivative instruments and their gains and losses
in a tabular format provides a more complete picture of the
location in an entity’s financial statements of both the
derivative positions existing at period end and the effect of
using derivatives during the reporting period. Entities are
required to provide enhanced disclosures about (a) how and
why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted
for under Statement 133 and its related interpretations, and
(c) how derivative instruments and related hedged items
affect an entity’s financial position, financial
performance, and cash flows. SFAS No. 161 is effective
for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008. Early adoption
is permitted, but not expected. Management is evaluating the
potential effect this guidance may have on the Company’s
financial condition and results of operations.
In May 2008, the FASB issued Financial Accounting Standard (FAS)
No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” The statement is intended to
improve financial reporting by identifying a consistent
hierarchy for selecting accounting principles to be used in
preparing financial statements that are prepared in conformance
with generally accepted accounting principles. Unlike Statement
on Auditing Standards (SAS) No. 69, “The Meaning of
Present Fairly in Conformity With GAAP,”
FAS No. 162 is directed to the entity rather than the
auditor. The statement is effective 60 days following the
SEC’s approval of the Public Company Accounting Oversight
Board (PCAOB) amendments to AU Section 411, “The
Meaning of Present Fairly in Conformity with GAAP,” and is
not expected to have any impact on the Company’s results of
operations, financial condition or liquidity.
In June 2008, FASB issued FSP Emerging Issues Task Force (EITF)
No. 03-6-1,
“Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities.” Under
the FSP, unvested share-based payment awards that contain rights
to receive nonforfeitable dividends (whether paid or unpaid) are
participating securities, and should be included in the two-
class method of computing EPS. The FSP is effective for fiscal
years beginning after December 15, 2008, and interim
periods within those years, and is not expected to have a
significant impact on the Company’s results of operations,
financial condition or liquidity.
Management does not believe that any other recently issued, but
not yet effective, accounting standards if currently adopted
would have a material effect on the accompanying financial
statements.
OVERTURE
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS —
(Continued)
NOTE 2 —
INITIAL PUBLIC OFFERING
The Offering called for the Company to offer for public sale
15,000,000 Units at a price of $10.00 per Unit (plus up to an
additional 2,250,000 units solely to cover over-allotments,
if any). Each Unit consists of one ordinary share of the Company
and one Redeemable Ordinary Share Purchase Warrant
(“Warrant”). Each Warrant will entitle the holder to
purchase from the Company one ordinary share at an exercise
price of $7.00 commencing the later of the completion of a
Business Combination or April 30, 2009 and expiring five
years from the January 31, 2013. The Company may redeem the
Warrants, at a price of $0.01 per Warrant upon
30 days’ notice after the Warrants become exercisable,
only in the event that the last sale price of the ordinary
shares is at least $14.25 per share for any 20 trading days
within a 30-trading day period ending on the third day prior to
the date on which the notice of redemption is given. In
accordance with the warrant agreement relating to the Warrants
sold and issued in the Offering, the Company is only required to
use its best efforts to maintain the effectiveness of the
registration statement covering the Warrants. The Company will
not be obligated to deliver securities, and there are no
contractual penalties for failure to deliver securities, if a
registration statement is not effective at the time of exercise.
Additionally, in the event that a registration is not effective
at the time of exercise, the holder of such Warrant shall not be
entitled to exercise such Warrant and in no event (whether in
the case of a registration statement not being effective or
otherwise) will the Company be required to net cash settle the
warrant exercise. Consequently, the Warrants may expire
unexercised and unredeemed.
The Company also granted the underwriters a
30-day
option to purchase up to an additional 2,250,000 units to
cover over-allotments, if any. This over-allotment option
expired unexercised.
The Company entered into an agreement with the underwriters of
the Offering (the “Underwriting Agreement”) dated
January 30, 2008. The Underwriting Agreement requires the
Company to pay 2.00% ($3,000,000) of the gross proceeds of the
Offering as an underwriting discount plus an additional 5.00%
($7,500,000) of the gross proceeds only upon consummation of a
Business Combination. The underwriters have waived their right
to receive payment of the 5.00% ($7,500,000) of the gross
proceeds upon the Company’s liquidation if it is unable to
complete a Business Combination.
Pursuant to the Sponsor Warrant Purchase Agreement dated as of
January 18, 2008, the Company’s officers, directors
and special advisors agreed to purchase from the Company, in the
aggregate, 4,380,000 warrants for $4,380,000 (the
“Sponsors’ Warrants”). The purchase and issuance
of the Sponsors’ Warrants occurred immediately prior to the
consummation of the Offering but was sold on a private placement
basis. Management believes the purchase price of these warrants
approximates the fair value of such warrants at the time of
issuance. Therefore, the Company did not record compensation
expense for the excess of the fair value of the warrants on the
day of purchase over the $1.00 purchase in accordance with
SFAS 123(R). The proceeds the Company received from these
purchases were placed in the Trust Account. The
Sponsors’ Warrants are identical to the warrants included
in the units sold in the offering, except that the
Sponsors’ Warrants will not be transferable or salable by
the purchasers of these warrants (subject to certain limited
circumstances) until the date that is 30 days after the
Company completes a Business Combination, and will be
exercisable on a cashless basis and will be non-redeemable by
the Company, in each case, so long as they are held by the
purchasers or their permitted transferees. If the Company does
not complete such a Business Combination then the $4,380,000
will be part of the liquidation distribution to the public
Shareholders and warrants will expire worthless. The purchasers
of the Sponsor’s Warrants have agreed that the
Sponsor’s Warrants will not be sold or transferred by them
until 30 days after the date on which the Company has
completed a Business Combination.
OVERTURE
ACQUISITION CORP.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS —
(Continued)
NOTE 3 —
NOTES PAYABLE, SHAREHOLDERS
On October 3, 2007, the Company issued $175,000 unsecured
promissory notes to the Initial Shareholders. The notes were
non-interest bearing and are payable upon the consummation of
the Offering. Due to the short-term nature of the notes, the
fair value of the notes approximates their carrying amount.
These notes were repaid in February 2008 from the proceeds of
the Offering.
NOTE 4 —
COMMITMENTS AND CONTINGENCIES
The Company entered into an agreement with the underwriters of
the Offering (the “Underwriting Agreement”) dated
January 30, 2008. The Underwriting Agreement required the
Company to pay 2% ($3,000,000) of the gross proceeds of the
Offering as an underwriting discount plus an additional 5%
($7,500,000) of the gross proceeds only upon consummation of a
Business Combination. The underwriters have waived their right
to receive payment of the 5% ($7,500,000) of the gross proceeds
upon the Company’s liquidation if it is unable to complete
a Business Combination.
Pursuant to a Registration Rights Agreement dated
January 30, 2008, the Initial Shareholders and holders of
the Sponsors’ Warrants (or underlying securities) are
entitled to registration rights with respect to the Founders
Ordinary Shares or Sponsors’ Warrants (or underlying
securities), as the case may be, the holders of the majority of
the Founders Ordinary Shares are entitled to elect to exercise
these registration rights at any time commencing three months
prior to the date on which the Founders Ordinary Shares is to be
released from escrow. The holders of the Sponsors’ Warrants
(or underlying securities) are entitled to demand that the
Company register such securities at any time 30 days after
the Company consummates a Business Combination. In addition, the
Initial Shareholders and holders of the Sponsors’ Warrants
(or underlying securities) have certain “piggyback”
registration rights on registration statements filed after the
Company’s consummation of a Business Combination.
NOTE 5 —
PREFERRED SHARES
The Company is authorized to issue 1,000,000 preferred shares
with such designations, voting and other rights and preferences
as may be determined from time to time by the Board of Directors.
The Company’s Amended and Restated Memorandum and Articles
of Association prohibits it, prior to a Business Combination,
from issuing preferred shares which participate in the proceeds
of the Trust Account or which vote as a class with the
Ordinary Shares on a Business Combination.
NOTE 6 —
ORDINARY SHARES
The Company is authorized to issue 100,000,000 Ordinary Shares
with a par value of $.0001 per share.
On September 28, 2007, the Company issued 4,312,500
Founders Shares to its Initial Shareholders, for $25,000, at a
purchase price of approximately $0.006 per share. This includes
an aggregate of 562,500 Founders Shares held by our Initial
Shareholders subject to redemption by the Company to the extent
that the underwriters’ over-allotment option is not
exercised in full so that our Founders will collectively own 20%
of our issued and outstanding shares after the Offering
(assuming none of them purchased units in the Offering). All
562,500 were subsequently forfeited since the over-allotment
option was not exercised.
Each of the Initial Shareholders has agreed to (i) waive
any right to receive a liquidation distribution with respect to
the Founders Ordinary Shares in the event we fail to consummate
a Business Combination and (ii) vote the Founders Ordinary
Shares in accordance with the majority of the ordinary shares
voted by our Public Shareholders in connection with the vote on
any Business Combination.
Cash held in Trust Account, interest and dividend income
available for working capital and taxes (including accrued
interest receivable of $3,368 at December 31, 2008)
73,522
62,148
Prepaid expenses and miscellaneous receivables
31,541
83,568
Total current assets
906,006
1,258,668
Trust account, restricted
Cash held in trust account, restricted
150,530,000
150,530,000
Total assets
$
151,436,006
$
151,788,668
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses
$
44,511
$
101,794
Ordinary shares subject to possible redemption
(4,499,999 shares at redemption value)
45,158,990
45,158,990
Commitments and contingencies
Shareholders’ equity
Preferred shares, $0.0001 par value, authorized
1,000,000 shares; none issued
—
—
Ordinary shares, $0.0001 par value; authorized
100,000,000 shares; issued and outstanding
18,750,000 shares (less 4,499,999 shares subject to
possible redemption) and 4,312,500 shares at
September 30, 2009 and December 31, 2008, respectively
1,425
1,425
Additional paid-in capital
105,233,111
105,233,111
Income accumulated during development stage
997,969
1,293,348
Total shareholders’ equity
106,232,505
106,527,884
Total liabilities and shareholders’ equity
$
151,436,006
$
151,788,668
The accompanying notes are an integral part of these condensed
financial statements.
ORGANIZATION,
BUSINESS OPERATIONS, SIGNIFICANT ACCOUNTING POLICIES AND GOING
CONCERN CONSIDERATIONS
These unaudited condensed financial statements as of
September 30, 2009 and for the three and nine months ended
September 30, 2009, and for the period from
September 25, 2007 (inception) through September 30,2009 have been prepared in accordance with accounting principles
generally accepted in the United States of America
(“GAAP”) for interim financial information and with
the instructions to
Form 10-Q.
Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the interim period
presented are not necessarily indicative of the results to be
expected for any other interim period or for the full year.
These unaudited condensed financial statements should be read in
conjunction with the financial statements and notes thereto for
the period ended December 31, 2008 included in Overture
Acquisition Corp.’s (the “Company”)
Form 10-K
filed on March 20, 2009. The accounting policies used in
preparing these unaudited condensed financial statements are
consistent with those described in the December 31, 2008
financial statements.
The Company was incorporated in the Cayman Islands on
September 25, 2007 as a blank check company formed for the
purpose of effecting a merger, share capital exchange, asset
acquisition, share purchase, reorganization or similar business
combination, with one or more businesses (a “Business
Combination”). The Company has selected December 31 as its
fiscal year end.
Management has evaluated subsequent events to determine if
events or transactions occurring through January 7, 2010,
the date the accompanying unaudited condensed financial
statements were issued, require potential adjustment or
disclosure.
Going
Concern and Management’s Plan and Intentions
Pursuant to its Articles of Association, if the Company is
unable to consummate a Business Combination prior to
January 30, 2010, the Company would have to liquidate and
return the funds held in the trust account to the holders of
shares issued in the Offering. There can be no assurance that
the Company will enter into a Business Combination prior to
January 30, 2010. This factor raises a substantial doubt
about the Company’s ability to continue as a going concern.
These unaudited condensed interim financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
Earnings
(Loss) Per Share
In accordance with Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) 260 , “Presentation of Earnings Per
Share”, earnings (loss) per ordinary share amounts
(“Basic EPS”) are computed by dividing earnings (loss)
by the weighted average number of ordinary shares outstanding
for the period. Ordinary shares subject to possible redemption
of 4,499,999 have been excluded from the calculation of basic
earnings per share since such shares, if redeemed, only
participate in their pro rata share of the trust earnings.
Earnings per ordinary share amounts, assuming dilution
(“Diluted EPS”), gives effect to dilutive options,
warrants, and other potential ordinary shares outstanding during
the period. FASB ASC 260 requires the presentation of both Basic
EPS and Diluted EPS on the face of the statements of operations.
In accordance with FASB ASC 260, the Company has not considered
the effect of its outstanding warrants in the
OVERTURE
ACQUISITION CORP.
(a development stage company)
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS — (Continued)
calculation of diluted earnings per share since the exercise of
the warrants is contingent upon the occurrence of future events.
Fair
Value of Financial Instruments
The Company’s financial instruments are cash, cash held in
trust and accounts payable. The recorded values of cash, cash
held in trust and accounts payable approximate their fair values
based on their short term maturities.
Concentration
of Credit Risk
FASB ASC 825, “Financial Instruments”, requires
disclosure of significant concentrations of credit risk
regardless of the degree of risk. At September 30, 2009,
financial instruments that potentially expose the Company to
credit risk consist of cash and cash equivalents. The Company
maintains its cash balances in U.S. Treasury only money
market funds at JP Morgan Private Bank. At times, the
Company’s cash and cash held in the trust account may be
uninsured or in deposit accounts that exceed the Federal Deposit
Insurance Corporation (“FDIC”) and Securities Investor
Protection Corporation (“SIPC”) insurance limits.
Management believes the risk of loss to be minimal.
Recently
Issued And Adopted Accounting Pronouncements
In June 2009, the FASB issued FASB ASC 105, “Generally
Accepted Accounting Principles”, which establishes the FASB
Accounting Standards Codification as the sole source of
authoritative generally accepted accounting principles. Pursuant
to the provisions of FASB ASC 105, the Company has updated
references to GAAP in its financial statements issued for the
period ended September 30, 2009. The adoption of FASB
ASC 105 did not impact the Company’s financial
position or results of operations.
In April 2009, FASB issued requirements for disclosures about
the fair value of financial instruments for interim reporting
periods which are included in FASB ASC 825, “Financial
Instruments”. Per FASB ASC 825, the requirements are
effective for interim reporting periods ending after
June 15, 2009. The adoption of these requirements did not
have a material effect on the Company’s condensed financial
position or results of operations.
In April 2009, FASB issued additional guidance for Fair Value
Measurements when the volume and level of activity for the asset
or liability has significantly decreased which is included in
FASB ASC 820, “Fair Value Measurements and
Disclosures.” The requirements are effective for interim
reporting periods ending after June 15, 2009. The adoption
of these requirements did not have a material effect on the
Company’s condensed financial position or results of
operations.
In April 2009 FASB issued additional clarification on the
initial recognition and measurement of assets acquired and
liabilities assumed in a business combination that arise from
contingencies which is included in FASB ASC 805, “Business
Combinations”. The adoption of these requirements did not
have a material effect on the Company’s condensed financial
position or results of operations, but will effect any future
business combinations.
In May 2009, FASB issued guidance that establishes general
standards of accounting for, and disclosure of events that occur
subsequent to the balance sheet date but before the financial
statements are issued, which is included in FASB ASC 855,
“Subsequent Events”. The requirements are effective
for all reporting periods ending after June 15, 2009. The
adoption of these requirements did not have a material effect on
the Company’s condensed financial position or results of
operations.
OVERTURE
ACQUISITION CORP.
(a development stage company)
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS — (Continued)
Management does not believe that any other recently issued, but
not yet effective, accounting standards if currently adopted
would have a material effect on the accompanying unaudited
condensed financial statements.
NOTE 2 —
COMMITMENTS
AND CONTINGENCIES
The Company entered into an agreement with the underwriters of
the Offering (the “Underwriting Agreement”) dated
January 30, 2008. The Underwriting Agreement required the
Company to pay 2% ($3,000,000) of the gross proceeds of the
Offering as an underwriting discount plus an additional 5%
($7,500,000) of the gross proceeds only upon consummation of a
Business Combination. The underwriters have waived their right
to receive payment of the 5% ($7,500,000) of the gross proceeds
upon the Company’s liquidation if it is unable to complete
a Business Combination.
The Company’s Memorandum and Articles of Association were
amended on January 30, 2008 to provide that the Company
will immediately go into voluntary liquidation if the Company
has not completed a Business Combination within 24 months
from the effective date of the registration statement relating
to the Offering (“Effective Date”) or January 30,2010. If the Company has not completed a Business Combination by
such date, its corporate existence will cease except for the
purposes of liquidating and winding up its affairs. In the event
of liquidation, it is possible that the per share value of the
residual assets remaining available for distribution (including
Trust Account assets) will be less than the initial public
offering price per unit in the Offering.
NOTE 3 —
SUBSEQUENT
EVENT
On December 6, 2009, the Board of Directors approved the
Master Agreement dated December 10, 2009 by and among the
Company, Overture Re Holdings Ltd. (“Overture Re
Holdings”), the Company’s newly formed, wholly
owned Bermuda holding company, Jefferson National Financial
Corp. (“JNF”) a Delaware corporation, Jefferson
National Life Insurance Company (“JNL”), a
Texas insurance company and a wholly owned subsidiary of JNF,
and JNL Bermuda LLC (“JNL Bermuda”), a newly
formed wholly owned Delaware subsidiary of JNL, and the Founders
of the Company pursuant to which, among other things, following
a future closing and amalgamation with JNL Bermuda, Overture Re
Ltd., a to-be-formed wholly owned Bermuda subsidiary of Overture
Re Holdings (“Overture Re”) Overture Re will be
a long term reinsurer domiciled in Bermuda.
Pursuant to the Master Agreement, $120,000,000 of the funds held
in the trust account will be paid at closing to JNL as
consideration in the transaction. In addition, the remaining
funds held in the trust account will be released (i) to pay
transaction fees and expenses; (ii) to pay the
Company’s tax obligations and deferred underwriting
discounts and commissions; (iii) to pay those holders of
shareholders who purchased shares in the Company’s initial
public offering (the “Public Shares”) who
properly exercised their redemption rights; and (iv) for
working capital and general corporate purposes of the Company
and its subsidiaries. In addition, the funds held in the trust
account may be used to purchase Public Shares in privately
negotiated transactions if the Share Repurchase Proposal is
approved at the Extraordinary General Meeting.
Pursuant to terms of the Master Agreement, the Company has
agreed to repurchase for an aggregate of $25,000 from the
Founders of the Company 3,750,000 Ordinary Shares that they
purchased prior the Company’s offering.
In consideration of the repurchase of the Founder Shares, the
Founders will receive: (i) Class A warrants to purchase an
aggregate of 46,875 shares of JNF common stock at an exercise
price of $75.00 per share, subject to a floating strike price
adjustment, and (ii) Class B warrants to purchase an
aggregate of 46,875
OVERTURE
ACQUISITION CORP.
(a development stage company)
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS — (Continued)
shares of JNF common stock at an exercise price of $125.00 per
share, subject to a floating strike price adjustment, and
(iii) the right to the issuance of 2,812,500 of the
Company’s Ordinary Shares issuable in three equal trances
in the event the volume weighted average price of the
Company’s Ordinary Shares for any five days during a 30 day
period equals or exceeds $12, $16 and $20, respectively.
In connection with the proposed acquisition (the
“Transaction”), the Company’s warrantholders will
be asked to approve a proposal to amend the terms of the Warrant
Agreement, which governs the Company’s 15,000,000 warrants
issued in its IPO (the “Public Warrants”) and the
4,380,000 warrants issued to the Company’s Founders to
provide that (i) the exercise price of the Company Warrants
will be increased from $7.00 to $11.00 per share, (ii) the
expiration date of the Company Warrants will be extended from
January 30, 2013 to January 30, 2015, and
(iii) the price at which our ordinary shares
(“Ordinary Shares”) must trade before the Company is
able to redeem the Warrants issued in its offering will be
increased from $14.25 to $20.00.
Management has reached an agreement with each of the
underwriters, pursuant to which such deferred underwriters’
compensation has been reduced to up to $1,000,000 to the extent
there is between $100,000,000 and $150,000,000 in trust at the
consummation of the Transaction. The amendment to the
underwriters agreement provides that to the extent there is at
least $100 million in the trust at the consummation of the
Transaction, the underwriters shall receive $20,000, pro rata,
for each $1 million in excess of $100 million. If
there is less than $100 million in the trust at the
consummation of the Transaction, the underwriters are not
entitled to any compensation. Pursuant to a financial advisory
agreement by and between the Company and Credit Suisse, the
Company agreed to pay Credit Suisse a transaction fee (the
“Transaction Fee”), payable upon the first closing in
connection with a Transaction, equal to 1.5% of the aggregate
value of the Transaction; provided, however, in no event shall
the Transaction Fee payable by the Company to Credit Suisse in
connection with a Transaction be less than $2 million. In
addition, pursuant to a financial advisory agreement by and
between the Company and JP Morgan, the Company has agreed
to pay JP Morgan a financial advisory fee of $500,000 upon
the consummation of the Transaction.
We have audited the accompanying carve-out balance sheets of the
Fixed and Variable Annuity Block of Jefferson National Life
Insurance Company (a carve out of fixed and variable annuity
block subject to reinsurance) (the “Company”) as of
December 31, 2008 and 2007, as described in Note 2,
and the related carve-out statements of operations, block equity
and cash flows for each of the three years ended
December 31, 2008, 2007 and 2006. These financial
statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such carve-out financial statements referred to
above present fairly, in all material respects, the financial
position of the Fixed and Variable Annuity Block of Jefferson
National Life Insurance Company (a carve out of fixed and
variable annuity block subject to reinsurance) at
December 31, 2008 and 2007, and the results of its
operations and its cash flows for each of the three years ended
December 31, 2008, 2007 and 2006, in conformity with
accounting principles generally accepted in the United States of
America.
Jefferson National Life Insurance Company (“JNL”) is a
life insurance company founded in 1937 and domiciled in the
State of Texas. JNL markets primarily variable annuities and, in
2005, launched a revolutionary flat insurance fee variable
annuity called Monument Advisor. JNL is licensed in all states
and the District of Columbia except New York.
The accompanying carve-out financial statements present the
fixed and variable annuity block subject to the contemplated
reinsurance treaty (Note 10). The carve-out financial
statements exclude the Advantage Variable Annuity product, and
the guaranteed minimum death benefit, guaranteed minimum income
benefit, and guaranteed minimum withdrawal benefit features.
These fixed and variable annuity products and features are not
subject to the proposed reinsurance transaction. These products
and features have specific risks which JNL manages separately
from the risks of the fixed and variable annuity block presented
in the carve-out financial statements.
2.
Summary
of Significant Accounting Policies
(a)
Basis
of Presentation
The carve-out financial statements include JNL’s accounts
pertaining to the fixed and variable annuity block (the
“Block” or “Company”) subject to the
contemplated reinsurance transaction between Jefferson National
Life Insurance Company and Overture Re (See Note 8). The
Block’s accounting and reporting policies conform to
accounting principles generally accepted in the United States of
America (“GAAP”). The Block is an integrated business
of JNL that operates as a single business and is not a
stand-alone entity. The Block represents a discrete activity of
JNL for which assets and liabilities were specifically
identifiable. Policy and contract reserves attributable to the
Block relate to specifically identifiable policies. The total
investments held by JNL as it pertains to the fixed annuity
block are segregated based on the total account value of the
annuitants, which is also the policy and contract reserve at the
balance sheet date. Since, (a) JNL did not historically
maintain these investments, attributable to the fixed annuity
policies, separately from other general account assets of the
company; and (b) the value of these assets can be easily
determined based on account value of the annuitants; the Company
has reflected these assets as Due from JNL in the carve-out
balance sheet. Assets supporting variable annuity policies are
maintained in separate investment portfolios which are
segregated from the general account assets of JNL and are
presented in the carve-out Block financial statements as
separate account assets. The separate account assets are
generally not subject to claims that arise out of any other
business of JNL. Investment risk associated with market value
changes are borne by the customers.
The carve-out financial statements of the Block reflect the
assets, liabilities, revenues and expenses directly attributable
to the Block, as well as allocations deemed reasonable by
management, to present the financial position, results of
operations, changes in Block equity and cash flows of the Block
on a stand-alone basis. The allocation methodologies have been
described in the following summary of accounting policies. The
financial information included herein may not necessarily
reflect the financial position, results of operations, changes
in Block equity and cash flows of the Block in the future or
what they would have been had the Block been a separate,
stand-alone entity during the periods presented. The carve-out
financial statements reflect all of the assets and liabilities
of the Block. The expenses reflected in the carve-out financial
statements reflects management’s best judgment and
estimates of expenses that would have been incurred if the Block
had operated as unaffiliated entity for the periods presented.
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
(b)
Use of
Estimates and Assumptions
The preparation of the carve-out financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and income and expenses
during the reporting period.
The Company’s principal estimates include deferred policy
acquisition costs, value of business acquired, policy and
contract reserves and allocated investment income. In developing
the estimates and assumptions, management uses all available
evidence. Because of uncertainties associated with estimating
the amounts, timing and likelihood of possible outcomes, actual
results could differ from these estimates.
(c)
Receivable
from JNL
Receivable from JNL represents assets held by JNL related to
fixed annuity policy and contract reserves and net cash related
to the Block’s operation. Cash and invested assets related
to the carve-out Block were co-mingled with other business of
JNL since it has historically managed and accounted for its cash
and investment portfolio as a single pool. Specific assets
supporting the policy liabilities of the Block contemplated in
the carve-out financial statements cannot be separately
identified. As such, the changes in fair value of investments
held by JNL are not reflected in the carve-out financials. See
note 7 for information related to the general account cash
and investments of JNL.
The various components of amounts included in Due from JNL
consist of the following:
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
(d)
Deferred
Policy Acquisition Costs
Deferred policy acquisition costs (“DAC”) are costs
which relate to and vary with the production of new business and
are deferred to the extent that such costs are deemed
recoverable from future profits. These costs consist primarily
of certain commissions and other related costs. DAC is subject
to recoverability testing at the time of policy issue and loss
recognition testing at the end of each accounting period. DAC is
amortized in relation to the associated gross margins as
promulgated by Statement of Financial Accounting Standards
(“SFAS”) No. 97, “Accounting and Reporting
by Insurance Enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from the Sale of
Investments”. Revisions to estimates result in changes to
the amounts expensed in the reporting period in which the
revisions are made and could result in the impairment of the
asset and charge to income if estimated future profits are less
than unamortized deferred amounts.
In the accompanying carve-out financial statements, DAC and the
related deferral and amortization were recognized based on the
proportionate share of account values of fixed and variable
annuities block reflected in the accompanying carve-out
financial statements compared to the total block of JNL.
(e)
Value
of Business Acquired
JNL initially recorded Value of Business Acquired
(“VOBA”) of $53,632 at September 30, 2002 upon
its acquisition by JNL’s parent. Initial fair value of VOBA
was estimated based on the projections used in the appraisal of
the purchased inforce business. In the accompanying carve-out
financial statements, VOBA and the related amortization were
recognized based on the proportionate share of account values of
the Block’s fixed and variable annuities to the total
account values of fixed and variable annuities pertaining to the
purchased inforce business. It is being amortized in proportion
to the estimated gross profits. The total amortization of VOBA
for the years ended December 31, 2008, 2007 and 2006 was
$3,167, $4,161 and $7,502, respectively.
(f)
Separate
Account Assets and Liabilities
Separate account assets and liabilities are reported at
estimated fair value and represent segregated funds that are
invested on behalf of and at the direction of policyholders. The
assets consist principally of common stocks, fixed maturities
and short-term investments. The assets of each account are
legally segregated and are generally not subject to claims that
arise out of any other business of the Company. Investment risks
associated with market value changes are borne by the customers,
except to the extent of minimum guarantees made by the Company
with respect to certain accounts. The investment income and
gains and losses for separate accounts generally accrue to
policyholders. Fees for administering these policies and
mortality and risk charges are included in policyholder fee
income.
In accordance with the provisions of SFAS No. 97, reserves
held for annuities in the accumulation phase and universal life
products are held at fund value.
(h)
Allocated
Investment Income
Net investment income was allocated to the Block using a pro
rata share of the actual investment income including realized
gains and losses produced by JNL’s total investment
portfolio applied to the net assets held by JNL in support of
the Block’s fixed annuity policy and contract reserves.
Income was allocated based on the actual rate of return
experienced by JNL’s investment portfolio which was 4.10%,
5.29% and 4.86% for the years ended December 31, 2008,
2007, and 2006, respectively.
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
(i)
Policyholder
Fee Income
Policyholder fee income consists primarily of fees associated
with investment management, administration and contract
guarantees from separate accounts and is recognized as income
when charged to the underlying account. JNL’s policyholder
fee income was allocated to the Block based on the percentage of
the Block’s separate account values to the total separate
account values of JNL, for the variable annuity products that
generated such income.
(j)
Surrender
Charges
Surrender charges consist of fees billed to contract holders for
withdrawal of annuity deposits before the expiration of the
surrender charge period. Surrender charges are recognized as
income when deducted from the underlying account. JNL’s
surrender charges were allocated to the Block based on the
percentage of the Block’s separate account values to the
total separate account values of JNL, for the variable annuity
products that generated surrender charges.
(k)
General
and Administrative Expenses
From January 1, 2006 to June 30, 2006, JNL had a
service agreement with Inviva, Inc., its former parent company.
Effective July 1, 2006, the JNL entered into a service
agreement with Jefferson National Financial Corp., its ultimate
parent company. These agreements covered certain general and
administrative expenses. During 2008, 2007 and 2006, general
and administrative expenses of $8,353, $8,338, and $8,731,
respectively, were allocated to the Block and are reflected in
the accompanying carve-out statement of operations. The terms
require that these amounts be charged at least quarterly and
settled within 30 days. The general and administrative
expenses allocated to the Block exclude certain corporate
expenses of JNL related to strategic initiatives, restructuring
and other costs not related to the administration of JNL’s
insurance operations. The administration costs that pertain to
JNL’s insurance operations were allocated based on the
percentage of the Block’s revenues to the total revenues of
JNL.
(l)
Commissions
JNL has two servicing agreements with its affiliate, Jefferson
National Securities Corporation, formerly Inviva Securities,
Inc. The Paymaster Agreement stipulates that the JNL will pay
all commissions associated with the issuance of variable
contracts through Jefferson National Securities Corporation and
the JNL agrees to reimburse Jefferson National Securities
Corporation for all variable commissions paid. The Distribution
Agreement stipulates that Jefferson National Securities
Corporation agrees to be the distributor of variable contracts
for JNL and the JNL agrees that it will reimburse the costs it
incurs to distribute these contracts. The total amount
reimbursed under these agreements pertaining to the Block in
2008, 2007 and 2006 under these agreements were $1,456, $2,003
and $1,842, respectively.
(m)
Income
Taxes
Deferred income taxes are generally recognized, based on enacted
tax rates, when assets and liabilities have different values for
financial statement and tax purposes. A valuation allowance is
recorded to reduce any portion of the deferred tax asset that is
expected to more likely than not be realized. Adjustments to the
valuation allowance will be made if there is a change in
management’s assessment of the amount of the deferred tax
asset that is realizable.
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
(n)
New
Accounting Pronouncements
On February 16, 2006, the Financial Accounting Standards
Board (“FASB”) issued Statement of Financial
Accounting Standards (“SFAS”) No. 155,
“Accounting for Certain Hybrid Instruments”. This
statement removes an exception from the requirement to bifurcate
an embedded derivative feature from a beneficial interest in
securitized financial assets. This statement also provides an
election, on an
instrument-by-instrument
basis, to measure at fair value the entire hybrid financial
instrument that contains an embedded derivative requiring
bifurcation, rather than measuring only the embedded derivative
on a fair value basis. The Company adopted this guidance
effective January 1, 2007 and has determined that
SFAS No. 155 did not have a material impact on the
Company’s carve-out financial statements.
In March 2006, the FASB issued SFAS No. 156,
“Accounting for Servicing Financial Assets — An
Amendment of FASB No. 140”. SFAS No. 156
requires that all separately recognized servicing assets and
servicing liabilities be initially measured at fair value, if
practicable. The statement permits, but does not require, the
subsequent measurement of servicing assets and servicing
liabilities at fair value. Specifically, the new standard
addresses the recognition and measurement of separately
recognized servicing assets and liabilities and provides an
approach to simplify efforts to obtain hedge-like (offset)
accounting. SFAS No. 156 was effective as of the
beginning of an entity’s first fiscal year that begins
after September 15, 2006, which for the Company is as of
the beginning of the year ended December 31, 2007. The
adoption of SFAS No. 156 did not have an effect on the
Company’s carve-out financial statements.
In June 2006, the FASB issued FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109”
(“FIN 48”). FIN 48 provides guidance on the
financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return.
FIN 48 requires that the companies recognize in the
financial statements the impact of a tax position if that
position more-likely-than-not will be sustained on an audit,
based on the technical merits of the position. FIN 48 also
provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosures, and
transition provisions. During 2008, FASB issued FASB Staff
Position
FIN 48-3,
“Effective Date of FASB Interpretation No. 48 for
Certain Nonpublic Enterprises”, which delayed the
effectiveness of FIN 48 until fiscal years beginning after
December 15, 2008. As such, the Company has not adopted
FIN 48 for the period presented herein. The Company does
not expect that the adoption of FIN 48 on January 1,2009 did not have a material impact on the carve-out financial
statements.
In September 2006, FASB issued SFAS No. 157,
“Fair Value Measurements”. This statement defines fair
value, establishes a framework for measuring fair value in GAAP,
and expands disclosures about fair value measurements. This
statement applies under other accounting pronouncements that
require or permit fair value measurements. Accordingly, this
statement does not require any new fair value measurements, but
required additional disclosures regarding the existing fair
value measurements the Company currently reports. This statement
is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods
within those fiscal years. The Company adopted
SFAS No. 157 on January 1, 2008. See Note 6
of the carve-out financial statements for disclosures under
SFAS No. 157.
In February 2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial
Liabilities”. SFAS No. 159 permits all entities
the option to measure most financial instruments and certain
other items at fair value at specified election dates and to
report related unrealized gains and losses in earnings. The fair
value option will generally be applied on an
instrument-by-instrument
basis and is generally an irrevocable election. SFAS
No. 159 is effective for fiscal years beginning after
November 15, 2007. The Company elected not to adopt
SFAS No. 159 and it did not have any impact on the
Company’s carve-out financial statements.
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
In March 2008, the FASB issued SFAS No. 161,
“Disclosures about Derivative Instruments and Hedging
Activities”. SFAS No. 161 amends and expands the
disclosure requirements of SFAS No. 133, “Accounting
for Derivative Instruments and Hedging Activities”. It
requires qualitative disclosures about objectives and strategies
for using derivatives, quantitative disclosures about fair value
amounts of gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in
derivative agreements. This statement is effective for financial
statements issued for fiscal years beginning after
November 15, 2008. The Company does not expect that the
adoption of SFAS No. 161 did not have a material
impact on the carve-out financial statements.
In May 2008, the FASB issued SFAS No. 162,
“Hierarchy of Generally Accepted Accounting
Principles”. This statement is intended to improve
financial reporting by identifying a consistent framework, or
hierarchy, for selecting accounting principles to be used in
preparing financial statements of non-governmental entities that
are presented in conformity with GAAP. This statement will be
effective 60 days following the U.S. Securities and
Exchange Commission’s approval of the Public Company
Accounting Oversight Board amendment to AU Section 411,
“The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles”. The Company does not
expect that the adoption of SFAS No. 162 did not have
a material impact on the carve-out financial statements.
In October 2008, the Financial Accounting Standards Board
(“FASB”) issued FSP
FAS 157-3,
“Determining the Fair Value of a Financial Asset When the
Market For That Asset Is Not Active” (“FSP
FAS 157-3”),
with an immediate effective date, including prior periods for
which financial statements have not been issued. FSP
FAS 157-3
amends FAS 157 to clarify the application of fair value in
inactive markets and allows for the use of management’s
internal assumptions about future cash flows with appropriately
risk-adjusted discount rates when relevant observable market
data does not exist. The objective of FAS 157 has not
changed and continues to be the determination of the price that
would be received in an orderly transaction that is not a forced
liquidation or distressed sale at the measurement date. The
adoption of FSP
FAS 157-3
did not have a material effect on the Company’s results of
operations, financial position or liquidity.
Statement of Position
05-1,
“Accounting by Insurance Enterprises for Deferred
Acquisition Costs in Connection with Modifications or Exchanges
of Insurance Contracts”
(“SOP 05-1”),
became effective January 1, 2007.
SOP 05-1
provides guidance on accounting for deferred acquisition costs
on internal replacements of insurance and investment contracts
other than those specifically described in FAS 97,
“Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts and for Realized Gains and
Losses from the Sale of Investments”. The SOP defines an
internal replacement as a modification in product benefits,
features, rights, or coverage that occurs by the exchange of a
contract for a new contract, or by amendment, endorsement, or
rider to a contract, or by the election of a feature or coverage
within a contract. The adoption of
SOP 05-1
did not have a material impact on the financial condition or
results of operations of the Company.
In December 2007, the FASB issued SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51”.
SFAS No. 160 amends Accounting Research
Bulletin No. 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and
for the deconsolidation of a subsidiary. In addition, it
clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be
reported as a component of equity in the consolidated financial
statements. SFAS No. 160 is effective on a prospective
basis beginning January 1, 2009, except for presentation
and disclosure requirements which are applied on a retrospective
basis for all periods presented. The adoption of this new
guideline on January 1, 2009 did not have a material impact
on its financial condition or results of operations.
In December 2007, the FASB issued SFAS No. 141(R),
“Business Combinations”. SFAS No. 141(R)
establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
the identifiable assets acquired, the liabilities assumed, and
any noncontrolling interest in the acquiree and recognizes and
measures the goodwill acquired in the business combination or a
gain from a bargain purchase. SFAS No. 141(R) also
sets forth the disclosures required to be made in the financial
statements to evaluate the nature and financial effects of the
business combination. SFAS No. 141(R) applies
prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.
Accordingly, SFAS No. 141(R) will be applied by the
Company to business combinations occurring on or after
January 1, 2009.
In April 2008, the FASB issued FSP
No. 142-3,
“Determination of the Useful Life of Intangible
Assets”
(“FSP 142-3”).
FSP 142-3
amends the factors that should be considered in developing
assumptions about renewal or extension used in estimating the
useful life of a recognized intangible asset under
SFAS No. 142, “Goodwill and Other intangible
Assets”. This standard is intended to improve the
consistency between the useful life of a recognized intangible
asset under SFAS No. 142 and the period of expected
cash flows used to measure the fair value of the asset under
SFAS No. 141R and other GAAP.
FSP 142-3
is effective for financial statements issued for fiscal years
beginning after December 15, 2008. The measurement
provisions of this standard will apply only to intangible assets
of the Company acquired after the effective date.
In May 2008, the FASB issued SFAS No. 163,
“Accounting for Financial Guarantee Insurance
Contracts”, an interpretation of SFAS No. 60.
SFAS No. 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default
(insured event) when there is evidence that credit deterioration
has occurred in an insured financial obligation. SFAS
No. 163 also clarifies how SFAS No. 60 applies to
financial guarantee insurance contracts, including the
recognition and measurement to be used to account for premium
revenue and claim liabilities. Those clarifications will
increase comparability in financial reporting of financial
guarantee insurance contracts by insurance enterprises.
SFAS No. 163 also requires expanded disclosures about
financial guarantee insurance contracts. SFAS No. 163
is effective for financial statements issued for fiscal years
and interim periods beginning after December 15, 2008. The
adoption of SFAS No. 163 on January 1, 2009 did not
have a material impact on its financial condition or results of
operations.
In April 2009, the FASB issued FASB Staff Position
(“FSP”)
No. 115-2
and FSP
No. 124-2,
“Recognition and Presentation of
Other-Than-Temporary
Impairments”. Under the new guidance, an other than
temporary impairment is recognized when an entity has the intent
to sell a debt security or when it is more likely than not an
entity will be required to sell the debt security before its
anticipated recovery. Additionally, the new guidance changes the
presentation and amount of
other-than-temporary
losses recognized in the income statement for instances when the
Company determines that there is a credit loss on a debt
security but it is more likely than not that the entity will not
be required to sell the security prior to the anticipated
recovery of its remaining cost basis. For these debt securities,
the amount representing the credit loss will be reported as an
impairment loss in the consolidated statement of income and the
amount related to all other factors will be reported in
accumulated other comprehensive income. The new guidance also
requires the presentation of
other-than-temporary
impairments separately from realized gains and losses on the
face of the income statement. In addition to the changes in
measurement and presentation, the new guidance is intended to
enhance the existing disclosure requirements for
other-than-temporary
impairments and requires all disclosures related to
other-than-temporary
impairments in both interim and annual periods. The new guidance
was effective for interim periods ended after June 15,2009, with early adoption permitted for periods ended after
March 15, 2009. The adoption of this FSP did not have a
material impact on Company’s results of operations,
financial position, or liquidity.
In April 2009, the FASB issued FSP
No. 157-4,
“Determining Fair Value When Volume and Level of Activity
for the Asset or Liability Have Significantly Decreased and
Identifying Transactions that are Not Orderly”. The new
guidance, which is now part of ASC 820, “Fair Value
Measurements and Disclosures”, requires the disclosure
of the inputs and valuation techniques used, as well as any
changes in valuation
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
techniques and inputs used during the period, to measure fair
value in interim and annual periods. The provisions of the new
guidance were effective for interim periods ended after
June 15, 2009, with early adoption permitted for periods
ended after March 15, 2009. The adoption of this FSP did
not have a material effect on Company’s results of
operations, financial position or liquidity.
In April 2009, the FASB issued
FSP 107-1
and APB
28-1,
“Interim Disclosures about Fair Value of Financial
Instruments”. The new guidance requires disclosure about
fair value of financial instruments in interim and annual
financial statements. The new guidance is effective for periods
ended after June 15, 2009, with early adoption permitted
for periods ended after March 15, 2009. The adoption of
this FSP is not expected to have a material effect on the
Company’s results of operations, financial position or
liquidity.
In May 2009, the FASB issued new guidance for accounting for
subsequent events. The new guidance, which was issued as
SFAS No. 165, “Subsequent Events”, is
consistent with existing auditing standards in defining
subsequent events as events or transactions that occur after the
balance sheet date but before the financial statements are
issued or are available to be issued, but it also requires the
disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date. The new guidance
defines two types of subsequent events: “recognized
subsequent events” and “non-recognized subsequent
events.” Recognized subsequent events provide additional
evidence about conditions that existed at the balance sheet date
and must be reflected in the company’s financial
statements. Non-recognized subsequent events provide evidence
about conditions that arose after the balance sheet date and are
not reflected in the financial statements of a company. Certain
non-recognized subsequent events may require disclosure to
prevent the financial statements from being misleading. The new
guidance was effective on a prospective basis for interim or
annual periods ending after June 15, 2009. The adoption of
the new guidance on April 1, 2009 had no effect on the
Company’s results of operations, financial position or
liquidity.
In June 2009, the FASB issued SFAS No. 168, “The
FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles — a
replacement of FASB Statement No. 162
(“Codification”). The Codification supersedes all
existing U.S. accounting standards issued by the FASB and
other related private sector standard setters into a single
source of authoritative accounting principles arranged by topic
and will serve as the single source of authoritative
non-governmental U.S. Generally Accepted Accounting
Principles. The Codification was effective on a prospective
basis for interim and annual reporting periods ending after
September 15, 2009. The adoption of the Codification
changed the Company’s references to U.S. GAAP
accounting standards but did not impact the Company’s
results of operations, financial position or liquidity.
In June 2009, the FASB issued new guidance on the accounting for
the transfers of financial assets. The new guidance, which was
issued as SFAS No. 166, “Accounting for Transfers
of Financial Assets, an Amendment of FASB Statement
No. 140”, has not yet been adopted into Codification.
SFAS No. 166 requires additional disclosures for
transfers of financial assets, including securitization
transactions, and any continuing exposure to the risks related
to transferred financial assets. SFAS No. 166
eliminates the concept of a qualifying special-purpose entity
and changes the requirements for derecognizing financial assets.
SFAS No. 166 is effective on a prospective basis for
the annual periods beginning after November 15, 2009 and
interim and annual periods thereafter. The Company does not
expect that the provisions of SFAS No. 166 to have a
material effect on its results of operations, financial position
or liquidity.
In June 2009, the FASB issued revised guidance on the accounting
for variable interest entities. The revised guidance, which was
issued as SFAS No. 167, “Amendments to FASB
Interpretation No. 46(R”), has not yet been adopted
into Codification. The revised guidance requires an analysis of
whether a company has: (1) the power to direct the
activities of a variable interest entity that most significantly
impact the entity’s economic performance and (2) the
obligation to absorb the losses that could potentially be
significant to the entity or the right to receive benefits from
the entity that could potentially be significant to the entity.
The
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
revised guidance also requires an entity to be re-evaluated as a
variable interest entity when the holders of the equity
investment at risk, as a group, lose the power from voting
rights or similar rights to direct the activities that most
significantly impact the entity’s economic performance. The
revised guidance requires additional disclosures about a
company’s involvement in variable interest entities and an
ongoing assessment of whether a company is the primary
beneficiary. The revised guidance is effective on a prospective
basis for the annual period beginning after November 15,2009 and interim and annual periods thereafter. The Company does
not expect that the revised guidance will have a material effect
on its results of operations, financial position or liquidity.
3.
Reserves
General account reserves balances at December 31 are comprised
of the following:
In addition to the general account reserves detailed above, JNL
so has significant business in separate accounts. Substantially
all of the separate account business of JNL relates to
individual variable annuities with nonguaranteed returns. The
net investment experience of the separate account is credited
directly to the policyholder and can be positive or negative.
4.
Reinsurance
JNL participates in reinsurance in order to provide greater
diversification of business, provide additional capacity for
future growth, limit the maximum net loss potential arising from
large risks and to exit certain lines of business. Reinsurance
ceded arrangements do not discharge the insurance subsidiary as
the primary insurer. Ceded balances would represent a liability
to the insurance subsidiary in the event the reinsurers were
unable to meet their obligations to the insurance subsidiaries
under the terms of the reinsurance agreements. JNL periodically
reviews the financial condition of its reinsurers and amounts
recoverable therefrom, recording an allowance when necessary for
uncollectible reinsurance.
Reinsurance recoverable on paid losses and ceded reserve amounts
at December 31 were as follows:
JNL entered into a reinsurance agreement with Scottish Re US,
Inc. (“SRUS”) effective January 1, 2005, whereby
it ceded 30% of its reserves on select annuity contracts. The
reinsurance on the fixed account portion of these contracts is
on a coinsurance basis. The reinsurance on the separate account
portion of these contracts is on a modified coinsurance basis
upon which the JNL maintains possession of the assets which
support the reserves ceded. In January 2005, JNL transferred
reserves of approximately $54,600, under the coinsurance portion
of the contract, to SRUS.
On January 5, 2009, the Delaware Department of Insurance
(“Delaware Department”) issued an order of supervision
against SRUS which, among other things, requires the Delaware
Department’s consent to any transaction outside the
ordinary course of business and formalized certain reporting and
processes already informally in place between SRUS and the
Department. A.M. Best rates SRUS “E” (under
regulatory supervision). As of December 31, 2008, the
balance of the Block’s annuity business ceded to SRUS was
approximately $56,000, under coinsurance, and is included in
reinsurance recoverable on paid losses and ceded reserves. SRUS
continues to maintain the capital ratios required by the
reinsurance agreement. JNL continues
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
to evaluate the financial condition of SRUS with respect to
JNL’s existing exposure. SRUS continues to perform under
its contractual obligations to JNL. However, it cannot predict
what changes in the status of SRUS’s financial condition
may have on its ability to take the reserve credit for the
business of SRUS in the future. If JNL were unable to take the
reserve credit for the business ceded to SRUS, it could have a
material adverse impact on JNL’s financial condition.
5.
Federal
Income Taxes
The components of the income tax expense (benefit) in the
accompanying statements of operations for the years ended
December 31 are summarized as follows:
2008
2007
2006
Current income tax expense (benefit)
$
(1,100
)
$
1,100
$
—
Deferred income tax expense (benefit)
36
17
(698
)
Total income tax expense (benefit)
$
(1,064
)
$
1,117
$
(698
)
The Block’s actual income tax expense for the years ended
December 31 is computed by applying the statutory Federal income
tax rate of 35% to income (loss) from continuing operations
before income taxes.
The Block’s deferred tax assets and liabilities are
comprised of the following at December 31:
Effective January 1, 2008, the Company adopted
SFAS No. 157, “Fair Value Measurements”, for
all financial instruments accounted for at fair value on a
recurring basis. SFAS No. 157 requires fair value to
be determined based on the exchange price that would be received
for the assets or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants.
SFAS No. 157 emphasizes that an entity’s
valuation technique for measuring fair value should maximize
observable inputs and minimize unobservable inputs.
SFAS No. 157 established a fair value hierarchy that
prioritizes the inputs used to measure fair value. The three
levels of the fair value hierarchy as defined by
SFAS No. 157 are as follows:
Level 1 — unadjusted quoted prices in
active markets for identical assets or liabilities;
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
Level 2 — quoted prices for similar
instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active and model
derived valuations whose inputs are observable or whose
significant value drivers are observable; and
Level 3 — significant inputs to the
valuation model are unobservable.
The following table shows, by level within the fair value
hierarchy, the Company’s financial assets that are
accounted for at fair value on a recurring basis as of
December 31, 2008. The financial assets are classified in
their entirety based on the lowest level of input that is
significant to the fair value measurement. The Company’s
assessment of the significance of a particular input to the fair
value measurement requires judgment and may affect the
asset’s placement within the fair value hierarchy levels.
Separate account assets and liabilities are valued using the net
asset value of the respective underlying portfolios at the end
of each New York Stock Exchange business day, as determined by
the respective fund manager.
(b)
Financial
Instruments, at Fair Value
The estimated fair values of financial instruments have been
determined by using available market information and the
valuation methodologies described below.
The fair value of policy and contract reserves is stated at
their cash surrender value. These contracts are issued with
variable interest rates that are periodically adjusted based on
changes in underlying economic conditions.
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
7.
Investments
held by JNL
(a)
As
discussed in note 2, cash and invested assets related to
the carve-out block are comingled with the other business of
JNL, excluding separate accounts. The following information
pertains to the general account assets of JNL and includes cash
and investments unrelated to the carve-out Block.
Cash and investments held by JNL as of December 31 2008 and 2007
is comprised of the following:
The amortized cost and fair values of available-for-sale fixed
maturity securities by contractual maturity at December 31,2008 are as follows:
Amortized Cost
Fair Value
Due in one year or less
$
8,814
$
8,800
Due after one year through five years
74,198
71,569
Due after five years through ten years
67,407
61,393
Due after ten years
76,671
65,176
Mortgage-backed securities
160,736
152,629
Total
$
387,826
$
359,567
Expected maturities may differ from contractual maturities
because borrowers may have the right to prepay obligations with
or without prepayment penalties.
Scheduled principal repayments under JNL’s mortgage trusts
and mortgage loans by contractual maturity at December 31,2008 are as follows:
JNL does not engage in subprime residential mortgage lending.
JNL’s exposure to subprime lending is limited to
investments within the fixed maturity investment portfolio which
contains securities collateralized by mortgages that have
characteristics of subprime lending such as adjustable rate
mortgages and alternative documentation mortgages. These
investments are in the form of asset-backed securities
collateralized by subprime mortgages and collateralized mortgage
obligations backed by alternative documentation mortgages. The
total market value of these investments is $14,444 which
includes an unrealized loss of $4,045. The average credit rating
of all of these securities was AAA as of December 31, 2008
and reflects the JNL’s practice of minimizing exposure to
low quality (subprime type) credit risk.
(f)
Fair
Value Measurements
The following table shows, by level within the fair value
hierarchy, JNL’s financial assets that are accounted for at
fair value on a recurring basis as of December 31, 2008.
The financial assets are classified in their entirety based on
the lowest level of input that is significant to the fair value
measurement. JNL’s assessment of the significance of a
particular input to the fair value measurement requires judgment
and may affect the asset’s placement within the fair value
hierarchy levels.
JNL uses the market approach for recurring fair value
measurements and the valuation techniques use inputs that are
observable, or can be corroborated by observable data, in an
active marketplace. For securities in illiquid markets,
valuation is determined by JNL using internal assumptions and
analyses.
The following information relates to the classification into the
fair value hierarchy:
Preferred Stock — Investments in preferred
stock are valued using active, high-volume trades for identical
securities. These securities are classified as Level 1 of
the fair value hierarchy.
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
Common Stock — Investments in common stock are
valued using active, high volume trades for identical
securities. These securities are classified as Level 1 of
the fair value hierarchy.
Fixed Income — For the majority of fixed income
securities, JNL uses third-party pricing models. Such pricing
models use standard inputs including, but not limited to,
benchmark yields, reported trades, broker/dealer quotes, issuer
spreads, two-sided markets, benchmark securities, and other
reference data. These securities are classified as Level 2
of the fair value hierarchy. JNL is valuing its Level 3
securities based on expected cash flows, internal risk
assumptions and discounts rates.
Separate Accounts — Separate account assets and
liabilities are valued using the net asset value of the
respective underlying portfolio at the end of each New York
Stock Exchange business day, as determined by the respective
fund manager.
The following table presents the changes in Level 3
securities measured on a recurring basis for the year ended
December 31, 2008:
JNL is subject to certain Risk-Based Capital (“RBC”)
requirements specified by the National Association of Insurance
Commissioners. Under those requirements, the amount of capital
and surplus maintained by life and health insurers is to be
determined based on various risk factors related to it. At
December 31, 2008 and 2007, JNL exceeded its RBC
requirements as JNL’s capital and surplus was 328% and 690%
of its calculated authorized control level RBC.
9.
Commitments
and Contingencies
Various lawsuits against the Company may arise in the ordinary
course of the Company’s business, some of which the Company
may be indemnified for under certain agreements. Contingent
liabilities arising from ordinary course litigation, income
taxes and other matters are not expected to be material in
relation the carve-out financial statements.
As discussed in Note 4, changes in the status of
SRUS’s financial condition in the future could have a
material adverse impact on JNL’s financial condition. As of
December 31, 2008, the Block’s receivable from SRUS
related to this exposure is approximately $56,000. JNL
continues to evaluate the financial condition of SRUS with
respect to JNL’s existing exposure. SRUS continues to
perform under its contractual obligations to JNL. However, it
cannot predict what changes in the status of SRUS’s
financial condition may have on its ability to take the reserve
credit for the business of SRUS in the future.
10.
Subsequent
Events
In December 2009, Jefferson National Financial Corp.
(“JNF”), the parent of JNL, entered into a Master
Agreement with Overture Acquisition Corp.
(“Overture”), a Cayman Islands special-purpose
acquisition
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Notes to Carve-Out Financial
Statements — (Continued)
company. Pursuant to this agreement, JNF will form JNL
Bermuda LLC and all parties, without limitation, agreed to
consummate the following transactions:
•
Prior to the closing, Overture Re Holdings, a wholly-owned
subsidiary of Overture, will form a Bermuda exempt company, to
be called Overture Re Ltd (“Overture Re”), and
Overture Re Holdings will cause Overture Re to obtain the
licenses required to operate as a reinsurer in Bermuda.
•
Prior to the closing, JNL Bermuda LLC and JNL will enter into
the Reinsurance Option and Contribution Agreement, pursuant to
which JNL will contribute certain employees, other assets
including a portfolio of securities worth approximately
$98,500,000 subject to adjustment as set forth in the Master
Agreement, and an option to enter into a Quota Share Reinsurance
Agreement with JNL.
•
Prior to closing, JNL Bermuda LLC will have entered into an
Investment Management Agreement with JNF Asset Management, LLC
(“JNFAM”), a wholly-owned subsidiary of JNF.
•
On the closing date, Overture Re and JNL Bermuda LLC will
amalgamate pursuant to an Agreement and Plan of Amalgamation,
whereby Overture Re will assume all properties, rights,
privileges and powers of JNL Bermuda LLC, including the
Reinsurance Option and Contribution Agreement and the Investment
Management Agreement.
•
On the closing date, Overture Re will exercise the option set
forth in the Reinsurance Option and Contribution Agreement and
JNL and Overture Re will deliver the Quota Share Reinsurance
Agreement, pursuant to which Overture Re will reinsure 90% of
the fixed annuity block of JNL and 50% of the variable annuity
block of JNL on a modified coinsurance basis, for ceding
commission of approximately $21,500,000.
•
On the closing date, Overture will be granted an option to
purchase all of the membership units of JNFAM exercisable on or
after the date that is six months after the closing date and on
or before the first anniversary of the closing date.
If the shareholders of Overture approve the transactions
contemplated by the Master Agreement, pursuant to the Agreement
and Plan of Amalgamation, Overture Re will purchase all the
membership units of JNL Bermuda LLC. This transaction is
expected to close in January 2010, subject to various regulatory
and shareholder approval.
We have reviewed the condensed carve-out balance sheets of the
Fixed and Variable Annuity Block of Jefferson National Life
Insurance Company (a carve out of fixed and variable annuity
block subject to reinsurance) (the “Company”) as of
September 30, 2009, and the related condensed carve-out
statements of operations, block equity and cash flows for the
nine month periods ended September 30, 2009 and 2008. These
interim financial statements are the responsibility of the
Company’s management.
We conducted our reviews in accordance with the standards of the
Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting
Oversight Board, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the condensed financial
statements referred to above for them to be in conformity with
accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with the standards of
the Public Company Accounting Oversight Board, the carve-out
balance sheets of the Fixed and Variable Annuity Block of
Jefferson National Life Insurance Company (a carve out of fixed
and variable annuity block subject to reinsurance) as of
December 31, 2008 and 2007, and the related statements of
operations, block equity, and cash flows for the years ended
December 31, 2008, 2007 and 2006 (not presented herein);
and in our report dated January 7, 2010, we expressed an
unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed
carve-out balance sheet as of December 31, 2008 is fairly
stated in all material respects in relation to the balance sheet
from which it has been derived.
Jefferson National Life Insurance Company (“JNL”) is a
life insurance company founded in 1937 and domiciled in the
State of Texas. JNL markets primarily variable annuities and, in
2005, launched a revolutionary flat insurance fee variable
annuity called Monument Advisor. JNL is licensed in all states
and the District of Columbia except New York.
The accompanying condensed carve-out financial statements
present the fixed and
variable annuity block subject to the contemplated reinsurance
treaty (Note 10). The condensed carve-out financial
statements exclude the Advantage Variable Annuity product, and
the guaranteed minimum death benefit, guaranteed minimum income
benefit, and guaranteed minimum withdrawal benefit features.
These fixed and variable annuity products and features are not
subject to the proposed reinsurance transaction. These products
and features have specific risks which JNL manages separately
from the risks of the fixed and variable annuity block presented
in the condensed carve-out financial statements.
2.
Summary
of Significant Accounting Policies
(a)
Basis
of Presentation
The condensed carve-out financial statements include JNL’s
accounts pertaining to the fixed and variable annuity block (the
“Block” or “Company”) subject to the
contemplated reinsurance transaction between Jefferson National
Life Insurance Company and Overture Re (See Note 10). They
do not include all of the information and footnotes required by
GAAP for complete financial statements. In the opinion of
management, all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation have been
included. Interim results for the nine months ended
September 30, 2009 are not necessarily indicative of the
results that may be expected for the year ending
December 31, 2009. Management believes that, although the
disclosures are adequate to make the information presented not
misleading, these condensed consolidated financial statements
should be read in conjunction with the Company’s audited
consolidated financial statements for the year ended
December 31, 2008.
The Block’s accounting and reporting policies conform to
accounting principles generally accepted in the United States of
America (“GAAP”). The Block represents a discrete
activity of JNL for which assets and liabilities were
specifically identifiable. Policy and contract reserves
attributable to the Block relate to specifically identifiable
policies. The total investments held by JNL as it pertains to
the fixed annuity block are segregated based on the total
account value of the annuitants, which is also the policy and
contract reserve at the balance sheet date. Since, (a) JNL
did not historically maintain these investments, attributable to
the fixed annuity policies, separately from other general
account assets of the company; and (b) the value of these
assets can be easily determined based on account value of the
annuitants; the Company has reflected these assets as Due from
JNL in the carve-out balance sheet. The Block is an integrated
business of JNL that operates as a single business and is not a
stand-alone entity. Assets supporting variable annuity policies
are maintained in separate investment portfolios which are
segregated from the general account assets of JNL and are
presented in the condensed carve-out Block financial statements
as separate account assets. The separate account assets are
generally not subject to claims that arise out of any other
business of JNL. Investment risk associated with market value
changes are borne by the customers.
The condensed carve-out financial statements of the Block
reflect the assets, liabilities, revenues and expenses directly
attributable to the Block, as well as allocations deemed
reasonable by management, to present the financial position,
results of operations, changes in Block equity and cash flows of
the Block on a stand-alone basis. The allocation methodologies
have been described in the following summary of accounting
policies. The financial information included herein may not
necessarily reflect the financial position, results of
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
operations, changes in Block equity and cash flows of the Block
in the future or what they would have been had the Block been a
separate, stand-alone entity during the periods presented. The
carve-out
financial statements reflect all of the assets and liabilities
of the Block. The expenses reflected in the carve-out financial
statements reflects management’s best judgment and
estimates of expenses that would have been incurred if the Block
had operated as unaffiliated entity for the periods presented.
(b)
Use of
Estimates and Assumptions
The preparation of the condensed carve-out financial statements
in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and income and expenses
during the reporting period.
The Company’s principal estimates include deferred policy
acquisition costs, value of business acquired, policy and
contract reserves and allocated investment income. In developing
the estimates and assumptions, management uses all available
evidence. Because of uncertainties associated with estimating
the amounts, timing and likelihood of possible outcomes, actual
results could differ from these estimates.
(c)
Receivable
from JNL
Receivable from JNL represents assets held by JNL related to
fixed annuity policy and contract reserves and net cash related
to the Block’s operation. Cash and invested assets related
to the carve-out Block were co-mingled with other business of
JNL since it has historically managed and accounted for its cash
and investment portfolio as a single pool. Specific assets
supporting the policy liabilities of the Block contemplated in
the condensed carve-out financial statements cannot be
separately identified. As such, the changes in fair value of
investments held by JNL are not reflected in the carve-out
financial statements. See note 7 for information related to
general account cash and investments of JNL.
The various components of amounts included in Due from JNL
consist of the following:
Deferred policy acquisition costs (“DAC”) are costs
which relate to and vary with the production of new business and
are deferred to the extent that such costs are deemed
recoverable from future profits. These costs include certain
commissions, costs of policy issuance and other sales related
operating costs. DAC is subject to recoverability testing at the
time of policy issue and loss recognition testing at the end of
each accounting period. DAC is amortized in relation to the
associated gross margins as promulgated by Accounting Standards
Codification (“ASC”)
944-20,
formerly, Statement of Financial Accounting Standards
(“SFAS”) No. 97, “Accounting and Reporting
by Insurance Enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from the Sale of
Investments”. Revisions to estimates result in changes to
the amounts expensed in the reporting period in which the
revisions are made and could result in the impairment of the
asset and charge to income if estimated future profits are less
than unamortized deferred amounts.
In the accompanying condensed carve-out financial statements,
DAC and the related deferral and amortization were recognized
based on the proportionate share of account values of fixed and
variable annuities block reflected in the accompanying condensed
carve-out financial statements compared to the total block of
JNL.
(e)
Value
of Business Acquired
JNL initially recorded Value of Business Acquired
(“VOBA”) of $53,632 at September 30, 2002 upon
its acquisition by JNL’s parent. Initial fair value of VOBA
was estimated based on the projections used in the appraisal of
the purchased inforce business. In the accompanying condensed
carve-out financial statements, VOBA and the related
amortization were recognized based on the proportionate share of
account values of the Block’s fixed and variable annuities
to the total account values of fixed and variable annuities
pertaining to the purchased inforce business. It is being
amortized in proportion to the estimated gross profits. The
total amortization of VOBA for the nine months ended
September 30, 2009 and 2008 was $1,740 and $1,837,
respectively.
(f)
Separate
Account Assets and Liabilities
Separate account assets and liabilities are reported at
estimated fair value and represent segregated funds that are
invested on behalf of and at the direction of policyholders. The
assets consist principally of common stocks, fixed maturities
and short-term investments. The assets of each account are
legally segregated and are
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
generally not subject to claims that arise out of any other
business of the Company. Investment risks associated with market
value changes are borne by the customers, except to the extent
of minimum guarantees made by the Company with respect to
certain accounts. The investment income and gains and losses for
separate accounts generally accrue to policyholders. Fees for
administering these policies and mortality and risk charges are
included in policyholder fee income.
In accordance with the provisions of ASC
944-20,
reserves held for annuities in the accumulation phase are held
at fund value.
(h)
Allocated
Investment Income
Net investment income was allocated to the Block using a pro
rata share of the actual investment income including realized
gains and losses produced by JNL’s total investment
portfolio applied to the net assets held by JNL in support of
the Block’s fixed annuity policy and contract reserves.
Income was allocated based on the actual rate of return
experienced by JNL’s investment portfolio which was 5.71%
and 4.59% for the nine months ended September 30, 2009 and
2008, respectively.
(i)
Policyholder
Fee Income
Policyholder fee income consists primarily of fees associated
with investment management, administration and contract
guarantees from separate accounts and is recognized as income
when charged to the underlying account. JNL’s policyholder
fee income was allocated to the Block based on the percentage of
the Block’s separate account values to the total separate
account values of JNL, for the variable annuity products that
generated such income.
(j)
Surrender
Charges
Surrender charges consist of fees billed to contract holders for
withdrawal of annuity deposits before the expiration of the
surrender charge period. Surrender charges are recognized as
income when deducted from the underlying account. JNL’s
surrender charges were allocated to the Block based on the
percentage of the Block’s separate account values to the
total separate account values of JNL, for the variable annuity
products that generated surrender charges.
(k)
General
and Administrative Expenses
JNL has a service agreement with Jefferson National Financial
Corp., its ultimate parent company. This agreement covers
certain general and administrative expenses. During the nine
months ended September 30, 2009 and 2008, general and
administrative expenses of $4,654 and $6,564, respectively, were
allocated to the Block and are reflected in the accompanying
carve-out statement of operations. The terms require that these
amounts be charged at least quarterly and settled within 30
days. The general and administrative expenses allocated to the
Block exclude certain corporate expenses of JNL related to
strategic initiatives, restructuring and other costs not related
to the administration of JNL’s insurance operations. The
administration costs that pertain to JNL’s insurance
operations were allocated based on the percentage of the
Block’s revenues to the total revenues of JNL.
(l)
Commissions
JNL has two servicing agreements with its affiliate, Jefferson
National Securities Corporation, formerly Inviva Securities,
Inc. The Paymaster Agreement stipulates that the JNL will pay
all commissions associated
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
with the issuance of variable contracts through Jefferson
National Securities Corporation and the JNL agrees to reimburse
Jefferson National Securities Corporation for all variable
commissions paid. The Distribution Agreement stipulates that
Jefferson National Securities Corporation agrees to be the
distributor of variable contracts for JNL and the JNL agrees
that it will reimburse the costs it incurs to distribute these
contracts. The total amount reimbursed under these agreements
pertaining to the Block in for the nine months ended
September 30, 2009 and 2008 under these agreements were
$462 and $1,091, respectively.
(m)
Income
Taxes
Deferred income taxes are generally recognized, based on enacted
tax rates, when assets and liabilities have different values for
financial statement and tax purposes. A valuation allowance is
recorded to reduce any portion of the deferred tax asset that is
expected to more likely than not be realized. Adjustments to the
valuation allowance will be made if there is a change in
management’s assessment of the amount of the deferred tax
asset that is realizable.
(n)
New
Accounting Pronouncements
With the exception of those discussed below, there have been no
recent accounting pronouncements or changes in accounting
pronouncements during the nine months ended September 30,2009, as compared to the recent accounting pronouncements
described in our audited carve-out financial statements for the
year ended December 31, 2008, that are of significance, or
potential significance, to us.
In June 2009, the Financial Accounting Standards Board
(“FASB”) issued Statement of Financial Accounting
Standards (“SFAS”) No. 168, The “FASB
Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles — a replacement of FASB
Statement No. 162” (the “Codification”). The
Codification supersedes all existing U.S. accounting
standards issued by the FASB and other related private sector
standard setters into a single source of authoritative
accounting principles arranged by topic and will serve as the
single source of authoritative nongovernmental
U.S. Generally Accepted Accounting Principles. The
Codification was effective on a prospective basis for interim
and annual reporting periods ending after September 15,2009. The adoption of the Codification changed the
Company’s references to U.S. GAAP accounting standards
but did not impact the Company’s results of operations,
financial position or liquidity.
In June 2009, the FASB issued new guidance on the accounting for
the transfers of financial assets. The new guidance, which was
issued as SFAS No. 166, “Accounting for Transfers
of Financial Assets, an Amendment of FASB Statement
No. 140”, has not yet been adopted into Codification.
SFAS No. 166 requires additional disclosures for
transfers of financial assets, including securitization
transactions, and any continuing exposure to the risks related
to transferred financial assets. SFAS No. 166
eliminates the concept of a qualifying special-purpose entity
and changes the requirements for derecognizing financial assets.
SFAS No. 166 is effective on a prospective basis for
the annual period beginning after November 15, 2009 and
interim and annual periods thereafter. The Company does not
expect that the provisions of SFAS No. 166 will have a
material effect on its results of operations, financial position
or liquidity.
In June 2009, the FASB issued revised guidance on the accounting
for variable interest entities. The revised guidance, which was
issued as SFAS No. 167, “Amendments to FASB
Interpretation No. 46(R)”, has not yet been adopted
into Codification. The revised guidance requires an analysis of
whether a company has: (1) the power to direct the
activities of a variable interest entity that most significantly
impact the entity’s economic performance and (2) the
obligation to absorb the losses that could potentially be
significant to the entity or the right to receive benefits from
the entity that could potentially be significant to the entity.
The revised guidance also requires an entity to be re-evaluated
as a variable interest entity when the holders of the equity
investment at risk, as a group, lose the power from voting
rights or similar rights to direct the activities
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
that most significantly impact the entity’s economic
performance. The revised guidance requires additional
disclosures about a company’s involvement in variable
interest entities and an ongoing assessment of whether a company
is the primary beneficiary. The revised guidance is effective on
a prospective basis for the annual period beginning after
November 15, 2009 and interim and annual periods
thereafter. The Company does not expect that the revised
guidance will have a material effect on its results of
operations, financial position or liquidity.
In May 2009, the FASB issued new guidance for accounting for
subsequent events. The new guidance, which is now part of ASC
855, “Subsequent Events”, is consistent with existing
auditing standards in defining subsequent events as events or
transactions that occur after the balance sheet date but before
the financial statements are issued or are available to be
issued, but it also requires the disclosure of the date through
which an entity has evaluated subsequent events and the basis
for that date. The new guidance defines two types of subsequent
events: “recognized subsequent events” and
“non-recognized subsequent events.” Recognized
subsequent events provide additional evidence about conditions
that existed at the balance sheet date and must be reflected in
the company’s financial statements. Non-recognized
subsequent events provide evidence about conditions that arose
after the balance sheet date and are not reflected in the
financial statements of a company. Certain non-recognized
subsequent events may require disclosure to prevent the
financial statements from being misleading. The new guidance was
effective on a prospective basis for interim or annual periods
ending after June 15, 2009. The adoption of the new
guidance on April 1, 2009 had no effect on the
Company’s results of operations, financial position or
liquidity.
In April 2009, the FASB issued new guidance for the accounting
for
other-than-temporary
impairments. Under the new guidance, which is now part of ASC
320, “Investments — Debt and Equity
Securities”, an
other-than-temporary
impairment is recognized when an entity has the intent to sell a
debt security or when it is more likely than not an entity will
be required to sell the debt security before its anticipated
recovery. Additionally, the new guidance changes the
presentation and amount of
other-than-temporary
losses recognized in the income statement for instances when the
company determines that there is a credit loss on a debt
security but it is more likely than not that the entity will not
be required to sell the security prior to the anticipated
recovery of its remaining cost basis. For these debt securities,
the amount representing the credit loss will be reported as an
impairment loss in the statement of income and the amount
related to all other factors will be reported in accumulated
other comprehensive income. The new guidance also requires the
presentation of
other-than-temporary
impairments separately from realized gains and losses on the
face of the income statement. In addition to the changes in
measurement and presentation, the new guidance is intended to
enhance the existing disclosure requirements for
other-than-temporary
impairments and requires all disclosures related to
other-than-temporary
impairments in both interim and annual periods. The new guidance
was effective for interim periods ended after June 15,2009, with early adoption permitted for periods ended after
March 15, 2009. The Company adopted the new guidance on
April 1, 2009. The adoption did not have a material impact
on its results of operations, financial position, or liquidity.
In April 2009, the FASB issued new guidance for determining when
a transaction is not orderly and for estimating fair value when
there has been a significant decrease in the volume and level of
activity for an asset or liability. The new guidance, which is
now part of ASC 820, “Fair Value Measurements and
Disclosures”, requires the disclosure of the inputs and
valuation techniques used, as well as any changes in valuation
techniques and inputs used during the period, to measure fair
value in interim and annual periods. The provisions of the new
guidance were effective for interim periods ended after
June 15, 2009, with early adoption permitted for periods
ended after March 15, 2009. The Company adopted the new
provisions on April 1, 2009 and the adoption did not have a
material effect on its results of operations, financial position
or liquidity.
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
In April 2009, the FASB issued new guidance related to the
disclosure of the fair value of financial instruments. The new
guidance, which is now part of ASC 820, “Fair Value
Measurements and Disclosures”, requires disclosure about
the fair value of financial instruments in interim and annual
financial statements. The new guidance was effective for periods
ended after June 15, 2009, with early adoption permitted
for periods ended after March 15, 2009. The Company adopted
the new provisions on April 1, 2009 and the adoption did
not have a material effect on its results of operations,
financial position or liquidity.
In April 2009, the FASB issued revised guidance for recognizing
and measuring pre-acquisition contingencies in a business
combination. Under the revised guidance, which is now part of
ASC 805, “Business Combinations”, pre-acquisition
contingencies are recognized at their acquisition-date fair
value if a fair value can be determined during the measurement
period. If the acquisition-date fair value cannot be determined
during the measurement period, a contingency (best estimate) is
to be recognized if it is probable that an asset existed or
liability had been incurred at the acquisition date and the
amount can be reasonably estimated. The revised guidance does
not prescribe specific accounting for subsequent measurement and
accounting for contingencies. The adoption of the revised
guidance on January 1, 2009 had no effect on the
Company’s results of operations, financial position or
liquidity.
In April 2008, the FASB issued revised guidance on determining
the useful life of intangible assets. The revised guidance,
which is now part of ASC 350, “Intangibles —
Goodwill and Other”, amends the factors that should be
considered in developing assumptions about renewals or
extensions used in estimating the useful life of a recognized
intangible. The revised guidance was effective for financial
statements issued for fiscal years which began after
December 15, 2008. The measurement provisions of the
revised guidance relate only to intangible assets of the Company
acquired after the effective date. The revised guidance did not
have a material impact on the Company’s results of
operations, financial position or liquidity.
In March 2008, the FASB issued new guidance on the disclosure of
derivative instruments and hedging activities. The new guidance,
which is now part of ASC 815, “Derivatives and Hedging
Activities”, requires companies with derivative instruments
to disclose information that should enable financial statement
users to understand how and why a company uses derivative
instruments, how derivative instruments and related hedged items
are accounted for and how derivative instruments and related
hedged items affect a company’s financial position,
financial performance and cash flows. The new guidance was
effective for financial statements issued for fiscal years and
interim periods which began after November 15, 2008. The
new guidance did not have a material impact on the
Company’s results of operations, financial position or
liquidity.
In December 2007, the FASB issued revised guidance for the
accounting for business combinations. The revised guidance,
which is now part of ASC 805, “Business Combinations”,
requires the fair value measurement of assets acquired,
liabilities assumed and any noncontrolling interest in the
acquiree at the acquisition date, with limited exceptions.
Previously, a cost allocation approach was used to allocate the
cost of the acquisition based on the estimated fair value of the
individual assets acquired and liabilities assumed. The cost
allocation approach treated acquisition-related costs and
restructuring costs that the acquirer expected to incur as a
liability on the acquisition date, as part of the cost of the
acquisition. Under the revised guidance, those costs are
recognized in the statement of income separately from the
business combination. In addition, the revised guidance includes
recognition, classification and measurement guidance for assets
and liabilities related to insurance and reinsurance contracts
acquired in a business combination. The revised guidance applies
to business combinations for acquisitions occurring on or after
January 1, 2009.
In December 2007, the FASB issued new guidance for the
accounting for noncontrolling interests. The new guidance, which
is now part of ASC 810, “Consolidation”, establishes
accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary. In addition, it clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the entity
that should be reported as a component of equity in the
statements. The new guidance became effective on a prospective
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
basis beginning January 1, 2009, except for presentation
and disclosure requirements which are applied on a retrospective
basis for all periods presented. The new guidance did not have a
material impact on the Company’s results of operations,
financial position or liquidity.
In June 2006, the FASB issued new guidance for accounting for
uncertainty in income taxes. The new guidance, which is now a
part of ASC 740, provides guidance on the financial statement
recognition and measurement of a tax position taken or expected
to be taken in a tax return. FIN 48 requires that the
companies recognize in the financial statements the impact of a
tax position if that position more-likely-than-not will be
sustained on an audit, based on the technical merits of the
position. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim
periods, disclosures, and transition provisions. The Company
adopted this guidance as of January 1, 2009 and the
adoption did not have a material impact on the condensed
carve-out financial statements.
3.
Reserves
General account reserves balances are comprised of the following:
In addition to the general account reserves detailed above, JNL
so has significant business in separate accounts. Substantially
all of the separate account business of JNL relates to
individual variable annuities with nonguaranteed returns. The
net investment experience of the separate account is credited
directly to the policyholder and can be positive or negative.
4.
Reinsurance
JNL participates in reinsurance in order to provide greater
diversification of business, provide additional capacity for
future growth, limit the maximum net loss potential arising from
large risks and to exit certain lines of business. Reinsurance
ceded arrangements do not discharge the insurance subsidiary as
the primary insurer. Ceded balances would represent a liability
to the insurance subsidiary in the event the reinsurers were
unable to meet their obligations to the insurance subsidiaries
under the terms of the reinsurance agreements. JNL periodically
reviews the financial condition of its reinsurers and amounts
recoverable therefrom, recording an allowance when necessary for
uncollectible reinsurance.
Reinsurance recoverable on paid losses and ceded reserve amounts
at December 31 were as follows:
JNL entered into a reinsurance agreement with Scottish Re US,
Inc. (“SRUS”) effective January 1, 2005, whereby
it ceded 30% of its reserves on select annuity contracts. The
reinsurance on the fixed account portion of these contracts is
on a coinsurance basis. The reinsurance on the separate account
portion of these contracts is on a modified coinsurance basis
upon which the JNL maintains possession of the assets which
support the reserves ceded. In January 2005, JNL transferred
reserves of approximately $54,600, under the coinsurance portion
of the contract, to SRUS.
On January 5, 2009, the Delaware Department of Insurance
(“Delaware Department”) issued an order of supervision
against SRUS which, among other things, requires the Delaware
Department’s consent to any
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
transaction outside the ordinary course of business and
formalized certain reporting and processes already informally in
place between SRUS and the Department. The original Order of
Supervision subsequently was amended and replaced with an
Extended and Amended Order of Supervision, dated April 3,2009, which amends and clarifies certain matters contained
within the original Order of Supervision. A.M. Best
continues to rate SRUS “E” (Under Regulatory
Supervision). As of September 30, 2009, the balance of the
Block’s annuity business ceded to SRUS was approximately
$53,000, under coinsurance, and is included in reinsurance
recoverable on paid losses and ceded reserves. SRUS continues to
maintain the capital ratios required by the reinsurance
agreement. JNL continues to evaluate the financial condition of
SRUS with respect to JNL’s existing exposure. SRUS
continues to perform under its contractual obligations to JNL.
However, it cannot predict what changes in the status of
SRUS’s financial condition may have on its ability to take
the reserve credit for the business of SRUS in the future. If
JNL were unable to take the reserve credit for the business
ceded to SRUS, it could have a material adverse impact on
JNL’s financial condition.
5.
Federal
Income Taxes
The components of the income tax expense (benefit) in the
accompanying statements of operations are summarized as follows:
Effective January 1, 2008, the Company adopted
SFAS No. 157, “Fair Value Measurements”, now
(ASC 820), for all financial instruments accounted for at
fair value on a recurring basis. SFAS No. 157 requires
fair value to be determined based on the exchange price that
would be received for the assets or paid to transfer a liability
(an exit price) in the principal or most advantageous market for
the asset or liability in an
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
orderly transaction between market participants.
SFAS No. 157 emphasizes that an entity’s
valuation technique for measuring fair value should maximize
observable inputs and minimize unobservable inputs.
SFAS No. 157 established a fair value hierarchy that
prioritizes the inputs used to measure fair value. The three
levels of the fair value hierarchy as defined by
SFAS No. 157 are as follows:
Level 1 — unadjusted quoted prices in
active markets for identical assets or liabilities;
Level 2 — quoted prices for similar
instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active and model
derived valuations whose inputs are observable or whose
significant value drivers are observable; and
Level 3 — significant inputs to the
valuation model are unobservable.
The following table shows, by level within the fair value
hierarchy, the Company’s financial assets that are
accounted for at fair value on a recurring basis as of
September 30, 2009. The financial assets are classified in
their entirety based on the lowest level of input that is
significant to the fair value measurement. The Company’s
assessment of the significance of a particular input to the fair
value measurement requires judgment and may affect the
asset’s placement within the fair value hierarchy levels.
Separate account assets and liabilities are valued using the net
asset value of the respective underlying portfolios at the end
of each New York Stock Exchange business day, as determined by
the respective fund manager.
(d)
Financial
Instruments, at Fair Value
The estimated fair values of financial instruments have been
determined by using available market information and the
valuation methodologies described below.
Amounts related to the Company’s financial instruments and
are as follows:
The fair value of policy and contract reserves is stated at
their cash surrender value. These contracts are issued with
variable interest rates that are periodically adjusted based on
changes in underlying economic conditions.
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
7.
Investments
held by JNL
(a)
As discussed in note 2, cash and invested assets related to
the carve-out block are comingled with the other business of
JNL, excluding separate accounts. The following information
pertains to the general account assets of JNL and includes cash
and investments unrelated to the carve-out Block.
Cash and investments held by JNL as of September 30, 2009
is comprised of the following:
The amortized cost and fair values of available-for-sale fixed
maturity securities by contractual maturity at
September 30, 2009 are as follows:
Amortized cost
Fair value
Due in one year or less
$
11,486
$
11,814
Due after one year through five years
51,683
54,411
Due after five years through ten years
81,311
86,171
Due after ten years
74,099
65,922
Mortgage-backed securities
178,747
177,471
Total
$
397,326
$
395,789
Expected maturities may differ from contractual maturities
because borrowers may have the right to prepay obligations with
or without prepayment penalties.
JNL does not engage in subprime residential mortgage lending.
JNL’s exposure to subprime lending is limited to
investments within the fixed maturity investment portfolio which
contains securities collateralized by mortgages that have
characteristics of subprime lending such as adjustable rate
mortgages and alternative documentation mortgages. These
investments are in the form of asset-backed securities
collateralized by subprime mortgages and collateralized mortgage
obligations backed by alternative documentation mortgages. The
total market value of these investments is $9,193 which includes
an unrealized loss of $4,767. The average credit rating of all
of these securities was AAA as of September 30, 2009 and
reflects JNL’s practice of minimizing exposure to low
quality (subprime type) credit risk.
(f)
Fair
Value Measurements
The following table shows, by level within the fair value
hierarchy, JNL’s financial assets that are accounted for at
fair value on a recurring basis as of September 30, 2009.
The financial assets are classified in their entirety based on
the lowest level of input that is significant to the fair value
measurement.
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
JNL’s assessment of the significance of a particular input
to the fair value measurement requires judgment and may affect
the asset’s placement within the fair value hierarchy
levels.
JNL uses the market approach for recurring fair value
measurements and the valuation techniques use inputs that are
observable, or can be corroborated by observable data, in an
active marketplace. For securities in illiquid markets,
valuation is determined by JNL using internal assumptions and
analyses.
The following information relates to the classification into the
fair value hierarchy:
Preferred Stock — Investments in preferred
stock are valued using active, high-volume trades for identical
securities. These securities are classified as Level 1 of
the fair value hierarchy.
Common Stock — Investments in common stock are
valued using active, high volume trades for identical
securities. These securities are classified as Level 1 of
the fair value hierarchy.
Fixed Income — For the majority of fixed income
securities, JNL uses third-party pricing models. Such pricing
models use standard inputs including, but not limited to,
benchmark yields, reported trades, broker/dealer quotes, issuer
spreads, two-sided markets, benchmark securities, and other
reference data. These securities are classified as Level 2
of the fair value hierarchy. JNL is valuing its Level 3
securities based on expected cash flows, internal risk
assumptions and discounts rates.
Put Option Contracts — Put options are stated
at fair value based on observation of current trades in an
active market.
Separate Accounts — Separate account assets and
liabilities are valued using the net asset value of the
respective underlying portfolio at the end of each New York
Stock Exchange business day, as determined by the respective
fund manager
The following table presents the changes in Level 3
securities measured on a recurring basis for the year ended
December 31, 2008:
JNL is subject to certain Risk-Based Capital (“RBC”)
requirements specified by the National Association of Insurance
Commissioners. Under those requirements, the amount of capital
and surplus maintained by life and health insurers is to be
determined based on various risk factors related to it. At
September 30, 2009 and December 31, 2008, JNL exceeded
its RBC requirements as JNL’s capital and surplus was 322%
and 328% of its calculated authorized control level RBC.
9.
Commitments
and Contingencies
Various lawsuits against the Company may arise in the ordinary
course of the Company’s business, some of which the Company
may be indemnified for under certain agreements. Contingent
liabilities arising from ordinary course litigation, income
taxes and other matters are not expected to be material in
relation the carve-out financial statements.
As discussed in Note 4, changes in the status of
SRUS’s financial condition in the future could have a
material adverse impact on JNL’s financial condition. As of
September 30, 2009, the Block’s receivable from SRUS
related to this exposure is approximately $53,000. JNL
continues to evaluate the financial condition of SRUS with
respect to JNL’s existing exposure. SRUS continues to
perform under its contractual obligations to JNL. However, it
cannot predict what changes in the status of SRUS’s
financial condition may have on its ability to take the reserve
credit for the business of SRUS in the future.
10.
Subsequent
Events
The Company has evaluated subsequent events through
January 7, 2010, which represents the date the financial
statements were issued. The Company identified the following
subsequent event for disclosure.
In December 2009, Jefferson National Financial Corp.
(“JNF”), the parent of JNL, entered into a Master
Agreement with Overture Acquisition Corp.
(“Overture”), a Cayman Islands special-purpose
acquisition company. Pursuant to this agreement, JNF will
form JNL Bermuda LLC and all parties, without limitation,
agreed to consummate the following transactions:
•
Prior to the closing, Overture Re Holdings, a wholly-owned
subsidiary of Overture, will form a Bermuda exempt company, to
be called Overture Re Ltd (“Overture Re”), and
Overture Re Holdings will cause Overture Re to obtain the
licenses required to operate as a reinsurer in Bermuda.
•
Prior to the closing, JNL Bermuda LLC and JNL will enter into
the Reinsurance Option and Contribution Agreement, pursuant to
which JNL will contribute certain employees, other assets
including a portfolio of securities worth approximately $98,500
subject to adjustment as set forth in the Master Agreement, and
an option to enter into a Quota Share Reinsurance Agreement with
JNL.
•
Prior to closing, JNL Bermuda LLC will have entered into an
Investment Management Agreement with JNF Asset Management, LLC
(“JNFAM”), a wholly-owned subsidiary of JNF.
•
On the closing date, Overture Re and JNL Bermuda LLC will
amalgamate pursuant to an Agreement and Plan of Amalgamation,
whereby Overture Re will assume all properties, rights,
privileges and powers of JNL Bermuda LLC, including the
Reinsurance Option and Contribution Agreement and the Investment
Management Agreement.
Fixed and
Variable Annuity Block of Jefferson National Life Insurance
Company
(a carve out of fixed and variable annuity block subject to
reinsurance)
Condensed Carve-Out Statements of Cash Flows
(Unaudited) — (Continued)
•
On the closing date, Overture Re will exercise the option set
forth in the Reinsurance Option and Contribution Agreement and
JNL and Overture Re will deliver the Quota Share Reinsurance
Agreement, pursuant to which Overture Re will reinsure 90% of
the fixed annuity block of JNL and 50% of the variable annuity
block of JNL on a modified coinsurance basis, for ceding
commission of approximately $21,500,000.
•
On the closing date, Overture will be granted an option to
purchase all of the membership units of JNFAM exercisable on or
after the date that is six months after the closing date and on
or before the first anniversary of the closing date.
If the shareholders of Overture approve the transactions
contemplated by the Master Agreement, pursuant to the Agreement
and Plan of Amalgamation, Overture Re will purchase all the
membership units of JNL Bermuda LLC. This transaction is
expected to close in January 2010, subject to various regulatory
and shareholder approval.
JEFFERSON
NATIONAL FINANCIAL CORP.
JEFFERSON NATIONAL LIFE INSURANCE COMPANY.
JNL BERMUDA LLC
JNF ASSET MANAGEMENT, LLC
OVERTURE ACQUISITION CORP.
OVERTURE RE HOLDINGS LTD.
THIS MASTER AGREEMENT (this “Agreement”)
is dated as of December 10, 2009, by and among Jefferson
National Financial Corp., a Delaware corporation
(“JNF”), Jefferson National Life Insurance
Company, a Texas insurance company (“JNL”),
JNL Bermuda LLC, a Delaware limited liability company
(“JNL Bermuda”), JNF Asset Management,
LLC, a Delaware limited liability company
(“JNFAM”), Overture Acquisition Corp., a
Cayman Islands company (“Overture”),
Overture Re Holdings Ltd., a Bermuda exempt company
(“Holdco”) and the sponsors of Overture that
are signatories hereto (the “Sponsors”).
RECITALS
WHEREAS, Overture has formed Holdco, a wholly owned subsidiary
in Bermuda, and prior to the Closing, Holdco will form a Bermuda
exempt company, to be called Overture Re Ltd.
(“Newco”), as a wholly owned subsidiary of
Holdco, and Newco will obtain the licenses required to operate
as a reinsurer in Bermuda. Overture and Holdco will cause Newco
to exercise the rights and perform the obligations attributed to
Newco in this Agreement and the Transaction Agreements.
WHEREAS, JNL, a wholly owned subsidiary of JNF, wishes to
acquire 24.5% of the ordinary shares of Overture, par value
$0.0001 per share (the “Overture Ordinary
Shares”) either through (a) open market purchases
of the Overture Ordinary Shares prior to Closing,
(b) through a private placement of Overture Ordinary
Shares, at a purchase price of $10.04 per share, at Closing
pursuant to a securities purchase agreement in substantially the
form attached hereto as Exhibit A (the
“Securities Purchase Agreement”),
and/or
(c) a combination thereof. JNL wishes to only enter into
the Securities Purchase Agreement if it has not been able
acquire 24.5% of the Overture Ordinary Shares as of the Closing
by open market purchases.
WHEREAS, prior to Closing, JNL Bermuda, a wholly owned
subsidiary of JNL, and JNL will have entered into a reinsurance
option and contribution agreement in substantially the form
attached hereto as Exhibit B (the
“Reinsurance Option and Contribution
Agreement”) whereby JNL will contribute to JNL Bermuda:
(a) employees Brian Heaphy, General Counsel, and Michael
Girouard, Chief Financial Officer, pursuant to employment
agreements between those employees and JNL Bermuda, to be
effective as of the Closing Date, (b) certain other assets
including, a portfolio of securities worth approximately
$98,500,000 (the “Securities Portfolio”)
subject to adjustment as provided herein, and (c) an option
to enter into a quota share reinsurance agreement with JNL in
substantially the form attached hereto as Exhibit C
(the “Quota Share Reinsurance Agreement”),
pursuant to which JNL Bermuda or any permitted successor or
assign of JNL Bermuda may reinsure 90% of the fixed annuity
block of JNL and 50% of the variable annuity block of JNL, for a
ceding commission of approximately $21,500,000 (the
“Ceding Commission”) conditional upon JNL
Bermuda or any successor or assign obtaining all necessary
licenses required to operate as a reinsurer in Bermuda.
WHEREAS, prior to Closing, JNL Bermuda will have entered into an
investment management agreement with JNFAM in substantially the
form attached hereto as Exhibit D (the
“Investment Management Agreement”).
WHEREAS, Overture and JNL wish that, on the Closing Date, Newco
will merge with JNL Bermuda pursuant to an Agreement and Plan of
Amalgamation in substantially the form attached hereto as
Exhibit E (the “Agreement and Plan of
Amalgamation”), whereby Newco will assume all
properties, rights, privileges, powers and obligations of JNL
Bermuda, including the Reinsurance Option and Contribution
Agreement and the Investment Management Agreement, as the
survivor entity to JNL Bermuda (the
“Amalgamation”).
WHEREAS, Overture will cause Newco to be licensed as a reinsurer
in Bermuda and Overture intends for Newco to exercise the option
under the Reinsurance Option and Contribution Agreement to enter
into the Quota Share Reinsurance Agreement with JNL on the
Closing Date.
WHEREAS, Overture wishes to (a) revise its compensation
agreements with its financial advisors and underwriters on terms
reasonably and mutually acceptable to Overture and JNF (each, a
“Compensation
Amendment Agreement”), and (b) amend the terms
and conditions of the warrants offered in Overture’s
initial public offering (the “Overture
Warrants”), on the Closing Date.
WHEREAS, on the Closing Date, Overture wishes to repurchase all
of the Overture Ordinary Shares owned by the Sponsors and the
Sponsors agree to such repurchases. In consideration for such
repurchases at their initial purchase price of $25,000 in the
aggregate pursuant to the form attached hereto as Exhibit K
(the “Sponsors’ Agreement”), the Sponsors
shall receive (a) [I] 937,500 Overture Ordinary Shares upon the
closing trade price of the Overture Ordinary Shares equaling or
exceeding $12.00 per share for any 10 day non-consecutive
VWAP trading days within any 30 trading day period, [II] 937,500
Overture Ordinary Shares upon the closing trade price of the
Overture Ordinary Shares equaling or exceeding $16.00 per share
for any 10 day non-consecutive VWAP trading days within any
30 trading day period, and [III] 937,500 Overture Ordinary
Shares upon the closing trade price of the Overture Ordinary
Shares equaling or exceeding $20.00 per share for any
10 day non-consecutive VWAP trading days within any 30
trading day period, and (b) on the Closing Date,
class A warrants of JNF, entitling the Sponsors to purchase
an aggregate of 46,875 shares of common stock of JNF at an
exercise price of $75.00 subject to a floating strike price
adjustment, and class B warrants of JNF, entitling the
Sponsors to purchase an aggregate of 46,875 shares of
common stock of JNF at an exercise price of $125.00 subject to a
floating strike price adjustment, pursuant to a warrant purchase
agreement substantially in the form attached hereto as
Exhibit F (the “Warrant Purchase
Agreement”).
WHEREAS, on the Closing Date, Overture will be granted an option
to purchase all of the membership interest of JNFAM exercisable
anytime during the period beginning on or after the date that is
six (6) months after the Closing Date and terminating
twelve (12) months later (the “Option
Period”), upon an exercise purchase price of up to
$3.5 million, and the parties anticipate that JNFAM will be
a registered investment advisor upon the date that is six
(6) months after the Closing Date or another entity
indirectly or directly owned by JNF will become a registered
investment advisor and will become the subject of this option.
WHEREAS, Overture wishes to establish an equity incentive plan
that becomes effective immediately after the Closing Date, in
substantially the form attached hereto as Exhibit G
(the “Equity Incentive Plan”).
WHEREAS, in connection with the foregoing the parties hereto
wish to enter into the transactions and agreements described
herein.
NOW THEREFORE, in consideration of the premises set forth above,
which are incorporated in this Agreement as if fully set forth
below, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly
acknowledged, the parties hereto agree as follows:
ARTICLE I
THE
TRANSACTIONS
Section 1.01 Pre-Closing
Transactions. Subject to the terms and
conditions hereof, prior to the consummation of the steps set
forth in Section 1.02, on or before the Closing Date
the following actions shall occur or shall have occurred:
(a) Holdco will form Newco and Newco will become
licensed to operate as a reinsurer in Bermuda;
(b) Newco and JNL Bermuda will execute and deliver the
Agreement and Plan of Amalgamation;
(c) JNL Bermuda and JNFAM will execute and deliver the
Investment Management Agreement;
(d) JNL and JNL Bermuda will execute and deliver the
Reinsurance Option and Contribution Agreement;
(e) Overture and its financial advisors and underwriters
will execute and deliver the Compensation Amendment Agreements;
(f) Overture and the Sponsors will execute and deliver the
Sponsors’ Agreement;
(g) JNL and Overture will execute and deliver the
Registration Rights Agreement; and
(h) the Sponsors and Overture will execute and deliver the
Amended and Restated Registration Rights Agreement.
Section 1.02 Closing
Date Transactions. Subject to the terms and
conditions hereof, on the Closing Date, the following actions
shall occur in the sequence set forth below; provided
that none of the steps described below in this
Section 1.02 will be deemed to have occurred until
each preceding step has been completed, and if any of the steps
described below in this Section 1.02 have not
occurred, then the Closing will not be deemed to have occurred
and all those steps that have occurred shall be reversed:
(a) The following actions shall occur simultaneously:
(i) Newco and JNL Bermuda will consummate the Amalgamation
and any other transactions contemplated by the Agreement and
Plan of Amalgamation;
(ii) all other necessary filings and other documents, and
such other filings and documents as shall reasonably have been
requested by JNL or Overture, will be executed and delivered to
give effect to the Amalgamation; and
(iii) if necessary, JNL and Overture shall execute and
deliver the Securities Purchase Agreement.
(b) Immediately following the actions referred to in
Section 1.02(a), the following actions shall occur
simultaneously:
(i) Newco will exercise its option to execute the Quota
Share Reinsurance Agreement as the survivor entity after the
Amalgamation (upon the consummation of which JNL will be deemed
to have consented to Newco as the successor to JNL Bermuda under
the Reinsurance Option and Contribution Agreement), and Newco
and JNL will execute and deliver the Quota Share Reinsurance
Agreement;
(ii) JNF and the Sponsors will execute and deliver the
Warrant Purchase Agreement; and
(iii) Overture, JNL and the Sponsors will execute and
deliver the Shareholders Agreement;
(iv) If applicable, Overture shall issue to JNL any
Overture Ordinary Shares to be delivered pursuant to the
Securities Purchase Agreement;
(v) The Equity Incentive Plan shall become
effective; and
(vi) the Overture Ordinary Shares owned by the Sponsors
will be repurchased pursuant to the Sponsors’ Agreement.
Section 1.03 Performance
of Obligations; Further Assurances. The
parties hereto hereby agree to perform their respective
obligations under this Agreement and the other Transaction
Agreements and to enter into, deliver and perform the
agreements, instruments, documents or certificates contemplated
by this Agreement and the other Transaction Agreements or
necessary to be executed in connection with the consummation of
the transactions contemplated hereby and thereby (the
“Transactions”).
Section 1.04 Newco. Overture
and Holdco will be jointly responsible for the performance of
the obligations of Newco which are set forth in this Agreement
and the Transaction Agreements and will cause Newco to exercise
the rights which are attributed to Newco in this Agreement and
the Transaction Agreements. If Newco is unable to exercise its
rights and or perform its obligations as set forth in this
Agreement or the Transaction Agreements, Overture and Holdco
shall exercise such rights and perform such obligations and
Overture and Holdco shall be liable for any failure to have
established Newco and to cause it to fully perform its
obligations hereunder or thereunder.
Section 1.05 Closing
Date Payments.
(a) On the Closing Date, Overture shall pay to JNL, by wire
transfer of immediately available funds, an amount equal to 80%
of the funds held in the Trust Account of Overture, which
shall be $120,000,000, as consideration for the Amalgamation
(the “Purchase Price”), which shall include the
amount of the Ceding Commission to be paid by Newco to JNL
pursuant to the Quota Share Reinsurance Agreement, to an account
specified by JNL prior to the Closing.
(b) The parties hereto acknowledge that the following
amounts shall also be paid on the Closing Date:
(i) If applicable, JNL shall pay the Securities Purchase
Price (as that term is defined in the Securities Purchase
Agreement) to Overture if required to pursuant to the Securities
Purchase Agreement; and
(ii) The Sponsors shall pay the Warrant Purchase Price (as
that term is defined in the Warrant Purchase Agreement) to JNF
pursuant to the Warrant Purchase Agreement.
Section 1.06 Pre-Closing
Purchase Price Adjustments. On the day that
is immediately prior to the Closing Date, the value of the
Securities Portfolio to be contributed from JNL to JNL Bermuda
pursuant to the Reinsurance Option and Contribution Agreement
shall be determined in accordance with the book value of such
Securities Portfolio at the close of business on such day. The
Securities Portfolio shall be of an amount that is equal in
value to the amount of the Purchase Price minus the Ceding
Commission.
ARTICLE II
CLOSING
Section 2.01 Closing
and Closing Date. Subject to the satisfaction
of the conditions set forth in Article XI hereof (or
the waiver thereof by the party entitled to waive that
condition), the execution of the Transaction Agreements provided
for in Article I and Article XI and the
consummation of the Transactions (the
“Closing”) shall take place at the offices of
Cadwalader, Wickersham & Taft LLP located at One World
Financial Center, New York, New York10281 (or at such other
place as the parties hereto may designate in writing) at
10:00 a.m., New York time, on the earlier of
(i) January 30, 2010 or (ii) the date that is two
(2) Business Days following the satisfaction or waiver of
the conditions set forth in Article XI (other than
conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of such
conditions), unless another time or date, or both, are agreed to
in writing by the parties hereto. The date on which the Closing
shall be held is referred to in this Agreement as the
“Closing Date.”
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF THE JNF PARTIES
Except as disclosed in the disclosure schedule delivered to the
Overture Parties and the Sponsors immediately prior to the
execution of this Agreement (“JNF Disclosure
Schedule”), each of JNF Parties, severally and jointly
(except for JNL and JNL Bermuda which severally and not
jointly), represents and warrants to Overture Parties and the
Sponsors as follows:
Section 3.01 Due
Organization, Good Standing and Corporate
Power. Except as listed on
Section 3.01 of the JNF Disclosure Schedule, it is
an entity duly organized, validly existing and in good standing
under applicable Laws of its jurisdiction of formation or
incorporation. It has all requisite corporate power and
authority to own, lease, and operate its properties and to
conduct its business as now being conducted. It is duly
qualified or licensed to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it
or the operation of its business makes such licensing or
qualification necessary. It has made available to Overture a
complete and correct copy of its charter, bylaws
and/or
equivalent organizational documents, each as amended and as in
effect. It is not in violation of any of its charter, bylaws
and/or
equivalent organizational documents.
Section 3.02 Authorization
and Validity of Agreement. It has the
requisite corporate power and authority to execute and deliver
this Agreement and the Transaction Agreements to which it is a
party and to perform its obligations hereunder and thereunder.
The execution and delivery by it of this Agreement and the
Transaction Agreements to which it is a party have been duly
authorized by all necessary action on its part and on the part
of its stockholders (or members or equity holders) and its board
of directors (or board of managers or management) and no other
corporate proceedings on its part are necessary to authorize the
execution and delivery of this Agreement and the Transaction
Agreements to which it is a party and to perform its obligations
hereunder and thereunder. This Agreement has been, and each
Transaction Agreement
to which it is a party shall, when executed and delivered on or
before the Closing Date have been, duly executed and delivered
by it and, assuming the due authorization, execution, and
delivery by the other parties hereto and thereto and the receipt
of all consents and approvals by Governmental Authorities as
required by Law, this Agreement constitutes, and each
Transaction Agreement to which it is a party shall when so
executed and delivered on the Closing Date constitutes, a valid
and binding obligation of it enforceable against it in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and similar Laws affecting creditors’ rights
generally, and, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought
in a proceeding in equity or at Law) (each an
“Enforceability Exception”).
Section 3.03 Consents
and Approvals; No Violations. Except for the
approvals, filings and notices set forth in
Section 3.03 of the JNF Disclosure Schedule,
assuming the making and obtaining of all filings, notifications,
consents, approvals, authorizations and other actions referred
to in Section 10.03, the execution, delivery, and
performance by it of this Agreement and the Transaction
Agreements to which it is a party, and the consummation by it of
the Transactions, do not and will not (i) violate, conflict
with or result in the breach of any provision of its charter,
bylaws or other applicable organizational documents,
(ii) conflict with or violate any Law applicable to it or
any of its assets, properties or businesses, (iii) require
any material consent, authorization, license, or approval of any
Governmental Authority, or (iv) conflict with, result in
any breach of, constitute a default (or event which with the
giving of notice or lapse of time or both, would become a
default) under, require any consent under or give to others any
rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, any note, bond, mortgage,
indenture, contract, agreement, lease, sublease, license,
Permit, franchise or other instrument or arrangement to which it
is a party or, except as contemplated herein, create or impose
any encumbrance, mortgage, pledge, security interest,
attachment, right of first refusal, option, proxy, voting trust,
encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in
the nature thereof), restrictions (whether on voting, sale,
transfer, disposition or otherwise), any subordination
arrangement in the favor of another Person, any filing or
agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute (each an
“Encumbrance”) upon the any of its properties
or assets or any rights thereto, which would adversely affect
(a) the ability of it to carry out its obligations under
this Agreement or Transaction Agreements or to consummate the
Transactions or (b) its business.
Section 3.04 All
Necessary Permits, etc. Except as listed on
Section 3.04 of the JNF Disclosure Schedule, it, and
each of its employees who is legally required to be licensed by
a Governmental Authority in order to perform his or her duties
with respect to his or her employment with it, possesses all
consents, authorizations, approvals, orders, licenses,
certificates, or permits issued by any Governmental Authority
(collectively, “Permits”) which are required by
Law to conduct the business now conducted by it, except where
the failure to possess such Permits would not, individually or
in the aggregate, reasonably be expected to have a JNF Material
Adverse Effect on it. All of its Permits are valid and in full
force and effect and no suspension or cancellation of any of the
Permits is pending or, to its Knowledge, threatened, except
where the invalidity of such Permits or the failure to be in
full force and effect would not, individually or in the
aggregate, reasonably be expected to have a JNF Material Adverse
Effect on it. There are no written agreements, memoranda of
understanding, commitment letters, or cease and desist orders,
to which it is a party, on the one hand, and any Governmental
Authority is a party or addressee, on the other hand. It is not
in violation in any respect of the terms of any Permit
reasonably expected to have a JNF Material Adverse Effect on it
Section 3.05 Compliance
with Applicable Laws. Except as listed on
Section 3.05 of the JNF Disclosure Schedule, to its
Knowledge, (a) there is no violation of Law by it that has
or, if known by an appropriate Governmental Authority, would
reasonably be expected to, materially and adversely affect the
legality, validity or enforceability of this Agreement, any
Transaction Agreement or the consummation of the Transactions or
have a JNF Material Adverse Effect on it, and (b) there is
no Law that is applicable to it that has or could reasonably be
expected to, materially and adversely affect the legality,
validity or enforceability of this Agreement, any Transaction
Agreement or the consummation of the Transactions or have a JNF
Material Adverse Effect on it. Except as set forth in
Section 3.05 of the JNF Disclosure Schedule and to
its Knowledge, it is not in conflict with, or in default or
violation of, nor has it received, since December 31,
2007, any written notice of any conflict with, or default or
violation of, (i) any applicable Law by which it or any of
its property or asset is bound or affected, or (ii) any
material contract to which it is a party.
(a) The authorized number of shares of capital stock of JNF
consists of 1,120,000, of which 1,000,000 shares are issued
and outstanding. All of JNF’s issued and outstanding
capital stock has been duly authorized and is validly issued,
fully paid, and nonassessable. Except as set forth on
Section 3.06(a) of the JNF Disclosure Schedule, JNF
does not have any other capital stock, equity securities, or
securities containing any equity features authorized, issued, or
outstanding and, except for the Warrant Purchase Agreement,
there are no agreements, subscriptions, options, warrants,
conversion rights, or other rights or arrangements existing or
outstanding which provide for the sale or issuance of any of the
foregoing by JNF. Except as set forth on
Section 3.06(a) of the JNF Disclosure Schedule,
there are no agreements or other obligations (contingent or
otherwise) that require JNF to repurchase or otherwise acquire
any shares of JNF’s capital stock or other equity
securities. To the Knowledge of JNF, neither Mitch Caplan nor
David Smilow is a party to any option, warrant, purchase right,
or other contract or commitment that could require either to
sell, transfer or otherwise dispose of their JNF capital stock
or other JNF equity securities. No holder of JNF capital stock
or equity securities is a party to any voting trust, proxy, or
other agreement or understanding with respect to the voting of
such holder’s capital stock or equity securities. Since
September 30, 2009, JNF has not declared or paid any
distribution or dividend in respect of its capital stock or
other equity securities and has not repurchased, redeemed or
otherwise acquired any capital stock or other equity securities
of JNF, and the board of directors of JNF has not authorized any
of the forgoing.
(b) All of the membership units of JNL Bermuda are owned
free and clear of any Encumbrances by JNF. All of JNL
Bermuda’s issued and outstanding membership units have been
duly authorized and are validly issued, fully paid, and
nonassessable. Except as set forth on
Section 3.06(b) of the JNF Disclosure Schedule, JNL
Bermuda does not have any other membership units, equity
securities, or securities containing any equity features
authorized, issued, or outstanding and, except for the Agreement
and Plan of Amalgamation, there are no agreements,
subscriptions, options, warrants, conversion rights, or other
rights or arrangements existing or outstanding which provide for
the sale or issuance of any of the foregoing by JNL Bermuda.
Except as set forth on Section 3.06(b) of the JNF
Disclosure Schedule, there are no agreements or other
obligations (contingent or otherwise) that require JNL Bermuda
to repurchase or otherwise acquire any membership units or other
equity securities of JNL Bermuda. No holder of JNF Bermuda
membership units or equity securities is a party to any option,
warrant, purchase right, or other contract or commitment that
could require such holder to sell, transfer, or otherwise
dispose of such holder’s membership units or equity
securities. No holder of JNL Bermuda membership units or equity
securities is a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of such
holder’s membership units or equity securities. Since the
date of its formation, JNL Bermuda has not declared or paid any
distribution or dividend in respect of its membership units or
other equity securities and has not repurchased, redeemed or
otherwise acquired any membership units or other equity
securities of JNL Bermuda, and the board of directors of JNL
Bermuda has not authorized any of the foregoing.
(c) All of the membership interests of JNFAM are owned free
and clear of any Encumbrances by JNF. All of JNFAM’s issued
and outstanding membership interests have been duly authorized
and are validly issued, fully paid, and nonassessable. Except as
set forth on Section 3.06(c) of the JNF Disclosure
Schedule, JNFAM does not have any other membership interests,
equity securities, or securities containing any equity features
authorized, issued, or outstanding and, except as set forth in
this Agreement, there are no agreements, subscriptions, options,
warrants, conversion rights, or other rights or arrangements
existing or outstanding which provide for the sale or issuance
of any of the foregoing by JNFAM. Except as set forth on
Section 3.06(c) of the JNF Disclosure Schedule and
in this Agreement, there are no agreements or other obligations
(contingent or otherwise) that require JNFAM to repurchase or
otherwise acquire any membership interests of JNFAM or other
equity securities. To the Knowledge of JNFAM, no holder of a
JNFAM membership interests is a party to any option, warrant,
purchase right, or other contract or commitment that could
require such holder to sell, transfer, or otherwise dispose of
such holder’s membership interest. No holder of JNFAM
membership interest or equity securities is a party to any
voting trust, proxy, or other
agreement or understanding with respect to the voting of such
holder’s membership interest or equity securities. Since
September 30, 2009, JNFAM has not declared or paid any
distribution or dividend in respect of its membership interest
or other equity securities and has not repurchased, redeemed or
otherwise acquired any membership interest or other equity
securities of JNFAM, and the board of managers of JNFAM has not
authorized any of the foregoing.
(d) All of the capital stock of each of JNF’s direct
and indirect subsidiaries, including without limitation JNL, JNL
Bermuda and JNFAM, are either directly or indirectly wholly
owned by JNF or subsidiaries of JNF. Except as set forth on in
Section 3.06(d) of the JNF Disclosure Schedule or as
set forth in this Agreement or the Transaction Agreements,
neither JNF nor any of its subsidiaries owns or holds the right
to acquire any stock, limited liability company interest,
partnership interest, joint venture interest, or other equity
ownership interest in any other Person. All of the outstanding
shares of capital stock or other equity interests in each of
JNF’s direct and indirect subsidiaries that are
corporations are duly authorized, validly issued, fully paid and
non-assessable, and with respect to subsidiaries that are
limited liability companies or other entities, are duly
authorized, validly issued, fully paid and non-assessable and
were issued free of preemptive rights and were not issued in
material violation of any applicable securities Laws. Except as
set forth in Section 3.06(d) of the JNF Disclosure
Schedule, each outstanding share of capital stock of or other
equity interest in each of JNF’s direct and indirect
subsidiaries is free and clear of any Encumbrance. Each of
JNF’s direct and indirect subsidiaries is validly existing
and in good standing under the laws of the jurisdiction of its
incorporation or organization, has all requisite power and
authority and all authorizations, licenses, and Permits
necessary to own its properties and to carry on its businesses
as now conducted and is qualified to do business in every
jurisdiction in which its ownership of property or the conduct
of its businesses as now conducted requires it to qualify,
except in each such case where the failure to have such power
and authority or hold such authorizations, licenses, and permits
or to be so qualified would not have a JNF Material Adverse
Effect on it. Section 3.06(d) of the JNF Disclosure
Schedule lists all jurisdictions in which each of the JNF
Parties is qualified to conduct its respective business.
Section 3.07 Financial
Statements. JNF has furnished Overture with
copies of its (a) unaudited consolidated balance sheet with
respect to JNF and its subsidiaries as of September 30,2009 and September 30, 2008, and the related statements of
income and cash flows for the nine-month periods then ended, and
(b) audited consolidated balance sheet and statements of
income and cash flows with respect to JNF and its subsidiaries
as of and for the fiscal years ended December 31, 2007 and
December 31, 2008 (collectively, the “JNF Financial
Statements”). Except as set forth in
Section 3.07 of the JNF Disclosure Schedule, to the
Knowledge of JNF, such JNF Financial Statements (i) present
fairly, in all material respects, the financial condition and
results of operations of JNF and its subsidiaries (taken as a
whole) as of the times and for the periods referred to therein
in accordance with GAAP (subject, in the case of the unaudited
financial statements, to normal year-end audit adjustments,
absence of footnotes and other presentation items), and
(ii) are consistent, in all material respects, with
JNF’s books and records and for the periods indicated
therein. Except as set forth in Section 3.07 of the
JNF Disclosure Schedules, to the Knowledge of JNF, there has
been no material fraud that involves the management of JNF or
other employees who have a significant role in JNF’s
internal controls over financial reporting with respect to the
JNF Financial Statements. To the Knowledge of JNF, neither JNF,
nor any director, officer, auditor, accountant or any employee
of JNF has received a material written complaint, allegation,
assertion or claim from any Governmental Authority regarding the
accounting or auditing practices, procedures, methodologies or
methods of JNF or its internal accounting controls, including
any complaint, allegation, assertion or claim that JNF has
engaged in questionable accounting or auditing practices which
resulted, or would reasonably be expected to result in a JNF
Material Adverse Effect. Except as set forth in
Section 3.07 of the JNF Disclosure Schedule, to the
Knowledge of JNF, no employee or member of JNF’s management
has received a written notice from any Governmental Authority or
any Person of any material violation of consumer protection,
insurance or securities Laws by JNF or any of its officers,
directors, employees or agents which resulted, or would
reasonably be expected to result in a JNF Material Adverse
Effect.
Section 3.08 Litigation. Except
as listed on Section 3.08 of the JNF Disclosure
Schedule, there are no Legal Proceedings pending or, to its
Knowledge, threatened against or affecting it or any of its
properties by
or before any Governmental Authority, that (i) if adversely
determined, could reasonably be expected to (a) individually or
in the aggregate have a JNF Material Adverse Effect on it or
(b) materially and adversely affect the legality, validity
or enforceability of this Agreement or any Transaction Agreement
to which it is a party, (ii) challenges or seeks to prevent,
enjoin, alter, or delay the consummation of the Transactions or
(iii) alleges criminal action or inaction on the part of
any of its executive officer. As of the date hereof, it is not
subject to any Law having, or that would reasonably be expected
to have, a JNF Material Adverse Effect on it. There is no
private or Governmental Authority inquiry, action, proceeding
suit, litigation, claim, arbitration or investigation (each an
“Action”) that it has pending against other
Persons. There is no Action pending or, to its Knowledge,
threatened against it involving a claim against it for false
advertising with respect to any of its products or services.
Section 3.09 Broker’s
or Finder’s Fee. Except as set forth in
Section 3.09 of the JNF Disclosure Schedule, neither
it nor any of its Affiliates, officers, managers, directors, or
employees acting on behalf of it or such Affiliates have
employed any broker or finder or incurred any liability for any
fees or commissions relating to investment banking, broker
services, or finders’ services in connection with the
Transactions.
Section 3.10 Absence
of Certain Changes.
(a) Except as described in Section 3.10(a) of
the JNF Disclosure Schedule, since September 30, 2009, it
has conducted its business in the ordinary course of business
consistent with past practice.
(b) Except as described in Section 3.10(b) of
the JNF Disclosure Schedule, since September 30, 2009,
there has not been any fact, change, effect, occurrence, event,
development or state of circumstances that has had or would
reasonably be expected to result in a JNF Material Adverse
Effect on it.
Section 3.11 Absence
of Undisclosed Liabilities. Except as and to
the extent reflected or reserved against in the JNF Financial
Statements or as described in Section 3.11 of the
JNF Disclosure Schedule, it has not incurred any liabilities or
obligations of the type required to be reflected on a balance
sheet that is not adequately reflected or reserved on or
provided for in the JNF Financial Statements, other than
liabilities of the type that have been incurred in the ordinary
course of business consistent with past practice.
Section 3.12 Restrictions
on Business Activities. Except as described
in Section 3.12 of the JNF Disclosure Schedule, to
the Knowledge of JNF, there is no decree, directive, order,
writ, judgment, stipulation, determination, decision, award,
injunction, temporary restraining order, cease and desist order
or other order by, or any supervisory agreement or memorandum of
understanding with any Governmental Authority (each, an
“Order”) binding upon it that has or could
reasonably be expected to have the effect of prohibiting,
preventing, restricting or impairing in any respect, any
business practice of it as its business is currently conducted,
any acquisition of property by it, the conduct of business by it
as currently conducted, or its ability from engaging in its
business as currently conducted or from competing with other
Persons, except for such Orders that would not reasonably be
expected to result in a JNF Material Adverse Effect.
Section 3.13 Securities
Portfolio. Immediately prior to the
contribution to JNL Bermuda, JNL will have good title to the
securities comprising the Securities Portfolio, and on the
Closing Date such securities will be held free and clear of all
Encumbrances by JNL and JNL will have the right to sell, assign,
and transfer the securities comprising the Securities Portfolio
subject only to the transfer restrictions under the securities
Laws.
Section 3.14 Access
to Information. It has had an opportunity to
conduct due diligence and ask questions of, and receive answers
from, the officers of Overture concerning this Agreement,
Transaction Agreements and all exhibits and schedules attached
hereto and thereto and the Transactions, as well as
Overture’s and its subsidiaries’ business, management
and financial affairs. JNL has received all the information it
considers necessary or appropriate for the Transactions
contemplated by this Agreement ant the Transaction Agreements.
Section 3.15 Solvency. Upon
the consummation of the Transactions, assuming the accuracy of
and compliance with, the representations, warranties, covenants,
and agreements of the parties contained herein, it
will not (a) be insolvent or left with unreasonably little
capital, (b) have incurred debts beyond their ability to
pay such debts as they mature, or (c) have their capital
impaired.
Section 3.16 Information
Supplied. None of the information supplied or
to be supplied by it expressly for inclusion or incorporation by
reference in the Registration Statement on
Form S-4
(the “S-4”) and the Proxy Statement will, at
the date of mailing of the definitive Proxy Statement (and any
amendment or supplement thereto) and at the time of the
Extraordinary General Meeting, excluding information supplied by
the Overture Parties and the Sponsors, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they are made, not misleading. None of the information supplied
or to be supplied by it expressly for inclusion or incorporation
by reference in any of the Signing
Form 8-K,
the Signing Press Release, the Closing
Form 8-K
and the Closing Press Release (collectively, the
“Ancillary Public Disclosures”) will, at the
time filed with the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading. Its representations and warranties
included in this Agreement, any Transaction Agreement and any
list, statement, document or information set forth in, or
attached to, any JNF Disclosure Schedule provided pursuant to
this Agreement or any Transaction Agreement or delivered
hereunder or thereunder, are true and complete in all material
respects and do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein
not misleading, in light of the circumstances under which they
were made. Notwithstanding the foregoing, it makes no
representation, warranty or covenant with respect to any
information supplied by any Overture Party or the Sponsors which
is contained in the
S-4, the
Proxy Statement or any Ancillary Public Disclosures.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF JNF AND JNL
Except as disclosed in the JNF Disclosure Schedule, JNF,
severally and jointly, and JNL, severally and not jointly,
represents and warrants to the Overture Parties as follows:
Section 4.01 Scheduled
Annuities.Schedule A attached to
the Quota Share Reinsurance Agreement will, upon execution and
delivery on the Closing Date, set forth by reference a list of
all the Annuities that, as of the Closing Date are to be
reinsured under the Quota Share Reinsurance Agreement as of the
Effective Date (as defined therein). Such list of Scheduled
Annuities will be complete and accurate in all material respects
(subject to the adjustments provided in Sections 2.03(a)
and 17.02 of the Quota Share Reinsurance Agreement) as of the
date that is three (3) Business Days prior to the Closing
Date and to JNF’s and JNL’s Knowledge the other
information with respect to each Scheduled Annuity, will be
complete and accurate in all material respects (subject to the
adjustments provided in Sections 2.03(a) and 17.02 of the
Quota Share Reinsurance Agreement) as of the date or dates set
forth therein. There is no material default or breach by JNL in
the timely performance of any obligation to be performed or paid
under a Scheduled Annuity or any other material provision
thereof. Except as noted in Section 4.01 of the JNF
Disclosure Schedule and herein, no consent is required from any
person under any Scheduled Annuity in order to consummate the
Transactions, except where the failure to obtain such consent
would not, individually or in the aggregate, reasonably be
expected to have a JNF Material Adverse Effect on JNL.
Section 4.02 Actions
Involving the Scheduled Annuities. There is
no pending, or to JNF’s and JNL’s Knowledge,
threatened Action, suit, or Legal Proceeding against or
involving JNL relating to the Scheduled Annuities that,
individually or in the aggregate, would reasonably be expected
to lead to the revocation, modification, termination,
suspension, or any other impairment of the rights of the holder
of any such Scheduled Annuity, except for such revocation,
modification, termination, suspension, or other impairment that
would not, individually or in the aggregate, reasonably be
expected to have a JNF Material Adverse Effect on JNL.
Section 4.03 Compliance
with Applicable Laws Related to the Scheduled Annuities.
(a) JNL is duly registered, licensed, or admitted as an
insurer under applicable insurance laws (collectively,
“Insurance Laws”) in each jurisdiction where
JNL is required to be so licensed or admitted to conduct
JNL’s business as it relates to the Scheduled Annuities,
except where the failure to be so registered, licensed, or
admitted would not, individually or in the aggregate, reasonably
be expected to have a JNF Material Adverse Effect on JNL.
(b) Except as otherwise would not, individually or in the
aggregate, be reasonably likely to have a JNF Material Adverse
Effect on JNL, all policies, certificates, and participation
agreements and other agreements of insurance which are a part of
the Scheduled Annuities are, to the extent required under
applicable Law, on forms approved by applicable insurance
regulatory authorities or which have been filed and not objected
to, and such forms comply in all material respects with the
insurance statutes, regulations, and rules applicable thereto
and, as to premium rates established by JNL which are required
to be filed with or approved by insurance regulatory
authorities, the rates have been so filed or approved, the
premiums charged conform thereto in all material respects, and
such premiums comply in all material respects with the insurance
statutes, regulations, and rules applicable thereto. Except as
described in Section 4.03(b) of the JNF Disclosure
Schedules and except as otherwise would not, individually or in
the aggregate, be reasonably likely to have a JNF Material
Adverse Effect on JNL, all marketing materials of JNL comply
with applicable Laws.
Section 4.04 Litigation
Related to Scheduled Annuities. Except as
listed on Section 4.04 of the JNF Disclosure
Schedule, there are no Legal Proceedings pending, or to
JNF’s and JNL’s Knowledge, threatened against or
affecting JNL or any of its properties by or before any
Governmental Authority that arise out of or relate to JNL’s
actual or alleged obligations under the Scheduled Annuities.
Section 4.05 Conduct
of Business. With respect to the Scheduled
Annuities only and subject to Section 9.01, JNL has
conducted its businesses only in the ordinary and usual course
of such businesses and JNL has not, except as required by Law,
(i) paid, discharged, or satisfied any claims in respect of
any Scheduled Annuities other than in the ordinary course of
business consistent with past practice, (ii) transferred
any of the Scheduled Annuities other than in the ordinary course
of business consistent with past practice, (iii) knowingly
taken any action reasonably likely to materially decrease the
value of the Scheduled Annuities except for establishing,
supplementing, or otherwise adjusting reserves in the ordinary
course of business consistent with past practice,
(iv) changed any material accounting principles, practices,
or methods applicable to Scheduled Annuities other than as
required by changes in GAAP or as disclosed in JNL’s
published statutory financial statements, or (v) made any
material change in actuarial, underwriting, or claims
administration policies, practices, procedures, methods,
assumptions, or principles applicable to Scheduled Annuities.
Section 4.06 Reinsurance
Agreements.
(a) Except as listed on Section 4.06(a) of the
JNF Disclosure Schedule, there are no treaties or agreements
providing for reinsurance coverage of risks under the Scheduled
Annuities from non-Affiliates of JNL to which an Affiliate of
JNL is a party other than the reinsurance to be provided under
the Quota Share Reinsurance Agreements.
(b) Except as listed on Section 4.06(b) of the
JNF Disclosure Schedule, there are no treaties or agreements
providing for reinsurance coverage of risks under Scheduled
Annuities with an Affiliate of JNL to which JNL is a party.
(c) Except as listed on Section 4.06(c) of the
JNF Disclosure Schedule, there are no treaties or agreements
providing for reinsurance coverage of risks under Scheduled
Annuities with a non-Affiliate of JNL to which JNL is a party.
REPRESENTATIONS
AND WARRANTIES OF JNF AND JNL BERMUDA
Except as disclosed in the JNF Disclosure Schedule, JNF,
severally and jointly, and JNL Bermuda, severally and not
jointly, represents and warrants to the Overture Parties as
follows:
Section 5.01 JNL
Bermuda. JNL Bermuda was formed on
November 23, 2009, and has no material assets or
liabilities other than those listed in Section 5.01 of the
JNF Disclosure Schedule.
Section 5.02 Assets
and Properties.
(a) JNL Bermuda has (i) good title to all of its real
or tangible material assets and properties (whether real,
personal or mixed, or tangible) and (ii) valid leasehold
interests in all of its real or tangible assets and properties
which it leases, in each case (with respect to both
clause (i) and (ii) above), free and clear of any
Liens, other than Permitted Liens.
(b) JNL Bermuda does not own any real property.
(c) All of the tangible assets and properties owned or
leased by JNL Bermuda are adequately maintained and are in good
operating condition and repair and free from any defects, except
as would not have a JNF Material Adverse Effect.
(a) Section 5.03(a) of the JNF Disclosure
Statement lists all of the material contracts of JNL Bermuda.
(b) JNL Bermuda has performed, in all material respects,
all obligations required to be performed by it under each
material contract. Except as would not have a JNF Material
Adverse Effect, no event has occurred or circumstance exists
with respect to any of JNL Bermuda or, to the Knowledge of JNL
Bermuda, with respect to any other Person that (with or without
lapse of time or the giving of notice or both) does or may
contravene, conflict with or result in a violation or breach of
or give any of JNL Bermuda or any other Person the right to
declare a default or exercise any remedy under, or to accelerate
the maturity of, or to cancel, terminate or modify, any material
contract. To the Knowledge of JNL Bermuda, no party to any
material contract has repudiated any material provision thereof
or terminated any material contract. All material contracts are
valid and binding on JNL Bermuda and, to the Knowledge of JNL
Bermuda, the other parties thereto, and are in full force and
effect. JNL Bermuda has provided to Company true, accurate and
complete copies or originals of the material contracts.
Section 5.04 Litigation. Except
as would not have a JNF Material Adverse Effect, (i) no
judgment, ruling, order, writ, decree, stipulation, injunction
or determination by or with any arbitrator, court or other
Governmental Authority to which JNL Bermuda is party or by which
JNL Bermuda or any assets thereof is bound, and which relates to
or affects JNL Bermuda, the assets, properties, Liabilities or
employees of JNL Bermuda is in effect and (ii) there is no
Action pending or, to the Knowledge of JNL Bermuda, threatened
against any of JNL Bermuda or the assets or properties of JNL
Bermuda.
Section 5.05 Compliance
with Applicable Law. JNL Bermuda is in
compliance and has complied at all times with all Laws
applicable to JNL Bermuda, except such non-compliance as would
not have a JNF Material Adverse Effect.
ARTICLE VI
REPRESENTATIONS
AND WARRANTIES OF JNF
JNF represents and warrants to the Sponsors as follows:
Section 6.01 Warrant
Offering Exemption. Assuming the accuracy of
the representations of the Sponsors in Article IX,
the offering, sale, and issuance of warrants to purchase common
stock of JNF pursuant to the Warrant Purchase Agreement are or
will be, exempt from registration under the Securities Act and
the rules and regulations promulgated thereunder, and such
offering, sale and issuance are also exempt from
registration under applicable state securities and “blue
sky” laws. JNF has made or will make all requisite filings
and has taken or will take all action necessary to be taken to
comply with such state securities or “blue sky” laws.
ARTICLE VII
REPRESENTATIONS
AND WARRANTIES OF JNF AND JNFAM
Except as disclosed in the JNF Disclosure Schedule, each of JNF
and JNFAM, severally and jointly, represents and warrants to the
Overture Parties as follows:
Section 7.01 Investment
Management. It is exempt from registration as
an investment adviser under one or more exemptions provided in
the Investment Advisers Act of 1940, as amended, and the
consummation of the Transactions do not require such
registration.
ARTICLE VIII
REPRESENTATIONS
AND WARRANTIES OF THE OVERTURE PARTIES
Except as disclosed in the disclosure schedule delivered to the
JNF Parties immediately prior to the execution of this Agreement
(“Overture Disclosure Schedule”), each of the
Overture Parties, severally and jointly, represents and warrants
to the JNF Parties as follows:
Section 8.01 Due
Organization, Good Standing and Corporate Power.
(a) Except as listed in Section 8.01 of the
Overture Disclosure Schedule, Overture and Holdco are entities
duly organized, validly existing and in good standing under the
applicable Laws of their jurisdiction of formation or
incorporation. Overture and Holdco have all requisite corporate
power and authority to own, lease, and operate its properties
and to conduct its business as now being conducted. Overture and
Holdco are duly qualified or licensed to do business and are in
good standing in each jurisdiction in which the properties owned
or leased by Overture or Holdco or the operation of their
businesses makes such licensing or qualification necessary. It
has made available to JNF a complete and correct copy of the
charters, bylaws and/ or equivalent organization documents, each
as amended and as in effect.
(b) Newco shall be an entity duly organized, validly
existing and in good standing under the Laws of Bermuda on or
prior to the Closing Date. Newco will have all requisite
corporate power and authority to own, lease, and operate its
properties and to conduct its business as it will be conducted.
Newco will be duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes
such licensing or qualification necessary. Newco will make
available to JNF, prior to the Closing, a complete and correct
copy of its charter, bylaws and/ or equivalent organization
documents, each as amended and as in effect.
Section 8.02 Authorization
and Validity of Agreement. Overture and
Holdco have the requisite corporate power and authority to
execute and deliver this Agreement and the Transaction
Agreements to which it is a party and to perform its obligations
hereunder and thereunder. Newco will have the requisite
corporate power and authority to execute and deliver the
Transaction Agreements to which it is a party and to perform its
obligations thereunder. The execution and delivery of this
Agreement and each Transaction Agreement to which Overture,
Holdco or Newco are a party and the consummation of the
transactions contemplated hereby and thereby, (i) have been
duly and validly authorized by the board of directors of
Overture, the board of directors of Holdco, Overture (as the
sole stockholder of Holdco) and Holdco (as the sole stockholder
of Newco), and will be duly and validly authorized by the board
of directors of Newco, and (ii) no other corporate
proceedings on the part of the Overture Parties are necessary to
authorize the execution and delivery of this Agreement and each
other Transaction Agreement to which they are a party or to
consummate the transactions contemplated hereby and thereby,
other than receipt of the Required Parent Vote. The affirmative
vote of the stockholders of Overture holding at least fifty-one
percent (51%) of the issued and outstanding Overture Ordinary
Shares present and entitled to vote on the approval and adoption
of this Agreement at the
Extraordinary General Meeting (the “Required Parent
Vote”) is necessary to approve and adopt this Agreement
and to consummate the Transactions, provided,
further, that stockholders of Overture holding thirty
percent (30%) or more of the Overture Ordinary Shares shall not
have voted against the Transaction and exercised their
conversion rights under Overture’s Charter to convert their
Overture Ordinary Shares into a cash payment from the
Trust Account. This Agreement has been, and each
Transaction Agreement to which any of the Overture Parties are a
party to shall, when executed and delivered on or before the
Closing Date have been, duly executed and delivered by it and,
assuming the due authorization, execution, and delivery by the
other parties hereto and thereto and the receipt of all consents
and approvals by Governmental Authorities as required by Law,
this Agreement constitutes, and each Transaction Agreement to
which such Overture Party is a party to shall when so executed
and delivered on the Closing Date constitute, a valid and
binding obligation of it enforceable against it in accordance
with their respective terms, subject to any Enforceability
Exceptions.
Section 8.03 Consents
and Approvals; No Violations. Except for the
approvals, filings and notices set forth in
Section 8.03 of the Overture Disclosure Schedule,
assuming the making and obtaining of all filings, notifications,
consents, approvals, authorizations and other actions referred
to in Section 9.03, the execution, delivery, and
performance by Overture and Holdco of this Agreement and the
Transaction Agreements to which any Overture Party is a party
to, and the consummation by it of the Transactions, do not and
will not (i) violate, conflict with or result in the breach
of any provision of the Charter, bylaws or other applicable
organizational documents of the Overture Parties,
(ii) conflict with or violate any Law applicable to the
Overture Parties or any of its assets, properties or businesses,
(iii) require any material consent, authorization, license,
or approval of any Governmental Authority, or (iv) conflict
with, result in any breach of, constitute a default (or event
which with the giving of notice or lapse of time or both, would
become a default) under, require any consent under or give to
others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, any note, bond,
mortgage, indenture, contract, agreement, lease, sublease,
license, Permit, franchise or other instrument or arrangement to
which an Overture Party is a party to, which would adversely
affect (a) the ability of it to carry out its obligations
under this Agreement or Transaction Agreements or to consummate
the Transactions or (b) such Overture Party’s business.
Section 8.04 All
Necessary Permits, etc.
(a) Except as listed in Section 8.04 of the
Overture Disclosure Schedule, Overture and Holdco possess all
Permits which are required by Law to conduct the business now
conducted by it, except where the failure to possess such
Permits would not, individually or in the aggregate, reasonably
be expected to have an Overture Material Adverse Effect on it.
All such Permits are valid and in full force and effect, except
where the invalidity of such Permits or the failure to be in
full force and effect would not, individually or in the
aggregate, reasonably be expected to have an Overture Material
Adverse Effect on it.
(b) Except as listed in Section 8.04 of the
Overture Disclosure Schedule, Newco will possess by the Closing
Date all Permits which are required by Law to conduct the
business to be conducted by Newco, except where the failure to
possess such Permits would not, individually or in the
aggregate, reasonably be expected to have an Overture Material
Adverse Effect on Newco. All such Permits will be by the Closing
Date valid and in full force and effect, except where the
invalidity of such Permits or the failure to be in full force
and effect would not, individually or in the aggregate,
reasonably be expected to have an Overture Material Adverse
Effect on Newco.
Section 8.05 Compliance
with Applicable Laws. Except as listed in
Section 8.05 of the Overture Disclosure Schedule, to
the Knowledge of the Overture Parties, (a) there is no
material violation of Law by the Overture Parties that has or,
if known by an appropriate Governmental Authority, would
reasonably be expected to, materially and adversely affect the
legality, validity or enforceability of this Agreement, any
Transaction Agreement or the consummation of the Transactions
and (b) there is no Law that is applicable to the Overture
Parties that has or could reasonably be expected to, materially
and adversely affect the legality, validity or enforceability of
this Agreement, any Transaction Agreement or the consummation of
the Transactions.
Section 8.06 Litigation. Except
as listed in Section 8.06 of the Overture Disclosure
Schedule, there are no Legal Proceedings pending or, to the
Knowledge of any of the Overture Parties, threatened against or
affecting any of the Overture Parties or any of their properties
by or before any Governmental Authority, that (i) if
adversely determined, could reasonably be expected to
(a) individually or in the aggregate have an Overture
Material Adverse Effect on any of the Overture Parties or
(b) materially and adversely affect the legality, validity
or enforceability of this Agreement or any Transaction Agreement
to which any Overture Party is a party to, (ii) challenges
or seeks to prevent, enjoin, alter, or delay the consummation of
the Transactions or (iii) alleges criminal action or
inaction on the part of any of the executive officers of any
Overture Party. As of the date hereof, none of the Overture
Parties are subject to any Law having, or that would reasonably
be expected to have, an Overture Material Adverse Effect
on it.
Section 8.07 Financial
Capability. Subject to the number of holders
of Overture Ordinary Shares voting against the Transaction and
exercising their conversion rights under Overture’s Charter
to convert their Overture Ordinary Shares into a cash payment
from the Trust Account, Overture has, and as of the Closing
Date, Newco will have available, all the capital and funds
necessary to perform its obligations under this Agreement, the
Transaction Agreements and to consummate the Transactions.
Section 8.08 Broker’s
or Finder’s Fee. Except as set forth in
Section 8.08 of the Overture Disclosure Schedule,
none of the Overture Parties nor any of their Affiliates,
officers, directors, or employees acting on behalf of any
Overture Party or such Affiliates have employed any broker or
finder or incurred any liability for any fees or commissions
relating to investment banking, broker services, or
finders’ services in connection with the Transactions.
Except as set forth in Section 9.08 herein, none of
the Overture Parties nor any of its Affiliates, officers,
directors or employees acting on behalf of any Overture Party or
such Affiliates have incurred or are required to pay any
break-up
fees, termination fees or related or similar liability.
Section 8.09 Taxes
and Returns.
(a) The Overture Parties have filed all Tax Returns
required to be filed by them and have made correct and complete
copies of all such Tax Returns available to JNL and JNF. All
such Tax Returns were correct and complete in all respects. All
of the Tax Returns of the Overture Parties have been timely
filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns are or were required to
be filed or requests for extensions have been timely filed and
any such extensions have been granted and have not expired.
(b) All Taxes due and owing by the Overture Parties have
been paid or adequate reserves for the payment thereof have been
established on their balance sheet in accordance with GAAP.
(c) All of the Taxes required to be paid by the Overture
Parties with respect to any completed and settled audit,
examination or deficiency Action with any taxing authority have
been paid in full.
(d) To Overture’s Knowledge, there is no audit,
examination, claim, assessment, levy, deficiency, administrative
or judicial proceeding, lawsuit or refund Action pending or
threatened in writing with respect to any Taxes of the Overture
Parties, and no taxing authority has given written notice of the
commencement of any audit, examination or deficiency Action with
respect to any such Taxes. The Overture Parties have delivered
to JNL and JNF correct and complete copies of all Tax
examination reports, closing agreements and statements of Tax
deficiencies assessed against or agreed to by the Overture
Parties.
(e) There are no outstanding agreements or waivers
extending the statutory period of limitations applicable to any
claim for, or the period for the collection or assessment of,
Taxes of the Overture Parties due for any taxable period.
(f) To Overture’s Knowledge, the Overture Parties have
not received written notice of any claim, and, to the Knowledge
of the Overture Parties, no claim has ever been made, by any
taxing authority in a jurisdiction where the Overture Parties do
not file Tax Returns that they are or may be subject to taxation
by that jurisdiction.
(g) No Liens for Taxes exist with respect to any of assets
or properties of the Overture Parties.
(h) The Overture Parties have not requested, nor are the
subject of or bound by, any private letter ruling, technical
advise memorandum, closing agreement or similar ruling,
memorandum or agreement with any taxing authority with respect
to any Taxes, nor is any such request outstanding.
(i) To Overture’s Knowledge, the Overture Parties have
not participated in a “listed transaction,” as defined
in Treasury Regulation § 1.6011-4(b)(2).
Section 8.10 Indebtedness. Except
as disclosed on Section 8.10 of the Overture
Disclosure Schedule, none of the Indebtedness of the Overture
Parties contains any restriction upon (i) the prepayment of
any of such Indebtedness, (ii) the incurrence of
Indebtedness by an Overture Party, or (iii) the ability of
an Overture Party to grant any Encumbrance on its properties or
assets.
(a) The authorized number of shares of capital stock of
Overture consists of (i) 100,000,000 Overture Ordinary
Shares, of which 18,750,000 Overture Ordinary Shares (4,499,999
of which are subject to possible redemption pursuant to the
terms of this Agreement and the Transaction Agreements) are
issued and outstanding and (ii) 1,000,000 preferred shares,
par value of $0.0001 per share, of which none are issued and
outstanding. All of Overture’s issued and outstanding
capital stock has been duly authorized and is validly issued,
fully paid, and nonassessable. Except as set forth on
Section 8.11(a) of the Overture Disclosure Schedule,
Overture does not have any other capital stock, equity
securities, or securities containing any equity features
authorized, issued, or outstanding and, except as contemplated
by this Agreement and the Transaction Agreements, there are no
agreements, subscriptions, options, warrants, conversion rights,
or other rights or arrangements existing or outstanding which
provide for the sale or issuance of any of the foregoing by
Overture. Except as contemplated by this Agreement or the
Transaction Agreements and as set forth on
Section 8.11(a) of the Overture Disclosure Schedule,
there are no agreements or other obligations (contingent or
otherwise) that require Overture to repurchase or otherwise
acquire any shares of Overture’s capital stock or other
equity securities. Overture has not declared or paid any
distribution or dividend in respect of its capital stock or
other equity securities and has not repurchased, redeemed or
otherwise acquired any capital stock or other equity securities
of Overture and the board of directors of Overture has not
authorized any of the foregoing.
(b) All of the capital stock of each of Overture’s
direct and indirect subsidiaries, including without limitation
Holdco and Newco, are either directly or indirectly wholly owned
by Overture or subsidiaries of Overture. Except as set forth on
in Section 8.11(b) of the Overture Disclosure
Schedule and as contemplated by this Agreement and the
Transaction Agreements, neither Overture nor any of its
subsidiaries owns or holds the right to acquire any stock,
limited liability company interest, partnership interest, joint
venture interest, or other equity ownership interest in any
other Person. All of the outstanding shares of capital stock or
other equity interests in each of Overture’s direct and
indirect subsidiaries that is a corporation are duly authorized,
validly issued, fully paid and non-assessable, and with respect
to subsidiaries that are limited liability companies or other
entities, are duly authorized, validly issued, fully paid and
non-assessable and were issued free of preemptive rights and
were not issued in material violation of any applicable
securities Laws. Except as set forth in
Section 8.11(b) of the Overture Disclosure Schedule,
each outstanding share of capital stock of or other equity
interest in each of Overture’s direct and indirect
subsidiaries is free and clear of any Encumbrance. There are no
outstanding obligations of Overture or any of its direct or
indirect subsidiaries to provide funds to make any investment
(in the form of a loan, capital contribution or otherwise) in
any other Person. Section 8.11(b) of the Overture
Disclosure Schedule lists all jurisdictions in which each of
Overture and its direct and indirect subsidiaries is qualified
to conduct its respective business.
Section 8.12 Overture
SEC Reports.
(a) Overture has timely filed all required registration
statements (including the registration statement on
Form S-1
(File
No. 333-146946)),
reports, schedules, forms, statements and other documents
required to be filed by it with the SEC since January 30,2008 (collectively, as they have been amended since the time of
their filing and including all exhibits thereto, the
“Overture SEC Reports”). None of the Overture
SEC Reports, as of their respective dates (or if amended or
superseded by a filing prior to the date of this
Agreement or the Closing Date, then on the date of such filing),
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances
under which they were made, not misleading. The audited
financial statements and unaudited interim financial statements,
if any, (including, in each case, the notes and schedules, if
any, thereto) included in the Overture SEC Reports complied as
to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in
accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as
permitted by Form 10Q of the SEC) and fairly present
(subject, in the case of the unaudited interim financial
statements included therein, to normal year-end adjustments and
the absence of complete footnotes) in all material respects the
financial position of Overture as of the respective dates
thereof and the results of their operations and cash flows for
the respective periods then ended.
(b) The information in the Proxy Statement or any amendment
or supplement thereto will not, as of the date of mailing of the
definitive Proxy Statement (and any amendment or supplement
thereto) to the shareholders of Overture or at the time of the
Extraordinary General Meeting, excluding information supplied by
the JNF Parties, contain any statement of a material fact that
is false or misleading or omits to state any material fact
required to be stated therein in light of the circumstances
under which it is made or necessary in order to make the
statement therein not false or misleading. None of the
information supplied or to be supplied by it expressly for
inclusion or incorporation by reference in the
S-4 or any
of the Ancillary Public Disclosures will, at the time filed with
the SEC, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Section 8.13 Transactions
with Affiliates. Except as contemplated by
this Agreement, the Transaction Agreements or disclosed in the
S-4 or the
Proxy Statement, there are no contracts or transactions between
the Overture Parties and any other Person of a type that would
be required to be disclosed under Item 404 of
Regulation SK under the Securities Act and the Exchange Act
and no loans by the Overture Parties to any of its employees,
officers or directors, or any of its Affiliates.
Section 8.14 Insurance.Section 8.14
of the Overture Disclosure Schedule sets forth a correct and
complete list of all material insurance policies issued in favor
of any Overture Party, or pursuant to which such Overture Party
is a named insured or otherwise a beneficiary. With respect to
each such insurance policy, (i) the policy is in full force
and effect and all premiums due thereon have been paid and
(ii) it is not in any material respect, in breach of or
default under, and it has not taken any action or failed to take
any action which, with notice or the lapse of time or both,
would constitute such a breach or default, or permit termination
or modification of, any such policy.
Section 8.15 Books
and Records. All of the books and records of
the Overture Parties are complete and accurate in all material
respects and have been maintained in the ordinary course and in
accordance with applicable Laws. The minute books and other
organizational documents of the Overture Parties are true and
complete in all material respects as in effect as of the date of
this Agreement and accurately reflect in all material respects
all proceedings of the respective boards of directors of the
Overture Parties (including the committees of such board of
directors) and shareholders thereof.
Section 8.16 Information
Supplied. Its representations and warranties
included in this Agreement, any Transaction Agreement and any
list, statement, document or information set forth in, or
attached to, any Overture Disclosure Schedule provided pursuant
to this Agreement or any Transaction Agreement or delivered
hereunder or thereunder, are true and complete in all material
respects and do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein
not misleading, under the circumstance under which they were
made. Notwithstanding the foregoing, it makes no representation,
warranty or covenant with respect to any information supplied by
any JNF Party which is contained in the
S-4, the
Proxy Statement or any Ancillary Public Disclosures.
Section 8.17 JNFAM. The
Overture Parties acknowledge that JNFAM is exempt from
registration as an investment advisor under one or more
exemptions provided in the Investment Advisers Act of 1940, as
amended, and the consummation of the transactions do not require
such registration.
Section 8.18 Solvency. Assuming
that the amount that will be required to be paid to those
shareholders of Overture who vote against the Transaction and
exercise their conversion rights with respect to their Overture
Ordinary Shares is less than the balance of the
Trust Account available to pay the same after providing for
payment of the Purchase Price and all fees and expenses payable
by Overture in connection with the Closing, upon the
consummation of the Transactions, assuming the accuracy of and
compliance with, the representations, warranties, covenants, and
agreements of the parties contained herein, the Overture Parties
will not (a) be insolvent or left with unreasonably little
capital, (b) have incurred debts beyond their ability to
pay such debts as they mature, or (c) have their capital
impaired.
ARTICLE IX
COVENANTS
Section 9.01 Pre-Closing
Conduct of Business. (a) From the date
hereof through the Closing Date, JNF and JNL agrees that, except
as (i) expressly contemplated by this Agreement or the
Transaction Agreements, (ii) required by applicable Law, or
(iii) disclosed in the JNF Disclosure Schedule, or
(iv) otherwise consented to by Overture in writing (which
consent shall not be unreasonably withheld or delayed), JNF and
JNL will carry on its business in the ordinary course consistent
with past practices. Without limiting the generality of the
foregoing, prior to the Closing Date, except as
(i) expressly contemplated by this Agreement or the
Transaction Agreements, (ii) required by applicable Law, or
(iii) set forth in Section 9.01 of the JNF
Disclosure Schedule, JNF and JNL will not, without the prior
written consent of Newco (which shall not be unreasonably
withheld or delayed):
(i) except as required by any Scheduled Annuity or
expressly required or permitted herein, pay, discharge, or
satisfy any claims in respect of any Scheduled Annuities other
than in the ordinary course of business consistent with past
practice;
(ii) knowingly take any action likely to materially
decrease the value of the Scheduled Annuities (except for
establishing, supplementing or otherwise adjusting reserves in
the ordinary course of business and consistent with past
practice);
(iii) change any material accounting principles, practices,
or methods applicable to Scheduled Annuities other than as
required by changes in GAAP;
(iv) make any material change in actuarial, underwriting,
or claims administration policies, practices, procedures,
methods, assumptions, or principles applicable to Scheduled
Annuities;
(v) knowingly take any action that would cause the
conditions set forth in Section 10.03(a) to become
incapable of being satisfied; or
(vi) authorize or agree to do any of the foregoing actions.
(b) Prior to the Closing Date, Newco will (i) use
commercially reasonable efforts to obtain and maintain all
licenses from Governmental Authorities necessary to issue the
reinsurance contemplated by the Transactions, and (ii) not
knowingly take any action that would cause the conditions set
forth in Section 10.02(a) to become incapable of
being satisfied.
(c) From the date hereof through the Closing Date, the
Overture Parties agree that, except as (i) expressly
contemplated by this Agreement or the Transaction Agreements,
(ii) required by applicable Law, or (iii) disclosed in
the Overture Disclosure Schedule, or (iv) otherwise
consented to by JNF in writing (which consent shall not be
unreasonably withheld or delayed), the Overture Parties will
carry on its business in the ordinary course consistent with
past practices. Without limiting the generality of the
foregoing, prior to the Closing Date, except as
(i) expressly contemplated by this Agreement or the
Transaction Agreements,
(ii) required by applicable Law, or (iii) set forth in
the Overture Disclosure Schedule, the Overture Parties will not,
without the prior written consent of JNF and JNL (which shall
not be unreasonably withheld or delayed):
(i) amend, waive or otherwise change, in any respect, any
of its respective Charter, bylaws and/ or equivalent
organizational documents;
(ii) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose
of any of its capital stock, or any options, warrants,
commitments, subscriptions or rights of any kind to acquire or
sell any of its capital stock, or other securities or equity
interests, including any securities convertible into or
exchangeable for any of its capital stock or equity interest of
any class and any other equity-based awards, or engage in any
hedging transaction with a third Person with respect to such
capital stock or other securities or equity interests;
(iii) split, combine, recapitalize or reclassify any of its
equity interests or issue any other securities in respect
thereof, or declare, pay or set aside any distribution or other
dividend (whether in cash, equity or property or any combination
thereof) in respect of its equity interests, or directly or
indirectly redeem, purchase or otherwise acquire or offer to
acquire any of its capital equity or other securities or equity
interests;
(iv) except for fees and expenses incurred with respect to
the negotiation and delivery of this Agreement and the
Transaction Agreements, and the consummation of the
Transactions, incur, create, assume, prepay or otherwise become
liable for any Indebtedness (directly, contingently or
otherwise), make a loan or advance to or investment in any third
party, or guarantee or endorse any indebtedness, liability or
obligation of any Person;
(v) acquire, including by merger, consolidation,
acquisition of stock or assets, or any other form of business
combination, any Person or any division thereof, or any material
amount of assets;
(vi) make capital expenditures in excess of $1,000,000;
(vii) prior to the Outside Date, adopt a plan of complete
or partial liquidation, dissolution, merger (except as
contemplated in the Agreement and Plan of Amalgamation),
restructuring, recapitalization or other reorganization;
(viii) sell, lease, license, transfer, exchange or swap,
mortgage or otherwise pledge or encumber (including
securitizations), or otherwise dispose of any material portion
of its properties, assets or rights;
(ix) enter into, amend, waive or terminate (other than
terminations in accordance with their terms) any Affiliate
Transaction; or
(x) authorize or agree to do any of the foregoing actions.
Section 9.02 Efforts
to Close. Subject to, and not in limitation
of, Section 9.03 and the other terms and conditions
of this Agreement and the Transaction Agreements, each of the
parties hereto will use commercially reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper, or advisable under
applicable Laws to cause the Closing to occur at the earliest
practicable date, and to obtain, as expeditiously as
practicable, any authorizations, approvals, consents of, or
agreements with Persons that may be or become necessary for the
performance of its respective obligations under this Agreement
and the Transaction Agreements to which each is a party and
cause the Closing to occur, and will cooperate fully with each
other in promptly seeking to obtain such authorizations,
approvals, and consents. Upon the terms and subject to the
conditions herein and subject to, and not in limitation of,
Section 9.03, each of the parties hereto agrees to
use commercially reasonable efforts to take or cause to be taken
all actions, to do or cause to be done, and to assist and
cooperate with the other party in doing, all things necessary or
advisable under applicable Law to cause the Closing to occur, in
the most expeditious manner practicable, including: (i) the
satisfaction of the conditions precedent to the obligations of
any of the parties hereto; (ii) the defending of any Legal
Proceedings naming such party, whether judicial or
administrative, challenging this Agreement, the Transaction
Agreements or the performance of the obligations hereunder or
thereunder; and (iii) the execution and delivery of such
agreements, documents and instruments, and the
taking of such other actions, as the other party may reasonably
require in order to carry out the intent of this Agreement and
the Transaction Agreements.
Section 9.03 Third
Party and Regulatory Approvals. (a) The
JNF Parties will each use commercially reasonable efforts, and
Newco will cooperate with the JNF Parties to secure, before the
Closing Date, the consent, approval, or waiver in form and
substance reasonably satisfactory to each of the JNF Parties and
Newco, listed in Section 9.03 of the JNF Disclosure
Schedule that are required to be obtained from any Person (other
than a Governmental Authority) to consummate the transactions
contemplated by this Agreement and the Transaction Agreements.
(b) During the period prior to the Closing Date, each of
the parties hereto shall use their commercially reasonable
efforts and cooperate with the other, in attempting to secure
any consents and approvals of any Governmental Authority
required to be obtained by any party hereto in order to permit
the consummation of the Transactions in the most expeditious
manner practicable, including approvals and consents from the
Texas Department of Insurance (“TDI”) and any
other consents set forth in Section 3.03 of the JNF
Disclosure Schedule and from the Bermuda Monetary Authority
(“BMA”) and any other consents set forth in
Section 8.03 of the Overture Disclosure Schedule.
Subject to applicable Law, the parties hereto will reasonably
consult and cooperate with one another and will furnish to each
other such necessary information and reasonable assistance as
either party may reasonably request in connection with its
preparation of necessary filings, submissions analyses,
appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or on behalf of any
party hereto relating to proceedings necessary to obtain such
regulatory approvals from any Governmental Authority in
connection with the Transactions. Unless impractical, prior to
filing any materials or documents with any Governmental
Authority in connection with the Transactions, the parties
hereto will afford the other parties hereto a reasonable
opportunity (which shall be no less than three Business Days) to
review and comment on such materials or documents. Without
limiting any of the foregoing, JNL will include information in
its submissions to the TDI in connection with the Transactions
as Newco reasonably requests, and Newco will include information
in its submissions to the BMA in connection with the
Transactions as JNL reasonably requests. Notwithstanding any
provision of this Agreement or the Transaction Agreements to the
contrary, in no event will any party hereto be required to
expend money (other than reasonable fees and expenses of
external advisors and de minimis costs), commence or participate
in any litigation, offer or grant any accommodation (financial
or otherwise), increase any risk, incur any liability or change
any material term of this Agreement or any of the Transaction
Agreements in connection with obtaining the consent of any
Governmental Authority related to the Transactions.
(c) To the extent not prohibited by the relevant
Governmental Authority, each party hereto will use its
commercially reasonable efforts to (i) permit the other
parties hereto to review in advance any proposed written or
material oral communication by such party to any Governmental
Authority relating to the subject matter of this Agreement,
(ii) promptly notify the other parties hereto of any
written or material oral communication it or any of its
Affiliates receives from any Governmental Authority relating to
the subject matter of this Agreement and the Transaction
Agreements, and (iii) provide to the other parties hereto
copies of all correspondence, filings, or written communications
between it (or its Representatives) and any such Governmental
Authority relating to the subject matter of this Agreement and
the Transaction Agreements; provided, that such correspondence,
filing, or written communication does not contain or reveal
confidential information of any party hereto or any of their
respective Affiliates. The parties hereto will use commercially
reasonable efforts to consult with the other in advance (to the
extent it has reasonable notice thereof and the opportunity to
so consult) and, to the extent permitted by such Governmental
Authority, give the other the opportunity to attend and
participate in any meeting with any Governmental Authority in
respect of any filings, investigation, or other inquiry of a
Governmental Authority related to the Transactions. This
paragraph will not apply to ordinary course communications
between either Newco or JNL and the TDI or BMA. From the date of
this Agreement through the Closing Date, each party hereto will
keep the other parties hereto promptly apprised of any material
development relating to the Transactions of which such party
learns through such communications with any Government Authority
to the extent permitted by such Government Authority.
Section 9.04 Confidentiality. Until
the Closing Date, each party hereto will comply with its
obligations under the Confidentiality Agreement, dated as of
December 2, 2009 (the “Confidentiality
Agreement”), with
respect to any information obtained by any such Person in
connection with this Agreement, the Transaction Agreements, and
the Transactions. Notwithstanding anything to the contrary in
the Confidentiality Agreement or in this Agreement, this
Section 9.04 will not preclude communications or
disclosures necessary to implement the provisions of this
Agreement and the Transaction Agreements or to comply with SEC
disclosure obligations or the rules of any stock exchange.
Section 9.05 Access. Upon
reasonable notice, from the date hereof until the Closing Date,
JNL and JNL Bermuda will allow Overture and its authorized
Representatives reasonable access during normal business hours
in a manner as will not adversely impact the conduct of the
business of JNL and JNL Bermuda to the reports, records
underwriting files, claim files and other information reasonably
requested by Overture and in JNL’s and JNL Bermuda’s
possession (or readily available to it) that relate to the
Scheduled Annuities and the subject matter of the Transactions
(including surveillance reports, ongoing monitoring information
of the underlying transactions and such other necessary
information) (collectively, the “Books and
Records”). JNL shall provide any information in its
possession (or readily available to it) related to the Scheduled
Annuities as may be reasonably requested by Overture in order
for the Newco to prepare financial and other reports in the
ordinary course of business. Notwithstanding the foregoing, JNL
will have the right to redact or make unavailable for inspection
by Overture or its Representatives any information which it
reasonably believes it may not provide by reason of applicable
Law, which it reasonably believes constitutes information
protected by attorney/client privilege or the attorney work
product doctrine or which it is required to keep confidential by
reason of contracts with third parties or by Law. All
information provided by a party to any other party hereunder
will be deemed to be “Confidential Information”
or “Evaluation Material” subject to the terms
of the Confidentiality Agreement.
Section 9.06 Notification
of Certain Matters. Each party hereto shall
provide prompt written notice to the other parties hereto of
(i) any notice or other written communication from any
Person or Governmental Authority received after the date of this
Agreement alleging that the consent, authorization, or approval
of such Person or Governmental Authority is or may be required
in connection with the Transactions, (ii) any Legal
Proceeding commenced or, to the Knowledge of the party,
threatened in writing of which such party becomes aware after
the date of this Agreement against, relating to or involving or
otherwise affecting it that relates to the consummation of the
Transactions, and (iii) any change of which such party
becomes aware after the date of this Agreement that would
reasonably be expected to have, individually or in the
aggregate, an Overture Material Adverse Effect or a JNF Material
Adverse Effect.
Section 9.07 Non-solicitation
of Employees. For a period of two
(2) years following the date hereof, the Overture Parties
and the Sponsors on the one hand and the JNF Parties, on the
other hand, will not, and will cause their respective parents
and subsidiaries not to without the prior written consent of the
other parties, solicit any employees of the other or the
other’s parent or subsidiaries to leave the employment of
the other or the other’s parent or subsidiaries or violate
the terms of their employment agreements, with the other or the
other’s parent or subsidiary; provided,
however, that nothing in this Section 9.07
will prohibit any of the parties hereto or their respective
parents or subsidiaries from employing any such employee
(i) who initiates discussions regarding such employment
without any direct or indirect solicitation, (ii) who seeks
employment in response to any general advertisement or other
similar method and not in response to any direct or indirect
solicitation efforts, (iii) whose employment has been
terminated by the Overture Parties or the Sponsors, on one hand,
or the JNF Parties, on the other hand, prior to commencement of
employment discussions with any party hereto or its Affiliates,
or (iv) whose employment was transferred from JNFAM to
Overture or an Affiliate of Overture, pursuant to the exercise
of the JNFAM Option.
Section 9.08 Fees
and Expenses. If Closing does not occur, each
party hereto will bear all costs and expenses incurred by
itself, its Affiliates, agents, attorneys and advisers relating
to the authorization, preparation, negotiation, execution, and
performance of this Agreement and the Transaction Agreements. If
the Closing does occur, Overture shall reimburse the JNF Parties
for all of the costs and expenses incurred by them, including
without limitation the costs and expenses of their Affiliates,
agents, attorneys, advisers, accountants, actuaries, recruiters
and consultants relating to the authorization, preparation,
negotiation, execution, and performance of this Agreement, the
Transaction Agreements, the
S-4, the
Proxy Statement and the Transactions, up to an amount of
$2,000,000.
Section 9.09 Supplementation
and Amendment of Schedules. From time to
time, prior to the Closing, the parties hereto shall have the
right to supplement or amend the JNF Disclosure Schedule or
Overture Disclosure Schedule, as applicable, with respect to any
matter arising hereafter or discovered after the delivery of the
JNF Disclosure Schedule and Overture Disclosure Schedule
pursuant to this Agreement. No such supplement or amendment
shall have any effect on the satisfaction of the conditions to
closing set forth in Article XI; provided,
however, if the Closing shall occur, then the parties
hereto shall be deemed to have waived any right or claim
pursuant to the terms of this Agreement or otherwise, with
respect to any and all matters disclosed pursuant to any such
supplement or amendment prior to the Closing.
Section 9.10 Survival
of Representations and Warranties; Indemnification.
(a) The representations and warranties contained in
Articles III through VIII and the covenants
and agreements set forth in Sections 9.01,9.02, the first sentence of 9.05, the first
sentence of 9.08, 9.12, 9.13, 9.14,
9.16, 9.17 and 9.20 hereof shall expire and
terminate and be of no further force and effect as of the
Closing Date; provided, however, that the representations
and warranties contained in Sections 8.02,
8.09, 8.11 and 8.18 with respect to the
Overture Parties, and Sections 3.02, 3.06(a),
3.06(b), 3.06(c), 3.13,3.15 and
Article IV with respect to the JNF Parties, shall
survive for a period of one year from the Closing Date.
(b) Indemnification by the JNF
Parties. Subject to the limitations set forth
in Section 9.10(e),
(i) Each of the JNF Parties shall severally and jointly
(except for JNL and JNL Bermuda which shall severally and not
jointly) indemnify and hold harmless each of the Overture
Parties, their respective Affiliates and each of their
respective successors and permitted assigns, and their
respective officers, directors, managers, employees and agents
(each, an “Overture Indemnified Party”) from
and against any liabilities, claims (including claims by third
Persons), demands, judgments, losses, costs, damages or expenses
whatsoever (including reasonable attorneys’,
consultants’ and other professional fees and disbursements
of every kind, nature and description) (collectively,
“Damages”), that such Overture Indemnified
Party may sustain, suffer or incur and that result from, arise
out of or relate to any material breach by such JNF Party of any
of their respective representations, warranties, covenants or
agreements contained in this Agreement or the Transaction
Agreements (except for the breaches of the representations,
warranties, covenants or agreements contained in the Quota Share
Reinsurance Agreement for which separate indemnification
provisions are provided therein for such breaches).
(ii) JNF shall severally indemnify and hold harmless each
Sponsor from and against any Damages that such Sponsor may
sustain, suffer or incur and that result from, arise out of or
relate to any material breach by JNF of any of its
representations, warranties, covenants or agreements contained
in this Agreement or the Transaction Agreements.
(c) Indemnification by the Overture
Parties. Subject to the limitations set forth
in Section 9.10(e), the Overture Parties shall
jointly and severally indemnify and hold harmless the JNF
Parties and their respective Affiliates and each of their
respective successors and permitted assigns, and their
respective officers, directors, managers, employees and agents
(each, a “JNF Indemnified Party”) from and
against any Damages that such JNF Indemnified Party may sustain,
suffer or incur and that result from, arise out of or relate to
any breach by an Overture Party of any of their respective
representations, warranties, covenants or agreements contained
in this Agreement or the Transaction Agreements (except for the
breaches of the representations, warranties, covenants or
agreements contained in the Quota Share Reinsurance Agreement
for which separate indemnification provisions are provided
therein for such breaches).
(d) Indemnification by the
Sponsors. Subject to the limitations set
forth in Section 9.10(e), each Sponsor, severally
and not jointly, shall indemnify and hold harmless JNF from and
against any Damages that JNF may sustain, suffer or incur and
that result from, arise out of or relate to any breach by such
Sponsor of any of his or her representations, warranties,
covenants or agreements contained in this Agreement or the
Transaction Agreements.
(e) Liability Baskets; Liability
Caps. The JNF Parties, the Overture Parties,
and the Sponsors, in connection with this Agreement, the
Transaction Agreements (except for the Quota Share Reinsurance
Agreement for which separate indemnification provisions are
provided therein), the
S-4, the
Proxy Statement or the Transactions:
(i) shall not have any liability (including Damages) until
the aggregate amount of any such liability incurred pursuant to
Section 9.10(b), 9.10(c) or 9.10(d),
respectively, exceeds $300,000 (and then only the extent of such
excess); and
(ii) shall not have any liability (including Damages) if
the aggregate amount of any such liability incurred pursuant to
Section 9.10(b), 9.10(c) or 9.10(d),
respectively, exceeds $1,000,000. For the avoidance of doubt,
the maximum amount of aggregate liability that may be incurred
pursuant to Section 9.10 by any of the JNF Parties,
the Overture Parties or the Sponsors, is $1,000,000 less the
$300,000 liability basket set forth in clause (i) above.
(f) Indemnification of Third Party Claims. The
indemnification obligations and liabilities under this
Section 9.10 with respect to Actions brought against
an indemnified party (each in such capacity, an
“Indemnitee”) by a Person other than a party
hereto (a “Third Party Claim”) shall be subject
to the following terms and conditions:
(i) The Indemnified Representative will give the
Indemnifying Representative as soon as practical after receiving
written notice of any Third Party Claim or becoming aware of any
condition or event that gives rise to such Third Party Claim,
specifying the nature and the amount (the “Claim
Notice”). The failure of the Indemnified Representative
to give timely notice shall not affect the Indemnified
Representative’s rights to indemnification hereunder except
to the extent that the Indemnifying Representative demonstrates
that it was materially prejudiced by such failure.
(ii) The Indemnifying Representative shall notify the
Indemnified Representative within fifteen (15) days after
receipt of the Claim Notice whether the Indemnifying
Representative will undertake, conduct, and control, through
counsel of his, her or its own choosing (subject to the consent
of Indemnified Representative, such consent not to be
unreasonably withheld, conditioned or delayed) and at his, her
or its expense, the settlement or defense thereof, and
Indemnified Representative shall cooperate with Indemnifying
Representative in connection therewith, provided that if
Indemnifying Representative undertakes such defense:
(A) the Indemnifying Representative shall not thereby
permit to exist any Encumbrance or other adverse charge upon any
asset of Indemnified Representative or settle such Action
without first obtaining the consent of Indemnified
Representative, except for settlements solely covering monetary
matters for which Indemnifying Representative has acknowledged
responsibility for payment; (B) the Indemnifying
Representative shall permit the Indemnified Representative (at
the Indemnified Representative’s sole cost and expense) to
participate in such settlement or defense through counsel chosen
by the Indemnified Representative; and (C) the Indemnifying
Representative shall agree promptly to reimburse the Indemnified
Representative for the full amount of any loss resulting from
such claim and all related expenses incurred by the Indemnified
Representative, except for those costs expressly assumed by the
Indemnified Representative hereunder. The Indemnified
Representative agrees to preserve and provide access to all
evidence that may be useful in defending against such claim and
to provide reasonable cooperation in the defense thereof or in
the prosecution of any Action against a third Person in
connection therewith. The Indemnifying Representative’s
defense of any claim or demand shall not constitute an admission
or concession of liability therefor or otherwise operate in
derogation of any rights Indemnifying Representative may have
against Indemnified Representative or any third Person. So long
as the Indemnifying Representative is reasonably contesting any
such claim in good faith, the Indemnified Representative shall
not pay or settle any such claim. If the Indemnifying
Representative does not notify the Indemnified Representative
within fifteen (15) days after receipt of Indemnified
Representative’s Claim Notice that he, she or it elects to
undertake the defense thereof, the Indemnified Representative
shall (upon further written notice), have the right to contest,
settle or compromise the claim in the exercise of his, her or
its exclusive discretion at the expense of the Indemnifying
Representative (provided that the Indemnifying Representative
shall not be required to pay the Indemnified
Representative’s expenses for the defense, settlement or
compromise of claims which are not covered by the Indemnifying
Representative’s obligations pursuant to this
Section 9.10). Unless the Indemnifying Representative has
consented to a settlement of a Third Party Claim (not to be
unreasonably withheld, conditioned or delayed), the amount of
the settlement shall not be a binding determination of the
amount of the Damages and such amount shall be determined in
accordance with the provisions of this Agreement.
Notwithstanding anything herein to the contrary, the
Indemnifying Representative shall not be entitled to assume
control of any defense described herein if (i) the Third
Party Claim relates to or arises in connection with any criminal
proceeding, Action, indictment, allegation or investigation;
(ii) the Third Party Claim seeks, as one of his, her or its
principal claims, an injunction or equitable relief against an
Indemnitee; or (iii) there is a reasonable probability that
a Third Party Claim may materially and adversely affect the
Indemnitee other than as a result of money damages or other
money payments.
(g) To the extent that any Damages that are subject to
indemnification pursuant to this Section 9.10 are
covered by insurance, the Indemnitees shall use commercially
reasonable efforts to obtain the maximum recovery under such
insurance. If an Indemnitee has received the payment required by
this Agreement from the Indemnifying Representative in respect
of any Damages and later receives proceeds from insurance or
other amounts in respect of such Damages, then he, she or it
shall hold such proceeds or other amounts in trust for the
benefit of the Indemnifying Representative and shall pay to the
Indemnifying Representative, as promptly as practicable after
receipt, a sum equal to the amount of such proceeds or other
amount received, up to the aggregate amount of any payments
received from the Indemnifying Representative pursuant to this
Agreement in respect of such Damages. Notwithstanding any other
provisions of this Agreement and the Transaction Agreements, it
is the intention of the Parties that no insurer or any other
third Person shall be (i) entitled to a benefit it would
not be entitled to receive in the absence of the foregoing
indemnification provisions, or (ii) relieved of the
responsibility to pay any claims for which it is obligated. To
the extent that any Damages that are subject to indemnification
pursuant to this Section 9.11 are deductible for
income Tax purposes by an Indemnitee, the amount of any Damages
shall be reduced by the income Tax savings to such Person as a
result of the payment of such Damages.
For purposes of this Agreement, the “Indemnified
Representative” means Overture (with respect to an
indemnification claim by a Overture Indemnified Party), JNF
(with respect to an indemnification claim by a JNF Indemnified
Party) and the Sponsor (with respect to an indemnification claim
by such Sponsor). For the purposes of this Agreement, the
“Indemnifying Representative” means JNF (with
respect to an indemnification claim by an Overture Indemnified
Party or a Sponsor), Overture (with respect to an
indemnification claim by a JNF Indemnified Party) and the
Sponsor (with respect to an indemnification claim by a JNF
Indemnified Party).]
Section 9.11 Public
Announcements. The parties agree that no
public release, announcement, public statement or communication
concerning this Agreement, the Transaction Agreements or the
Transactions shall be issued by a party or any of its Affiliates
without the prior written consent of JNF or Overture (which
consent shall not be unreasonably withheld, conditioned or
delayed), except as such release or announcement may be required
by applicable Law or the rules or regulations of any securities
exchange, in which case the applicable party shall use
reasonable best efforts to allow the other party reasonable time
to comment on such release or announcement in advance of such
issuance; provided, however, that either Overture or JNF may
make any public statement in response to specific questions by
the press, analysts, investors or those attending industry
conferences or financial analyst conference calls, so long as
any such statements are not inconsistent with previous public
releases, announcements, public statement or communications made
by Overture or JNF in compliance with this Agreement.
Section 9.12 Proxy
Statement.
(a) Simultaneously with the date of this Agreement or, if
such date is impractical, promptly thereafter, Overture shall
prepare and file with the SEC the
S-4 and a
proxy statement (the “Proxy Statement”) for the
purpose of, among other things, registering the Company’s
warrants and the Overture Ordinary Shares underlying such
warrants and soliciting proxies from (i) holders of
Overture Ordinary Shares to vote, at a meeting of the holders of
Overture Ordinary Shares to be called for such purpose (the
“Extraordinary General Meeting”), in favor of,
among other things, (A) the adoption of this Agreement and
the approval of the Transactions, (B) the adoption of the
amendment and restatement of the Charter to effectuate
(x) a change in
the name of Overture, (y) the elimination of the staggered
board provisions, and (z) the repurchase of certain
Overture Ordinary Shares issued in Overture’s initial
public offering, (C) the redemption of the Sponsors’
Overture Ordinary Shares, (D) the election of certain
directors, (E) the adoption of the Equity Incentive Plan,
(F) any other proposals the parties deem necessary to
consummate the Transactions, and (G) an adjournment
proposal (items (i)(A) through (i)(G), collectively, the
“Proxy Matters”), and (ii) (A) holders of
the Overture Warrants to amend the terms of the Warrant
Agreement, dated January 30, 2008, by and between Overture
and American Stock Transfer and Trust Company, as warrant
agent, to amend the exercise price of the Overture Warrants to
$11.00 per warrant (the “Warrant Amendment”),
and (B) an adjournment proposal. Overture agrees that the
Proxy Statement and the Other Filings does and will comply in
all material respects with all applicable Laws, rules and
regulations promulgated thereunder.
(b) The JNF Parties acknowledges that a substantial portion
of the S-4
and the Proxy Statement shall include disclosure regarding the
JNF Parties and its respective management, operations and
financial condition. Accordingly, each of the JNF Parties agrees
to promptly provide Overture with accurate and complete
information concerning it and its management and operations and
financial condition required to be included in the
S-4 and the
Proxy Statement. The JNF Parties shall make its managers,
directors, officers and employees available to Overture and its
Representative in connection with the drafting of the
S-4 and the
Proxy Statement and responding in a timely manner to comments on
the S-4 and
the Proxy Statement. Overture shall not file the Proxy Statement
without the prior consent of JNF, such consent not to be
unreasonably withheld.
(c) Overture, with the assistance of the JNF Parties, shall
promptly respond to any SEC comments on the
S-4 and the
Proxy Statement and shall use reasonable best efforts to have
the S-4
declared effective and the Proxy Statement cleared by the SEC
under the Exchange Act as soon after filing as practicable.
(d) Overture will advise JNF, promptly after it receives
notice thereof, of the time when the
S-4 is
declared effective and the Proxy Statement has been cleared by
the SEC under the Exchange Act or any supplement or amendment to
the S-4 or
the Proxy Statement has been filed, or any request by the SEC
for amendment of the
S-4 or the
Proxy Statement or comments thereon and responses thereto or
requests by the SEC for additional information. No amendment or
supplement to the
S-4 or the
Proxy Statement shall be filed without the approval of JNF,
which approval shall not be unreasonably withheld.
(e) If at any time prior to the Closing, any information
relating to the Overture Parties, the JNF Parties or any of
their respective subsidiaries, Affiliates, officers, managers or
directors, should be discovered and that should be set forth in
an amendment or supplement to the
S-4 or the
Proxy Statement, so that such document would not include any
misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the
party which discovers such information shall promptly notify the
other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC
and, to the extent required by Law, disseminated to the
stockholders of Overture.
Section 9.13 Extraordinary
General Meeting; Mailing of Proxy
Statement. As promptly as practicable
following the execution of this Agreement, Overture, acting
through the board of directors of Overture, shall, in accordance
with applicable Law:
(a) duly call, give notice of, convene and hold the
Extraordinary General Meeting for the purposes described in
Section 9.12(a). Overture shall (i) use
reasonable best efforts to solicit the approval of this
Agreement, the Transaction Agreements and the Transactions by
the stockholders of Overture, (ii) include in the Proxy
Statement (1) the Overture board of directors’
declaration of the advisability of this Agreement and its
recommendation to the stockholders of Overture that they adopt
this Agreement and approve the Transactions, and (2) all
other requests or approvals necessary to consummate the
Transactions including, without limitation, the proposals set
forth in Section 9.12(a) (other than those regarding
adjournment) and (iii) use reasonable best efforts to
solicit the approval of the Warrant Amendment by the holders of
the Overture Warrants. Notwithstanding the foregoing, Overture
may adjourn or postpone the Extraordinary General Meeting as and
to the extent permitted by applicable Law. Overture shall use
its commercially
reasonable efforts to cause the Proxy Statement to be mailed to
its stockholders and warrantholders as promptly as
practicable; and
(b) promptly transmit any amendment or supplement to its
stockholders, if at any time prior to the Extraordinary General
Meeting there shall be discovered any information that should be
set forth in an amendment or supplement to the Proxy Statement.
Section 9.14 Other
Actions. Notwithstanding anything to the
contrary in Section 9.12:
(a) as promptly as practicable after the execution of this
Agreement, Overture will prepare and file any other filings
required under the Securities Act or Exchange Act or any other
federal, foreign, blue sky Law relating to the Transactions
(“Other Filings”).
(b) as promptly as practicable after the execution of this
Agreement, Overture and JNF shall mutually agree on and issue a
press release announcing the execution of this Agreement (the
“Signing Press Release”). Immediately after the
issuance of the Signing Press Release, Overture shall prepare
and file a Current Report on
Form 8-K
pursuant to the Exchange Act to report the execution of this
Agreement, attaching this Agreement and the Signing Press
Release thereto (“Signing
Form 8-K”),
which JNF shall review, comment upon and approve (which approval
shall not be unreasonably withheld, conditioned or delayed)
prior to filing.
(c) as promptly as practicable after the voting results at
the Extraordinary General Meeting are known, Overture shall
prepare a draft
Form 8-K
announcing such results, and announcing the Closing, if
applicable, together with, or incorporating by reference, such
other information that may be required to be disclosed with
respect to such results, in any report or form to be filed with
the SEC (“Closing
Form 8-K”),
which JNF shall review, comment upon and approve (which approval
shall not be unreasonably withheld, conditioned or delayed)
prior to filing. As promptly as practicable after the voting
results at the Extraordinary General Meeting are known, Overture
and JNF shall mutually agree on and issue a press release
announcing such voting results and, if applicable, the
consummation of the Transaction (“Closing Press
Release”). Concurrently with the Closing, Overture
shall distribute the Closing Press Release and shall file the
Closing
Form 8-K
with the SEC.
Section 9.15 Required
Information. In connection with the
preparation of the Signing
Form 8-K,
the Signing Press Release, the
S-4, the
Proxy Statement, the Closing
Form 8-K,
the Closing Press Release, or any other report, statement,
filing notice or application made by or on behalf of the
Overture Parties and the JNF Parties to any Government
Authority, the NYSE Amex or other third Person in connection
with the Transactions, and for such other reasonable purposes,
the Overture Parties and the JNF Parties each shall, upon
request by the other, furnish the other with all information
concerning themselves, their respective directors, officers,
managers, members, stockholders and equity holders and such
other matters as may be reasonably necessary or advisable in
connection with the Transactions, or any other report,
statement, filing, notice or application made by or on behalf of
the Overture Parties or the JNF Parties to any third Person or
any Governmental Authority in connection with the Transactions.
Section 9.16 Voting
of Overture Ordinary Shares. JNL shall vote
any Overture Ordinary Shares to which JNL acquires prior to the
Closing Date (and to which JNL is permitted to vote on as of the
record date for the Extraordinary General Meeting) to approve
the items set forth in Section 9.13(a) at the
Extraordinary General Meeting.
Section 9.17 Registration
Rights. Prior to the Closing, JNL and
Overture are to enter into a Registration Rights Agreement
substantially in the form attached at Exhibit H hereto (the
“Registration Rights Agreement”) with respect
to any Overture Ordinary Shares acquired by JNL either
(a) through open market purchases prior to the Closing
Date, or (b) pursuant to the Securities Purchase Agreement
at Closing. The Sponsors and Overture are to enter into an
Amended and Restated Registration Rights Agreement substantially
in the form attached at Exhibit I hereto (the
“Amended and Restated Registration Rights
Agreement”) with respect to any Overture Ordinary
Shares or any other equity securities of Overture owned by the
Sponsors at the Closing to be effective as of the Closing Date.
Overture, the Sponsors and JNL are to enter into a Shareholders
Agreement substantially in the form attached at Exhibit J
hereto (the “Shareholders Agreement”) at the
Closing to be effective as of the Closing Date.
Section 9.18 Directors. At
and after the Closing Date, the board of directors of Overture
shall consist of seven (7) members of which (i) four
(4) members shall be nominated by JNL, being David Smilow,
Mitchell H. Caplan, Antoine Schwartz and Dean C. Kehler, and
(ii) three (3) members shall be nominated by Overture
and the Sponsors, being John F. W. Hunt, Marc J. Blazer, and
Andrew H. Lufkin. Immediately after the Closing, David Smilow is
to be the Executive Chairman of Overture and Mitchell H. Caplan
is to be the Vice Chairman and Chief Executive Officer of
Overture.
Section 9.19 JNFAM
Option.
(a) Upon the Closing Date, JNF will grant to Overture an
option to purchase all of the membership interests of JNFAM (the
“JNFAM Option”) and Overture hereby accepts the
JNFAM Option. The consideration for issuance for the JNFAM
Option is to be $1.00, payable by Overture to JNF on the Closing
Date, and such other good and valuable consideration the receipt
and adequacy of which JNF hereby acknowledges. The parties
hereto anticipate that JNFAM will be a registered investment
advisor as of the date that is six (6) months after the
Closing Date and if JNFAM is not, another entity indirectly or
directly owned by JNF may become a registered investment advisor
and will become the subject of the JNFAM Option instead of JNFAM.
(b) The JNFAM Option may be exercisable at anytime during
the Option Period by delivery of the Option Notice in accordance
with clause (c) prior to such expiration.
(c) In the event that Overture wishes to exercise the JNFAM
Option, it shall give written notice (an “Option
Notice”) to JNF (the date of delivery of such notice
being the “Notice Date”) specifying a date,
which shall be no later than thirty (30) Business Days and
no earlier than five (5) Business Days following the Notice
Date, for the execution and delivery of a purchase agreement by
and among JNFAM, JNF and Overture setting forth the terms of the
acquisition of JNFAM by Overture and the delivery of the
exercise purchase price of up to $3.5 million, as
contemplated by the JNFAM Option on terms to be agreed by the
parties.
(d) During the Option Period, JNF shall not transfer, sell
or dispose any portion of its membership interest in JNFAM to
any Person nor allow or permit any Encumbrance to be attached to
such membership interest.
Section 9.20 Amendment
of Escrow Agreement. In addition to the
Sponsors’ Agreement, each of the Sponsors and Overture have
executed an amendment to that certain Escrow Agreement, dated
January 30, 2008, by and among the Sponsors, Overture and
American Stock Transfer and Trust Company to reflect the
redemption of the Overture Ordinary Shares by Overture pursuant
to this Agreement and the Sponsors’ Agreement (the
“Escrow Agreement Amendment”).
ARTICLE X
CLOSING
CONDITIONS
Section 10.01 Conditions
Precedent to the Obligations of Each
Party. The obligation of each party hereto to
consummate the Closing on the Closing Date is subject to the
satisfaction and fulfillment (or the waiver thereof by the party
entitled to waive that condition) at or prior to the Closing of
each of the following conditions:
(a) No statute, rule, or regulation shall have been
enacted, entered, or promulgated and no Law shall have been
issued by any Governmental Authority restraining, enjoining or
otherwise prohibiting the consummation of the Transactions and
there shall not have been adopted any Law or regulation making
all or any portion of the Transactions illegal.
(b) The parties hereto shall have received the
authorizations, approvals, and consents of the Persons and
Governmental Authorities identified in
Sections 10.03 and 3.03 of the JNF Disclosure
Schedule, Section 8.03 of the Overture Disclosure
Schedule and Section 9.03 without any condition or
requirement which, either alone or together with all such other
conditions or requirements, would (i) be materially
inconsistent with any material term of this Agreement or the
Transaction Agreements, (ii) reasonably be expected to
materially and
adversely affect the benefits, taken as a whole, which either
party would otherwise receive from the Transactions, or
(iii) reasonably be expected to materially increase
(A) Newco’s risk of paying a material amount,
individually or in the aggregate, in claims under the Scheduled
Annuities or (B) JNL’s risk of paying a material
amount, individually or in the aggregate, in claims under risks
it insures or guarantees other than the Scheduled Annuities.
(c) The Required Parent Vote shall have been obtained with
respect to the Proxy Matters in accordance with Overture’s
Charter and the Laws of the jurisdiction of its formation and
the rules and regulations of the NYSE Amex and the stockholders
of Overture holding thirty percent (30%) or more of the Overture
Ordinary Shares shall not have voted against the Transactions
and exercised their conversion rights under Overture’s
Charter to convert their Overture Ordinary Shares into a cash
payment from the Trust Account.
(d) The Warrant Amendment is approved by the holders of the
Overture Warrants at the Extraordinary General Meeting.
(e) Overture and its underwriters and financial advisors
have entered into the Compensation Amendment Agreements.
(f) Newco has received all necessary licenses, Permits and
approvals from all Governmental Authorities and has taken all
actions required to be duly registered, licensed, or admitted as
an insurer under applicable Insurance Laws in each jurisdiction
where it is or will be required to be so licensed or admitted to
conduct its business as it relates to the Scheduled Annuities
after the Closing Date, including Bermuda.
(g) Each of the Transaction Agreements shall have been
fully executed by the parties thereto and delivered to the
parties hereto.
(h) The amount of the payments to be made pursuant to the
expected redemptions of Overture Ordinary Shares by shareholders
of Overture and any future purchase contracts entered into by
Overture with respect to the Overture Ordinary Shares shall not
be in excess of $50,000,000 in the aggregate.
Section 10.02 Conditions
Precedent to the Obligations of the JNF
Parties. The obligation of each of the JNF
Parties to consummate the Closing on the Closing Date is subject
to the satisfaction and fulfillment at or prior to the Closing
of each of the following conditions (to the extent noncompliance
is not waived in writing by JNF on behalf of the JNF Parties):
(a) The representations and warranties made by each of the
Overture Parties herein and in any Transaction Agreement shall
be true and correct at and as of the Closing Date as though made
on the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and
correct on and as of such earlier date) and except where such
failure to be true and correct would not reasonably be expected,
individually or in the aggregate, to have an Overture Material
Adverse Effect on any of the Overture Parties taken as a whole.
(b) The representations and warranties made by each Sponsor
herein and in any Transaction Agreement shall be true and
correct at and as of the Closing Date as though made on the
Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case
such representations and warranties shall be true and correct on
and as of such earlier date).
(c) Each of the Overture Parties shall have performed in
all material respects all agreements and complied with all
covenants contained herein and in any Transaction Agreement
required to be performed or complied with by it prior to or at
the Closing.
(d) Each Sponsor shall have performed in all material
respects all agreements and complied with all covenants
contained herein and in any Transaction Agreement required to be
performed or complied with by him or her prior to or at the
Closing.
(e) JNF shall have received certificates from an authorized
officer of each of the Overture Parties, dated at and as of the
Closing Date, in form and substance reasonably satisfactory to
JNF, certifying that the conditions specified in
Sections 11.02(a) and (c) have been fulfilled.
(f) JNF shall have received a certificates from each
Sponsor, dated at and as of the Closing Date, in form and
substance reasonably satisfactory to JNF, certifying that the
conditions specified in Sections 11.02(b) and
(d) have been fulfilled.
(g) Each of the Overture Parties shall have delivered to
JNF a true copy of the resolutions of the respective board of
directors of the Overture Parties authorizing the execution of
this Agreement and Transaction Agreements and the consummation
of the transactions contemplated herein and therein, certified
by the respective Secretary of the Overture Parties or similar
officer.
(h) Holdco shall have formed Newco;
(i) No Overture Material Adverse Effect with respect to the
Overture Parties shall have occurred since the date of this
Agreement.
(j) Overture shall have obtained written confirmation from
the Federal Trade Commission that the Transactions do not need
to be approved or an application does not need to be filed with
respect to the Transactions pursuant to the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
(k) JNF shall have received an opinion of the Overture
Parties’ counsel, Ellenoff Grossman & Schole LLP,
in form and substance reasonably acceptable to JNF, addressed to
JNF, and dated as of the Closing Date.
(l) JNF shall have received an opinion of the Overture
Parties’ counsel, Maples and Calder, in form and substance
reasonably acceptable to JNF, addressed to JNF, and dated as of
the Closing Date.
(m) JNF shall have received an opinion of the Overture
Parties’ counsel, Appleby’s, in form and substance
reasonably acceptable to JNF, addressed to JNF, and dated as of
the Closing Date.
(n) The board of directors of Overture shall be constituted
as set forth in Section 9.18, effective as of the
Closing Date.
(o) The stockholders of Overture shall have approved the
Equity Incentive Plan.
(p) JNF shall have received the Escrow Agreement Amendment
duly executed by the Sponsors, Overture and American Stock
Transfer and Trust Company.
(q) Overture and the Sponsors shall have executed and
delivered the Sponsors’ Agreement.
Section 10.03 Conditions
Precedent to the Obligations of the Overture
Parties. The obligations of each of the
Overture Parties to consummate the Closing on the Closing Date
is subject to the satisfaction and fulfillment at or prior to
the Closing of each of the following conditions (to the extent
noncompliance is not waived in writing by Overture on behalf of
the Overture Parties):
(a) The representations and warranties made by each of the
JNF Parties herein and in any Transaction Agreement shall be
true and correct at and as of the Closing Date as though made on
the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case
such representations and warranties shall be true and correct on
and as of such earlier date), in all respects except where such
failure to be true and correct would not reasonably be expected,
individually or in the aggregate, to have a JNF Material Adverse
Effect on the JNF Parties taken as a whole.
(b) Each of the JNF Parties shall have performed in all
material respects all obligations and all agreements and
complied with all covenants contained herein and in any
Transaction Agreement required to be performed or complied with
by it prior to or at the Closing.
(c) Overture shall have received a certificate from an
authorized officer of each of the JNF Parties, dated at and as
of the Closing Date, in form and substance reasonably
satisfactory to Overture, certifying that the conditions
specified in Sections 11.03(a) and (b) have
been fulfilled.
(d) Each of the JNF Parties shall have delivered to
Overture a true copy of the resolutions of the JNF Parties
authorizing the execution of this Agreement and Transaction
Agreements and the consummation of the transactions contemplated
herein and therein, certified by the respective Secretary of
each of the JNF Parties or similar officer.
(e) No JNF Material Adverse Effect shall have occurred with
respect to the JNF Parties since the date of this Agreement.
(f) Overture shall have received an opinion of the JNF
Parties’ counsel, Cadwalader, Wickersham & Taft
LLP, in form and substance reasonably acceptable to Overture,
addressed to Overture, and dated as of the Closing Date.
(g) Overture shall have received an opinion of the general
counsel of JNF, in form and substance reasonably acceptable to
Overture, addressed to Overture, and dated as of the Closing
Date.
(h) Overture shall have received an opinion of the Overture
Parties’ counsel, Maples and Calder, in form and substance
reasonably acceptable to Overture, addressed to Overture, and
dated as of the Closing Date.
(i) Overture shall have received an opinion of the Overture
Parties’ counsel, Appleby’s, in form and substance
reasonably acceptable to Overture, addressed to Overture, and
dated as of the Closing Date.
(j) JNL and JNL Bermuda shall have entered into the
Reinsurance Option and Contribution Agreement.
(k) JNL shall have acquired 24.5% of the Overture Ordinary
Shares as of the Closing, either through (a) open market
purchases of the Overture Ordinary Shares,
and/or
(b) through a private placement of shares of Overture
Ordinary Shares pursuant to the Securities Purchase Agreement
and/or
(c) a combination thereof.
(l) JNL Bermuda and JNFAM shall have entered into the
Investment Management Agreement.
(m) JNL, the Sponsors and Overture shall have entered into
the Shareholders Agreement.
(n) JNF shall have contributed the Securities Portfolio to
JNL Bermuda.
(o) Newco shall have assumed by operation of the
Amalgamation the Investment Management Agreement and the
Reinsurance Option and Contribution Agreement.
(p) Newco and JNL shall have entered into the Quota Share
Reinsurance Agreement.
(q) The Sponsors shall have received the JNF Warrants
pursuant to the Warrant Purchase Agreement as executed by JNF
and the Sponsors.
Section 10.04 Frustration
of Closing Conditions. No party hereto may
rely on the failure of any condition set forth in this
Article XI if such failure was primarily caused by
the failure of such party (or its Affiliates) to comply with its
(or its Affiliates’) obligations or any provision under
this Agreement.
ARTICLE XI
TERMINATION
Section 11.01 Termination. This
Agreement may be terminated and the Transactions may be
abandoned at any time prior to the Closing Date:
(a) by mutual written consent of the parties hereto;
(b) by any of the JNF Party, on the one hand, or the
Overture Parties and the Sponsors, on the other hand, if the
Closing conditions set forth in Section 10.01(a)
cannot be satisfied by the Outside Date;
(c) by any of the JNF Parties, on the one hand, or the
Overture Parties or the Sponsors, on the other hand, if the
Closing Date has not occurred on or before
5:00 p.m. New York City time on January 30, 2010
(such date, the “Outside Date”) (or such later
date as may be agreed in writing to by the parties hereto);
provided, however, that the right to terminate
this Agreement pursuant to this Section 11.01(c)
will not be available to any party hereto whose failure (or
failure of its Affiliates) to fulfill any of its (or its
Affiliates’) obligations contained in this Agreement has
been the cause of, resulted in, or contributed to the failure of
the Closing to have occurred on or prior to the Outside Date;
(d) by the JNF Parties if any of the Overture Parties
materially breach any representation, warranty, or covenant
contained in this Agreement such that the conditions set forth
in Section 10.02(a) or (c) would not
be satisfied, such breach cannot be cured by the Outside Date
and such breach results in an Overture Material Adverse Effect
to the Overture Parties taken as a whole; or
(e) by the JNF Parties if any of the Sponsors materially
breach any representation, warranty, or covenant contained in
this Agreement such that the conditions set forth in
Sections 11.02(b) or (d) would not be
satisfied, such breach cannot be cured by the Outside
Date; or
(f) by the Overture Parties, if any of the JNF Parties
materially breach any representation, warranty, or covenant
contained in this Agreement such that the conditions set forth
in Section 10.03(a) or (b) would not be
satisfied, such breach cannot be cured by the Outside Date and
such breach results in a JNF Material Adverse Effect to the JNF
Parties taken as a whole.
(g) by Overture or JNF if any Transaction Agreement is
terminated.
Section 11.02 Effect
of Termination. In the event of termination
of this Agreement pursuant to Section 11.01, this
Agreement and all Transaction Agreements will forthwith become
void and there will be no liability under this Agreement or any
Transaction Agreement on the part of any party hereto, except to
the extent that such termination results from the willful and
material breach by a party of this Agreement provided,
however, that the provisions of
Sections 10.04, 10.08,
Sections 13.01 though 13.14, and this
Section 11.02 will each remain in full force and
effect and will survive any termination of this Agreement. In
the event of termination of this Agreement, none of the parties
hereto shall be obligated to proceed with the Transactions. If
Closing does not occur and the Transactions are not consummated
by the Outside Date, any and all of the Transaction Agreements
that have been executed and delivered shall terminate and become
forthwith void. If Closing does not occur, JNL or any of its
Affiliates that may hold Overture Ordinary Shares purchased in
the open market (e.g. excluding the Overture Ordinary Shares
purchased pursuant the Securities Purchase Agreement) shall be
entitled to liquidation rights and receive funds from the
Trust Account with respect to such shares on a pro rata
basis with the other holders of the Overture Ordinary Shares.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Trust Account
Waiver.
(a) The JNF Parties each acknowledge that Overture is a
blank check company formed for the purpose of acquiring one or
more businesses or assets (an “Initial Business
Combination”). The JNF Parties each further
acknowledges that Overture’s sole assets consist of the
cash proceeds of its initial public offering and private
placements of its securities, and that substantially all of
those proceeds have been deposited in the trust account for the
benefit of Overture, certain of its public stockholders and the
underwriters of the Overture’s initial public offering (the
“Trust Account”). For and in consideration
of Overture’s entering into this Agreement, the receipt and
sufficiency of which is hereby acknowledged, each of the JNF
Parties, on behalf of itself and any of their respective
managers, directors, officers, Affiliates, members,
shareholders, trustees or subsidiaries, hereby irrevocably waive
any right, title, interest or claim of any kind (any
“Claim”) they have or may have in the future in
or to any monies in the Trust Account and agree not to seek
recourse against the Trust Account or any funds distributed
therefrom as a result of, or arising out of, any Claims against
Overture arising under this Agreement or the Transaction
Agreements. Notwithstanding the provisions of this
Section 12.01, the foregoing waiver shall not apply
to (i) Claims for the Purchase Price in the event Closing
does occur pursuant to the terms and conditions of this
Agreement, or (ii) in the event Closing does not occur
pursuant to the terms and conditions of this Agreement, Claims
for liquidation rights and receiving funds from the
Trust Account with respect to those Overture Ordinary
Shares the JNF Parties purchased in the open market (e.g.
excluding the Overture Ordinary Shares purchased pursuant the
Securities Purchase Agreement).
(b) In the event the JNF Parties commence any Action based
upon, in connection with, relating to or arising out of any
matter relating to Overture, which proceeding seeks, in whole or
in part, relief against the Trust Account and/ or its
assets or the Overture’s public stockholders, whether in
the form of money damages
or injunctive relief, Overture shall be entitled to recover from
the JNF Parties the associated legal fees and costs in
connection with any such Action.
Section 12.02 Specific
Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance
with its specific terms hereof or were otherwise breached. In
the event of any actual or threatened breach of any of the
terms, conditions and provisions of this Agreement or any other
Transaction Agreement prior to the consummation of the
Transactions, the party or parties who are or are to be
aggrieved shall be entitled to seek an injunction or injunctions
to prevent breaches of this Agreement or to enforce specifically
the performance of the terms, conditions and provisions under
this Agreement.
Section 12.03 Amendment;
Waiver. Subject to applicable Law, this
Agreement may be amended, modified, or supplemented or changed,
and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by
the party against whom enforcement of any such amendment,
supplement, modification or waiver is sought. Except as
otherwise provided in this Agreement, the failure by any Person
to comply with any obligation, covenant, or condition under this
Agreement may be waived by the Person entitled to the benefit
thereof only by a written instrument signed by the Person
granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement, or
condition will not operate as a waiver or continuing waiver of,
or estoppel with respect to, any subsequent or other failure.
The failure of any Person to enforce at any time any of the
provisions of this Agreement will in no way be construed to be a
waiver or continuing waiver of any such provision, nor in any
way to affect the validity of this Agreement or any part hereof
or the right of any Person thereafter to enforce each and every
such provision. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of such right, power or remedy by
such party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other
remedies provided by Law.
Section 12.04 Notices. All
notices, consents, claims, demands, waivers, and other
communications under this Agreement shall be in writing and
shall be given or made (and shall be deemed to have been duly
given or made upon receipt) by delivery in person, by an
internationally recognized overnight courier service, by
facsimile, electronic mail or in Portable Document Format (upon
electronic confirmation of delivery) or by registered or
certified mail (postage prepaid, return receipt requested), to
the respective parties hereto at the following addresses (or at
such other address for a party as shall be specified in a notice
given in accordance with this Section 12.04):
If to JNF:
Jefferson National Financial Corp.
9920 Corporate Campus Drive, Suite 1000 Louisville, Kentucky40223
Facsimile:
502-213-2970
Electronic Mail: chawley@jeffnat.com
Attention: Craig A. Hawley
General Counsel & Secretary
With a copy (which shall not constitute notice) to:
Cadwalader, Wickersham & Taft LLP
One World Financial Center New York, NY10281
Facsimile:
(212) 504-6666
Electronic Mail: ira.schacter@cwt.com
Attention: Ira J. Schacter, Esq.
Jefferson National Life Insurance Company
9920 Corporate Campus Drive, Suite 1000 Louisville, Kentucky40223
Electronic Mail: chawley@jeffnat.com
Facsimile:
502-213-2970
Attention: Craig A. Hawley
General Counsel & Secretary
With a copy (which shall not constitute notice) to:
Cadwalader, Wickersham & Taft LLP
One World Financial Center New York, NY10281
Facsimile:
(212) 504-6666
Electronic Mail: ira.schacter@cwt.com
Attention: Ira J. Schacter, Esq.
If to JNL Bermuda:
JNL Bermuda LLC
c/o Jefferson
National Financial Corp.
9920 Corporate Campus Drive, Suite 1000 Louisville, Kentucky40223
Electronic Mail: chawley@jeffnat.com
Facsimile:
502-213-2970
Attention: Craig A. Hawley
General Counsel & Secretary
With a copy (which shall not constitute notice) to:
Cadwalader, Wickersham & Taft LLP
One World Financial Center New York, NY10281
Facsimile:
(212) 504-6666
Electronic Mail: ira.schacter@cwt.com
Attention: Ira J. Schacter, Esq.
If to JNFAM:
JNF Asset Management, LLC
9920 Corporate Campus Drive, Suite 1000 Louisville, Kentucky40223
Electronic Mail: chawley@jeffnat.com
Facsimile:
502-213-2970
Attention: Craig A. Hawley
General Counsel & Secretary
With a copy (which shall not constitute notice) to:
Cadwalader, Wickersham & Taft LLP
One World Financial Center New York, NY10281
Facsimile:
(212) 504-6666
Electronic Mail: ira.schacter@cwt.com
Attention: Ira J. Schacter, Esq.
Overture Acquisition Corp.
c/o Maples
Corporate Services Limited
PO Box 309
Ugland House
Grand Cayman, KY 1-1104
Cayman Islands
Electronic Mail: blazer@overtureac.com
Attention: Marc Blazer
With a copy (which shall not constitute notice) to:
Ellenoff Grossman & Schole LLP
150 East 42nd Street
Facsimile:
(212) 370-7889
Electronic Mail: ellenoff@egsllp.com
Attention: Douglas S. Ellenoff
If to Holdco:
Overture Re Holdings Ltd.
c/o Maples
Corporate Services Limited
PO Box 309
Ugland House
Grand Cayman, KY 1-1104
Cayman Islands
Electronic Mail: blazer@overtureac.com
Attention: Marc Blazer
With a copy (which shall not constitute notice) to:
Ellenoff Grossman & Schole LLP
150 East 42nd Street
Facsimile:
(212) 370-7889
Electronic Mail: ellenoff@egsllp.com
Attention: Douglas S. Ellenoff
If to Newco:
Overture Re Ltd.
c/o Maples
Corporate Services Limited
PO Box 309
Ugland House
Grand Cayman, KY 1-1104
Cayman Islands
Electronic Mail: blazer@overtureac.com
Attention: Marc Blazer
With a copy (which shall not constitute notice) to:
Ellenoff Grossman & Schole LLP
150 East 42nd Street
Facsimile:
(212) 370-7889
Electronic Mail: ellenoff@egsllp.com
Attention: Douglas S. Ellenoff
With a copy (which shall not constitute notice) to:
Ellenoff Grossman & Schole LLP
150 East 42nd Street
Facsimile:
(212) 370-7889
Electronic Mail: ellenoff@egsllp.com
Attention: Douglas S. Ellenoff
Section 12.05 Third-Party
Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties
hereto and their respective successors and permitted assigns,
and nothing herein, express or implied, is intended to or shall
confer upon any other Person any legal or equitable right,
benefit, remedy or right of Action of any nature whatsoever,
arising directly or indirectly out of, based upon or in any way
related to or in connection with this Agreement or the
Transaction Agreements.
Section 12.06 Successors
and Assigns. No party hereto may assign this
Agreement or any of its rights or obligations hereunder without
the prior written consent of the other parties hereto, and any
attempt to make any such assignment (by operation of Law or
otherwise) without such consent will be null and void. Any
assignment will not relieve the party making the assignment from
any liability under this Agreement. Upon any such permitted
assignment, the references in this Agreement to any party hereto
shall also apply to any such party’s assignee unless the
context otherwise requires.
Section 12.07 Governing
Law. This Agreement will be governed by and
construed in accordance with the internal Laws of the State of
New York, without regard to any applicable conflict of Laws
principles.
Section 12.08 Submission
to Jurisdiction; Waivers. Each party hereby
irrevocably agrees that any Legal Proceeding with respect to,
arising out of, connected to or otherwise relating to this
Agreement, the Transaction Agreements or the Transactions may be
brought and determined in any federal or state court located in
the State and City of New York in the Borough of Manhattan, and
each party hereby irrevocably submits with regard to any such
Legal Proceeding for itself and in respect to its property,
generally and unconditionally, to the exclusive jurisdiction of
the aforesaid courts. Each party hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense,
counterclaim, or otherwise, in any Legal Proceeding with respect
to this Agreement, the Transaction Agreements or the
Transactions (i) any claim that it is not personally
subject to the jurisdiction of the above-named courts for any
reason other than the failure to lawfully serve process,
(ii) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment, or otherwise), and
(iii) to the fullest extent permitted by applicable Law,
that (a) the Legal Proceeding in any such court is brought
in an inconvenient forum, (b) the venue of such Legal
Proceeding is improper, and (c) this Agreement, the
Transaction Agreements or the Transactions may not be enforced
in or by such courts. Each party hereto agrees that service of
any process, summons, notice or document on such party as
provided in Section 12.04 shall be effective service
of process for any Legal Proceeding brought against such party
in such courts. Each party hereto further agrees that a judgment
in any such dispute may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by Law.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION ARISING OUT OF OR RELATED
TO THIS AGREEMENT, THE TRANSACTION AGREEMENTS, OR THE
TRANSACTIONS.
Section 12.09 Partial
Invalidity and Severability. All rights and
restrictions contained herein may be exercised and will be
applicable and binding only to the extent that they do not
violate any applicable Laws and are intended to be limited to
the extent necessary to render this Agreement legal, valid, and
enforceable. If any term or other provision of this Agreement,
or part thereof, not essential to the purpose of this Agreement
will be held to be illegal, invalid, or unenforceable by a court
of competent jurisdiction, it is the intention of the parties
hereto that the remaining terms hereof, or part thereof will
constitute their agreement with respect to the subject matter
hereof and all such remaining terms, or parts thereof, will
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid,
illegal, or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties hereto as closely as
possible in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated
to the greatest extent possible.
Section 12.10 Entire
Agreement. This Agreement (including the
Transaction Agreements, and the appendixes, schedules and
exhibits attached hereto), and the Confidentiality Agreement,
constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the
parties hereto with respect to the subject matter of this
Agreement.
Section 12.11 Definitions. In
addition to the terms defined elsewhere herein, as used in this
Agreement, the following terms have the meanings specified below:
(a) “Action” means any legal,
administrative, governmental or regulatory proceeding or other
action, suit, proceeding, claim, arbitration, mediation,
alternative dispute resolution procedure, inquiry or
investigation by or before any arbitrator, mediator, court or
other Governmental Authority.
(b) “Affiliate” means, with respect to any
particular Person, any other Person which, directly or
indirectly, controls or is controlled by or under common control
with such particular Person. A Person will be “controlled
by” any other Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such Person, whether through the
ownership of voting securities, contract, or otherwise.
(c) “Business Day” means any day other
than a Saturday, Sunday or other day on which national
commercial banking institutions located in New York, New York,
Bermuda or the Cayman Islands are authorized by Law to close.
Any event the scheduled occurrence of which would fall on a day
that is not a Business Day will be deferred until the next
succeeding Business Day.
(d) “Charter” means the Amended and
Restated Memorandum and Articles of Association of Overture
Acquisition Corp.
(e) “Exchange Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
of the SEC promulgated thereunder, all as the same shall be in
effect at the time.
(f) “GAAP” means United States generally
accepted accounting principles consistently applied, as in
effect from time to time.
(g) “Governmental Authority” means any
nation or government, any state or other political subdivision
thereof, and any central bank thereof, any municipal, local,
city, or county government, and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions
of or pertaining to government, and any corporation, or other
entity owned or controlled, through stock or capital ownership
or otherwise, by any of the foregoing.
(h) “JNF Material Adverse Effect” means,
with respect to the JNF Parties, any circumstance, change in or
effect on the JNF Parties that, individually or in the aggregate
with all other circumstances, is or is reasonably likely to be
materially adverse to (a) the business, operations, assets
or liabilities (including contingent liabilities), employee
relationships, customer relationships, results of operations or
the condition (financial or otherwise) of any of the JNF
Parties, or (b) the ability of any JNF Party to consummate
the Transactions; other than any effect resulting from
(i) the effect of any change in the United States or
foreign
economies or securities or financial markets in general;
(ii) the effect of any change that generally affects any
industry in which the JNF Parties operate except to the extent
such change has a disproportionate effect on the JNF Parties;
(iii) the effect of any change arising in connection with
earthquakes, hostilities, acts of war, sabotage or terrorism or
military actions or any escalation or material worsening of any
such hostilities, acts of war, sabotage or terrorism or military
actions existing or underway; (iv) the execution,
performance or compliance by the JNF Parties with this Agreement
and the Transaction Agreements; (v) the effect of any
changes in applicable Laws or accounting rules; or (vi) any
effect resulting from the public announcement of this Agreement
or the consummation of the Transactions.
(i) “JNF Parties” means JNF, JNL, JNL
Bermuda and JNFAM.
(j) “Knowledge”, with respect to any
Person, means the actual knowledge of the executive officers of
such Person after reasonable inquiry.
(k) “Law” means any federal, national,
supranational, state, provincial, local or similar statute, law,
ordinance, regulation, rule (including any rules regarding
discovery), code, order (including injunction, judgment, decree,
ruling, writ, assessment, or arbitration award), requirement or
rule of law (including common law) enacted, promulgated, issued,
or entered by a Governmental Authority.
(l) “Legal Proceeding” means any judicial,
administrative or arbitral actions, suits, material inquiry,
investigations, proceedings, or claims (including counterclaims)
by or before a Governmental Authority.
(m) “Lien” means any charge, or other
claim, community property interest, condition, equitable
interest, lien, encumbrance, option, proxy, pledge, security
interest, mortgage, right of first refusal, right of first
offer, retention of title agreement, defect of title or
restriction of any kind or nature, including any restriction on
use, voting, transfer, receipt of income or exercise of any
other attribute of ownership.
(n) “Overture Material Adverse Effect”
means, with respect to the Overture Parties, any circumstance,
change in or effect on the Overture Parties that, individually
or in the aggregate with all other circumstances, is or is
reasonably likely to be materially adverse to (a) the
business, operations, assets or liabilities (including
contingent liabilities), employee relationships, customer
relationships, results of operations or the condition (financial
or otherwise) of the Overture Parties taken as a whole, or
(b) the ability of the Overture Parties to consummate the
Transactions; other than any effect resulting from
(i) the effect of any change in the United States or
foreign economies or securities or financial markets in general;
(ii) the effect of any change that generally affects any
industry in which the Overture Parties operate except to the
extent such change has a disproportionate effect on the Overture
Parties; (iii) the effect of any change arising in
connection with earthquakes, hostilities, acts of war, sabotage
or terrorism or military actions or any escalation or material
worsening of any such hostilities, acts of war, sabotage or
terrorism or military actions existing or underway;
(iv) the execution, performance or compliance by the
Overture Parties with this Agreement and the Transaction
Agreements; (v) the effect of any changes in applicable
Laws or accounting rules; or (vi) any effect resulting from
the public announcement of this Agreement or the consummation of
the Transactions.
(o) “Overture Parties” means Overture,
Holdco and Newco.
(p) “Person” means an individual,
corporation, limited liability company, association, joint-stock
company, business trust or other similar organization,
partnership, joint venture, trust, unincorporated organization,
or government or any agency, instrumentality, or political
subdivision thereof.
(q) “Representative” means with respect to
any Person, each of such Person’s directors, officers,
employees, attorneys, accountants, advisors, agents, and other
representatives.
(r) “Scheduled Annuity” means those
policies listed in Schedule A to the Quota Share
Reinsurance Agreement.
(s) “Securities Act” means the Securities
Act of 1933, as amended, and the rules and regulations of the
SEC promulgated thereunder, all as the same shall be in effect
at the time.
(t) “Taxes” or “Tax”
means all federal, national, state, province, local and foreign
taxes, charges, duties, fees, levies or other assessments,
including without limitation income, excise, property, sales,
use, gross
receipts, recording, insurance, value addeds, profits, license,
withholding, payroll, employment, capital stock, customs duties,
net worth, windfall profits, capital gains, transfer,
registration, estimated, stamp, social security, environmental,
occupation, franchise or other taxes of any kind whatsoever,
imposed by any Governmental Authority, and all interest,
additions to tax, penalties and other similar amounts imposed
thereon.
(u) “Tax Return” means, with respect to
any Person, all federal, national, state, province, local and
foreign Tax returns, reports, declarations, statements and other
documentation, including any schedule or attachment thereto,
required to be filed by or on behalf of such Person (or any
predecessor) or any consolidated, combined, affiliated or
unitary group of which such Person is or has been a member (but
only with respect to taxable periods during which such Person is
a member thereof), including information returns required to be
provided to any payee or other Person.
(v) “Transaction Agreements” means the
Securities Purchase Agreement, the Reinsurance Option and
Contribution Agreement, Quota Share Reinsurance Agreement,
Investment Management Agreement, Agreement and Plan of
Amalgamation, Warrant Purchase Agreement, Equity Incentive Plan,
Registration Rights Agreement, Shareholders Agreement, the
Amended and Restated Registration Rights Agreement, the
Sponsors’ Agreement, Compensation Amendment Agreements and
the Overture Warrant Amendment Letter Agreement.
The following terms have the meanings set forth in the Sections
listed below:
Section 12.12 Interpretation. The
following rules shall apply to the interpretation of this
Agreement
(a) when a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference is to an
Article or Section of, or a Schedule or Exhibit to, this
Agreement unless otherwise indicated;
(b) the table of contents and headings for this Agreement
are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement;
(c) whenever the words “include,”“includes” or “including” are used in this
Agreement, they are deemed to be followed by the words
“without limitation”;
(d) the words “hereof,”“herein” and
“hereunder” and words of similar import, when used in
this Agreement, refer to this Agreement as a whole and not to
any particular provision of this Agreement;
(e) all terms defined in this Agreement have the defined
meanings when used in any certificate or other document made or
delivered pursuant hereto, unless otherwise defined therein;
(f) the definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms;
(g) any Law defined or referred to herein or in any
agreement or instrument that is referred to herein means such
Law or statute as from time to time may be amended, modified or
supplemented, including by succession of comparable successor
Laws;
(h) any reference to a Person is also to its successors and
permitted assigns; and
(i) the use of “or” is not intended to be
exclusive unless expressly indicated otherwise.
Section 12.13 Joint
Participation. The parties hereto have
participated jointly in negotiating and drafting this Agreement.
In the event that an ambiguity or a question of intent or
interpretation arises, this Agreement will be construed as if
drafted jointly by the parties hereto, and no presumption or
burden of proof will arise favoring or disfavoring any party
hereto by virtue of the authorship of any provision of this
Agreement. The terms of this Agreement and the other Transaction
Agreements shall be considered and interpreted without any
presumption, inference or rule requiring construction or
interpretation of any provision of this Agreement against the
interests of the drafter of this Agreement.
Section 12.14 Counterparts. This
Agreement may be executed in as many counterparts as may be
required, which counterparts may be delivered by facsimile or
electronic mail, and it shall not be necessary that the
signature of, or on behalf of, each party hereto, appear on each
counterpart; but it shall be sufficient that the signature of,
or on behalf of, each party hereto, or that the signatures of
the persons required to bind any party hereto, appear on one or
more such counterparts, each of which will be deemed an
original, and all of which will constitute one and the same
instrument. Delivery of a copy of this Agreement bearing an
original signature by facsimile transmission or by electronic
mail in Portable Document Format form will have the same effect
as physical delivery of the paper document bearing the original
signature.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be signed by their respective duly authorized
officers as of the date first written above.
JEFFERSON NATIONAL LIFE INSURANCE
COMPANY, a Texas insurance company
By:
Name:
Title:
JEFFERSON NATIONAL FINANCIAL CORP., a
Delaware corporation
By:
Name:
Title:
JNL BERMUDA LLC., a Delaware limited liability company
By:
Name:
Title:
JNF ASSET MANAGEMENT, LLC, a Delaware
limited liability company
This Securities Purchase Agreement (as it may from time to time
be amended and including all exhibits referenced herein, this
“Agreement”), is dated as of
[ ,
2009], by and among Overture Acquisition Corp., a Cayman Islands
exempted company (the “Company”), and
Jefferson National Life Insurance Company., a Texas insurance
company (“Purchaser”).
RECITALS
WHEREAS, the Company and Purchaser have entered into a Master
Agreement dated as of December 10, 2009 along with
Jefferson National Financial Corp., JNF Asset Management, LLC,
JNL Bermuda LLC, Overture Re Holdings Ltd. and certain sponsors
of the Company (the “Master Agreement”);
WHEREAS, pursuant to the Master Agreement, the Company and
Purchaser have agreed that Purchaser will acquire ordinary
shares of the Company (the “Ordinary
Shares”) up to 24.5% of the Company either through
(a) open market purchases of the Ordinary Shares and
privately negotiated transfers,
and/or
(b) through a private placement of the Ordinary Shares at a
purchase price of $10.04 per share on the Closing Date; and
WHEREAS, if Purchaser is not able to obtain the entire 24.5% of
the Ordinary Shares through open market purchases or privately
negotiated transfers, the Company will issue Ordinary Shares to
Purchaser in a private placement upon the terms set forth in
this Agreement.
NOW THEREFORE, in consideration of the mutual promises contained
in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby, intending legally to be bound,
agree as follows:
AGREEMENT
Section 1.Authorization,
Purchase and Sale; Terms of the Ordinary Shares.
A. Authorization of the Ordinary
Shares.The Company has duly authorized the
issuance and sale of the Ordinary Shares to Purchaser.
B. Purchase and Sale of Ordinary Shares.
On the Closing Date (as that term is defined in
the Master Agreement), the Company shall issue and sell to
Purchaser, and Purchaser shall purchase from the Company, a
number of the Ordinary Shares to be computed using the formula
on Exhibit A. The purchase price for each Ordinary Share
shall be $10.04 per share, for an aggregate purchase price to be
calculated according to the number of Ordinary Shares determined
by Exhibit A (the “Securities Purchase
Price”), which shall be paid by wire transfer of
immediately available funds to the Company in accordance with
the Company’s wiring instructions. On the Closing Date,
upon the payment by Purchaser of the Securities Purchase Price
by wire transfer of immediately available funds to the Company,
the Company shall deliver to Purchaser certificates evidencing
the Ordinary Shares to be purchased by Purchaser hereunder,
registered in Purchaser’s name.
C. Terms of Ordinary
Shares. (i) Each Ordinary Shares shall
have the terms set forth herein.
(ii) Transfer
Restrictions: Purchaser acknowledges that the
Ordinary Shares are subject to the restrictions on transfer set
forth in Section 8.
(iii) Registration Rights: In
connection with the closing of this Agreement, the Company and
Purchaser shall enter into an agreement (the
“Registration Rights Agreement”)
granting Purchaser registration rights with respect to its
Ordinary Shares.
Section 2. Representations
and Warranties of the Company. As a material
inducement to Purchaser to enter into this Agreement and
purchase the Ordinary Shares, the Company hereby represents and
warrants to Purchaser (which representations and warranties
shall survive the Closing Date) that:
A. Organization and Corporate
Power.The Company is a corporation duly
organized, validly existing and in good standing under the laws
of the Cayman Islands and is qualified to do business in every
jurisdiction in which the failure to so qualify would reasonably
be expected to have a material adverse effect on the financial
condition, operating results or assets of the Company. The
Company possesses all requisite corporate power and authority
necessary to carry out the transactions contemplated by this
Agreement.
B. Authorization; No
Breach. (i) The execution, delivery and
performance of this Agreement and the issuance of the Ordinary
Shares have been duly authorized by the Company as of the
Closing Date. This Agreement constitutes the valid and binding
obligation of the Company, enforceable in accordance with its
terms. This Agreement and, upon issuance in accordance with, and
payment pursuant to, the terms of this Agreement, the Ordinary
Shares constitute valid and binding obligations of the Company,
enforceable in accordance with their respective terms as of the
Closing Date.
(ii) The execution and delivery by the Company of this
Agreement and the issuance of the Ordinary Shares and the
fulfillment of and compliance with the respective terms hereof
and thereof by the Company, do not and will not as of the
Closing Date (a) conflict with or result in a breach of the
terms, conditions or provisions of, (b) constitute a
default under, (c) result in the creation of any lien,
security interest, charge or encumbrance upon the Company’s
share capital or assets under, (d) result in a violation of
or (e) require any authorization, consent, approval,
exemption or other action by or notice or declaration to, or
filing with, any court or administrative or governmental body or
agency pursuant to the memorandum and articles of association of
the Company, as may be amended from time to time, or any
material law, statute, rule or regulation to which the Company
is subject, or any agreement, order, judgment or decree to which
the Company is subject, except for any filings required after
the date hereof under Cayman Islands laws or United States
federal or state securities laws.
C. Title to Securities. Upon
issuance in accordance with, and payment pursuant to, the terms
hereof, the Ordinary Shares issuable will be duly and validly
issued, fully paid and nonassessable. Upon issuance in
accordance with, and payment pursuant to, the terms hereof,
Purchaser will have good title to its Ordinary Shares, free and
clear of all liens, claims and encumbrances of any kind, other
than (i) transfer restrictions hereunder and under the
other agreements contemplated hereby, (ii) transfer
restrictions under Cayman Islands laws or United States federal
and state securities laws and (iii) liens, claims or
encumbrances imposed due to the actions of the applicable
Purchaser.
D. Governmental Consents. No
permit, consent, approval or authorization of, or declaration to
or filing with, any governmental authority is required in
connection with the execution, delivery and performance by the
Company of this Agreement, or the consummation by the Company of
any other transactions contemplated hereby.
Section 3. Representations
and Warranties of Purchaser. As a material
inducement to the Company to enter into this Agreement and issue
and sell the Ordinary Shares to Purchaser, Purchaser hereby
represents and warrants to the Company (which representations
and warranties shall survive the Closing Date) that:
A. Capacity and State Law
Compliance. Purchaser has the legal capacity
to execute and perform the obligations imposed on Purchaser
hereunder. Purchaser has engaged in the transactions
contemplated by this Agreement within a state in which the offer
and sale of Ordinary Shares is permitted under applicable
securities laws. Purchaser understands and acknowledges that the
purchase of the Ordinary Shares will require the availability of
an exemption from registration under United States federal
and/or state
securities laws and that any sale of such shares shall require
registration or the availability of an exemption from
registration under United States federal
and/or state
securities laws.
B. Authorization; No
Breach. (i) This Agreement constitutes a
valid and binding obligation of Purchaser, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent
conveyance, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors’ rights
and to general equitable principles (whether considered in a
proceeding in equity or law).
(ii) The execution and delivery by Purchaser of this
Agreement and the fulfillment of and compliance with the
respective terms hereof by Purchaser does not and shall not as
of the Closing Date conflict with or result in a breach of the
terms, conditions or provisions of the organizational documents
of Purchaser, if any, or any other agreement, instrument, order,
judgment or decree to which Purchaser is subject.
C. Investment
Representations. (i) Purchaser is
acquiring a certain number of the Ordinary Shares (collectively,
“Securities”) for its own account for
investment purposes only and not with a view towards, or for
resale in connection with, any public sale or distribution
thereof.
(ii) Purchaser is an “accredited investor” as
such term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended (the
“Securities Act”).
(iii) Purchaser understands that the Securities are being
offered and will be sold to it in reliance on specific
exemptions from the registration requirements of the United
States federal and state securities laws and that the Company is
relying, among other things, upon the truth and accuracy of, and
Purchaser’s compliance with, the representations and
warranties of Purchaser set forth herein and the bona fide
nature of the investment intent of the Purchaser in order to
determine the availability of such exemptions and the
eligibility of Purchaser to acquire such Securities.
(iv) Purchaser did not decide to enter into this Agreement
as a result of any general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act.
(v) Purchaser has been furnished with all materials
relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities
which have been requested by Purchaser. Purchaser has been
afforded the opportunity to ask questions of the executive
officers and directors of the Company. Purchaser understands
that its investment in the Securities involves a high degree of
risk. Purchaser has sought, and relied on, such accounting,
legal and tax advice as Purchaser has considered necessary to
make an informed investment decision with respect to
Purchaser’s acquisition of the Securities, and has not
relied on any statements or representations of the Company or
the Company’s agents.
(vi) Purchaser understands that no United States federal or
state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in
the Securities by Purchaser nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
(vii) Purchaser understands that: (a) the Securities
have not been and are not being registered under the Securities
Act or any state securities laws and may not be offered for
sale, sold, assigned or transferred unless (1) subsequently
registered thereunder or (2) sold in reliance on an
exemption therefrom; and (b) except as specifically set
forth in the Registration Rights Agreement, neither the Company
nor any other person is under any obligation to register the
Securities under the Securities Act or any state securities laws
or to comply with the terms and conditions of any exemption
thereunder. In this regard, Purchaser understands that the
Securities and Exchange Commission has taken the position that
promoters or affiliates of a blank check company and their
transferees, both before and after a business combination, are
deemed to be “underwriters” under the Securities Act
when reselling the securities of a blank check company. Based on
that position, Rule 144 adopted pursuant to the Securities
Act would not be available for resale transactions of the
Securities despite technical compliance with the requirements of
such rule, and the Securities can be resold only through a
registered offering or in reliance upon another exemption from
the registration requirements of the Securities Act. Purchaser
is able to bear the economic risk of its investment in the
Securities for an indefinite period of time.
(viii) Purchaser has such knowledge and experience in
financial and business matters, knows of the high degree of risk
associated with investments in the securities of companies in
the development stage,
such as the Company, is capable of evaluating the merits and
risks of an investment in the Securities and is able to bear the
economic risk of an investment in the Securities in the amount
contemplated hereunder. Purchaser has adequate means of
providing for his, her or its current financial needs and
contingencies and will have no current or anticipated future
needs for liquidity which would be jeopardized by the investment
in the Securities. Purchaser can afford a complete loss of his,
her or its investment in the Securities.
Section 4. Conditions
of Purchaser’s Obligations. The
obligation of Purchaser to purchase and pay for the Ordinary
Shares that it has or will purchase is subject to the
fulfillment, on or before the Closing Date, of each of the
following conditions:
A. Representations and
Warranties. The representations and
warranties of the Company contained in Section 2 shall be
true and correct at and as of the Closing Date as though then
made.
B. Performance.The Company shall
have performed and complied with all agreements, obligations and
conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing Date.
C. No Injunction. No litigation,
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization
having authority over the matters contemplated hereby, which
prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 5. Conditions
of the Company’s Obligations. The
obligations of the Company to Purchaser under this Agreement are
subject to the fulfillment, on or before the Closing Date, of
each of the following conditions:
A. Representations and
Warranties. The representations and
warranties of Purchaser contained in Section 3 shall be
true and correct at and as of the Closing Date as though then
made.
B. Performance. Purchaser shall
have performed and complied with all agreements, obligations and
conditions contained in this Agreement that are required to be
performed or complied with by Purchaser on or before the Closing
Date.
C. Corporate Consents.The Company
shall have obtained the consent of its Board of Directors [and
shareholders, if required] authorizing the execution, delivery
and performance of this Agreement and the issuance and sale of
the Ordinary Shares hereunder.
D. No Injunction. No litigation,
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization
having authority over the matters contemplated hereby, which
prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 6. Termination. This
Agreement may be terminated at any time prior to the Closing
Date as it relates only to the Securities to be purchased
pursuant to this Agreement on and after such Closing Date upon
the mutual written consent of the Company and Purchaser.
Section 7. Survival
of Representations and Warranties. All of the
representations and warranties contained herein shall survive
the Closing Date.
Section 8. Miscellaneous.
A. Legends. (i) The
certificates evidencing the Ordinary Shares shall (unless
otherwise permitted by the provisions of this Agreement) be
stamped or imprinted with a legend substantially similar to the
following (in addition to any legend required by state
securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
UNDER THE SECURITIES LAWS
OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS
PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS IN
ACCORDANCE WITH APPLICABLE REGISTRATION REQUIREMENTS OR AN
EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
(ii) By accepting the certificates bearing the aforesaid
legend, Purchaser agrees, prior to any permitted transfer of the
Securities, to give written notice to the Company expressing its
desire to effect such transfer and describing briefly the
proposed transfer. Upon receiving such notice, the Company shall
present copies thereof to its counsel, and Purchaser agrees not
to make any disposition of all or any portion of the Securities
unless and until:
(a) there is then in effect a registration statement under
the Securities Act covering such proposed disposition, and such
disposition is made in accordance with such registration
statement, in which case the legends set forth above with
respect to the Securities sold pursuant to such registration
statement shall be removed; or
(b) if reasonably requested by the Company,
(A) Purchaser shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such
Securities under the Securities Act or applicable state
securities laws, (B) the Company shall have received
customary representations and warranties regarding the
transferee that are reasonably satisfactory to the Company
signed by the proposed transferee and (C) the Company shall
have received an agreement by such transferee to the
restrictions contained in the legends referred to in
(i) hereof. Notwithstanding the foregoing, Purchaser also
understands and acknowledges that the transfer of the Ordinary
Shares is subject to the specific conditions to such transfer as
outlined herein, as to which Purchaser specifically assents by
its execution hereof.
(iii) The Company may, from time to time, make stop
transfer notations in its records and deliver stop transfer
instructions to its transfer agent to the extent its counsel
considers it necessary to ensure compliance with applicable
federal and state securities laws and the transfer restrictions
contained elsewhere in this Agreement.
B. Successors and Assigns. Except
as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the
respective successors of the parties hereto whether so expressed
or not.
C. Severability. Whenever
possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
D. Counterparts. This Agreement
may be executed simultaneously in two or more counterparts, none
of which need contain the signatures of more than one party, but
all such counterparts taken together shall constitute one and
the same agreement.
E. Descriptive Headings;
Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not
constitute a substantive part of this Agreement. The use of the
word “including” in this Agreement shall be by way of
example rather than by limitation.
F. Governing Law. This Agreement
shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in
accordance with the internal laws of the State of New York. The
parties agree that, all actions and proceedings arising out of
this Agreement or any of the transactions contemplated hereby,
shall be brought in the United States District Court for the
Southern District of New York or in a New York State Court in
the County of New York and that, in connection with any such
action or proceeding, submit to the jurisdiction of, and venue
in, such court. Each of the parties hereto also
irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim arising out of, connected with or
relating to this Agreement or the transactions contemplated
hereby.
G. Notices. All notices, demands
or other communications to be given or delivered under or by
reason of the provisions of this Agreement shall be in writing
and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid), sent to the recipient by
facsimile, provided the recipient confirms recipient of such
facsimile, or mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid. Such
notices, demands and other communications shall be sent:
H. No Strict Construction. The
parties hereto have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties hereto,
and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
Purchaser has agreed to beneficially own as of the Closing Date
through purchases or obligations to purchase 24.5% of the
Ordinary Shares of the Company after giving effect to any
redemptions or obligations to redeem or repurchase any Ordinary
Shares that the Company has as of the Closing Date pursuant to
the Company’s amended and restated memorandum and articles
of association or otherwise. If Purchaser is not able through
beneficial ownership to obtain or to be contractually obligated
to obtain the entire 24.5% of the Ordinary Shares through open
market purchases, privately negotiated transactions, or
otherwise on the Closing Date, the Company will issue additional
Ordinary Shares to Purchaser in a private placement in an amount
which results in Purchaser obtaining or being obligated to
obtain 24.5% of the Ordinary Shares outstanding on the Closing
Date, after giving effect to the private placement and such
redemptions or obligations to redeem or repurchase any Ordinary
Shares. Therefore, the number of Ordinary Shares Purchaser is
obligated to purchase under this Agreement from the Company
shall be calculated based on the number of shares Purchaser
beneficially owns through open market purchases, privately
negotiated transactions, or otherwise as of the Closing Date in
accordance with the following formula:
x
=
0.245[18,750,000 − (3,750,000 + Y + Z)] − (A + B)
0.755
REINSURANCE OPTION AND CONTRIBUTION AGREEMENT (this
“Agreement”), dated as
of ,
by and between Jefferson National Life Insurance Company, a
Texas insurance company (“JNL”) and JNL Bermuda
LLC, a Delaware limited liability company (“JNL
Bermuda”).
WHEREAS, JNL Bermuda is a wholly owned subsidiary of JNL, and
JNL wishes to assign the Employment Contracts (as defined below)
and contribute the Assets (as defined below) to JNL Bermuda;
WHEREAS, JNL also wishes to grant to JNL Bermuda an option,
which may be exercised by JNL Bermuda or any permitted successor
or assign thereof in accordance with the terms of this
Agreement, to enter into a quota share reinsurance agreement
with JNL substantially in the form attached hereto as
Exhibit A unless otherwise mutually agreed (the
“Quota Share Reinsurance Agreement”; all
capitalized terms used but not defined herein shall have the
meaning ascribed to them in the Quota Share Reinsurance
Agreement), relating to the Block described therein, and
pursuant to which JNL Bermuda or any such successor or assign
may reinsure 90% of the Fixed Annuity Block of JNL and 50% of
the Variable Annuity Block of JNL, upon JNL Bermuda or any such
successor or assign obtaining all necessary licenses required to
operate as a reinsurer in Bermuda (the
“Option”); and
WHEREAS, JNL Bermuda is willing to accept the assignment of the
Employment Contracts, the contribution of the Assets, and the
grant of the Option, from JNL upon the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and intending to
be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I
OPTION
Section
1.1 Grant of Option. JNL
hereby grants the Option to JNL Bermuda, and JNL Bermuda hereby
accepts the Option.
Section
1.2 Option Purchase
Price. The purchase price for the Option (the
“Option Purchase Price”) is $10.00, payable by JNL
Bermuda to JNL on the date hereof, and such other good and
valuable consideration, the receipt and adequacy of which JNL
hereby acknowledges.
Section
1.3 Option Term. The Option
will expire January 30, 2010 (the “Option Term”)
unless the Option Notice is delivered in accordance with
Section 1.4 prior to such expiration.
Section
1.4 Exercise of Option. The
Option may not be exercised by JNL Bermuda or any successor to
or assign of JNL Bermuda until the exercising party has obtained
all necessary licenses and permits that are required for it to
lawfully operate as a reinsurer in Bermuda. In the event that
JNL Bermuda or any successor to or assign of JNL Bermuda wishes
to exercise the Option, it shall give written notice (an
“Option Notice”) to JNL (the date of delivery of such
notice being the “Notice Date”) specifying a date,
which shall be no later than five (5) business days
following the Notice Date, for the execution and delivery of the
Quota Share Reinsurance Agreement by both parties (the
“Option Closing”).
Section
1.5 Option Closing
Deliveries. At the Option Closing,
(i) JNL and JNL Bermuda or any successor to or assign of
JNL Bermuda exercising the Option shall execute and deliver the
Quota Share Reinsurance Agreement and (ii) the Ceding
Commission thereunder shall be paid by wire transfer of
immediately available funds to such bank account as JNL shall
designate by notice in writing to such exercising party prior to
the Option Closing.
Section
2.1 Assignment and
Contribution. As of the date of this
Agreement, JNL hereby assigns to JNL Bermuda the employment
agreements or arrangements of those employees set forth on
Schedule 2.1(a) attached hereto (the “Employees”,
and the employment agreements or arrangements of such Employees,
the “Employment Contracts”) and JNL hereby contributes
to JNL Bermuda those assets set forth on Schedule 2.1(b)
hereto (the “Assets”), and JNL Bermuda hereby accepts
the Employment Contracts and the Assets. JNL intends to transfer
all of its right, title and interest in and to the Employment
Contracts and the Assets to JNL Bermuda. JNL agrees that it will
execute and deliver such additional instruments of transfer and
will take such other action as JNL Bermuda may request in order
to transfer all of its rights, title and interest in and to the
Employment Contracts and the Assets to JNL Bermuda. JNL Bermuda
hereby assumes and agrees to satisfy and discharge any
liabilities associated with the Employment Contracts, the
Employees and the Assets from and after the date of this
Agreement.
ARTICLE III
TERMINATION
Section
3.1 Termination. This
Agreement shall terminate upon the first to occur of the
following:
(a) upon written notice by JNL to JNL Bermuda, in the event
that (i) JNL Bermuda shall not have complied in all
material respects with the covenants and agreements contained in
this Agreement to be complied with by it, (ii) JNL Bermuda
shall make a general assignment for the benefit of creditors or
(iii) any proceeding shall be instituted by or against JNL
Bermuda seeking to adjudicate JNL Bermuda as bankrupt;
provided, that in the case of clause (a)(i), JNL Bermuda
shall have ten (10) days to cure such breached covenant or
agreement, and providedfurther that in the case
of clause (a)(iii) solely with respect to an involuntary
proceeding, JNL Bermuda shall have forty five (45) days to
have such proceeding dismissed or discharged (and in the event
JNL Bermuda does cure either of the foregoing within the
applicable time period, JNL shall not be entitled to terminate
this Agreement pursuant to this Section 3.1(a) with respect
to the matter that has been so cured);
(b) upon written notice by JNL Bermuda to JNL, in the event
that (i) JNL shall not have complied in all material
respects with the covenants and agreements contained in this
Agreement to be complied with by it, (ii) JNL shall make a
general assignment for the benefit of creditors or
(iii) any proceeding shall be instituted by or against JNL
seeking to adjudicate JNL as bankrupt; provided, that in
the case of clause (b)(i), JNL shall have ten (10) days to
cure such breached covenant or agreement, and providedfurther that in the case of clause (b)(iii) solely with
respect to an involuntary proceeding, JNL shall have forty five
(45) days to have such proceeding dismissed or discharged
(and in the event JNL does cure either of the foregoing within
the applicable time period, JNL Bermuda shall not be entitled to
terminate this Agreement pursuant to this Section 3.1(b)
with respect to the matter that has been so cured);
(c) upon notice by either party to the other party, in the
event that any Governmental Authority shall have issued an order
(including an injunction, judgment, decree, ruling, writ,
assessment, or arbitration award) or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order or other action
shall have become final and nonappealable;
(d) upon expiration of the Option Term, without exercise of
the Option pursuant to Section 1.4;
(e) upon due execution and delivery of the Quota Share
Reinsurance Agreement; or
(f) by the mutual written consent of JNL and JNL Bermuda.
For the purposes of this Agreement, “Governmental
Authority” means any nation or government, any state or
other political subdivision thereof, and any central bank
thereof, any municipal, local, city, or county government, and
any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of
or pertaining to government, and any corporation, or other
entity owned or controlled, through stock or capital ownership
or otherwise, by any of the foregoing.
Section
3.2 Effect of
Termination. In the event of termination of
this Agreement as provided in Section 3.1, this Agreement
shall forthwith become void and there shall be no liability on
the part of any party hereto except (a) as set forth in
Sections 4.1, 4.3, 4.10 and 4.11 and (b) that nothing
shall relieve any party hereto from liability for any breach of
this Agreement.
ARTICLE IV
GENERAL
PROVISIONS
Section
4.1 Expenses. Except as
otherwise specified in this Agreement, all costs and expenses,
including fees and disbursements of counsel, financial advisors
and accountants, incurred in connection with this Agreement and
the transactions contemplated by this Agreement shall be paid by
the party incurring such costs and expenses.
Section
4.2 Notices. All notices,
requests, claims, demands and other communications hereunder
shall be in writing and shall be given or made (and shall be
deemed to have been duly given or made upon receipt) by delivery
in person, by an internationally recognized overnight courier
service, by facsimile or by registered or certified mail
(postage prepaid, return receipt requested) to the respective
parties hereto at the following addresses (or at such other
address for a party as shall be specified in a notice given in
accordance with this Section 4.2):
Section
4.3 Public
Announcements. Neither JNL or JNL Bermuda
shall make, or cause to be made, any press release or public
announcement in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media
without the prior written consent of the other party unless
otherwise required by law or applicable stock exchange
regulation, and the parties shall cooperate as to the timing and
contents of any such press release, public announcement or
communication.
Section
4.4 Further Action. Each of
the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all appropriate action, to do or cause to be
done all things necessary, proper or advisable under applicable
law, and to execute and deliver such documents and other papers,
as may reasonably be required to carry out the provisions of
this Agreement and consummate and make effective the
transactions contemplated hereby.
Section
4.5 Entire Agreement. This
Agreement constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, among
the parties hereto with respect to the subject matter hereof.
Section
4.6 Headings. The headings
in this Agreement are for reference purposes only and do not
affect in any way the meaning or interpretation of this
Agreement.
Section
4.7 Assignment. This
Agreement may be assigned by a party hereto by operation of law
or otherwise only with the express written consent of the other
party hereto (which consent may not be unreasonably withheld).
Section
4.8 Amendment. This
Agreement may not be amended or modified except (a) by an
instrument in writing signed by, or on behalf of, JNL and JNL
Bermuda or (b) by a written waiver executed by JNL Bermuda
and JNL.
Section
4.9 Successors and Assigns; No Third Party
Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties
hereto and their respective permitted successors and permitted
assigns and nothing herein, express or implied, is intended to
or shall confer upon any other person any legal or equitable
right, benefit or remedy of any nature whatsoever.
Section
4.10 Governing Law. This
Agreement shall be governed by, and construed in accordance
with, the Laws of the State of New York applicable to contracts
executed in and to be performed in that state and without regard
to any applicable conflicts of law principles. All actions
arising out of or relating to this Agreement shall be heard and
determined exclusively in any New York federal court sitting in
the Borough of Manhattan of The City of New York, provided,
however, that if such federal court does not have jurisdiction
over such action, such action shall be heard and determined
exclusively in any New York state court sitting in the Borough
of Manhattan of The City of New York. Consistent with the
preceding sentence, the parties hereto hereby (a) submit to
the exclusive jurisdiction of any federal or state court sitting
in the Borough of Manhattan of The City of New York for the
purpose of any action arising out of or relating to this
Agreement brought by any party hereto and (b) irrevocably
waive, and agree not to assert by way of motion, defense, or
otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution,
that the action is brought in an inconvenient forum, that the
venue of the action is improper, or that this Agreement or the
transactions contemplated by this Agreement may not be enforced
in or by any of the above-named courts. Each party hereto agrees
that service of any process, summons, notice or document on such
party as provided in Section 4.2 shall be effective service
of process for any legal proceeding brought against such party
in such courts.
Section
4.11 Waiver of Jury
Trial. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable Law any
right it may have to a trial by jury with respect to any
litigation directly or indirectly arising out of, under, or in
connection with this Agreement or the transactions contemplated
hereby. Each of the parties hereto hereby (a) certifies
that no representative, agent or attorney of the other party has
represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce the foregoing
waiver and (b) acknowledges that it has been induced to
enter into this Agreement and the transactions contemplated by
this Agreement, as applicable, by, among other things, the
mutual waivers and certifications in this Section 4.11.
Section
4.12 Counterparts. This
Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
This Quota Share Reinsurance Agreement (this
“Agreement”),
dated ,
is made and entered into by and between Jefferson National Life
Insurance Company, a Texas insurance company (the
“Ceding Company”), and Overture Re Ltd., a
Bermuda exempt company licensed in Bermuda to operate as a
reinsurer (the “Reinsurer”) (each, a
“Party”, and together, the
“Parties”).
WHEREAS, the Ceding Company and JNL Bermuda LLC (“JNL
Bermuda”) have entered into the Reinsurance Option and
Contribution Agreement, dated as
of
(the “Reinsurance Option and Contribution
Agreement”), whereby, among other things, the Ceding
Company granted to JNL Bermuda, or any successor to JNL Bermuda
by merger or otherwise, the option to enter into a quota share
reinsurance agreement with the Ceding Company;
WHEREAS, pursuant to the Agreement and Plan of Amalgamation,
dated as
of
(the “Amalgamation Agreement”), JNL Bermuda has
amalgamated with the Reinsurer, with the Reinsurer being the
surviving entity of such amalgamation, and the Reinsurer has
thereby acquired all of JNL Bermuda’s rights under the
Reinsurance Option and Contribution Agreement;
WHEREAS, the Reinsurer has obtained all necessary licenses
required to operate as a reinsurer in Bermuda; and
WHEREAS, the Reinsurer wishes to exercise its rights under the
Reinsurance Option and Contribution Agreement and enter into
this Agreement with the Ceding Company to provide reinsurance
for the Block (as hereinafter defined) pursuant to the terms and
conditions of this Agreement;
NOW THEREFORE, in consideration of the payments, covenants,
conditions, promises and releases contained herein, and for
other fair and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Certain
Defined Terms.
The following terms shall have the respective meanings set forth
below throughout this Agreement:
“Accounting Period” shall mean each calendar
quarterly period; provided that the first Accounting Period
shall be from the Effective Date to the last day of the calendar
quarter during which this Agreement is entered into and the last
Accounting Period shall be from the first day of the calendar
quarter during which this Agreement is terminated to the
Termination Effective Date.
“Actuarial Firm” shall have the meaning set
forth in Section 3.02(c)(iv).
“Adjustment Date” shall have the meaning set
forth in Section 2.03(a).
“Administrative Guidelines” means the
guidelines, relating to the Ceding Company’s provision of
administrative services to and for the benefit of the Reinsurer,
set forth on Schedule D hereto, as the same may be amended,
modified or supplemented in accordance with Section 17.03.
“Affiliate” means, with respect to any
particular Person, any other Person which, directly or
indirectly, controls or is controlled by or under common control
with such particular Person. A Person will be “controlled
by” any other Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such Person, whether through the
ownership of voting securities, contract, or otherwise.
“Agreement” or “this
Agreement” means this Quota Share Reinsurance Agreement
by and between the Parties as set forth in the preamble.
“Annuity” or “Annuities” means
all of those annuity contracts issued or assumed by the Ceding
Company that are (i)(A) identified by annuity form number
and/or plan
code and policy count or otherwise on Schedule A hereto,
with exceptions noted thereon, and (B) in force and effect
as of the Effective Date, and (ii) the Future Annuities. On
the Closing Date, the Ceding Company will provide the Reinsurer
with a listing of the Annuities as of the Effective Date, by
policy number, in electronic format as part of the
Schedule A.
“Annuity Forms” shall have the meaning set
forth in Section 18.01.
“Asserted Liability” shall have the meaning set
forth in Section 19.04.
“Authorized Control Level RBC” means, with
respect to any person, the number determined by the risk based
capital formula in accordance with the risk based capital report
including “RBC Instructions“ adopted and amended by
the National Association of Insurance Commissioners as in effect
from time to time.
“Benefit Payments” means the payments during
any given Accounting Period in respect of cash surrender value,
partial surrenders, full surrenders, annuity payments, Out of
Pocket Expenses (net of any Recovery) and Death Benefits under
the Covered Annuities payable by the Ceding Company net of any
payments payable by reinsurers under the Inuring Reinsurance.
“Block” means, when used alone, collectively
the Fixed Annuity Block and the Variable Annuity Block.
“Ceding Commission” means $21,500,000.
“Ceding Company” means Jefferson National Life
Insurance Company
“Ceding Company Losses” shall have the meaning
set forth in Section 19.02.
“Claims Notice” shall have the meaning set
forth in Section 19.03.
“Closing Date” shall mean the date of this
Agreement.
“Code” means the Internal Revenue Code of 1986,
as amended.
“Company Action Level RBC” means the
product of 2.0 and of the Authorized Control Level RBC.
“Confidential Information” shall have the
meaning set forth in Section 16.01(b).
“Covered Annuity” means each and every Annuity
reinsured pursuant to Section 2.01 hereunder excluding the
exclusions set forth in Section 2.03.
“Death Benefits” means the death benefit
payments provided under the Covered Annuities not in excess of
policy account value.
“Effective Date” shall have the meaning set
forth in Section 3.01.
“Excess of Limit Payments” means Benefit
Payments made in excess of limits in the documents governing
Covered Annuities due to failure to handle or settle claims in a
manner consistent with the Administrative Guidelines.
“Excluded Liabilities” means any liability or
obligation of the Ceding Company with respect to the excluded
coverage set forth in Section 2.03.
“Expense Allowance” shall have the meaning set
forth in Section 4.03.
“Extra Contractual Obligations” means all
liabilities (i) for compensatory, consequential, exemplary,
punitive or similar damages or losses which directly relate to
any alleged or actual act, error, omission, fraud or
misrepresentation by any Person, whether intentional or
otherwise or (ii) from any actual or alleged reckless
conduct or bad faith by any Person, in each case described in
(i) or (ii), in connection with such Person’s handling
of any claim under any of the Covered Annuities (including the
settlement,
defense of, or appeal of any claim) or in connection with the
issuance, offer, sale, delivery, cancellation or administration
by any Person of any of the Covered Annuities.
“FET” shall have the meaning set forth in
Section 4.03(e).
“Fixed Annuity Block” means those fixed Covered
Annuities that do not have any variable options and the fixed
options of the variable annuities included in the Covered
Annuities.
“Fixed Annuity Quota Share Percentage” means
90%.
“Fixed Benefit Payments” shall have the meaning
set forth in Section 4.04.
“Fixed Modified Coinsurance Adjustment” shall
have the meaning set forth in Section 5.01(g).
“Fixed Modified Coinsurance Assets” shall have
the meaning set forth in Section 5.01(c).
“Fixed Modified Coinsurance Investment Income”
shall have the meaning set forth in Section 5.01(f).
“Fixed Modified Coinsurance Trust” shall have
the meaning set forth in Section 5.01(a).
“Fixed Modified Coinsurance Reserve” means with
respect to the Covered Annuities, the Statutory Reserve less the
Variable Modified Coinsurance Reserve.
“Fixed Reinsurance Premiums” shall have the
meaning set forth in Section 4.02(a).
“Fund” means the Separate Account assets
funding variable benefits of the Variable Annuity Block.
“Future Annuities” means the Annuities issued
by the Ceding Company following the Effective Date constituting
(i) “Monument Advisor“ policies, or
(ii) “403(b)“ policies, in each case on one of
the forms attached hereto as Schedule B.
“Governmental Authority” means any nation or
government, any state or other political subdivision thereof,
and any central bank thereof, any municipal, local, city, or
county government, and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions
of or pertaining to government, and any corporation, or other
entity owned or controlled, through stock or capital ownership
or otherwise, by any of the foregoing.
“Indemnified Party” shall have the meaning set
forth in Section 19.03.
“Indemnifying Party” shall have the meaning set
forth in Section 19.03.
“Initial Covered Annuities” means the Covered
Annuities that are in force as of the Effective Date.
“Interest Maintenance Reserve” means the
liability reserve determined in accordance with SAP, the purpose
of which is to amortize realized capital gains and losses
resulting from fluctuations in interest rates.
“Inuring Reinsurance” means all reinsurance
agreements that the Ceding Company has entered into with third
parties in respect of the Covered Annuities, and any reinsurance
agreement entered into by the Ceding Company to replace any of
such reinsurance agreements following any termination or
recapture thereof, as all such reinsurance agreements may be in
force from time to time and at any time.
“Investment Manager” shall have the meaning set
forth in Section 5.01(d).
“JNL Bermuda” shall have the meaning set forth
in the recitals.
“Knowledge”, with respect to any Person, means
the actual knowledge of the executive officers of such Person
after reasonable inquiry.
“Law” means any federal, national,
supranational, state, provincial, local or similar statute, law,
ordinance, regulation, rule (including any rules regarding
discovery), code, order, requirement or rule of law (including
common law).
“Master Agreement” means the Master Agreement,
dated as of December 9, 2009, by and among the Ceding
Company, Jefferson National Financial Corp., JNL Bermuda LLC,
JNF Asset Management, LLC, Overture Acquisition Corp., Overture
Re Holdings Ltd. and the sponsors of Overture Acquisition Corp.
“Material Adverse Effect” means, with respect
to the Ceding Company, any circumstance, change in or effect on
the Ceding Company or the Covered Annuities that, individually
or in the aggregate with all other circumstances, is or is
reasonably likely to be materially adverse to (a) the
reinsurance hereunder, or (b) the ability of the Ceding
Company to consummate the transactions contemplated in this
Agreement; other than any effect resulting from
(i) the effect of any change in the United States or
foreign economies or securities or financial markets in general;
(ii) the effect of any change that generally affects any
industry in which the Ceding Company operates except to the
extent such change has a disproportionate effect on the Ceding
Company or the Covered Annuities; (iii) the effect of any
change arising in connection with earthquakes, hostilities, acts
of war, sabotage or terrorism or military actions or any
escalation or material worsening of any such hostilities, acts
of war, sabotage or terrorism or military actions existing or
underway; (iv) the execution, performance or compliance by
the Ceding Company with this Agreement and the related
agreements; (v) the effect of any changes in applicable
Laws or accounting rules; or (vi) any effect resulting from
the public announcement of this Agreement or the consummation of
the transactions contemplated hereby.
“Net Settlement” shall have the meaning set
forth in Section 4.05.
“Non-Guaranteed Elements” means cost of
insurance charges, loads and expense charges, credited interest
rates, mortality and expense charges, administrative expense
risk charges, variable premium rates and variable
paid-up
amounts, each as applicable under the Covered Annuities.
“Out of Pocket Expenses” shall have the meaning
set forth in Section 7.02.
“Party” or “Parties” shall
have the meaning set forth in the preamble.
“Person” means an individual, corporation,
partnership, association, trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
“Policy Loans” means any and all loans,
including principal and accrued interest thereon, made by the
Ceding Company to the owners of the Covered Annuities pursuant
to the terms of the Covered Annuities.
“Premiums” means premiums, considerations,
deposits, fees collected and similar receipts with respect to
the Covered Annuities net of any refunds and net of any such
amounts due to be paid to third party reinsurers for Inuring
Reinsurance.
“Pricing Gain/Loss” means any gain or loss of
the Ceding Company to a fund or product resulting from pricing
errors, expense calculation errors or missing fund activity.
“Quota Share Percentage” shall mean the Fixed
Annuity Quota Share Percentage or the Variable Annuity Quota
Share Percentage, as the case may be.
“Recovery” or “Recoveries”
means any amount received or collected in reimbursement of any
Out of Pocket Expenses paid by the Reinsurer under this
Agreement, whether by subrogation, salvage, reimbursement or
other recovery.
“Reinsurance Option and Contribution Agreement”
shall have the meaning set forth in the recitals.
“Reinsurance Premiums” shall have the meaning
set forth in Section 4.02(b).
“Reinsured Liabilities” means the applicable
Quota Share Percentage of all gross liabilities and obligations
arising out of or relating to the Covered Annuities whether
incurred before or after the Effective Date net of benefits
receivable under Inuring Reinsurance, including, without
limitation: (i) the applicable Quota Share Percentage of
(a) the Statutory Reserve; (b) all Benefit Payments
including liabilities for incurred but not reported claims,
pending claims, benefits, interest on death claims or unearned
premiums arising under or relating to the Covered Annuities,
whether or not included within the
Statutory Reserve; (c) all liabilities arising out of any
changes to the terms and conditions of the Covered Annuities
mandated by Law or pursuant to the terms of this Agreement;
(d) all liabilities for amounts payable for returns or
refunds of premiums; and (e) all unclaimed property
liabilities arising under or relating to the Covered Annuities,
and (ii) all liabilities or obligations of the Reinsurer
for Extra Contractual Obligations based on acts, errors or
omissions by the Reinsurer, or any of its officers or employees,
agents, subcontractors or representatives.
“Reinsurer” has the meaning set forth in the
Preamble to this Agreement.
“Reinsurer Losses” shall have the meaning set
forth in Section 19.01.
“Representatives” shall have the meaning set
forth in Section 16.01(b).
“Required Balance” shall have the meaning set
forth in Section 5.01(a).
“SAP” means the statutory accounting practices
prescribed or permitted by the State of Texas.
“SAP
Appendix A-785”
shall have the meaning set forth in Section 11.01.
“Separate Account” means collectively the
Jefferson National Life Annuity Account C, Jefferson National
Life Annuity Account E, Jefferson National Life Annuity Account
G, Jefferson National Life Annuity Account H, Jefferson National
Life Annuity Account I, Jefferson National Life Annuity
Account J, Jefferson National Life Annuity Account K, Conseco
Variable Insurance Separate Account L, and Jefferson National
Life Advisor Variable Annuity Account.
“Separate Account Charges” means, without
duplication of Premiums, mortality and expense risk charges,
administrative, subscription and other fees and charges deducted
by the Ceding Company from the Separate Account supporting the
Variable Annuity Block pursuant to the terms of the Annuities in
the Variable Annuity Block.
“Statutory Reserve” means the Ceding
Company’s statutory reserve in respect of the Covered
Annuities net of reserve credits due to Inuring Reinsurance
determined in accordance with applicable valuation laws,
regulations and actuarial guidelines to which the Ceding Company
is subject on each valuation date, including without limitation,
SAP and VACARVM; provided that the Statutory Reserve shall
include an allocated portion of the Ceding Company’s
admitted Interest Maintenance Reserve determined by dividing the
aggregate statutory value of the assets supporting the Fixed
Modified Coinsurance Reserve by the aggregate statutory value of
the Ceding Company’s general account invested assets and
multiplying the resulting ratio by the amount of the Ceding
Company’s Interest Maintenance Reserve.
“Statutory Value” means, with respect to any
asset, the statutory admitted value of the assets as reflected
on the Ceding Company’s statutory books and records.
“Term” shall have the meaning set forth in
Section 3.01.
“Termination Effective Date” shall have the
meaning set forth in Section 3.02(a) or (d), as applicable.
“Termination Notice” shall have the meaning set
forth in Section 3.02(a).
“Third Party Claimant” shall have the meaning
set forth in Section 19.04.
“Third-Party Information” shall have the
meaning set forth in Section 16.01(b).
“Total Adjusted Capital” means, with respect to
any Person, the number determined by the sum of (x) such
Person’s statutory capital and surplus as would be
determined under SAP and (y) such other items, if any, as
the “RBC Instructions” adopted and amended by the
National Association of Insurance Commissioners from time to
time may provide.
“Umpire” shall have the meaning set forth in
Section 20.04(b).
“VACARVM” means Commissioners Annuity Reserve
Valuation Method for variable annuity as in effect from time to
time.
“Variable Annuity Block” means those variable
Covered Annuities that do not have any fixed options and the
variable options of the other Annuities included in the Covered
Annuities.
“Variable Annuity Quota Share Percentage” means
50%.
“Variable Benefit Payments” shall have the
meaning set forth in Section 4.04.
“Variable Modified Coinsurance Adjustment”
shall have the meaning set forth in Section 5.02(a).
“Variable Modified Coinsurance Reserve” means
the Statutory Reserve attributable to the Variable Annuity Block.
“Variable Reinsurance Premiums” shall have the
meaning set forth in Section 4.02(b).
Section 1.02 Interpretation
and Rules of Construction. In this Agreement,
except to the extent otherwise provided or that the context
otherwise requires:
(a) when a reference is made in this Agreement to an
Article, Section or Schedule, such reference is to an Article,
Section or Schedule of this Agreement unless otherwise indicated;
(b) the table of contents and headings for this Agreement
are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement;
(c) whenever the words “include,”“includes” or “including” are used in this
Agreement, they are deemed to be followed by the words
“without limitation”;
(d) the words “hereof,”“herein” and
“hereunder” and words of similar import, when used in
this Agreement, refer to this Agreement as a whole and not to
any particular provision of this Agreement;
(e) all terms defined in this Agreement have the defined
meanings when used in any certificate or other document made or
delivered pursuant hereto, unless otherwise defined therein;
(f) the definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms;
(g) any Law defined or referred to herein or in any
agreement or instrument that is referred to herein means such
Law or statute as from time to time amended, modified or
supplemented, including by succession of comparable successor
Laws;
(h) references to a Person are also to its successors and
permitted assigns; and
(i) the use of “or” is not intended to be
exclusive unless expressly indicated otherwise.
ARTICLE II
REINSURANCE
COVERAGE
Section 2.01 Reinsurance
Coverage. (a) Fixed Annuity
Block. In accordance with the terms and conditions of this
Agreement, as of the Effective Date, the Ceding Company cedes on
a “modified coinsurance” basis, and the Reinsurer
accepts as indemnity reinsurance, on such basis, and agrees to
indemnify the Ceding Company for, the Fixed Annuity Quota Share
Percentage of all risks and obligations arising under the Fixed
Annuity Block
(b) Variable Annuity Block. In
accordance with the terms and conditions of this Agreement, as
of the Effective Date, the Ceding Company cedes on a
“modified coinsurance” basis, and the Reinsurer
accepts as indemnity reinsurance, on such basis, and agrees to
indemnify the Ceding Company for, the Variable Annuity Quota
Share Percentage of all risks and obligations arising under the
Variable Annuity Block.
(c) Policy Loans. The Reinsurer
will reinsure its Fixed Annuity Quota Share Percentage of the
Policy Loans. Accounting for reinsurance of Policy Loans will be
as follows: Policy Loans will generally be treated like the
other assets supporting the Fixed Modified Coinsurance Reserve;
i.e., (i) repayments of principal amounts will be
treated like the liquidation of a security constituting an asset
supporting the Fixed Modified Coinsurance Reserve and will not
be reflected in the Net Settlement, (ii) the funding of
Policy Loans will be treated like the purchase of a security
constituting an asset supporting the Fixed Modified Coinsurance
Reserve and will not be reflected in the Net Settlement,
(iii) interest on Policy Loans will be treated as Fixed
Modified Coinsurance Investment Income, and (iv) the amount
by which any defaulted Policy Loan exceeds the cash surrender
value of the relevant Covered Annuity will be treated as a
capital loss.
(d) Subject to Section 8.02, the Reinsurer shall be
subject in all respects to all of the terms and conditions,
general and specific stipulations, clauses, waivers, extensions,
modifications, alterations, cancellations, interpretations, and
endorsements of the applicable Covered Annuity.
Section 2.02 Indemnity
Reinsurance. This Agreement is an indemnity
reinsurance agreement solely between the Ceding Company and the
Reinsurer, and performance of the obligations of each Party
under this Agreement will be rendered solely to the other Party.
In no instance will any Person other than the Ceding Company or
the Reinsurer have any rights under this Agreement, and the
Ceding Company will be and remain the only Party hereunder that
is liable to any insured, policyowner, annuityholder or
beneficiary under any Covered Annuity. The Reinsurer’s
reinsurance coverage for any Covered Annuity begins on the later
of (a) the Effective Date, and (b) the date of
commencement of the Ceding Company’s contractual liability
for the Covered Annuity, and will terminate simultaneously with
the termination of the Ceding Company’s contractual
liability for the Covered Annuity unless otherwise terminated in
accordance with the terms of this Agreement.
Section 2.03 Excluded
Coverage. (a) Adjustment.
Notwithstanding its identification in or by reference in
Schedule A, an Annuity included as an Initial Covered
Annuity shall cease to be an Annuity subject to this Agreement
if it shall be determined by the Ceding Company, subsequent to
the Effective Date and on or before the date that is
60 days following the Effective Date (the
“Adjustment Date”), that, as of the Effective
Date, such Annuity was not in force; provided that if an Annuity
that is designated as not in force as of the Adjustment Date due
to an error in such designation, upon correction of such error,
such Annuity shall be restored to the list of the Initial
Covered Annuities. The Parties agree that Schedule A will
be deemed automatically amended to remove any non-inforce
Annuity described in this Section 2.03(a), and thereafter
such Annuity shall be excluded from coverage hereunder and the
Reinsurer shall have no liability with respect to such Annuity.
The Parties shall make appropriate adjustment between each other
in order to put each Party in the economic position as if only
in force Annuities were included in the Initial Covered Annuity
list on the Closing Date.
(b) Exclusions. This Agreement
does not apply to, and specifically excludes from the
reinsurance coverage hereunder:
(i) any liabilities and obligations arising under insurance
or annuity contracts issued by the Ceding Company that are not
identified in or by reference in Schedule A and do not
constitute Future Annuities;
(ii) any guaranteed benefits or income withdrawal benefits,
other than payments due upon partial or full surrenders and
death benefits not excluded pursuant to clause (iii) below,
that may be provided by the Ceding Company under riders or
endorsements attached to the Annuities (including without
limitation any medical and hospital expense coverage or other
types of benefits, provided that waiver of surrender of nursing
home and hospitalization are not excluded from coverage
hereunder);
(iii) any benefits paid as a result of “guaranteed
death benefit” provisions under any Annuity;
(iv) any Excess of Limit Payments or Extra Contractual
Liabilities liability based on acts, errors or omissions by the
Ceding Company, or any of its officers or employees, agents,
subcontractors or representatives and not attributable to a
written direction or a request by a designated officer of the
Reinsurer; and
(v) any and all liabilities, causes of action, including
regulatory action, lawsuits, penalties, claims and demands that
arise out of or result from the fact that any Annuity was issued
and delivered in a jurisdiction where issuance and delivery of
the Annuity constituted the doing of business where the Ceding
Company was not licensed.
(c) Reinstatement. Reinsurance
coverage shall be reinstated for a terminated Covered Annuity if
the Ceding Company reinstates such Covered Annuity using
conventional underwriting and issue practices. Reinsurance
Premiums for the interval during which the Covered Annuity was
lapsed will be paid to the Reinsurer based on the Quota Share
Percentage on the same basis as the Ceding Company charged the
owner of the Covered Annuity for the reinstatement.
Section 2.04 Increase
in Amount Covered. Subject to
Section 17.01 hereof, if the amount of insurance under any
Covered Annuity increases, the increase will automatically be
reinsured hereunder.
Section 2.05 Reductions
and Terminations. If the amount of insurance
under any Covered Annuity is reduced or terminated, reinsurance
under this Agreement on such Covered Annuity will be similarly
reduced or terminated.
ARTICLE III
TERM AND
TERMINATION
Section 3.01 Term. This
Agreement shall be effective as of 12:01 a.m., Eastern
Standard Time, on January 1, 2010 (the “Effective
Date”) and continue in full force and effect until the
extinguishment of all liabilities of the Reinsurer with respect
to the Covered Annuities or termination provided in
Section 3.02 below (such period the
“Term”).
Section 3.02 Termination
of In Force Business. (a) Upon the
occurrence of any of any of the events specified in clause (i),
(ii) or (v) below, the Ceding Company shall have the
right, in its sole discretion, to terminate this Agreement
immediately upon a notice of termination to the Reinsurer (a
“Termination Notice”) setting forth the
termination effective date (the “Termination Effective
Date”) and upon the occurrence of any of the events
specified in clause (iii) or (iv) below, the Ceding
Company shall have the right, in its sole discretion, to
terminate this Agreement upon a Termination Notice only after
the Reinsurer has failed to remedy any of the events under
clauses (iii) and (iv) below within 90 days of
the notice of such event from the Ceding Company to the
Reinsurer:
(i) The Reinsurer is declared insolvent by a court of
competent jurisdiction, or a conservator, rehabilitator,
liquidator or statutory successor is appointed for the
Reinsurer; or
(ii) The Reinsurer’s Total Adjusted Capital is less
than 150% of the Company Action Level RBC; or
(iii) The Reinsurer fails to receive or maintain all
licenses and permits necessary to operate as a reinsurer in
Bermuda; or
(iv) The Reinsurer fails to pay when due any Net Settlement
payment to be made by it hereunder pursuant to
Section 4.05, or the effectuation of any offset of or
deduction from any amount payable to the Reinsurer is delayed or
prohibited by operation of Law, other than any payment that is
to be made on behalf of the Reinsurer by the Ceding Company
pursuant to Article VII in performance of the
administrative services provided for thereunder; or
(v) The Ceding Company fails to receive full credit on its
financial statements filed with the Texas Department of
Insurance for the reinsurance offered hereunder.
(b) If the Ceding Company elects to terminate this
Agreement pursuant to the foregoing Section 3.02(a), the
Ceding Company shall recapture all, but not less than all, of
the liability with respect to all Covered Annuities ceded
hereunder, effective on the Termination Effective Date, and
subject to a terminal settlement between the Parties as set
forth in Section 3.02(c) below, the Reinsurer shall have no
further liability with respect to the Covered Annuities
subsequent to the Termination Effective Date.
(c) Termination of this Agreement for reinsurance coverage
in force is subject to a terminal settlement. A terminal
settlement is due as of the Termination Effective Date and,
subject to potential later payment under clause (iv) below,
payable by wire transfer within forty-five (45) days after
the Termination Effective Date. The terminal settlement consists
of:
(i) payment by the appropriate party of the quarterly Net
Settlement, computed as of the Termination Effective Date;
(ii) to the extent the fair market value of the assets in
the Fixed Modified Coinsurance Trust exceeds the Required
Balance, in each case as of the Termination Effective Date, the
Ceding Company will pay such excess to the Reinsurer and the
Reinsurer will accordingly establish and maintain on its
statutory financial statements an interest maintenance reserve
with respect to such transfer;
(iii) to the extent the fair market value of the assets in
the Fixed Modified Coinsurance Trust is less than the Required
Balance, in each case as of the Termination Effective Date, the
Reinsurer will pay the Ceding Company such shortfall and the
Reinsurer will accordingly establish and maintain on its
statutory financial statements a negative amount of interest
maintenance reserve as a non-admitted asset with respect to such
transfer (it being understood that the fair market value of the
invested assets in the Fixed Modified Coinsurance Trust will be
determined by the Investment Manager); and
(iv) in the case of termination pursuant to
Section 3.04 only, a termination value not in excess of the
Ceding Commission calculated by the Ceding Company in good faith
as of the Termination Effective Date according to “best
practices” that are appropriate to valuing annuities and
related cash flows and consistent with the terms of this
Agreement. If termination value is positive, the amount of such
termination value shall be paid to the Reinsurer by the Ceding
Company. The Reinsurer shall have ten (10) calendar days to
either accept the termination value as calculated or raise
objections. The parties shall cooperate with each other in order
to resolve any disagreement with respect to the termination
value. If the Ceding Company and the Reinsurer cannot agree on
the termination value within ten (10) days after the
Reinsurer raises its objections, the Parties shall submit the
calculation to a nationally recognized, independent actuarial
firm (including without limitation, the actuarial group of a
nationally recognized, independent accounting firm), that is
mutually acceptable to the Parties (hereinafter the
“Actuarial Firm”) for confirmation as being
reasonably consistent with the terms of the Agreement. If the
parties cannot reach agreement as to the termination value after
receiving the results from the Actuarial Firm, the matter will
be submitted to arbitration in accordance with Article XX. The
parties will share equally in the costs and expenses incurred by
the Actuarial Firm. Payment of the termination value will be
made within thirty (30) days of (i) receipt of the
Ceding Company’s calculation by the Reinsurer, if the
Reinsurer does not object to such calculation, or (ii) the
date upon which (A) the Parties agree upon the termination
value following an objection to the initial calculation or
(B) the date upon which an arbitration award determining
the termination value is issued pursuant to Article XX.
It is recognized and acknowledged by both parties that
“best practices” for valuing cash flows linked to the
Covered Annuities include:
1) commencing with seriatim in force data as of the
effective date of termination;
2) fixing actuarial assumptions such as lapse, mortality,
mortality improvement, utilization, etc. within a range deemed
consistent with market standards;
3) determining market inputs for interest rates, implied
volatilities, and other market inputs; and
4) valuing the present value of all the future cash flows
using the inputs and assumptions determined above.
Section 3.03 Termination
of Future Annuities. This Agreement may be
terminated for the acceptance of Future Annuities after
90 days’ written notice of termination by either Party
to the other. Unless mutually agreed, the Reinsurer will
continue to accept reinsurance during this
90-day
period. The Reinsurer’s acceptance will be subject to both
the terms of this Agreement and the Ceding Company’s
payment of applicable Reinsurance Premiums. In addition, either
Party may terminate this Agreement immediately for the
reinsurance
of Future Annuities if the other Party materially breaches this
Agreement, or becomes insolvent or financially impaired.
Termination of this Agreement for Future Annuities does not
affect the existing reinsurance coverage of the Covered
Annuities in force at the effective date of such termination.
Section 3.04 Amounts
Due the Reinsurer in Arrears. (a) If any
material amount of Net Settlement due the Reinsurer pursuant to
Section 4.05 is not paid within sixty (60) days after
the due date, the Reinsurer has the right to terminate this
Agreement. If the Reinsurer elects to terminate this Agreement,
it will give the Ceding Company 90 days written notice of
its intention. The Termination Effective Date under this
Section 3.04 is the day after the 90 day notice period
expires. If the amounts due the Reinsurer in arrears, including
any that become in arrears during the 90 day notice period,
are not paid before the expiration of the notice period, the
Reinsurer will be relieved of all liability under the Covered
Annuities as of the last date for which amounts due the
Reinsurer have been paid for each Covered Annuity.
(b) Terminated reinsurance coverage hereunder for failure
to pay amounts due to the Reinsurer in arrears may be
reinstated, subject to approval by the Reinsurer, within
60 days of the Termination Effective Date, and upon payment
of all amounts in arrears. The Reinsurer has no liability for
any Benefit Payments incurred between the Termination Effective
Date and the date of the reinstatement of the Reinsurance
Coverage. The right to terminate reinsurance does not prejudice
the Reinsurer’s right to amounts due in arrears for the
period during which reinsurance was in force prior to the
expiration of the 90 days notice.
(c) The Ceding Company will not force termination under the
provisions of this Section to transfer the Covered Annuities to
another reinsurer. Termination under this Section is subject to
the payment of a terminal settlement under Section 3.02.
Section 3.05 Fixed
Modified Coinsurance Assets and Variable Modified Coinsurance
Assets. Upon termination, all assets
supporting the Variable Modified Coinsurance Reserve will be
retained by the Ceding Company. After settlement pursuant to
Section 3.02(c) above, assets remaining in the Fixed
Modified Coinsurance Trust will be retained by the Ceding
Company and the Fixed Modified Coinsurance Trust shall be
terminated.
ARTICLE IV
CEDING
COMMISSION, REINSURANCE PREMIUM AND RESERVE
Section 4.01 Ceding
Commission; Other Payments to Ceding Company.
(a) Ceding Commission. On the
Closing Date, the Reinsurer is paying to the Ceding Company the
Ceding Commission in immediately available funds in accordance
with payment instructions provided by the Ceding Company prior
to the Closing Date.
(b) Asset Transfer. In
consideration for the reinsurance provided by the Reinsurer
hereunder, on the Closing Date, the Ceding Company is
transferring to the Reinsurer assets and cash with a total
Statutory Value equal to (i) the Fixed Annuity Quota Share
Percentage of the Fixed Modified Coinsurance Reserve and
(ii) the Variable Annuity Quota Share Percentage of the
Variable Modified Coinsurance Reserve as of the Effective Date
by:
(i) transferring to the Fixed Modified Coinsurance Trust
assets listed on Schedule C and cash with a Statutory Value
in an aggregate amount equal to the Fixed Annuity Quota Share
Percentage of the result of the (1) Fixed Modified
Coinsurance Reserve less (2) the Policy Loans outstanding
on the Covered Annuities, in each case as of the Effective Date;
(ii) withholding the Fixed Annuity Quota Share Percentage
of the Policy Loans on the Ceding Company’s books for the
account of the Reinsurer; and
(iii) retaining assets supporting the Variable Annuity
Quota Share Percentage of the Variable Modified Coinsurance
Reserve as of the Effective Date in the Ceding Company’s
Separate Account.
The parties will estimate the above amounts as of the Effective
Date and will then adjust this estimate to reflect the actual
values on the Effective Date in connection with the first
quarterly Net Settlement after the Closing Date.
Section 4.02 Reinsurance
Premium. (a) During the term of this
Agreement, the Reinsurer shall be entitled to payment of
reinsurance premiums through the Net Settlements amounts equal to
(a) the Fixed Annuity Quota Share Percentage of the
Premiums received by the Ceding Company (and attributable to
periods) on and after the Effective Date that are attributable
to the Fixed Annuity Block (the “Fixed Reinsurance
Premiums”); and
(b) the Variable Annuity Quota Share Percentage of the
Premiums and Separate Account Charges received by the Ceding
Company (and attributable to periods) on and after the Effective
Date that are attributable to the Variable Annuity Block (the
“Variable Reinsurance Premiums” and together
with the Fixed Reinsurance Premiums the “Reinsurance
Premiums”).
Section 4.03 Expense
Allowance. During the term of this Agreement,
the Reinsurer will pay an expense allowance for all Covered
Annuities to the Ceding Company as of the close of each
Accounting Period through the Net Settlement as follows (the
“Expense Allowance”):
(a) a one-time fee of $750 for each Future Annuity that is
a Monument Advisor policy issued during such Accounting Period;
(b) 50% of the commissions payable by the Ceding Company
with respect to Future Annuities that are 403(b) policies during
such Accounting Period;
(c) an administration fee for the Covered Annuities as set
forth on Schedule E;
(d) a fee for managing the Fixed Modified Coinsurance
Assets equal to 0.25% per annum, calculated on a quarterly basis
based upon the product of (i) 0.25% divided by 4 multiplied
by (ii) the market value of the Fixed Modified Coinsurance
Assets as of the end of the last trading day of each Accounting
Period;
(e) a premium tax reimbursement equal to 2% of the
Reinsurance Premiums; and
(f) an excise tax reimbursement equal to 100% of the
U.S. federal insurance excise tax (“FET”),
if any, imposed on the Reinsurance Premiums paid to the
Reinsurer by the Ceding Company under this Agreement, to the
extent such Reinsurance Premiums are subject to the FET pursuant
to section 4371 of the Code.
Section 4.04 Benefit
Payments. During the term of this Agreement,
the Reinsurer will pay through the Net Settlements (i) the
Fixed Annuity Quota Share Percentage of the Benefit Payments
attributable to the Fixed Annuity Block (the “Fixed
Benefit Payments”) and (ii) the Variable Annuity
Quota Share Percentage of the Benefit Payments attributable to
the Variable Annuity Block (the “Variable Benefit
Payments”) as of the close of each Accounting Period.
Section 4.05 Net
Settlement. A “Net
Settlement” is due as of the close of each Accounting
Period. If the amount of the Net Settlement is positive, the
Ceding Company will pay such amount in cash to the Reinsurer. If
the amount of the Net Settlement is negative, the Reinsurer will
pay the absolute value of such amount in cash to the Ceding
Company. The Net Settlement for each Accounting Period is equal
to the following:
(a) The Reinsurance Premiums; minus
(b) The Expense Allowance; minus
(c) The Fixed Benefit Payments and the Variable Benefit
Payments; plus
(d) The Variable Modified Coinsurance Adjustment; plus
The Reinsurer shall be given credit for the amount of any
deposit pursuant to Section 5.01(e) against any amount
payable by the Reinsurer in connection with the Net Settlement
for such Accounting Period.
Within 30 days after the end of each Accounting Period, the
Ceding Company will submit a Net Settlement statement to the
Reinsurer with information that is substantially similar to the
information specified in Section 6.01 hereof. If the amount
of the Net Settlement for an Accounting Period is positive, the
Ceding Company shall pay such amount to the Reinsurer at the
time it delivers the Net Settlement statement for such
Accounting Period to the Reinsurer. If the amount of the Net
Settlement for an Accounting Period is negative, the Reinsurer
shall pay the absolute value of such amount to the Ceding
Company within 15 days of its receipt of the Net Settlement
statement for such Accounting Period. If a Net Settlement
remains outstanding longer than 45 days after the end of a
calendar quarter, interest will be charged at a rate equal to
3-month
LIBOR plus 1% per annum applied from the 46th day after the
end of the calendar quarter for which the Net Settlement is
determined to the date of payment.
Section 4.06 Ongoing
Payments. Except as otherwise specifically
provided for herein, and except as pertaining to the Ceding
Commission, all amounts due to be paid or credited under this
Agreement to either the Reinsurer or the Ceding Company shall be
determined on a net basis as of the last day of the Accounting
Period to which such amount is attributable.
ARTICLE V
FIXED
MODIFIED COINSURANCE RESERVE AND VARIABLE MODIFIED
COINSURANCE RESERVE
Section 5.01 Fixed
Modified Coinsurance Account. (a) As of
the Closing Date, the Ceding Company will establish a trust,
which will at all times be maintained separate and apart from
any other assets of the Ceding Company (the “Fixed
Modified Coinsurance Trust”) pursuant to a Fixed
Modified Coinsurance Trust Agreement in the form attached
hereto as Schedule F. “Required Balance”
means as of any date, an amount equal to the Fixed Annuity Quota
Share Percentage of the excess of the Fixed Modified Coinsurance
Reserve over the Policy Loans.
(b) As of the Closing Date the Ceding Company is depositing
in the Fixed Modified Coinsurance Trust cash and invested assets
with an aggregate Statutory Value equal to not less than the
Required Balance as of the Effective Date. The Ceding Company is
entitled to withdraw assets from the Fixed Modified Coinsurance
Trust Account solely as permitted by this Agreement or the
Fixed Modified Coinsurance Trust Agreement.
(c) During the term of this Agreement, the Ceding Company
will own, manage and maintain the assets in the Fixed Modified
Coinsurance Trust (the “Fixed Modified Coinsurance
Assets”) and the Fixed Annuity Quota Share Percentage
of the Policy Loans collectively supporting the Fixed Annuity
Quota Share Percentage of the Fixed Modified Coinsurance Reserve.
(d) The investment of the Fixed Modified Coinsurance Assets
will initially be managed by the Ceding Company or its
Affiliates (the “Investment Manager”) in
accordance with the Investment Guidelines attached hereto as
Schedule G taking into account investment and reinvestment
recommendations made by the Reinsurer.
(e) The Ceding Company shall estimate (i) the
aggregate Statutory Value of the assets in the Fixed Modified
Coinsurance Trust and (ii) the amount of the Required
Balance, in each case as of the end of each Accounting Period
within ten days after the Accounting Period. If the estimated
aggregate Statutory Value of the assets in the Fixed Modified
Coinsurance Trust is less than the estimated Required Balance,
the Reinsurer shall within eleven (11) days after the end
of the relevant Accounting Period, transfer to the Fixed
Modified Coinsurance Trust cash or other assets which meet the
requirements of the Investment Guidelines in an amount
sufficient to increase the aggregate Statutory Value of the
assets in the Fixed Modified Coinsurance Trust to an amount that
equals the estimated Required Balance as of the end of such
Accounting Period. If the aggregate Statutory Value of the
assets in the Fixed Modified Coinsurance Trust exceeds the
Required Balance as shown in the Net Settlement statements
delivered by the Ceding Company, the Reinsurer may request the
Ceding
Company to, and the Ceding Company shall, withdraw from the
Fixed Modified Coinsurance Trust cash or other assets in an
amount equal to such excess and pay them over to the Reinsurer;
provided that, after any such withdrawal, the aggregate
Statutory Value of the remaining assets in the Fixed Modified
Coinsurance Trust equals or exceeds the Required Balance as of
the end of such Accounting Period.
(f) For each Accounting Period, the Ceding Company will pay
to the Reinsurer investment income equal to (i) plus
(ii) plus (iii) (the “Fixed Modified Coinsurance
Investment Income”) through the Net Settlement where:
(i) is the Fixed Annuity Quota Share Percentage of the net
investment income received, accrued and credited and any related
adjustments on the assets supporting the Fixed Modified
Coinsurance Reserve;
(ii) is Fixed Annuity Quota Share Percentage of the
realized capital gains and losses (net of additions or
deductions to the Interest Maintenance Reserve for interest
related realized capital gains and losses and including
statutory impairments) on the assets supporting the Fixed
Modified Coinsurance Reserve and the Fixed Annuity Quota Share
Percentage of unrealized capital gains and losses that are
debited or credited to the Ceding Company’s surplus account
in accordance with applicable statutory accounting requirements
with respect to the Fixed Annuity Block; and
(iii) the Fixed Annuity Quota Share Percentage of the
amortization of the Interest Maintenance Reserve on the assets
supporting the Fixed Modified Coinsurance Reserve.
(g) For each Accounting Period a “Fixed Modified
Coinsurance Adjustment” will be calculated as follows:
(i) The Fixed Modified Coinsurance Investment Income; minus
(ii) the Fixed Annuity Quota Share Percentage of the Fixed
Modified Coinsurance Reserve as of the close of the current
Accounting Period less the Fixed Annuity Quota Share Percentage
of the Fixed Modified Coinsurance Reserve as of the close of the
preceding Accounting Period; provided, that for the purposes of
this clause (g)(ii), any reduction of the Fixed Modified
Coinsurance Reserve resulting from transfers by holders of
Covered Annuities from fixed investment options to variable
investment options during the Accounting Period shall be added
back to the Fixed Modified Coinsurance Reserve as of the close
of the current Accounting Period; plus
(iii) the Variable Annuity Quota Share Percentage of the
aggregate amount of transfers by holders of Covered Annuities
from fixed investment options to variable investment options
during the Accounting Period.
For any Accounting Period in which the Fixed Modified
Coinsurance Adjustment is positive, the Ceding Company will owe
the Reinsurer such amount. For any Accounting Period in which
the Fixed Modified Coinsurance Adjustment is negative, the
Reinsurer will owe the Ceding Company the absolute value of such
amount. Settlement will be made through Net Settlement for each
Accounting Period.
(a) The “Variable Modified Coinsurance
Adjustment” will be calculated for each Accounting
Period as follows:
(i) 0.15% of market value of the assets in the Ceding
Company’s Separate Account supporting the variable
Annuities (including any variable Annuities that have fixed
options) that generate revenue sharing and
12b-1 fees,
less
(ii) the Variable Annuity Quota Share Percentage of the
transfers from the Ceding Company’s general account to the
Fund, including premiums and fund transfers, with respect to the
Variable Annuity Block for the Accounting Period; plus
(iii) the Fixed Annuity Quota Share Percentage of the
transfers from the Fund to the Ceding Company’s general
account, including benefits and fund transfers, with respect to
the Variable Annuity Block, for the Accounting Period; plus
(iv) the Variable Annuity Quota Share Percentage of the
Pricing Gains/Losses with respect to the Variable Annuity Block
for the Accounting Period.
(b) For any Accounting Period in which the Variable
Modified Coinsurance Adjustment is positive, the Ceding Company
will owe the Reinsurer such amount. For any Accounting Period in
which the Variable Modified Coinsurance Adjustment is negative,
the Reinsurer will owe the Ceding Company the absolute value of
such amount. Settlement will be made through Net Settlement for
each Accounting Period.
(c) The Ceding Company will own, manage and maintain the
assets supporting the Variable Annuity Quota Share Percentage of
the Variable Modified Coinsurance Reserve in its Separate
Account in accordance with the terms of the Annuities included
in the Variable Annuity Block.
ARTICLE VI
REPORTS
Section 6.01 Accounts
of Premium, Payments and Subrogation. Within
thirty (30) days following the end of each calendar
quarter, the Ceding Company shall render or cause to be rendered
to the Reinsurer a summary report and accounting of all
transactions for the Covered Annuities, including premiums
earned, benefits paid, claims received, denied
and/or paid,
Policy Loan amount, Fixed Modified Coinsurance Reserve, Variable
Modified Coinsurance Reserve and Statutory Reserve increases or
decreases, Fixed Modified Coinsurance Assets amount (both market
value and Statutory Value), par/exposure drawdowns, refundings,
terminations, any subrogation, salvage or reimbursement, other
matters that have occurred during the preceding quarter with
respect to the Covered Annuities, and any other information
needed by the Reinsurer for reporting with respect to the
Covered Annuities in the Reinsurer’s statutory and tax
financial statements, such reports to be in a mutually agreed
upon form and to be prepared according to mutually agreed upon
standards.
Section 6.02 Other
Information. Within 45 days following
the end of each calendar year, the Ceding Company shall furnish
to the Reinsurer any other information that the Parties may
reasonably require for their annual financial statements.
ARTICLE VII
ADMINISTRATION
OF COVERED ANNUITIES
Section 7.01 Administration
of Covered Annuities.
(a) Upon the execution of this Agreement, the Ceding
Company shall retain the obligation of administering the Covered
Annuities, in accordance with the guidelines set forth on
Schedule D hereto; provided that the Ceding Company
is not required to take any action that will be in violation of
any Law, and may take any action required by, or necessary to be
in compliance with, any applicable Law. Actions taken (or failed
to be taken) by the Ceding Company as contemplated by and in
accordance with Schedule D shall not constitute a breach by
the Reinsurer of any Reinsurer obligation under this Agreement.
The Reinsurer shall not deny coverage, or seek to avoid the
provision of reinsurance under this Agreement on the ground of
any act, error or omission in the provision of administrative
services by the Ceding Company as contemplated by
Schedule D.
(b) In consideration for the Ceding Company performing
administrative services, the Reinsurer shall pay to the Ceding
Company, for each Accounting Period, the fees computed as set
forth on Schedule E hereto for each Covered Annuity in
force for any portion of the Accounting Period being
administered by the Ceding Company.
(c) In the event that the Ceding Company shall be unable to
provide or cause to provide services as required by this
Agreement for any reason for a period of time that can
reasonably be expected to exceed thirty (30) calendar days,
the Ceding Company shall provide notice to the Reinsurer of its
inability to perform the services and shall cooperate with the
Reinsurer in providing or otherwise obtaining alternative means
of providing such services at the Ceding Company’s sole
cost and expense.
(d) The Ceding Company shall at all times during the term
of this Agreement keep and maintain in force all necessary
licenses, authorizations, permits and qualifications from
Governmental Authorities under applicable Laws and regulations
as may be necessary to perform the administrative services in
the manner required by this Agreement.
Section 7.02 Contested
Claims. The Ceding Company will advise the
Reinsurer of its intention to contest, compromise or litigate
any Benefit Payments with respect to any Covered Annuities. The
Reinsurer will pay its share of the expenses and costs of such
contests, including reasonable attorneys fees (“Out of
Pocket Expenses”) (according to the Fixed Annuity Quota
Share Percentage or the Variable Annuity Quota Share Percentage,
as applicable), or it may choose not to participate. If the
Reinsurer chooses not to participate, it will discharge its
liability by payment to the Ceding Company of the full amount of
its liability on such Covered Annuities reinsured hereunder
through the applicable Net Settlement process.
ARTICLE VIII
FOLLOW THE
FORTUNES; FOLLOW THE SETTLEMENTS;
SUBROGATION
Section 8.01 Finality
of Settlements. All settlements made by or on
behalf of the Ceding Company shall be final, conclusive and
unconditionally binding upon the Reinsurer.
Section 8.02 Follow
the Fortunes; Follow the Settlements. The
Reinsurer’s liability under this Agreement shall follow
from, and be incurred simultaneously with and be identical
(subject to the Fixed Annuity Quota Share Percentage or the
Variable Annuity Quota Share Percentage, as applicable) to any
and all liabilities of the Ceding Company on the Covered
Annuities. The Reinsurer shall be bound, without limitation, by
all payments and settlements entered into by or on behalf of the
Ceding Company. Nothing in this Section 8.02 shall be
construed to expand the liability of the Reinsurer beyond what
is specifically assumed under this Agreement without the
Reinsurer’s prior written consent.
Section 8.03 Subrogation. The
Reinsurer is entitled to its proportionate share of any
Recoveries on account of claims and settlements relating to or
arising out of the Covered Annuities that are actually collected
by or on behalf of the Ceding Company.
ARTICLE IX
WAIVER OF
DEFENSES
Section 9.01 Reinsurer’s
Knowledge. The Reinsurer has sufficient
knowledge and experience in financial, business and other
relevant matters to be capable of evaluating the risks and
merits of entering into and performing this Agreement. Prior to
the Reinsurer’s execution and delivery of this Agreement,
the Reinsurer has (i) been given the opportunity to ask
questions of, and receive answers from, the Ceding Company
concerning the terms and conditions of this Agreement and the
subject matter of this Agreement, (ii) been given the
opportunity to request and review such additional information
necessary to evaluate the risks and merits of entering into and
performing this Agreement and to verify the accuracy of or to
supplement the information provided to the Reinsurer to the
extent that the Ceding Company possesses such information, and
(iii) received all documents and information reasonably
necessary to make the decision to enter into and perform this
Agreement.
Section 9.02 Waiver
of Defenses. Subject to the Reinsurer’s
right to offset as set forth in Article XIV below, the
Reinsurer hereby knowingly and voluntarily waives any and all
defenses to payment under this Agreement and agrees not to seek
rescission of this Agreement because of any actual or alleged
misrepresentation
and/or
non-disclosure as to the subject matter of this Agreement at or
prior to the Reinsurer’s execution and delivery of this
Agreement. Without limiting the generality of the foregoing, the
Reinsurer hereby knowingly and voluntarily waives the “duty
of utmost good faith” and any similar duty arising or
alleged to arise in connection with the cession of liabilities
from the Ceding Company to the Reinsurer hereunder as of
the Closing Date; provided, however, that the Reinsurer reserves
all of its rights and remedies in respect of any such duty of
utmost good faith arising after the Closing Date.
ARTICLE X
NO RIGHTS OF
THIRD PARTIES
Section 10.01 No
Third Party Rights. Nothing in this
Agreement, express or implied, is intended, or shall be
construed to confer upon or give to any Person (other than the
Parties and their permitted assigns or successors), any rights
or remedies under or by reason of this Agreement.
ARTICLE XI
CREDIT FOR
REINSURANCE
Section 11.01 Credit
for Reinsurance. The Reinsurer shall take any
and all steps necessary to comply with all applicable Laws and
regulations and required under the terms of the National
Association of Insurance Commissioners Accounting Practices and
Procedures Manual
Appendix A-785,
Credit for Reinsurance, as amended from time to time
(“SAP
Appendix A-785”)
so as to permit the Ceding Company to receive full credit under
the terms of SAP
Appendix A-785
as admitted reinsurance for the Reinsurer’s share of the
Statutory Reserve, if any, and any other liabilities ceded
hereunder, and to obtain full financial statement credit for the
reinsurance provided by this Agreement in all applicable United
States jurisdictions in which the Ceding Company is licensed to
transact business, including, without limitation, compliance
with the Texas Insurance Code, to the extent credit is not
otherwise available under applicable Law or regulations. Where
SAP
Appendix A-785
provides alternative methods to ensure such credit, the
Reinsurer shall be entitled to elect, in its sole discretion,
the method to be used. It is understood and agreed that any term
or condition required by such Law or regulation to be included
in this Agreement for the Ceding Company to receive financial
credit for the reinsurance provided by this Agreement shall be
deemed to be incorporated in this Agreement by reference to the
extent not inconsistent with the express terms of this
Agreement. The Reinsurer shall provide, upon the reasonable
request and at the discretion of the Ceding Company, evidence of
the steps that the Reinsurer has taken to comply with this
Section 11.01.
Section 11.02 Release
of Contingency Reserves. The Ceding Company
shall periodically, and in any event at least annually (and, to
the extent necessary, shall seek approval from the Texas
Department of Insurance to) release contingency reserves in
respect of Covered Annuities to the maximum extent permitted
pursuant to the Texas Insurance Code.
ARTICLE XII
ERRORS AND
OMISSIONS
Section 12.01 Errors
and Omissions. Any inadvertent error,
omission or delay in connection with this Agreement shall not
affect the liability which otherwise would have attached to
either Party, provided such error, omission or delay is
rectified promptly after notification to or discovery by the
Ceding Company or the Reinsurer, as the case may be.
ARTICLE XIII
ACCESS TO
RECORDS
Section 13.01 Provision
of Records to Reinsurer. The Ceding Company
shall as soon as practicable provide to the Reinsurer copies
(which may be in electronic form) of reports, records, claim
files and other information relating to the Covered Annuities
requested by the Reinsurer; provided that the Ceding
Company shall have the right to redact, on a reasonable basis,
materials which are protected by attorney/client privilege or
the attorney work product doctrine or that contain information
unrelated to the Covered Annuities or that
are not material to the Covered Annuities; provided further
that in the event of any such redaction for reasons of
attorney/client privilege or the attorney work product doctrine,
the Ceding Company shall use its commercially reasonable efforts
to provide the Reinsurer with the substance of the information
requested in a manner consistent with maintaining such
protection.
Section 13.02 Reinsurer’s
Access to Records. The Reinsurer shall, at
all reasonable times during the term of this Agreement and
thereafter, have access to, and be permitted to copy, the books,
records, files and documents (including computer files,
retrieval programs and similar documentation) of the Ceding
Company with respect to the Covered Annuities; provided
that the Ceding Company shall have the right to redact, on a
reasonable basis, materials which are protected by
attorney/client privilege not shared by the Reinsurer or the
attorney work product doctrine not shared by the Reinsurer or
that contain information unrelated to the Covered Annuities or
that are not material to the Covered Annuities. The Ceding
Company shall cooperate with the certified public accountants of
the Reinsurer in connection with the preparation of the
Reinsurer’s audited financial statements.
Section 13.03 Ceding
Company’s Access to Records. The Ceding
Company shall, at all reasonable times during the term of this
Agreement and thereafter, have access to, and be permitted to
copy, the books, records, files and documents (including
computer files, retrieval programs and similar documentation) of
the Reinsurer with respect to the Covered Annuities; provided
that the Reinsurer shall have the right to redact, on a
reasonable basis, materials which are protected by
attorney/client privilege not shared by the Ceding Company or
the attorney work product doctrine not shared by the Ceding
Company or that contain information unrelated to the Covered
Annuities or that are not material to the Covered Annuities. The
Reinsurer shall cooperate with the certified public accountants
of the Ceding Company in connection with the preparation of the
Ceding Company’s audited financial statements.
ARTICLE XIV
OFFSET AND
RECOUPMENT
Section 14.01 Offset
and Recoupment. Except for the payment of the
amounts specified in Section 4.01 on the Closing Date, each
Party hereto shall have, and may exercise at any time and from
time to time, the right to offset and recoup any balance or
balances, whether on account of premiums or on account of
Benefit Payments or otherwise, due from such Party to the other
Party hereto under this Agreement, and may offset the same
against any balance or balances due or to become due to the
former from the latter under the same. The Party asserting the
right of offset shall have and may exercise such right whether
the balance or balances due or to become due to such Party from
the other are on account of premiums or on account of Benefit
Payments or otherwise, and regardless of the capacity in which
each Party acted under this Agreement or, if more than one
agreement between the Parties, the different agreements
involved. In the event of the insolvency of a Party hereto,
offsets and recoupment shall be allowed only in accordance with
the applicable Law.
ARTICLE XV
INSOLVENCY
Section 15.01 Reinsurer’s
Obligation To Pay Claims. In the event of the
insolvency of the Ceding Company or the appointment of a
conservator, rehabilitator, liquidator or statutory successor of
the Ceding Company, the reinsurance under this Agreement shall
be payable directly to its liquidator, receiver, conservator or
statutory successor, on the basis of the liability of the Ceding
Company without diminution because of the insolvency of the
Ceding Company or because the liquidator, receiver, conservator
or statutory successor of the Ceding Company has failed to pay
all or a portion of any claim. The reinsurance under this
Agreement shall be payable by the Reinsurer to the Ceding
Company’s liquidator, receiver, conservator or statutory
successor, except as provided by applicable Law.
Section 15.02 Right
to Interpose. In the event of the insolvency
of the Ceding Company, the liquidator, receiver, conservator or
statutory successor of the Ceding Company shall give written
notice to the
Reinsurer of the pendency of the claim against the Ceding
Company, which claim would involve a possible liability on the
part of the Reinsurer, promptly after such claim is filed in the
conservation or liquidation proceeding or in the receivership,
and that during the pendency of such claim, the Reinsurer may
investigate such claim and interpose at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or
defenses that it may deem available to the Ceding Company or its
liquidator, receiver, conservator or statutory successor. The
expense thus incurred by the Reinsurer shall be chargeable,
subject to court approval, against the insolvent Ceding Company
as part of the expense of liquidation or rehabilitation to the
extent of the share of the benefit which may accrue to the
Ceding Company solely as a result of the defense undertaken by
the Reinsurer.
ARTICLE XVI
CONFIDENTIALITY
Section 16.01 Confidentiality.
(a) The Party receiving Confidential Information agrees,
for the benefit of the disclosing Party and the provider of any
Third-Party Information, to use the same degree of care to keep
the disclosing Party’s Confidential Information
confidential as it employs with its own confidential information
of like kind, to take all reasonable measures to keep the
disclosing Party’s Confidential Information secret and
confidential, and to observe all applicable Law governing the
use and protection of any personally identifiable information
contained within the disclosing Party’s Confidential
Information or Third-Party Information.
(b) The term “Confidential Information”
shall mean the following, whether provided by the disclosing
Party, its officers, directors, employees, agents, advisors,
legal counsel, auditors, Affiliates or other representatives
(collectively, “Representatives”), whether in
oral, written, digital or other form, and whether provided
before or after the Closing Date: all information concerning the
disclosing Party or its business, this Agreement, any Covered
Annuity or proposed annuity or the related terms and conditions
thereof, as well as all underlying transactions relating thereto
and all information with respect to the parties to such
transactions, their Affiliates, their business or operations or
the assets covered by such transactions or otherwise provided by
or on behalf of such parties in connection with such
transactions (“Third-Party Information”), and
all certificates, notices, agreements and any other
communications of any sort relating to the foregoing, together
with all documents, materials and other information provided by
the disclosing Party or its Representatives or third parties in
connection with this Agreement or the foregoing items or
matters, including any and all financial, technical (including
underwriting and credit evaluation techniques, procedures,
practices and methodologies), commercial or other information,
and any notes, communications, analyses, compilations, studies,
memoranda or other documents prepared or derived by the
receiving Party or others which contain or reflect all or any
part of such documents, materials and other information.
(c) Notwithstanding anything contained herein to the
contrary, any Confidential Information will not be deemed
confidential if (i) it is in the public domain (through no
breach of this paragraph by the receiving Party or any of its
Representatives of the obligations set forth in this paragraph),
(ii) it was lawfully in the receiving Party’s or any
of its Representatives’ possession at the time of
disclosure, (iii) it was lawfully received by the receiving
Party or any of its Representatives from a third party that, to
the receiving Party’s or any of its Representatives’
knowledge, was not under an obligation of confidentiality,
(iv) the disclosing Party has consented to its disclosure,
or (v) it was independently developed by the receiving
Party without reference to the Confidential Information provided
by the disclosing Party or any of its Representatives. The
receiving Party shall have the burden to prove that any of the
foregoing exceptions are applicable by written evidence. If the
receiving Party is requested or required in connection with a
judicial, regulatory, administrative, governmental or other
legal proceeding or by applicable Law or court order, subpoena
or similar legal process, to disclose any Confidential
Information, the receiving Party shall provide the disclosing
Party with timely notice of such request, to the extent
reasonably practicable and unless prohibited by applicable Law,
so that the disclosing Party (or a party to an underlying
transaction, as applicable) may seek, at the disclosing
Party’s (or such party’s) expense, an appropriate
protective order, but in any event the receiving Party may
disclose whatever Confidential Information it is advised by
counsel it is required to disclose. The receiving Party
agrees that in the event of a breach by the receiving Party or
threatened breach of this Article XVI, the disclosing Party
may seek the imposition of injunctive relief and other equitable
remedies, in addition to other remedies available to them, and
the receiving Party will not raise as a defense in any action
for injunctive or other equitable relief that the disclosing
Party has an adequate remedy at Law or require the posting of
security or bond therefor.
ARTICLE XVII
AMENDMENT,
ETC. OF COVERED ANNUITIES
Section 17.01 Amendments
of Covered Annuities. Except with the prior
written consent of the Reinsurer, which consent shall not be
unreasonably withheld, delayed or conditioned, the Ceding
Company shall not amend or modify the terms or conditions of any
Covered Annuity (including to any contract riders or
endorsements thereto) other than those amendments or
modifications entered into in the ordinary course of business or
required by applicable Law. In the event that any such
amendments or modifications are made in any Covered Annuity
other than in accordance with this Section 17.01, this
Agreement will cover liability incurred by the Ceding Company
for Benefit Payments as if such changes, amendments or
modifications had not been made.
Section 17.02 Adjustments. If
the Ceding Company’s liability under any of the Covered
Annuities is changed because of a misstatement of age, sex or
any other material fact, the Reinsurer will share in the change
proportionately to the amount reinsured hereunder, and will make
any and all proportional adjustments with the Ceding Company.
Section 17.03 Credited
Interest Adjustments. In setting credited
interest rates for the Covered Annuities, the Ceding Company
will take into account recommendations made by the Reinsurer,
however the Parties acknowledge and agree that nothing in this
Agreement shall be construed to limit the Ceding Company’s
right to determine Non-Guaranteed Elements for the Covered
Annuities. For Covered Annuities that provide non-guaranteed
credited interest rates, the Ceding Company intends, to the
extent possible, to maintain or increase its current interest
rate spreads unless such interest rate spreads are changed due
to applicable Law. For Covered Annuities in which credited
interest rates are at minimum guaranteed levels, the Ceding
Company will maintain such rates at such minimum guaranteed
levels until such time as the Ceding Company and the Reinsurer
agree that rates should be changed to adjust for persistency
deterioration, to the extent permitted under the terms of such
Covered Annuities and applicable Law.
ARTICLE XVIII
REPRESENTATIONS
OF THE CEDING COMPANY
Section
18.01 Representations of the Ceding
Company. The Ceding Company hereby represents
and warrants to the Reinsurer as of the Effective Date:
(a) A correct and complete listing of the Initial Covered
Annuities is set forth in or by reference in Schedule A
hereto. Copies of the annuity policies and contracts of the
Ceding Company reinsured hereunder and all amendments,
endorsements and riders thereto (collectively, the
“Annuity Forms”) on which a material amount of
the Initial Covered Annuities in force on the date of this
Agreement and reinsured hereunder were issued, have been made
available previously to the Reinsurer and will be made available
upon reasonable request in writing by the Reinsurer during the
Term. The information contained in or by reference in
Schedule A is complete and accurate in all material
respects as of the Effective Date.
(b) There is no material default or breach by the Ceding
Company in the timely performance of any obligation to be
performed or paid under an Initial Covered Annuity or in the
observance by the Ceding Company of any other material provision
thereof as of the Effective Date. Except as noted in the
Disclosure Schedule attached hereto as Schedule H, no
consent is required from any person under any Covered Annuity in
effect on the Effective Date in order to consummate the
reinsurance provided for
herein, except where the failure to obtain such consent would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Ceding Company.
(c) There is no pending, or to the Ceding Company’s
Knowledge, threatened Action, suit, or Legal Proceeding against
or involving the Ceding Company relating to the Initial Covered
Annuities in effect on the Effective Date that, individually or
in the aggregate, would reasonably be expected to lead to the
revocation, modification, termination, suspension, or any other
impairment of any such Initial Covered Annuity, except for such
revocation, modification, termination, suspension, or other
impairment that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Ceding Company.
(d) The Ceding Company is duly registered, licensed, or
admitted as an insurer under applicable insurance Laws
(collectively, “Insurance Laws”) in each
jurisdiction where the Ceding Company is required to be so
licensed or admitted to conduct the Ceding Company’s
business as it relates to the Initial Covered Annuities, except
where the failure to be so registered, licensed, or admitted
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Ceding Company.
(e) Except as otherwise would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse
Effect on the Ceding Company, all policies, certificates,
applications and other agreements of insurance which are a part
of the Initial Covered Annuities, are, to the extent required
under applicable Law, on forms approved by applicable insurance
regulatory authorities or which have been filed and not objected
to, and such forms comply in all material respects with the
insurance statutes, regulations, and rules applicable thereto
and, as to premium rates established by the Ceding Company which
are required to be filed with or approved by insurance
regulatory authorities, the rates have been so filed or
approved, the premiums charged conform thereto in all material
respects, and such premiums comply in all material respects with
the insurance statutes, regulations, and rules applicable
thereto. Except as otherwise would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse
Effect on the Ceding Company, all marketing materials of the
Ceding Company comply with applicable Laws.
(f) Except as listed on Schedule I, there are no Legal
Proceedings pending, or to the Ceding Company’s Knowledge,
threatened against or affecting the Ceding Company or any of its
properties by or before any Governmental Authority that arises
out of or relates to the Ceding Company’s actual or alleged
obligations under the Initial Covered Annuities.
(g) With respect to the Initial Covered Annuities only, the
Ceding Company has conducted its businesses only in the ordinary
and usual course of such businesses and the Ceding Company has
not, except as required by Law, (i) paid, discharged, or
satisfied any claims in respect of any Initial Covered Annuities
other than in the ordinary course of business consistent with
past practice, (ii) transferred any of the Initial Covered
Annuities other than in the ordinary course of business
consistent with past practice, (iii) knowingly taken any
action reasonably likely to materially decrease the value of the
Initial Covered Annuities except for establishing,
supplementing, or otherwise adjusting reserves in the ordinary
course of business consistent with past practice,
(iv) changed any material accounting principles, practices,
or methods applicable to Initial Covered Annuities other than as
required by changes in GAAP, SAP or as disclosed in the Ceding
Company’s published statutory financial statements, or
(v) made any material change in actuarial, underwriting, or
claims administration policies, practices, procedures, methods,
assumptions, or principles applicable to Initial Covered
Annuities.
(h) Except as listed on Schedule J, there are no
Inuring Reinsurance as of the Effective Date.
(i) Except as set forth in Schedule A hereof, as the
case may be:
(i) all Initial Covered Annuities have been administered in
all material respects in accordance with the applicable Annuity
Form and applicable Law, and all benefits claimed by any Person,
and all cash values, charges and other amounts required to be
calculated, under any annuity contract of the Ceding Company
have since September 30, 2009 been paid (or provision for
payment thereof
has been made) or calculated, as the case may be, in accordance
with the terms of the Annuity Forms under which they arose, and
such payments were not delinquent in any material respect and
were paid (or will be paid) without fines or penalties, except
for any such claim for benefits for which the Ceding Company
reasonably believes or believed that there is a reasonable basis
to contest payment and is taking such action.
(ii) (x) except as previously disclosed to the
Reinsurer in writing, the Ceding Company has not changed the
“cost of insurance” or similar charges on or in
respect of the Covered Annuities during the past 12 months
and (y) the Ceding Company does not have any agreements,
written or otherwise, with annuityholders or groups of
annuityholders regarding credited interest rates to be paid with
respect to any of the Initial Covered Annuities except as set
forth in the Initial Covered Annuities and except as set forth
on Schedule K.
ARTICLE XIX
INDEMNIFICATION
Section
19.01 Indemnification of the Reinsurer by the
Ceding Company. The Ceding Company will
indemnify and hold harmless the Reinsurer and its Affiliates
from and against monetary damages, liabilities, obligations,
costs and expenses which may include but are not limited to
plaintiff’s litigation-related costs and fees, together
with the Reinsurer’s reasonable attorney’s fees, costs
and expenses, resulting from or relating to (i) a breach of
any representation or warranty of the Ceding Company in
Article XVIII hereof (disregarding for purposes of this
clause (i) any materiality or Material Adverse Effect
qualification contained in such representation or warranty),
(ii) any actions taken or omissions made by the Ceding
Company or the Ceding Company’s employees or agents in the
solicitation, sale, issuance or administration of any Covered
Annuity including, without limitation, any Extra-Contractual
Obligation or liability in excess of policy limits arising out
of or relating to any such actions taken or omissions made, and
not attributable to a written direction or a request by a
designated officer of the Reinsurer, (iii) any Future
Annuity issued on a basis inconsistent with the current
underwriting standards of the Ceding Company, (iv) the
failure of any Covered Annuity to have complied in all material
respects with applicable Laws and regulations at the time of its
issuance or thereafter due to facts or circumstances extant on
or before the Effective Date, (v) any breach or
nonfulfillment by the Ceding Company of, or any failure by the
Ceding Company to perform, any of the terms or conditions of, or
any duties or obligations under, this Agreement (including the
administration of the Covered Annuities), (vi) any Excluded
Liabilities, (vii) any successful enforcement of this
indemnity or (viii) any failure by the Ceding Company to
obtain the approval of any applicable Governmental Authority, to
the extent required under applicable legal requirements, of any
application, brochure or marketing materials pertaining to the
Covered Annuities or failure to have any such application,
brochure or marking materials filed with and not objected to by
such Governmental Authority within the period provided by
applicable Law for objection (collectively, the
“Reinsurer Losses”). The Ceding Company shall
not be obligated to indemnify the Reinsurer or its Affiliates
under this Section 19.01 as to any claim arising from the
Reinsurer’s willful or negligent misconduct or breach of
the terms of this Agreement or any agreement contemplated hereby.
Section
19.02 Indemnification of the Ceding Company by
the Reinsurer. The Reinsurer will indemnify
and hold harmless the Ceding Company and its Affiliates from and
against monetary damages, liabilities, obligations, costs and
expenses which may include but are not limited to
plaintiff’s litigation-related costs and fees, together
with the Ceding Company’s reasonable attorney’s fees,
costs and expenses, resulting from or relating to (i) the
Reinsured Liabilities, (ii) any other breach or
nonfulfillment by the Reinsurer of, or any other failure by the
Reinsurer to perform, any of the terms or conditions of, or any
duties or obligations or agreements under, this Agreement, or
(iii) any successful enforcement of this indemnity
(collectively, the “Ceding Company Losses”);
provided, however, that in no event shall Ceding Company Losses
include any contractual liability under any Covered Annuity
arising prior to the Effective Date. The Reinsurer shall not be
obligated to indemnify the Ceding Company or its Affiliates
under this Section 19.02 as to any claim arising from the
Ceding Company’s willful or negligent misconduct or breach
of the terms of this Agreement or any agreement contemplated
hereby.
Section
19.03 Claims Notice. In the event
that either the Ceding Company or the Reinsurer wishes to assert
a claim for indemnification hereunder, the Party seeking
indemnification (the “Indemnified Party”) shall
deliver written notice (a “Claims Notice”) to
the other Party (the “Indemnifying Party”) no
later than ten (10) Business Days after such claim becomes
known to the Indemnified Party, specifying the facts
constituting the basis for, and the amount (if known) of the
claim asserted. Failure to deliver a Claims Notice with respect
to a claim (other than a claim based on an Asserted Liability,
as defined below) in a timely manner as specified in the
preceding sentence shall not be deemed a waiver of the
Indemnified Party’s right to indemnification hereunder for
losses in connection with such claims, but the amount of
reimbursement to which the Indemnified Party is entitled shall
be reduced by the amount, if any, by which the Indemnified
Party’s losses would have been less had such Claims Notice
been timely delivered.
Section
19.04 Right to Contest Claims of Third
Parties.
(a) If an Indemnified Party asserts, or may in the future
seek to assert, a claim for indemnification hereunder because of
a claim or demand made, or an action, proceeding or
investigation instituted, by any Person not a party to this
Agreement (a “Third Party Claimant”) that may
result in a liability with respect to which the Indemnified
Party would be entitled to indemnification pursuant to this
Article (an “Asserted Liability”), the
Indemnified Party shall deliver to the Indemnifying Party a
Claims Notice with respect thereto, which Claims Notice shall,
in accordance with the provisions of Section 19.03, be
delivered as promptly as practicable and in any event no later
than ten (10) Business Days after such Asserted Liability
is actually known to the Indemnified Party. Failure to deliver a
Claims Notice with respect to a claim in a timely manner as
specified in the preceding sentence shall not be deemed a waiver
of the Indemnified Party’s right to indemnification
hereunder for a liability in connection with such claim, but the
amount of reimbursement to which the Indemnified Party is
entitled shall be reduced by the amount, if any, by which the
Indemnified Party’s resultant liabilities would have been
less had such Claims Notice been timely delivered.
(b) The Indemnifying Party shall have the right, upon
written notice to the Indemnified Party, to investigate,
contest, defend or settle any Asserted Liability that may result
in a liability with respect to which the Indemnified Party is
entitled to indemnification pursuant to this Article, provided
that the Indemnified Party may, at its option and at its own
expense, participate in the investigation, contesting, defense
or settlement of any such Asserted Liability through
representatives and counsel of its own choosing; and provided,
further, that the Indemnifying Party shall not settle any
Asserted Liability unless (i) such settlement is on
exclusively monetary terms or (ii) the Indemnified Party
shall have consented to the terms of such settlement, which
consent shall not be unreasonably withheld. If requested by the
Indemnifying Party, the Indemnified Party will, at the sole cost
and expense of the Indemnifying Party, cooperate with the
Indemnifying Party and its counsel in contesting any Asserted
Liability or, if appropriate and related to the Asserted
Liability in question, in making any counterclaim against the
Third Party Claimant, or any cross-complaint against any Person
(other than the Indemnified Party or its Affiliates). Unless and
until the Indemnifying Party elects to defend the Asserted
Liability, the Indemnified Party shall have the right, at its
option and at the Indemnifying Party’s expense, to do so in
such manner as it deems appropriate, provided, however, that the
Indemnified Party shall not settle or compromise any Asserted
Liability for which it seeks indemnification hereunder without
the prior written consent of the Indemnifying Party (which shall
not be unreasonably withheld).
(c) The Indemnifying Party shall be entitled to participate
in (but not to control) the defense of any Asserted Liability
which it has not elected to defend with its own counsel and at
its own expense.
(d) The Ceding Company and the Reinsurer shall make
mutually available to each other all relevant information in
their possession as to any Asserted Liability (except to the
extent that such action would result in a loss of
attorney-client privilege) and shall cooperate with each other
in defense thereof.
Section
19.05 Mitigation. Each Party
agrees to use its respective commercially reasonable best
efforts to mitigate losses and not to cause or worsen any
liability as would constitute a liability of the other Party
pursuant to any claim of indemnification hereunder.
Section
19.06 Limitation on Indemnification
Claims. (a) The Ceding Company shall not
have any liability under Section 19.01(i) until the
aggregate amount of any such liability incurred pursuant to such
section exceeds $500,000 (and then only the extent of such
excess).
(b) The Ceding Company shall not have any liability under
Section 19.01(i) if the aggregate amount of any such
liability incurred exceeds ten percent (10%) of the Ceding
Commission.
(c) The representations and warranties of the Ceding
Company contained in Article XVIII shall expire and
terminate and be of no further force and effect as of the first
anniversary of the Effective Date. Notwithstanding the preceding
sentences, any breach of representation or warranty in respect
of which indemnity may be sought under this Agreement shall
survive such time at which it would otherwise terminate pursuant
to the preceding sentences, if notice of the inaccuracy or
breach thereof giving rise to such right of indemnity shall have
been given to the party against whom such indemnity may be
sought prior to such time.
(d) Upon making any indemnification payment, the
Indemnifying Party will, to the extent of such payment, be
subrogated to all rights of the Indemnified Party against any
third party in respect of the loss to which the payment relates.
The amount of losses sustained by an Indemnified Party and owed
by an Indemnifying Party shall be reduced by any amount received
by such Indemnified Party with respect thereto under any
insurance or reinsurance coverage from any other party alleged
to be responsible therefor. The Indemnified Party shall use
reasonable efforts to collect any amounts available under such
insurance or reinsurance coverage and from such other party
alleged to have responsibility.
ARTICLE XX
ARBITRATION
Section
20.01 Scope. Any dispute or
other matter in question between the Reinsurer and the Ceding
Company arising out of, or relating to, the formation,
interpretation, performance or breach of this Agreement, whether
such dispute arises before or after termination of this
Agreement, and whether in contract or in tort, shall be settled
by arbitration.
Section
20.02 Good Faith
Negotiation. The Reinsurer and the Ceding
Company agree that, prior to resorting to arbitration, they will
negotiate diligently and in good faith, in an effort to resolve
any dispute. Once a Party notifies the other of a dispute and
invokes this paragraph, the Parties shall have sixty
(60) days (or such longer period as the Parties may agree)
within which to negotiate a resolution. At the end of such sixty
(60) day period, either Party may initiate arbitration.
Section
20.03 Initiation of
Arbitration. To initiate arbitration, either
the Reinsurer or the Ceding Company shall notify the other Party
in writing of its desire to arbitrate. The notice shall identify
the claimant and the contract at issue, if applicable, and the
nature of the claims
and/or
issues. Notice shall be sent by certified mail, with return
receipt, or another service which produces a receipt. The
arbitration will be deemed to have been commenced on the date
the notice of arbitration is received.
Section
20.04 Arbitration Panel.
(a) Number and Qualification of
Arbitrators. There will be three
(3) arbitrators who will each have no less than ten
(10) years of industry experience and who are
(i) current or former officers or directors of
disinterested life insurance or reinsurance companies or
(ii) professionals with no less than twenty (20) years
of experience in or serving the life insurance or reinsurance
industries other than the Parties to this Agreement, their
Affiliates or subsidiaries. The arbitrators shall not be under
the control of any Party to the arbitration, nor shall any
member of the panel have a financial interest in the outcome of
the dispute.
(b) Selection of Arbitrators. Each
Party shall have the right to appoint one arbitrator. Within
thirty (30) days following the commencement of the
arbitration proceedings, each Party will provide the other with
the identification of their appointed arbitrator, and provide a
copy of the arbitrator’s curriculum vitae. If either Party
refuses or neglects to appoint an arbitrator within thirty
(30) days following the commencement of the arbitration
proceedings, the other Party may appoint the second arbitrator
to act as the appointed arbitrator for
the defaulting Party. The Parties’ appointed arbitrators
shall jointly appoint a third arbitrator (the
“Umpire”) and shall send notice to the Parties
of the appointment of the Umpire. Each Party may consult, in
confidence, with the arbitrator they appointed concerning the
appointment of an Umpire. If the two Party-appointed arbitrators
fail to reach agreement on an Umpire within sixty (60) days
of their appointment, each Party shall provide the other, within
seven (7) days thereafter, with a list of six
(6) names of qualified individuals. Each Party will select
three (3) names from the combination of the two lists and
notify the other Party as to its selection. Each Party will then
rank the combined selections of the Parties in order of
preference, and the individual with the lowest total numerical
ranking will act as Umpire. If the ranking results in a tie, the
Parties will draw lots from the tied individuals, and the
individual chosen by lot will act as Umpire. If either Party
fails to act in good faith within a reasonable period of time to
complete these procedures, the non-defaulting Party will appoint
the Umpire from its original candidate pool. The Umpire selected
under this paragraph will not be advised as to which Party
initiated his or her selection.
(c) Replacement. In the event any
arbitrator fails, refuses or becomes unable to act as such
before an award has been rendered, a successor shall be selected
in the same manner as the original arbitrator.
Section
20.05 Procedural Requirements.
(a) Submission of Briefs. The
claimant and the respondent shall each submit initial briefs to
the panel of arbitrators outlining the issues in dispute and the
reasons for their respective positions within thirty
(30) days of the notice of the appointment of the Umpire.
(b) Standard of Review. The
decision of the arbitrators will be based on the terms and
conditions of this Agreement as well as the customs and
practices of the life insurance and reinsurance industry, rather
than on strict interpretation of Law. It is the intention of the
Parties that in resolving any ambiguities or oversights inherent
in this Agreement or its operation, the arbitrators will treat
this Agreement as an honorable engagement and shall construe it
so as to achieve the objectives of the Agreement in a fair and
just manner, and in so doing will not be strictly constrained by
the letter of the Law or the literal interpretation of the
language of this Agreement.
(c) Hearing Procedures. The
arbitrators shall decide all substantive and procedural issues
by a majority of votes. As soon as possible, the arbitrators
will establish arbitration procedures as warranted by the facts
and issues of the particular case. Except as provided
specifically in this Article, the arbitrators shall have the
power to determine all procedural rules of the arbitration,
including, but not limited to, inspection of documents,
examination of witnesses, and any other matter related to the
conduct of the arbitration. Each Party may examine the witnesses
who testify at the arbitration hearing. Each Party shall have
the right to be represented by legal counsel. The arbitrators
shall not be obligated to follow judicial formalities or the
rules of evidence except to the extent required by governing
Law. To the extent permitted by Law, the panel and the Umpire
shall have the authority to issue subpoenas (including subpoenas
to third party witnesses) and other orders to enforce their
decisions.
(d) Confidentiality. The arbitrators shall
recognize the attorney-client privilege, and neither a Party nor
an arbitrator may disclose the existence, content or result of
any arbitration hereunder, except to the extent such disclosure
may be required for review and enforcement by a court of
competent jurisdiction, independent accounting audit, to support
reinsurance or retrocessional recoveries, to regulatory
authorities as required under applicable Law, or as otherwise
agreed to by the Parties. Any third party receiving Confidential
Information must agree to maintain confidentiality before
disclosure will be permitted.
(e) Location of Hearing. The
location of all proceedings shall be determined by the
arbitrators.
Section 20.06 Arbitration
Award.
(a) Interim Relief. The panel may
issue orders for interim relief upon showing of good cause,
including pre-award security.
(b) Time of Decision. Absent good
cause for an extension as determined by the panel, the panel
shall render the award within thirty (30) days after the
date of the closing of the hearing, or if an arbitration hearing
has been waived or otherwise dispensed with, within thirty
(30) days after the date that the panel received all
materials submitted by the Parties for disposition.
(c) Remedies. The panel is
authorized to award any remedy or sanctions by applicable Law,
including, but not limited to, monetary damages, equitable
relief, pre or post award interest, costs of arbitration,
attorneys fees, and other final or interim relief. Arbitrators
shall not be empowered to award damages in excess of
compensatory damages, and each Party irrevocably waives any
damages in excess of compensatory damages.
(d) Decisions; Enforcement. The
decision of the arbitrators will be made by majority rule, and
shall be final and binding on both Parties. There shall be no
appeal from the decision, except that the Parties retain the
right to challenge under the Federal Arbitration Act. Either
Party to the arbitration may petition the United States District
Court for the Southern District of New York to reduce the
decision to judgment. In furtherance thereof, the parties hereto
hereby submit to the jurisdiction of such court, and agree that
any process relating to a proceeding in such court may be served
to such party by mail, facsimile, electronic imaging delivered
by electronic mail or personal delivery at the respective
addresses set forth in Section 21.07.
(e) Expenses. Unless the
arbitrators decide otherwise, each Party will bear the expense
of its own arbitration activities, including its appointed
arbitrator and any outside attorney and witness fees. The
Parties will jointly and equally bear the expense of the Umpire
and other costs of arbitration.
ARTICLE XXI
MISCELLANEOUS
Section
21.01 Governing Law. Except
to the extent that the insurance laws and regulations of the
State of Texas are specifically applicable, this Agreement shall
be governed by, and construed and interpreted in accordance
with, the Laws of the State of New York applicable to agreements
made and to be performed entirely therein without reference to
such State’s principles of conflicts of law to the extent
that the application of the Laws of another jurisdiction would
be required thereby.
Section
21.02 Amendment. This
Agreement may be amended only by the written agreement of the
Ceding Company and the Reinsurer.
Section
21.03 Currency. All
payments, reports and calculations pursuant to this Agreement
shall be in United States currency (converted, where applicable,
at the same rates of exchange used by the Reinsurer in its books
of account).
Section
21.04 Taxes. The Reinsurer
shall pay any tax, interest, penalties, fees or other costs
imposed by any taxing authority on the Reinsurer or on any
payments made to the Reinsurer under this Agreement.
Section
21.05 Accounting
Practices. Unless otherwise specified herein,
all references to premiums, reserves and other accounting terms
shall be understood in accordance with SAP.
Section
21.06 Entire Agreement. This
Agreement and the schedules hereto constitute the entire
agreement between the Parties relating to the subject matter
hereof and supersedes all prior written and oral statements with
respect hereto.
Section
21.07 Notices. All notices
shall be in writing and shall be (i) delivered personally,
(ii) sent by an overnight delivery service, (iii) sent
by confirmed facsimile transmission or (iv) sent as
electronic image files in “Portable Document Format”
configuration and delivered by electronic mail, addressed to the
Parties at the addresses set forth below. Any such notice shall
be deemed given (i) in the case of personal delivery, when
so delivered personally, (ii) if sent by overnight delivery
service, one day after delivery of such notice to such service,
(iii) if sent by confirmed facsimile transmission, at the
time of transmission and (iv) if sent by electronic imaging
and electronic mail, at the time of transmission. Notice shall
be provided as follows:
If to the Ceding Company:
Jefferson National Life Insurance Company
9920 Corporate Campus Drive
Suite 1000 Louisville, KY40223
Facsimile:
(502) 213-2970
Electronic Mail: chawley@jeffnat.com
Attention: Craig Hawley, Esq.
With a copy (which shall not constitute notice) to:
Overture Re Ltd.
Emporium Building
4th Floor 69 Front Street
Hamilton HM12
PO Box HM3352
Hamilton HM PX
Bermuda
With a copy (which shall not constitute notice) to:
Ellenoff Grossman & Schole LLP
150 East 42nd Street New York, New York10017
Facsimile:
(212) 370-7889
Electronic Mail: ellenoff@egsllp.com
Attention: Douglas I. Ellenoff, Esq.
Section
21.08 Counterparts. This
Agreement may be executed in as many counterparts as may be
required, which counterparts may be delivered by facsimile or
electronic mail, and it shall not be necessary that the
signature of, or on behalf of, each Party, appear on each
counterpart; but it shall be sufficient that the signature of,
or on behalf of, each party, or that the signatures of the
persons required to bind any party, appear on one or more such
counterparts, each of which will be deemed an original, and all
of which will constitute one and the same instrument. Delivery
of a copy of this Agreement bearing an original signature by
facsimile transmission or by electronic mail in “portable
document format” form will have the same effect as physical
delivery of the paper document bearing the original signature.
Section
21.09 Waivers. Except as
otherwise provided in this Agreement, the failure by any Party
to comply with any obligation, covenant or condition under this
Agreement may be waived by the Party entitled to the benefit
thereof only by a written instrument signed by the Party
granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or
condition will not operate as a waiver or continuing waiver of,
or estoppel with respect to, any subsequent or other failure.
The failure of a Party to enforce at any time any of the
provisions of this Agreement will in no way be construed to be a
waiver or continuing waiver of any such provision, nor in any
way to affect the validity of this Agreement or any part hereof
or the right of a Party thereafter to enforce each and every
such provision. No
failure on the part of a Party hereto to exercise, and no delay
in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise of such right, power or remedy by such Party preclude
any other or further exercise thereof or the exercise of any
other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided
by Law.
Section
21.10 Successors and
Assigns. (a) No Party hereto may assign
this Agreement or any of its rights or obligations hereunder
without the prior written consent of the other Party hereto, and
any attempt to make any such assignment (by operation of Law or
otherwise) without such consent will be null and void. Any
assignment will not relieve the Party making the assignment from
any obligations under this Agreement.
(b) Notwithstanding Section 21.10(a), the Ceding
Company may without consent of the Reinsurer assign its rights
and obligations under Article VII hereof to any affiliate
of the Ceding Company that shall assume the Ceding
Company’s obligations in Article VII in writing, and
upon notification of such assignment to the Reinsurer, the
Ceding Company shall be relieved from such obligations.
(c) Upon any permitted assignment hereunder, the references
in this Agreement to a Party hereto shall also apply to such
Party’s assignee unless the context otherwise requires.
Section
21.11 Partial Invalidity and
Severability. All rights and restrictions
contained herein may be exercised and will be applicable and
binding only to the extent that they do not violate any
applicable Laws and are intended to be limited to the extent
necessary to render this Agreement legal, valid and enforceable.
If any term or other provision of this Agreement, or part
thereof, not essential to the purpose of this Agreement will be
held to be illegal, invalid or unenforceable by a court of
competent jurisdiction, it is the intention of the Parties
hereto that the remaining terms hereof, or part thereof, will
constitute their agreement with respect to the subject matter
hereof and all such remaining terms, or parts thereof, will
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any Party. Upon
such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties hereto shall
negotiate in good faith to modify this Agreement so as to effect
the original intent of the Parties hereto as closely as possible
in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated
to the greatest extent possible.
Section
21.12 Joint
Participation. The Parties hereto have
participated jointly in negotiating and drafting this Agreement.
In the event that an ambiguity or a question of intent or
interpretation arises, this Agreement will be construed as if
drafted jointly by the Parties hereto, and no presumption or
burden of proof will arise favoring or disfavoring any Party
hereto by virtue of the authorship of any provision of this
Agreement. The terms of this Agreement shall be considered and
interpreted without any presumption, inference or rule requiring
construction or interpretation of any provision of this
Agreement against the interests of the drafter of this Agreement.
Section
21.13 Headings. The headings
for this Agreement are for reference purposes only and do not
affect in any way the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be signed by their respective duly authorized
officers as of the date first written above.
Standards: The Ceding Company, as
administrator of the Covered Annuities (the
“Administrator”) agrees to perform the
Administrative Services (as defined below) in accordance
(i) in all material respects, with applicable Law,
(ii) in all material respects, with the terms and
conditions of the Covered Annuities, and (iii) with
substantially the same standards, guidelines and procedures
pursuant to which the Administrator performs similar functions
with respect to its own annuities (the “Administrator
Standards”). The Administrator further agrees to adhere
to any written guidelines and procedures regarding the
Administrative Services as may reasonably be agreed to by the
Parties from time to time. In the absence of such
agreed-upon
guidelines and procedures, the Administrator is hereby
authorized to conduct the Administrative Services in accordance
with the Administrator Standards.
Administrative Services: The Administrator
shall provide, as deemed reasonably necessary by the
Administrator, all services with respect to the Covered
Annuities, including without limitation the following services
(“Administrative Services”) in respect of the
Covered Annuities:
(i) paying out Benefit Payments;
(ii) collecting installments of premiums;
(iii) monitoring and reporting on the performance of the
Covered Annuities; (iv) generating reports on the Covered
Annuities;
(v) processing requests for amendments or changes,
including evaluating and processing waivers and consents as
deemed appropriate by the Administrator, to the terms or
conditions of any Covered Annuities;
(vi) managing work-out and claim situations, including
evaluating and processing waivers and consents as deemed
appropriate by the Administrator;
(vii) presenting analyses and recommendations regarding
Statutory Reserve, Fixed Modified Coinsurance Reserve and
Variable Modified Coinsurance Reserve;
(viii) reporting on risk characteristics of the Covered
Annuities;
(ix) investigating, mitigating, negotiating, defending or
working out any Benefit Payments or other claims involving any
of the Covered Annuities;
(x) settling Benefit Payments and paying such claims;
(xi) protecting, perfecting and exercising any subrogation,
salvage or reimbursement rights or security interests with
respect to any Covered Annuities;
(xii) collecting any and all premiums owing on the Covered
Annuities and paying, returning or refunding any premiums owing
to the annuityholders;
(xiii) taking such action as may be deemed appropriate to
enforce any rights or remedies in respect of the Covered
Annuities, and retain and direct counsel and advisors from time
to time as deemed appropriate by the Administrator in its sole
discretion in connection with the enforcement of any such rights
and remedies;
(xiv) providing usual and customary services for
annuityholders;
(xv) preparing accounting and actuarial information related
to the Covered Annuities as required to timely satisfy statutory
or tax reporting requirements applicable to the Ceding Company
and the Reinsurer;
(xvi) maintaining appropriate books and records related to
the Covered Annuities in accordance with applicable Law;
(xvii) making regulatory filings relating to the Covered
Annuities; and
(xviii) making all routine tax filings of the Ceding
Company relating to the Covered Annuities.
The Administrator shall have the right to take any actions that
it deems appropriate in connection with the Administrative
Services, provided, however, that in no event may it
increase the obligations or risks covered under a Covered
Annuity, extend the term of any Covered Annuity or accelerate
the payment of claims under a Covered Annuity, in each case
except as otherwise permitted in the Agreement.
THIS INVESTMENT MANAGEMENT AGREEMENT (this
“Agreement”), is made as
of ,
20 , by and between JNL Bermuda LLC (the
“Client”) and JNF Asset Management, LLC (the
“Manager”).
WITNESSETH:
WHEREAS, the Client and the Manager desire to enter into this
Agreement for the portfolios described herein;
WHEREAS, the Client has all requisite authority to appoint one
or more investment managers to supervise and direct the
investment and reinvestment of a portion or all of the assets of
the Client;
THEREFORE, for and in consideration of the premises and of the
mutual covenants herein contained, the parties hereby agree to
the Agreement, as follows:
1. Appointment and Status as Investment
Manager. The Client hereby appoints the
Manager as the investment manager of one or more of the
Client’s portfolios with an aggregate net asset value of
(a) 20% or more of the net asset value of the Client’s
total investable assets as of the date hereof (which shall
exclude assets held for the benefit of the Client under the
reinsurance agreement that may be entered into by the Client or
any permitted successor or assignee thereof with Jefferson
National Life Insurance Company pursuant to the Reinsurance
Option and Contribution Agreement between such parties dated as
of the date hereof), which shall initially consist of the
portfolio described in Exhibit A attached hereto and
(b) 20% or more, as of the date of contribution or
acquisition, of any additional investable assets contributed to
or acquired by the Client after the date hereof (the
“Portfolios”), which additional assets shall be
identified through either a supplement to Exhibit A or by
delivery of a record in the form of Exhibit B hereto, in
each case acknowledged by the parties, as applicable from time
to time. The Client may sub-divide the Portfolios or establish
additional Portfolios, in which case the Client and the Manager
shall mutually agree on the investment strategy and other
guidelines for such sub-divided or additional Portfolios and
shall attach to this Agreement an additional exhibit in the form
of Exhibit B for each such Portfolio. The Manager hereby
accepts its appointment as investment manager and acknowledges
that it is a fiduciary with respect to the assets under
management.
2. Representations and
Acknowledgements. The Manager represents and
warrants that (a) it has all requisite authority to manage
the Portfolios hereunder, (b) the terms of the Agreement do
not conflict with any obligation by which the Manager is bound,
whether arising by contract, operation of law or otherwise,
(c) this Agreement has been duly authorized by appropriate
corporate action, and (d) it is exempt from registration as
an investment adviser under one or more exemptions provided in
the Investment Advisers Act of 1940, as amended (the
“Advisers Act”).
The Client represents and warrants that (a) it has all
requisite authority to appoint the Manager to manage the
Portfolios hereunder, (b) the terms of the Agreement do not
conflict with any obligation by which the Client is bound,
whether arising by contract, operation of law or otherwise,
(c) this Agreement has been duly authorized by appropriate
corporate action, (d) it is an “accredited
investor” as defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended,
(e) it is a “qualified purchaser” as defined in
Section 2(a)(51) of the Investment Company Act of 1940, as
amended, (f) it has sufficient knowledge to understand the
risks associated with investment of the Portfolios pursuant to
the guidelines set forth in Exhibit A and Exhibit B
(the “Guidelines”), and (g) it accepts and is
able to bear such risks. The Client shall provide prompt written
notice to the Manager in the event any of the foregoing
representations or acknowledgements ceases to be true, correct
and complete in any material respect.
The Client acknowledges that (a) the Manager is not
registered as an investment adviser with the
U.S. Securities and Exchange Commission pursuant to one or
more exemptions provided in the Advisers Act, (b) the
Manager’s services described herein require the exercise of
good-faith judgments that may ultimately prove to be erroneous,
(c) in connection with providing such services, the Manager
may make
certain assumptions about the movements of interest rates,
volatility of interest rates, movements of spreads, and the
relationship of debt prepayments to interest rates, (d) the
Manager’s assumptions may not necessarily capture all the
characteristics and risks inherent in the Portfolios,
(e) the Manager’s assumptions may be based upon
information provided to the Manager by the Client or certain
third-party vendors and is assumed to be reliable and accurate,
and the Manager will not be responsible for verifying the
accuracy of any such information, and (f) the investment of
the Portfolios pursuant to the Guidelines may not achieve the
Client’s investment objectives.
3. Management Services. The
Manager shall be responsible for the investment and reinvestment
of the Portfolios. Each Portfolio may include any and all
securities and instruments described in the Guidelines for such
Portfolio. The Client does hereby delegate to the Manager all of
its powers, duties and responsibilities with regard to such
investment and reinvestment and hereby appoints the Manager as
its agent in fact with full authority to buy, sell or otherwise
effect investment transactions involving the assets in its name
and for the Portfolios. Said powers, duties and responsibilities
shall be exercised exclusively by the Manager pursuant to and in
accordance with its fiduciary responsibilities and the
provisions of this Agreement. In deciding on a proper investment
for each Portfolio, the Manager shall consider the following
factors as communicated in writing to the Manager by the Client
from time to time: (a) the investment purposes of the
Client, (b) the Client’s financial needs such as
liquidity, (c) applicable laws, (d) the Client’s
investment policies and guidelines, and (e) the
Portfolio’s Guidelines. In addition, in accordance with the
Manager’s internal policies in effect from time to time,
the Manager or its agent is authorized, but shall not be
required, to vote, tender or convert any securities in each
Portfolio; to execute waivers, consents and other instruments
with respect to such securities; to endorse, transfer or deliver
such securities or to consent to any class action, plan of
reorganization, merger, combination, consolidation, liquidation
or similar plan with reference to such securities.
4. Accounting and Reports. At
such intervals as shall be mutually agreed upon between the
parties, the Manager shall furnish the Client with appraisals of
each Portfolio, performance tabulations, a summary of purchases
and sales and such other reports as shall be agreed upon from
time to time. The Manager shall also reconcile accounting,
transaction and asset-summary data with custodian reports at
times that are mutually agreeable to the Manager and the Client.
In addition, the Manager shall communicate and resolve any
significant discrepancies with the custodian. The Manager shall,
on invitation, attend meetings with representatives of the
Client to discuss the positions in each Portfolio and the
immediate investment outlook, or shall submit its views in
writing as the Client shall reasonably request from time to time.
5. Compensation. For its
investment management services rendered hereunder, the Manager
shall be compensated in accordance with Exhibit C, attached
hereto.
6. Custodian. The securities in
each Portfolio shall be held by a custodian duly appointed by
the Client, and the Manager is authorized to give instructions
to the custodian with respect to all investment decisions
regarding the Portfolios. Nothing contained herein shall be
deemed to authorize the Manager to take or receive physical
possession of any of the assets for the Portfolios, it being
intended that sole responsibility for safekeeping thereof (in
such investments as the Manager may direct) and the consummation
of all purchases, sales, deliveries and investments made
pursuant to the Manager’s direction shall rest upon the
custodian.
7. Brokerage. The Client hereby
delegates to the Manager sole and exclusive authority to
designate the brokers or dealers through whom all purchases and
sales on behalf of the Portfolios will be made. The Manager will
determine the rate or rates, if any, to be paid for brokerage
services provided to the Portfolios. The Manager, in seeking to
obtain best execution of transactions for the Portfolios, may
consider the quality and reliability of brokerage services, as
well as research and investment information and other services
provided by brokers or dealers, including such factors as
(i) price, (ii) the broker’s or dealer’s
facilities, reliability and financial responsibility,
(iii) when relevant, the ability of the broker to effect
securities transactions, particularly with regard to such
aspects as timing, order size and execution of the order,
(iv) the broker’s or dealer’s recordkeeping
capabilities and (v) the research and other services
provided by such broker or dealer to the Manager which are
expected to enhance its general portfolio management
capabilities (collectively, “Research”),
notwithstanding that the Client may not be the exclusive
beneficiary of such Research, provided the Manager shall comply
with the safe harbor for “soft dollars” set forth in
Section 28(e) of the Securities Exchange Act of 1934, as
amended.
8. Confidential Information. All
information regarding operations and investments of the Client
shall be regarded as confidential by the Manager and shall not
be disclosed by the Manager without the prior written consent of
the Client except to accountants, attorneys and other
professional advisors of the Client or the Manager, or to the
Client’s custodial and administrative services providers,
or pursuant to an order of any governmental authority (with
prior notice to Client and an opportunity to object to such
order).
9. Directions to the Manager. All
directions by or on behalf of the Client to the Manager shall be
in writing signed by an officer of the Client listed on
Exhibit D and may be delivered by first class mail, private
courier, facsimile or
e-mail. The
Manager shall be fully protected in relying upon any direction
in accordance with this Section with respect to any instruction,
direction or approval of the Client, and shall be so protected
also in relying upon a certification duly executed on behalf of
the Client as to the names of persons authorized to act for it
and in continuing to rely upon such certification until notified
by the Client to the contrary. The Manager shall also be fully
protected in acting upon any instrument, certificate or paper
believed by it to be genuine and to be signed or presented by
the proper persons or to any statement contained in any such
writing and may accept the same as conclusive evidence of the
truth and accuracy of the statements therein contained.
10. Liabilities of the Manager.
The Manager, its officers, directors, employees and agents shall
not be liable to the Client for, and shall be indemnified by the
Client against, any and all losses, damages, costs, expenses
(including reasonable attorneys’ fees), liabilities, claims
and demands (collectively, “Losses”), for any action,
omission, information, recommendation or other circumstance
arising from or in connection with this Agreement, except in the
case of the Manager’s or such person’s fraud, willful
misconduct, gross negligence, reckless disregard for its duties
or willful violation of any applicable U.S. federal or
state securities laws and except as further limited in the
paragraph immediately below; provided, however, this limitation
shall not relieve the Manager or such persons from any
responsibility or liability for any responsibility, obligation
or duty which the Manager or such officer, director or employee
may have under any federal securities laws; and provided,
further, however, that to the extent any limitations or
restrictions contained in the Guidelines are not adhered to as a
result of changes in market value, additions to or withdrawals
from a Portfolio, portfolio rebalancing or other non-volitional
acts of the Manager, the Manager shall not be liable to the
Client, and such non-adherence shall not be considered a breach
of this Agreement.
11. Non-Exclusive Management. The
Client understands that the Manager may furnish investment
management and advisory services to others, and that the Manager
shall be at all times free, in its discretion, to make
recommendations to others which may be the same as, or may be
different from, those made to the Client. The Client further
understands that the Manager, its affiliates, and any officer,
director, stockholder, employee or any member of their families
may or may not have an interest in the securities whose purchase
and sale the Manager may recommend. Actions with respect to
securities of the same kind may be the same as or different from
the action which the Manager, or any of its affiliates, or any
officer, director, stockholder, employee or any member of their
families, or other investors may take with respect thereto.
12. Aggregation and Allocation of
Orders. The Client acknowledges that
circumstances may arise under which the Manager determines that,
while it would be both desirable and suitable that a particular
security or other investment be purchased or sold for the
account of more than one of the Manager’s clients’
accounts, there is a limited supply or demand for the security
or other investment. Under such circumstances, the Client
acknowledges that, while the Manager will seek to allocate the
opportunity to purchase or sell that security or other
investment among those accounts on an equitable basis, the
Manager shall not be required to assure equality of treatment
among all of its clients (including that the
opportunity to purchase or sell that security or other
investment will be proportionally allocated among those clients
according to any particular or predetermined standards or
criteria). Where, because of prevailing market conditions, it is
not possible to obtain the same price or time of execution for
all of the securities or other investments purchased or sold for
the Account, the Manager may average the various prices and
charge or credit the Account with the average price.
13. Conflict of Interest. The
Client agrees that the Manager may refrain from rendering any
advice or services concerning securities of companies of which
any of the Manager’s, or affiliates of the Manager’s
officers, directors, or employees are directors or officers, or
companies as to which the Manager or any of the Manager’s
affiliates or the officers, directors and employees of any of
them has any substantial economic interest or possesses material
non-public information, unless the Manager either determines in
good faith that it may appropriately do so without disclosing
such conflict to the Client or discloses such conflict to the
Client prior to rendering such advice or services with respect
to the Account.
From time to time, when determined by the Manager in its
capacity as a fiduciary to be in the best interest of the
Client, a Portfolio may purchase securities from or sell
securities to another account managed by the Manager at
prevailing market levels and in compliance with applicable law,
and the Client hereby consents to such activities.
14. Effective Period of Agreement and
Amendments. This Agreement shall become
effective on the date hereof and shall continue until the
resignation or removal of the Manager as provided herein. Any
amendment to this Agreement or a Portfolio’s Guidelines
shall be written and signed by both parties to this Agreement.
15. Termination of Agreement.
Either the Manager or the Client may terminate this Agreement
upon nine months’ prior written notice to the other. Upon
termination of this Agreement or as close to such date as is
reasonably possible, the Manager shall provide the Client with a
final report containing the same information as Section 4
above and shall provide commercially reasonable transition
assistance to any replacement investment managers appointed by
the Client.
16. Assignment. No assignment (as
that term is defined in the Advisers Act) of this Agreement by
the Manager may be made without the consent of the Client, and
any such assignment made without such consent shall be null and
void for all purposes. Subject to the foregoing, this Agreement
shall inure to the benefit of and be binding upon the parties
hereto, their successors and permitted assigns, provided that
any successor or assignee of the Client shall be deemed to have
made the representations and acknowledgements set forth in
Section 2 as of the date of such succession or assignment.
17. Severability. Any term or
provision of this Agreement which is invalid or unenforceable in
any applicable jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms
or provisions of the Agreement in any jurisdiction.
18. Applicable Law. To the extent
not inconsistent with applicable federal law, this Agreement
shall be construed pursuant to, and shall be governed by, the
laws of the state of New York, without regard to that
state’s principles of conflicts of laws.
19. Notices. All notices required
or permitted under this Agreement, other than directions
pursuant to Section 9, shall be sent, if to the Manager:
JNF Asset Management, LLC
9920 Corporate Campus Drive, Suite 1000 Louisville, KY40223
Attention: Craig A. Hawley
Cadwalader, Wickersham & Taft LLP
One World Financial Center New York, NY10282
Attention: Ira Schacter
or by facsimile to:
(212) 504-6666
if to the Client:
JNL Bermuda LLC
c/o Jefferson
National Financial Corp.
9920 Corporate Campus Drive, Suite 1000 Louisville, KY40223
Attention: Craig A. Hawley
or by facsimile to:
(502) 213-2970
and
Cadwalader, Wickersham & Taft LLP
One World Financial Center New York, NY10282
Attention: Ira Schacter
or by facsimile to:
(212) 504-6666
or such other name or address as may be given in writing to the
other party. All notices hereunder shall be sufficient if
delivered by facsimile or overnight mail. Any notices shall be
deemed given only upon actual receipt.
23. Counterparts. This Agreement
may be executed in counterparts, each of which shall be an
original but all of which together shall constitute one
agreement.
24. Use of Futures. Pursuant to
an exemption from the Commodity Futures Trading Commission (the
“Commission”) in connection with accounts of qualified
eligible persons, this Agreement is not required to be, and has
not been, filed with the Commission. The Commission does not
pass upon the merits of participating in a trading program or
upon the adequacy or accuracy of commodity trading advisor
disclosure. Consequently, the Commission has not reviewed or
approved this Agreement. The Manager is not registered as a
commodity trading advisor or commodity pool operator and,
consequently, the Manager is not subject to the reporting and
other requirements applicable to such persons.
IN WITNESS WHEREOF, the parties hereto have caused this
Investment Management Agreement to be duly executed and
delivered as of the date first above written.
As compensation for the Manager rendering investment management
services under this Agreement, the Client shall pay the Manager
an asset management fee at the annual rate of 25 basis
points on the net asset value of the Client’s assets
managed by the Manager, subject to increase with respect to
particular asset classes as may be agreed from time to time by
the parties. As the Client’s assets under management with
the Manager increase, the parties may agree to discount all or
any portion of the asset management fee consistent with
then-current market practice. The asset management fee shall be
due and payable in arrears at the end of each calendar quarter
during the term of this Agreement. If the management of the
Portfolios commences or ends at any time other than the
beginning or end of a calendar quarter, the quarterly fee shall
be prorated based on the portion of such calendar quarter during
which this Agreement was in force.
AGREEMENT AND PLAN OF AMALGAMATION, dated as of
[ ],
2009 (this “Agreement”), by and between
OVERTURE RE LTD., a Bermuda exempt company (the
“Company”), and JNL BERMUDA LLC., a Delaware
limited liability company (the “Amalgamation
Sub”).
WITNESSETH:
WHEREAS:
(A) The Company was incorporated under the laws of Bermuda
pursuant to the Companies Act and is a company in good standing
under the laws of Bermuda;
(B) Amalgamation Sub was incorporated under the laws of the
State of Delaware pursuant to the Delaware Limited Liability
Company Act (“DLLCA”) and is a limited
liability company in good standing under the laws of State of
Delaware
(C) The Amalgamation Sub has entered into a Master
Agreement dated as of December 10, 2009 along with
Jefferson National Life Insurance Co., Jefferson National
Financial Corp., JNF Asset Management, LLC, Overture Acquisition
Corp., Overture Re Holdings Ltd., and the sponsors of Overture
Acquisition Corp. (the “Master Agreement”);
(D) Pursuant to the Master Agreement and this Agreement,
the Company and the Amalgamation Sub have agreed to amalgamate
(the “Amalgamation”), whereby the company
continuing from the amalgamation of the Company and Amalgamation
Sub (the “Amalgamated Company”) will, inter
alia, acquire, among other assets and liabilities, all of
the Amalgamation Sub’s rights under the Reinsurance Option
and Contribution Agreement and the Investment Management
Agreement, upon the terms and conditions set forth in this
Agreement;
(E) The Company, acting under the authority contained in
Section 104 of the Companies Act by the written consent of
its sole member dated
[ ],
2009, and Amalgamation Sub, acting under the authority contained
in
Section 18-209
of the DLLCA by the written consent of its sole member dated
[ ],
2009, agreed to amalgamate upon the terms and conditions
hereinafter set out;
(F) It is desired by the parties that the said Amalgamation
shall be effected; and
(G) The parties desire to make certain agreements in
connection with the Amalgamation and also to prescribe certain
conditions to the Amalgamation.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby,
the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined
Terms. Capitalized terms used in this
Agreement and not otherwise defined herein, shall have the
meaning ascribed to them in the Master Agreement.
Section 1.2 Interpretation.
The rules of interpretation specified in Section 12.12 of
the Master Agreement shall apply to this Agreement.
ARTICLE II
THE
AMALGAMATION
Section 2.1 The
Amalgamation Application. The Company and
the Amalgamation Sub shall cause an application for registration
of an amalgamated company to be prepared, executed and delivered
to the Registrar
of Companies in Bermuda as provided under Section 104(a) of
the Companies Act on the Closing Date and shall cause the
Amalgamation to become effective pursuant to the Companies Act
and the DLLCA.
Section 2.2 Amalgamation.
The parties to this Agreement agree that, on the terms and
subject to the conditions of this Agreement and the Master
Agreement and in accordance with the Companies Act and the
DLLCA, at the Effective Time, the Company and Amalgamation Sub
shall amalgamate and continue as a Bermuda exempted company.
Section 2.3 Effective
Time. The Amalgamation shall become
effective upon the issuance of a Certificate of Amalgamation by
the Registrar of Companies or such other time as the Certificate
of Amalgamation may provide. The parties will request that the
Registrar of Companies provide in the Certificate of
Amalgamation that the Effective Time will be the time when the
Amalgamation Application is filed with the Registrar of
Companies or another time mutually agreed to by the parties.
Section 2.4 Closing.
The closing of the Amalgamation (the “Closing”)
shall take place at the offices of Appleby’s, Canon’s
Court, 22 Victoria Street, Hamilton, Bermuda at 10:00 a.m.,
local time, on the Closing Date.
Section 2.5 Organizational
Documents; Governance. (a) The name of
the Amalgamated Company shall be “Overture Re Ltd.”
(that is, the present name of the Company) and the registered
office of the Amalgamated Company shall be c/- Appleby’s,
Canon’s Court, 22 Victoria Street, Hamilton, Bermuda;
(b) Memorandum of Association;
Bylaws. The Memorandum of Association of the
Company, as in effect immediately prior to the Effective Time,
shall be the Memorandum of Association of the Amalgamated
Company from and after the Effective Time until thereafter
amended. The Bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the
Amalgamated Company from and after the Effective Time until
thereafter amended.
(c) Board of Directors. The Board
of Directors of the Amalgamated Company (the “Board of
Directors”) shall initially consist of not more than
3 directors, and the first directors of the Amalgamated
Company shall be the persons whose names and addresses are set
out in Schedule 2.5(c) attached hereto, who shall hold
office until the first annual meeting of the Amalgamated Company
or until their successors are elected or appointed.
Section 2.6 Effect
on Capital Stock and Additional Share
Consideration. At the Effective Time, by
virtue of the Amalgamation and without any action on the part of
the Company, the Amalgamation Sub or the holder of any of the
following securities:
(a) Each share of common stock, par value $0.01 per share,
of the Company (the “Company Common Stock”)
issued and outstanding immediately prior to the Effective Time
shall be converted into a common share in the capital of the
Amalgamated Company having a par value of $0.01.
(b) All shares of common stock, par value $0.01 per share,
of the Amalgamation Sub (the “Amalgamation Sub Common
Stock”) issued and outstanding immediately prior to the
Effective Time shall be converted into and represent the right
to receive the Purchase Price as set forth in Section 1.05
of the Master Agreement and as adjusted in accordance with the
terms set forth in the Master Agreement.
(c) Each share of Amalgamation Sub Common Stock converted
pursuant to this Article II shall no longer be outstanding
and shall automatically be cancelled and shall cease to exist as
of the Effective Time, and the certificates previously
representing such shares of Amalgamation Sub Common Stock (the
“Amalgamation Sub Certificates”) shall
thereafter represent solely the right to receive the Purchase
Price as set forth in Section 2.6(b).
Section 3.1 Conditions
to Effect the Amalgamation. The obligations
of Amalgamation Sub and Company to effect the Amalgamation are
subject to the satisfaction or waiver at or prior to the Closing
of the closing conditions set forth in Article X of the
Master Agreement.
ARTICLE IV
TERMINATION
Section 4.1 Termination.
This Agreement shall be terminated and the Amalgamation
abandoned at any time prior to the Closing Date if, pursuant to
Article XII of the Master Agreement, the Master Agreement
is terminated and the Transactions are abandoned.
Section 4.2 Effect
of Termination. Any termination of this
Agreement will be effective immediately upon the delivery of
written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement, this
Agreement shall thereafter become void and have no further force
or effect without any liability on the part of any party in
respect thereof, except as set forth in the Master Agreement.
ARTICLE V
GENERAL
PROVISIONS
Section 5.1 Assignment.
No party to this Agreement will convey, assign or otherwise
transfer any of its rights or obligations under this Agreement
without the prior written consent of the Amalgamation Sub (in
the case of an assignment by the Company) or of the Company (in
the case of an assignment by the Amalgamation Sub), such consent
not to be unreasonably withheld. Any conveyance, assignment or
transfer requiring the prior written consent of the Amalgamation
Sub or the Company which is made without such consent will be
void ab initio. No assignment will relieve the assigning party
of its obligations hereunder or thereunder.
Section 5.2 Parties
in Interest. This Agreement is binding upon
and is for the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement is
not made for the benefit of any Person not a party hereto, and
no Person other than the parties hereto or their respective
successors and permitted assigns will acquire or have any
benefit, right, remedy or claim under or by reason of this
Agreement.
Section 5.3 Amendment.
Prior to the Closing, this Agreement may not be amended except
by a written agreement executed by the Company and the
Amalgamation Sub. From and after the Closing, any amendment
shall require the written consent of the Amalgamated Company.
Section 5.4 Waiver;
Remedies. No failure or delay on the part of
the Company or the Amalgamation Sub in exercising any right,
power or privilege under this Agreement will operate as a waiver
thereof, nor will any waiver on the part of the Company or the
Amalgamation Sub of any right, power or privilege under this
Agreement operate as a waiver of any other right, power or
privilege under this Agreement, nor will any single or partial
exercise of any right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right,
power or privilege under this Agreement. All waivers shall be in
writing and executed by the party to be charged therewith. The
rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the parties may
otherwise have at law or in equity.
Section 5.5 Notices.
All notices, consents, claims, demands, waivers, and other
communications under this Agreement shall given in accordance
with Section [12.04] of the Master Agreement.
Section 5.6 Severability. If
any provision of this Agreement or the application thereof to
any Person or circumstance is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining
provisions thereof, or the application of such provision to
Persons or circumstances other than those
as to which it has been held invalid or unenforceable, shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated thereby.
Section 5.7 Consent
to Jurisdiction. (a) Each of the parties
hereto irrevocably agrees that any legal action or proceeding
with respect to this Agreement and the rights and obligations
arising hereunder, or for recognition and enforcement of any
judgment in respect of this Agreement and the rights and
obligations arising hereunder brought by the other party hereto
or its successors or assigns, shall be brought and determined
exclusively in the courts of Bermuda. Each of the parties hereto
hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect of its property, generally
and unconditionally, to the personal jurisdiction of the
aforesaid courts and agrees that it will not bring any action
relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than the
aforesaid courts. Each of the parties hereto hereby irrevocably
waives, and agrees not to assert as a defense, counterclaim or
otherwise, in any action or proceeding with respect to this
Agreement, (i) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason
other than the failure to serve in accordance with this
Section 5.7, (ii) any claim that it or its property is
exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service
of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), and
(iii) to the fullest extent permitted by applicable Law,
any claim that (A) the suit, action or proceeding in such
court is brought in an inconvenient forum, (B) the venue of
such suit, action or proceeding is improper or (C) this
Agreement, or the subject mater hereof, may not be enforced in
or by such courts.
(b) EACH OF THE PARTIES IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING
TO ANY OF THE TRANSACTION AGREEMENTS, THE TRANSACTION OR THE
ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.
Section 5.8 Governing
Law. This Agreement will be governed by and
construed in accordance with the Laws of Bermuda.
Section 5.9 Counterparts. This
Agreement may be executed in separate counterparts, each such
counterpart being deemed to be an original instrument, and all
such counterparts will together constitute the same agreement.
Section 5.10 Entire
Agreement. This Agreement and the Master
Agreement constitute the entire agreement of the parties hereto
with respect to the subject matter hereof and supersede all
prior agreements and undertakings, both written and oral, among
the parties hereto with respect to the subject matter hereof.
Section 5.11 Headings. The
headings in this Agreement are for references purposes only and
do not affect in any way the meaning or interpretation of this
Agreement.
This WARRANT PURCHASE AGREEMENT (as it may from time to time be
amended and including all exhibits referenced herein, this
“Agreement”), dated as of
[ ],
2009, is entered into by and among Jefferson National Financial
Corp., a Delaware corporation (the
“Company”), and the purchasers listed in
Schedule A hereto (each, a
“Purchaser” and, collectively, the
“Purchasers”).
WHEREAS, the Company and the Purchasers have entered into a
Master Agreement dated as of December 10, 2009, along with
Jefferson National Life Insurance Co., JNF Asset Management,
LLC, JNL Bermuda LLC, Overture Acquisition Corp. and Overture Re
Holdings Ltd. (the “Master Agreement”);
WHEREAS, pursuant to the Master Agreement, the Company and the
Purchasers have agreed that the Company will issue to the
Purchasers certain Class A warrants valuing the Company at
$75 million and Class B warrants valuing the Company
at $125 million upon the terms and conditions set forth in
this Agreement;
WHEREAS, the Company desires to issue and sell and the
Purchasers desire to purchase, in the amounts set forth opposite
each Purchaser’s name on Schedule A attached
hereto and upon the terms and conditions set forth in this
Agreement, (i) Class A warrants (the
“Class A Warrants”) entitling the
Purchasers to purchase an aggregate of 46,875 shares of
common stock of the Company (“Common
Stock”) at an exercise price of $75.00 (subject to
the floating exercise price adjustment) substantially in the
form of the warrant certificate attached hereto as
Exhibit A (the “Class A Warrant
Certificate”); and (ii) Class B warrants
(the “Class B Warrants”) entitling
the Purchasers to purchase an aggregate of 46,875 shares of
Common Stock at an exercise price of $125.00 (subject to the
floating exercise price adjustment) substantially in the form of
the warrant certificate attached hereto as Exhibit B
(the “Class B Warrant
Certificate”); and
WHEREAS, pursuant to the terms of this Agreement, a Class A
Warrant Certificate and Class B Warrant Certificate will be
delivered to each Purchaser representing the number of
Class A Warrants and Class B Warrants, respectively,
that such Purchaser is purchasing.
NOW THEREFORE, in consideration of the mutual promises contained
in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby, intending legally to be bound,
agree as follows:
AGREEMENT
Section 1. Authorization,
Purchase and Sale; Terms of the Warrants.
A. Authorization of the
Warrants.The Company has duly authorized
(a) the issuance and sale of the Class A Warrants and
the Class B Warrants to the Purchasers; and (b) the
reservation of the Common Stock for issuance upon exercise of
the Class A Warrants and the Class B Warrants.
B. Purchase, Sale and Delivery of the
Warrants. On or after the Closing Date (as
such term is defined in the Master Agreement), the Company shall
issue and sell to the Purchasers, and the Purchasers shall
purchase from the Company, the respective number of Class A
Warrants and Class B Warrants set forth opposite each
Purchaser’s name on Schedule A attached hereto.
The purchase price for (a) each Class A Warrant shall
be $0.0001 per warrant; and (b) each Class B Warrant
shall be $0.0001 (together the “Warrant Purchase
Price”), which shall be paid by the Purchasers by
wire transfer of immediately available funds to the Company in
accordance with the Company’s wiring instructions. On or
after the Closing Date, the Company will deliver to each
Purchaser a Class A Warrant Certificate and a Class B
Warrant Certificate registered in such Purchaser’s name
representing the number of warrants that such Purchaser is
purchasing.
C. Terms of the
Warrants. (i) The Class A Warrants
and the Class B Warrants shall have the terms set forth in
this Agreement and the Class A Warrant Certificate and the
Class B Warrant Certificate, respectively.
(ii) Transfer Restrictions: In
addition to the restrictions on transfer set forth in
Section 9 hereof, each of the Purchasers acknowledges that
the Class A Warrants, the Class B Warrants and the
Common Stock issuable upon exercise of the Class A Warrants
and the Class B Warrants, are subject to the restrictions
on transfer and exercise set forth in the Class A Warrant
Certificate and the Class B Warrant Certificate.
Section 2. Representations
and Warranties of the Company. As a material
inducement to the Purchasers to enter into this Agreement and
purchase the Class A Warrants and the Class B
Warrants, the Company hereby represents and warrants to the
Purchasers (which representations and warranties shall survive
the Closing Date) that:
A. Organization and Corporate
Power.The Company is a corporation duly
organized, validly existing and in good standing under the laws
of Delaware and is qualified to do business in every
jurisdiction in which the failure to so qualify would reasonably
be expected to have a material adverse effect on the financial
condition, operating results or assets of the Company. The
Company possesses all requisite corporate power and authority
necessary to carry out the transactions contemplated by this
Agreement.
B. Authorization; No
Breach. (i) The execution, delivery and
performance of this Agreement and the Class A Warrants and
the Class B Warrants have been duly authorized by the
Company as of the Closing Date. This Agreement constitutes the
valid and binding obligation of the Company, enforceable in
accordance with its terms. Upon issuance in accordance with, and
payment pursuant to, the terms of this Agreement, the
Class A Warrants and the Class B Warrants constitute
valid and binding obligations of the Company, enforceable in
accordance with their respective terms as of the Closing Date.
(ii) The execution and delivery by the Company of this
Agreement and the Class A Warrants and the Class B
Warrants, the sale and issuance of the Class A Warrants and
the Class B Warrants, the issuance of the Common Stock upon
exercise of the Class A Warrants and the Class B
Warrants and the fulfillment of and compliance with the
respective terms hereof and thereof by the Company, do not and
will not as of the Closing Date (a) conflict with or result
in a breach of the terms, conditions or provisions of,
(b) constitute a default under, (c) result in the
creation of any lien, security interest, charge or encumbrance
upon the Company’s share capital or assets under,
(d) result in a violation of or (e) require any
authorization, consent, approval, exemption or other action by
or notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to the
memorandum and articles of association of the Company, as may be
amended from time to time, or any material law, statute, rule or
regulation to which the Company is subject, or any agreement,
order, judgment or decree to which the Company is subject,
except for any filings required after the date hereof under
Delaware laws or United States federal or state securities laws.
C. Title to Securities. Upon
issuance in accordance with, and payment pursuant to, the terms
hereof, the Common Stock issuable upon exercise of the
Class A Warrants and the Class B Warrants will be duly
and validly issued, fully paid and nonassessable. Upon issuance
in accordance with, and payment pursuant to, the terms hereof,
the Purchasers will have good title to the Class A
Warrants, the Class B Warrants and the Common Stock
issuable upon exercise of such Class A Warrants and the
Class B Warrants, free and clear of all liens, claims and
encumbrances of any kind, other than (i) transfer
restrictions hereunder and under the other agreements
contemplated hereby, (ii) transfer restrictions under
Delaware laws or United States federal and state securities laws
and (iii) liens, claims or encumbrances imposed due to the
actions of the applicable Purchaser.
D. Governmental Consents. No
permit, consent, approval or authorization of, or declaration to
or filing with, any governmental authority is required in
connection with the execution, delivery and performance by the
Company of this Agreement, or the consummation by the Company of
any other transactions contemplated hereby.
Section 3. Representations
and Warranties of the Purchasers. As a
material inducement to the Company to enter into this Agreement
and issue and sell the Class A Warrants and the
Class B Warrants to the Purchasers, the Purchasers,
severally and not jointly, hereby represent and warrant to the
Company (which representations and warranties shall survive the
Closing Date) that:
A. Capacity and State Law
Compliance. Each Purchaser has the legal
capacity to execute and perform the obligations imposed on such
Purchaser hereunder. Each Purchaser has engaged in the
transactions contemplated by this Agreement within a state in
which the offer and sale of the Class A Warrants and the
Class B Warrants is permitted under applicable securities
laws. Each Purchaser understands and acknowledges that the
purchase of the Common Stock upon the exercise of the
Class A Warrants and the Class B Warrants will require
the availability of an exemption from registration under United
States federal
and/or state
securities laws and that any sale of such Common Stock shall
require registration or the availability of an exemption from
registration under United States federal
and/or state
securities laws.
B. Authorization; No
Breach. (i) This Agreement constitutes a
valid and binding obligation of each Purchaser, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other laws
of general applicability relating to or affecting
creditors’ rights and to general equitable principles
(whether considered in a proceeding in equity or law).
(ii) The execution and delivery by each Purchaser of this
Agreement and the fulfillment of and compliance with the
respective terms hereof by each Purchaser does not and shall not
as of the Closing Date conflict with or result in a breach of
the terms, conditions or provisions of the organizational
documents of such Purchaser, if any, or any other agreement,
instrument, order, judgment or decree to which such Purchaser is
subject.
C. Investment
Representations. (i) Each Purchaser is
acquiring the Class A Warrants and the Class B
Warrants and, upon exercise of the Class A Warrants or the
Class B Warrants, the Common Stock issuable upon such
exercise (collectively, the
“Securities”) for its own account for
investment purposes only and not with a view towards, or for
resale in connection with, any public sale or distribution
thereof.
(ii) Each Purchaser is an “accredited investor”
as such term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended (the
“Securities Act”).
(iii) Each Purchaser understands that the Securities are
not registered under the Securities Act and are being offered
and will be sold in reliance on specific exemptions from the
registration requirements of the United States federal and state
securities laws and that the Company is relying upon the truth
and accuracy of, and such Purchaser’s compliance with, the
representations and warranties of the Purchasers set forth
herein in order to determine the availability of such exemptions
and the eligibility of such Purchaser to acquire such Securities.
(iv) Each Purchaser did not decide to enter into this
Agreement as a result of any general solicitation or general
advertising within the meaning of Rule 502(c) under the
Securities Act.
(v) Each Purchaser has been furnished with all materials
relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities
which have been requested by such Purchaser. Each Purchaser has
been afforded the opportunity to ask questions of the executive
officers and directors of the Company. Each Purchaser
understands that its investment in the Securities involves a
high degree of risk. The Purchaser has sought such accounting,
legal and tax advice as such Purchaser has considered necessary
to make an informed investment decision with respect to such
Purchaser’s acquisition of the Securities.
(vi) Each Purchaser understands that no United States
federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement
of the Securities or the fairness or suitability of the
investment in the Securities by such Purchaser nor have such
authorities passed upon or endorsed the merits of the offering
of the Securities.
(vii) Each Purchaser understands that: (a) the
Securities have not been and are not being registered under the
Securities Act or any state securities laws and may not be
offered for sale, sold, assigned or transferred unless
subsequently registered thereunder or sold in reliance on an
exemption therefrom; and (b) neither the Company nor any
other person is under any obligation to register the Securities
under the Securities Act or any state securities laws. Each
Purchaser is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale
of shares purchased in a private placement subject to the
satisfaction of certain conditions, including among other
things, the existence of a public market for the shares, the
availability of certain current public information about the
Company, the resale occurring not less than one year after a
party has purchased and paid for the security to be sold, the
sale being effected through a “broker’s
transaction” or in transactions directly with a
“market maker” and the number of shares being sold
during any three-month period not exceeding specified
limitations. Each Purchaser understands that the current public
information referred to above is not now available. Each
Purchaser acknowledges and understands that the Company may not
be satisfying the current public information requirement of
Rule 144 at the time such Purchaser wishes to sell the
Securities and that, in such event, the Purchaser may be
precluded from selling such securities under Rule 144, even
if the other requirements of Rule 144 have been satisfied.
Each Purchaser acknowledges that, in the event all of the
requirements of Rule 144 are not met, registration under the
Securities Act or an exemption from registration will be
required for any disposition of the Securities. Such Investor
understands that, although Rule 144 is not exclusive, the
Securities and Exchange Commission has expressed its opinion
that persons proposing to sell restricted securities received in
a private offering other than in a registered offering or
pursuant to Rule 144 will have a substantial burden of
proof in establishing that an exemption from registration is
available for such offers or sales and that such persons and the
brokers who participate in the transactions do so at their own
risk.
(viii) Each Purchaser understands and acknowledges that no
public market now exists for any of the securities issued by the
Company and that the Company has made no assurances that a
public market will ever exist for the Company’s securities.
(ix) Each Purchaser has such knowledge and experience in
financial and business matters, knows of the high degree of risk
associated with investments in the securities of companies in
the development stage, such as the Company, is capable of
evaluating the merits and risks of an investment in the
Securities and is able to bear the economic risk of an
investment in the Securities in the amount contemplated
hereunder. Each Purchaser has adequate means of providing for
his, her or its current financial needs and contingencies and
will have no current or anticipated future needs for liquidity
which would be jeopardized by the investment in the Securities.
Each Purchaser can afford a complete loss of his, her or its
investment in the Securities.
D. Waiver of Claims. Each
Purchaser hereby waives any and all rights to assert any present
or future claims, including any right of rescission, against the
Company with respect to its purchase of the Class A
Warrants and the Class B Warrants, and each Purchaser
agrees to indemnify and hold the Company harmless from all
losses, damages or expenses that relate to claims or proceedings
brought against the Company by such Purchaser of the
Class A Warrants and the Class B Warrants or his, her
or its transferees, assigns or any subsequent holders of the
Class A Warrants and the Class B Warrants.
Section 4. Conditions
of the Purchasers’ Obligations. The
obligation of each Purchaser to purchase and pay for the
Class A Warrants and the Class B Warrants is subject
to the fulfillment, on or before the Closing Date, of each of
the following conditions:
A. Representations and
Warranties. The representations and
warranties of the Company contained in Section 2 shall be
true and correct at and as of the Closing Date as though then
made.
B. Performance.The Company shall
have performed and complied with all agreements, obligations and
conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing Date.
C. No Injunction. No litigation,
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization
having authority over the matters contemplated hereby, which
prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 5. Conditions
of the Company’s Obligations. The
obligations of the Company to each Purchaser under this
Agreement are subject to the fulfillment, on or before the
Closing Date, of each of the following conditions:
A. Representations and
Warranties. The representations and
warranties of such Purchaser contained in Section 3 shall
be true and correct at and as of the Closing Date as though then
made.
B. Performance. Such Purchaser
shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are
required to be performed or complied with by the Purchaser on or
before the Closing Date.
C. Corporate Consents.The Company
shall have obtained the consent of its Board of Directors
authorizing the execution, delivery and performance of this
Agreement and the issuance and sale of the Class A Warrants
and the Class B Warrants hereunder.
D. No Injunction. No litigation,
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization
having authority over the matters contemplated hereby, which
prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 6. Termination. This
Agreement may be terminated at any time prior to the Closing
Date as it relates only to the Securities to be purchased
pursuant to this Agreement on or after such Closing Date upon
the mutual written consent of the Company and the Purchasers.
Section 7. Survival
of Representations and Warranties. All of the
representations and warranties contained herein shall survive
the Closing Date.
Section 8. Definitions. Terms
used but not otherwise defined in this Agreement shall have the
meaning assigned to such terms in the Registration Statement,
Section 9. Miscellaneous.
A. Legends. (i) The
Class A Warrant Certificates and the Class B Warrant
Certificate evidencing the Class A Warrants and the
Class B Warrants and the Common Stock issued upon exercise
of any Class A Warrants and the Class B Warrants will
be stamped or imprinted with a legend substantially similar to
the following (in addition to any legend required by state
securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS IN ACCORDANCE WITH
APPLICABLE REGISTRATION REQUIREMENTS OR AN
EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
(ii) By accepting the Class A Warrant Certificates or
the Class B Warrant Certificates bearing the aforesaid
legend, each of the Purchasers agrees, prior to any permitted
transfer of the Securities, to give written notice to the
Company expressing its desire to effect such transfer and
describing briefly the proposed
transfer. Upon receiving such notice, the Company shall present
copies thereof to its counsel, and each of the Purchasers agrees
not to make any disposition of all or any portion of the
Securities unless and until:
(a) there is then in effect a registration statement under
the Securities Act covering such proposed disposition, and such
disposition is made in accordance with such registration
statement, in which case the legends set forth above with
respect to the Securities sold pursuant to such registration
statement shall be removed; or
(b) if reasonably requested by the Company, (A) the
Purchaser shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such Securities
under the Securities Act or applicable state securities laws,
(B) the Company shall have received customary
representations and warranties regarding the transferee that are
reasonably satisfactory to the Company signed by the proposed
transferee and (C) the Company shall have received an
agreement by such transferee to the restrictions contained in
the legends referred to in (i) hereof. Notwithstanding the
foregoing, each of the Purchasers also understands and
acknowledges that the transfer and exercise, as the case may be,
of the Class A Warrants and the Class B Warrants are
subject to the specific conditions to such transfer or exercise
as outlined herein, as to which each of the Purchasers
specifically assents by its execution hereof.
(iii) The Company may, from time to time, make stop
transfer notations in its records and deliver stop transfer
instructions to its transfer agent to the extent its counsel
considers it necessary to ensure compliance with applicable
federal and state securities laws and the transfer restrictions
contained elsewhere in this Agreement.
B. Successors and Assigns. Except
as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the
respective successors of the parties hereto whether so expressed
or not.
C. Severability. Whenever
possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
D. Counterparts. This Agreement
may be executed simultaneously in two or more counterparts, none
of which need contain the signatures of more than one party, but
all such counterparts taken together shall constitute one and
the same agreement.
E. Descriptive Headings;
Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not
constitute a substantive part of this Agreement. The use of the
word “including” in this Agreement shall be by way of
example rather than by limitation.
F. Governing Law. This Agreement
shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in
accordance with the internal laws of the State of New York. The
parties agree that, all actions and proceedings arising out of
this Agreement or any of the transactions contemplated hereby,
shall be brought in the United States District Court for the
Southern District of New York or in a New York State Court in
the County of New York and that, in connection with any such
action or proceeding, submit to the jurisdiction of, and venue
in, such court. Each of the parties hereto also irrevocably
waives all right to trial by jury in any action, proceeding or
counterclaim arising out of, connected with or relating to this
Agreement or the transactions contemplated hereby.
G. Notices. All notices, demands
or other communications to be given or delivered under or by
reason of the provisions of this Agreement shall be in writing
and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid), sent to the recipient by
facsimile, provided the recipient confirms recipient of such
facsimile, or mailed to the
If to a Purchaser, to the address set below such
Purchaser’s name on the signature pages hereto, or to such
other address or to the attention of such other person as such
Purchaser has specified by prior written notice to the sending
party.
H. No Strict Construction. The
parties hereto have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties hereto,
and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR UNDER THE
SECURITIES LAWS OF ANY STATE AND THEY MAY NOT BE TRANSFERRED IN
VIOLATIONS OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS
THEREUNDER OF THE PROVISIONS OF THIS WARRANT. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
CLASS A
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
of
JEFFERSON NATIONAL FINANCIAL CORP.
Dated as
of
[ ],
2009
Void
after the date specified in Section 7
No.
[ ]
Class A Warrant to
Purchase
[
]
Shares of Common Stock
(subject to adjustment)
THIS CERTIFIES THAT, for value received, Jefferson National
Financial Corp., a Delaware corporation (the
“Company”) hereby grants to
[insert name of warrant holder], or its registered
assigns (the “Holder”), the right,
subject to the provisions and upon the terms and conditions set
forth herein, to purchase from the Company,
[ ] shares of the
Company’s Common Stock, $0.0001 par value per share
(the “Common Stock”), in the amounts, at
such times and at the price per share set forth in
Section 1. The term “Class A
Warrant” as used herein shall include this
Class A Warrant and any warrants delivered in substitution
or exchange therefor as provided herein. This Class A
Warrant is issued in connection with the transactions described
in the Warrant Purchase Agreement, dated
[ ],
2009, by and among the Company and the purchasers described
therein (the “Purchase Agreement”).
For income tax purposes, the value of this Class A Warrant
on the date hereof is equal to $0.0001 per share of Common Stock
for which it may be exercised.
The following is a statement of the rights of the Holder and the
conditions to which this Class A Warrant is subject, and to
which Holder, by acceptance of this Class A Warrant, agrees:
1. Number and Price of Common Stock; Exercise Period.
(a) Number of shares of Common
Stock. Subject to any previous exercise of the
Class A Warrant, the Holder shall have the right to
purchase up to [ ] shares of
Common Stock, as may be adjusted pursuant hereto.
(b) Exercise Price. (i) The exercise
price per share of Common Stock shall be, subject to adjustment
pursuant hereto, (1) equal to $75.00, or (2) equal to
the Floating Exercise Price if determined in accordance with
clause (ii) below that the increase or decrease in the fair
market value of the Company can be attributed to an acquisition
made by the Company (the “Exercise
Price”).
(ii) The exercise price per share of the Company may be
increased up to $112.50 or decreased to $37.50 if there is a
corresponding increase or decrease in the fair market value of
the Company which can be attributed to an acquisition made by
the Company (the “Floating Exercise
Price”). An independent investment bank mutually
agreed to by the Holder and the Company shall determine:
(1) the Floating Exercise Price by adjusting the exercise
price per share of Common Stock by an amount corresponding to
the increase or decrease in the fair market value of the
Company; (2) the determination of the fair market value of
the
Company, and (3) whether such increase or decrease in the
fair market value is attributable to an acquisition made by the
Company by reviewing the balance sheet of the Company to
determine if the acquisition made a net positive contribution on
such balance sheet. If the Holder and the Company cannot
mutually agree on an investment bank,
[ ]
shall be deemed to be the bank engaged by the parties hereto.
(c) Exercise Period. This Class A
Warrant shall be exercisable, in whole or in part, after the
issuance hereof and prior to (or in connection with) the
expiration of this Class A Warrant as set forth in
Section 7.
2. Exercise of the Class A Warrant.
(a) Exercise. The purchase rights
represented by this Class A Warrant may be exercised at the
election of the Holder, in whole or in part, in accordance with
Section 1, by the tender to the Company at its principal
office (or such other office or agency as the Company may
designate) of a notice of exercise in the form of Exhibit A
(the “Notice of Exercise”), duly
completed and executed by or on behalf of the Holder, together
with the surrender of this Class A Warrant. The Holder may
only exercise the purchase rights represented by this
Class A Warrant in accordance with Section 2(b) below.
(b) Cashless Exercise. If the fair market
value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), the
Holder may elect to receive a number of shares of Common Stock
equal to the value of this Class A Warrant (or of any
portion of this Class A Warrant being canceled), in which
event the Company shall issue to the Holder that number of
shares of Common Stock computed using the following formula:
X
=
Y (A — B)
A
Where:
X
=
The number of shares of Common Stock to be issued to the Holder
Y
=
The number of shares of Common Stock purchasable under this
Class A Warrant or, if only a portion of the Class A Warrant is
being exercised, the portion of the Class A Warrant being
cancelled (at the date of such calculation)
A
=
The fair market value of one share of Common Stock (at the date
of such calculation)
B
=
The Exercise Price (as adjusted to the date of such calculation)
For purposes of the calculation above, the fair market value of
one share of Common Stock shall be determined by the Board of
Directors of the Company, acting in good faith; provided,
however, that:
(i) where a public market exists for the Company’s
common stock at the time of such exercise, the fair market value
per share of Common Stock shall be the average of the closing
bid and asked prices of the common stock or the closing price
quoted on the national securities exchange on which the common
stock is listed as published in the Wall Street Journal, as
applicable, for the ten (10) trading day period ending five
(5) trading days prior to the date of determination of fair
market value;
(ii) if the Class A Warrant is exercised in connection
with the Company’s initial public offering of common stock,
the fair market value per share of Common Stock shall be the per
share offering price to the public of the Company’s initial
public offering; and
(iii) all such determinations to be appropriately adjusted
for stock dividend, stock split, stock combination or other
similar transactions during the applicable calculation period.
(c) Stock Certificates. The rights under
this Class A Warrant shall be deemed to have been exercised
and the Common Stock issuable upon such exercise shall be deemed
to have been issued immediately prior to the close of business
on the date this Class A Warrant is exercised in accordance
with its terms, and the person entitled to receive the Common
Stock issuable upon such exercise shall be treated for all
purposes as the Holder of record of such Common Stock as of the
close of business on such date. As promptly as reasonably
practicable on or after such date, the Company shall issue and
deliver to the person or persons entitled to receive the same a
certificate or certificates for that number of shares issuable
upon such exercise. In the event
that the rights under this Class A Warrant are exercised in
part and have not expired, the Company shall execute and deliver
a new Class A Warrant reflecting the number of shares of
Common Stock that remain subject to this Class A Warrant.
(d) No Fractional Shares or Scrip. No
fractional shares or scrip representing fractional shares shall
be issued upon the exercise of the rights under this
Class A Warrant. In lieu of such fractional share to which
the Holder would otherwise be entitled, the Company shall make a
cash payment equal to the Exercise Price multiplied by such
fraction.
(e) Reservation of Stock.The Company
agrees during the term the rights under this Class A
Warrant are exercisable to take all reasonable action to reserve
and keep available from its authorized and unissued shares of
Common Stock for the purpose of effecting the exercise of this
Class A Warrant such number of shares (and shares of common
stock for issuance on conversion of such shares) as shall from
time to time be sufficient to effect the exercise of the rights
under this Class A Warrant; and if at any time the number
of authorized but unissued shares of Common Stock shall not be
sufficient for purposes of the exercise of this Class A
Warrant in accordance with its terms and the conversion of the
Common Stock, without limitation of such other remedies as may
be available to the Holder, the Company will use all reasonable
efforts to take such corporate action as may, in the opinion of
counsel, be necessary to increase its authorized and unissued
shares of its Common Stock (and shares of common stock for
issuance on conversion of such shares) to a number of shares as
shall be sufficient for such purposes. The Company represents
and warrants that all shares that may be issued upon the
exercise of this Class A Warrant will, when issued in
accordance with the terms hereof, be validly issued, fully paid
and nonassessable.
3. Replacement of the Class A
Warrant. Subject to the receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Class A Warrant and, in
the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and
substance to the Company or, in the case of mutilation, on
surrender and cancellation of this Class A Warrant, the
Company shall execute and deliver, in lieu of this Class A
Warrant, a new warrant of like tenor and amount.
4. Transfer of the Class A Warrant.
(a) Class A Warrant Register. The
Company shall maintain a register (the “Class A
Warrant Register”) containing the name and address
of the Holder or Holders. Until this Class A Warrant is
transferred on the Class A Warrant Register in accordance
herewith, the Company may treat the Holder as shown on the
Class A Warrant Register as the absolute owner of this
Class A Warrant for all purposes, notwithstanding any
notice to the contrary. Any Holder of this Class A Warrant
(or of any portion of this Class A Warrant) may change its
address as shown on the Class A Warrant Register by written
notice to the Company requesting a change.
(b) Transferability of the Class A
Warrant. Subject to the provisions of this
Class A Warrant with respect to compliance with the
Securities Act of 1933, as amended (the “Securities
Act”) title to this Class A Warrant may be
transferred, in whole or in part, by endorsement (by the
transferor and the transferee executing the assignment form
attached as Exhibit B (the “Assignment
Form”)) and delivery in the same manner as a
negotiable instrument transferable by endorsement and delivery.
(c) Exchange of the Class A Warrant upon a
Transfer. This Class A Warrant is
exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for new Class A Warrants
of like tenor representing in the aggregate the purchase rights
hereunder, and each of such new Class A Warrants shall
represent such portion of such rights as is designated by the
Holder at the time of such surrender. On surrender of this
Class A Warrant (and a properly endorsed Assignment Form)
for exchange, the Company shall issue to or on the order of the
Holder a new warrant or warrants of like tenor, in the name of
the Holder or as the Holder (on payment by the Holder of any
applicable transfer taxes) may direct, for the number of shares
issuable upon exercise hereof, and the Company shall register
any such transfer upon the Class A Warrant Register. The
date the Company initially issues the Class A Warrant shall
be deemed to the date of issuance of this Class A Warrant
regardless of the number of times new certificates representing
the unexpired and unexercised rights formerly represented by
this Class A Warrant shall be issued. All Class A
Warrants representing portions of the rights hereunder are
referred to herein as the “Class A
Warrants”.
(d) Securities Law Legend. Each
certificate representing a Class A Warrant or the
underlying Common Stock issuable upon exercise hereof, shall
(unless otherwise permitted by the provisions of this
Class A Warrant) be stamped or imprinted with a legend
substantially similar to the following (in addition to any
legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS IN ACCORDANCE WITH APPLICABLE REGISTRATION
REQUIREMENTS OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
(e) Restrictions on Transfer. No
transfer, sale, assignment, hypothecation or other disposition
of this Class A Warrant maybe made except in accordance
with the provisions of this Section 4; provided that
the Holder, by acceptance of this Class A Warrant, agrees
to be bound by the applicable provisions of the Warrant Purchase
Agreement and all applicable benefits of the Warrant Purchase
Agreement shall inure to such Holder.
(f) Removal of Legend. The legend
referring to federal and state securities laws identified in
Section 4(d) stamped on a certificate evidencing the
Class A Warrant (and the Common Stock issuable upon
conversion thereof) and the stock transfer instructions and
record notations with respect to such securities shall be
removed and the Company shall issue a certificate without such
legend to the holder of such securities if (i) such
securities are registered under the Securities Act, or
(ii) such holder provides the Company with an opinion of
counsel reasonably acceptable to the Company to the effect that
a sale or transfer of such securities may be made without
registration or qualification.
5. Adjustments. Subject to the expiration
of this Class A Warrant pursuant to Section 7, the
number and kind of shares purchasable hereunder and the Exercise
Price therefor are subject to adjustment from time to time, as
follows:
(a) Merger or Reorganization. If at any
time there shall be any reorganization, recapitalization, merger
or consolidation (a “Reorganization”)
involving the Company (other than as otherwise provided for
herein or as would cause the expiration of this Class A
Warrant under Section 7) in which shares of the
Company’s stock are converted into or exchanged for
securities, cash or other property, then, as a part of such
Reorganization, lawful provision shall be made so that the
Holder shall thereafter be entitled to receive upon exercise of
this Class A Warrant, the kind and amount of securities,
cash or other property of the successor corporation resulting
from such Reorganization, equivalent in value to that which a
holder of the Common Stock deliverable upon exercise of this
Class A Warrant would have been entitled in such
Reorganization if the right to purchase the Common Stock
hereunder had been exercised immediately prior to such
Reorganization. In any such case, appropriate adjustment (as
determined in good faith by the Board of Directors of the
successor corporation) shall be made in the application of the
provisions of this Class A Warrant with respect to the
rights and interests of the Holder after such Reorganization to
the end that the provisions of this Class A Warrant shall
be applicable after the event, as near as reasonably may be, in
relation to any shares or other securities deliverable after
that event upon the exercise of this Class A Warrant.
(b) Reclassification of Shares. If the
securities issuable upon exercise of this Class A Warrant
are changed into the same or a different number of securities of
any other class or classes by reclassification, capital
reorganization, conversion of all outstanding shares of the
relevant class or series (other than as would cause the
expiration of this Class A Warrant pursuant to
Section 7) or otherwise (other than as otherwise
provided for herein) (a
“Reclassification”), then, in any such
event, in lieu of the number of shares of Common Stock which the
Holder would otherwise have been entitled to receive, the Holder
shall have the right thereafter to exercise this Class A
Warrant for a number of shares of such other class or classes of
stock that a holder of the number of securities deliverable upon
exercise of this Class A
Warrant immediately before that change would have been entitled
to receive in such Reclassification, all subject to further
adjustment as provided herein with respect to such other shares.
(c) Subdivisions and Combinations. In the
event that the outstanding shares of Common Stock are subdivided
(by stock split, by payment of a stock dividend or otherwise)
into a greater number of shares of such securities, the number
of shares of Common Stock issuable upon exercise of the rights
under this Class A Warrant immediately prior to such
subdivision shall, concurrently with the effectiveness of such
subdivision, be proportionately increased, and the Exercise
Price shall be proportionately decreased, and in the event that
the outstanding shares of Common Stock are combined (by
reclassification or otherwise) into a lesser number of shares of
such securities, the number of shares of Common Stock issuable
upon exercise of the rights under this Class A Warrant
immediately prior to such combination shall, concurrently with
the effectiveness of such combination, be proportionately
decreased, and the Exercise Price shall be proportionately
increased.
(d) Redemption. In the event that all of
the outstanding shares of the securities issuable upon exercise
of this Class A Warrant are redeemed in accordance with the
Company’s certificate of incorporation, this Class A
Warrant shall thereafter be exercisable for a number of shares
of the Company’s common stock equal to the number of shares
of common stock that would have been received if this
Class A Warrant had been exercised in full immediately
prior to such redemption and the preferred stock received
thereupon had been simultaneously converted into common stock.
(e) Stock Dividends. If the Company at
any time while this Class A Warrant is outstanding and
unexpired shall pay a dividend or make a distribution to all of
its stockholders with respect to its Common Stock payable in
Common Stock, then the Exercise Price shall be adjusted, from
and after the date of determination of stockholders entitled to
receive such dividend or distribution, to that price determined
by multiplying the Exercise Price in effect immediately prior to
such date of determination by a fraction (A) the numerator
of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution,
and (B) the denominator of which shall be the total number
of shares of Common Stock outstanding immediately after such
dividend or distribution.
(f) Notice of Adjustments. Upon any
adjustment in accordance with this Section 5, the Company
shall give notice thereof to the Holder, which notice shall
state the event giving rise to the adjustment, the Exercise
Price as adjusted and the number of securities or other property
purchasable upon the exercise of the rights under this
Class A Warrant, setting forth in reasonable detail the
method of calculation of each. The Company shall, upon the
written request of any Holder, furnish or cause to be furnished
to such Holder a certificate setting forth (i) such
adjustments, (ii) the Exercise Price at the time in effect
and (iii) the number of securities and the amount, if any,
of other property that at the time would be received upon
exercise of this Class A Warrant.
6. Notification of Certain Events. Prior
to the expiration of this Class A Warrant pursuant to
Section 7, in the event that the Company shall authorize:
(a) the voluntary liquidation, dissolution or winding up of
the Company; or
(b) any transaction resulting in the expiration of this
Class A Warrant pursuant to Section 7(b) or 7(c);
the Company shall send to the Holder of this Class A
Warrant at least ten (10) days prior written notice of the
date on which a record shall be taken for any such dividend or
distribution or the expected effective date of any such other
event specified in clause (a) or (b), as applicable. The
notice provisions set forth in this section may be shortened or
waived prospectively or retrospectively by the consent of the
holders of at least 75% of the shares of Common Stock issuable
upon exercise of the rights under the Class A Warrants.
7. Expiration of the Class A
Warrant. This Class A Warrant shall expire
and shall no longer be exercisable as of the earlier of:
(a) 5:00 p.m., Eastern time, on the date which is
three (3) years from the date hereof;
(b) (i) an acquisition of the Company by another
entity by means of any transaction or series of related
transactions to which the Company is a party (including, without
limitation, any stock acquisition, reorganization, merger or
consolidation, but excluding any sale of stock for capital
raising purposes and any transaction effected primarily for
purposes of changing the Company’s jurisdiction of
incorporation) approved by the holders of not less than eighty
five (85%) percent of the Common Stock (on a fully diluted
basis, including shares issuable upon exercise of the
Class A Warrants), other than a transaction or series of
related transactions in which the holders of the voting
securities of the Company outstanding immediately prior to such
transaction or series of related transactions retain,
immediately after such transaction or series of transactions, as
a result of shares in the Company held by such holders prior to
such transaction or series of transactions, at least a majority
of the total voting power represented by the outstanding voting
securities of the Company or such other surviving or resulting
entity (or if the Company or such other surviving or resulting
entity is a wholly owned subsidiary immediately following such
acquisition, its parent), or (ii) a sale, lease or other
disposition of all or substantially all of the assets of the
Company and its subsidiaries taken as a whole by means of any
transaction or series of related transactions, except where such
sale, lease or other disposition is to a wholly owned subsidiary
of the Company.
8. No Rights as a Stockholder. Nothing
contained herein shall entitle the Holder to any rights as a
stockholder of the Company or to be deemed the holder of any
securities that may at any time be issuable on the exercise of
the rights hereunder for any purpose nor shall anything
contained herein be construed to confer upon the Holder, as
such, any right to vote for the election of directors or upon
any matter submitted to stockholders at any meeting thereof, or
to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification
of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance or otherwise) or to
receive notice of meetings, or, except as provided above, to
receive dividends or subscription rights or any other rights of
a stockholder of the Company until the rights under the
Class A Warrant shall have been exercised and the Common
Stock purchasable upon exercise of the rights hereunder shall
have become deliverable as provided herein.
9. Market Stand-off. If requested in
writing by the underwriters for the initial underwritten public
offering of securities of the Company, the Holder shall agree to
enter into the form of
lock-up
agreement provided by such underwriters to holders of capital
stock of the Company providing that the Holder shall not sell
any shares of capital stock of the Company without the consent
of such underwriters for a period of not more than 180 days
following the effective date of the registration statement
relating to such offering; provided that all officers and
directors and greater-than-1% shareholders of the Company enter
into substantially the same agreement and any discretionary
waiver or termination of the restrictions of such agreements by
the Company or representatives of the underwriters shall apply
to all person subject to such agreements pro rata based on the
number of shares subject to such agreements.
10. Representations and Class A Warranties of the
Holder. By acceptance of this Class A
Warrant, the initial Holder represents and warrants to the
Company as follows:
(a) No Registration. The Holder
understands that this Class A Warrant and the Common Stock
(the “Securities”) have not been, and
will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment
intent and the accuracy of the Holder’s representations as
expressed herein or otherwise made pursuant hereto.
(b) Investment Intent. The Holder is
acquiring the Securities for investment for its own account, not
as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof. The Holder has no
present intention of selling, granting any participation in, or
otherwise distributing the Securities, nor does it have any
contract, undertaking, agreement or arrangement for the same.
(c) Investment Experience. The Holder has
substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the
Company, and has such knowledge
and experience in financial or business matters so that it is
capable of evaluating the merits and risks of its investment in
the Company.
(d) Speculative Nature of Investment. The
Holder understands and acknowledges that an investment in the
Company is highly speculative and involves substantial risks.
The Holder can bear the economic risk of its investment and is
able, without impairing its financial condition, to hold the
Securities for an indefinite period of time and to suffer a
complete loss of its investment.
(e) Accredited Investor. The Holder is an
“accredited investor” within the meaning of
Regulation D, Rule 501(a), promulgated by the
Securities and Exchange Commission under the Securities Act and
shall submit to the Company such further assurances of such
status as may be reasonably requested by the Company.
11. Information and Appraisal Rights.
(a) Information Rights. From the date
hereof until the earlier of (x) the expiration of the
exercise period set forth in Section 7, or (y) the
date the Holder has exercised this Class A Warrant in full,
subject to an obligation to keep the following confidential,
(i) the Company shall furnish to the Holder, within
90 days of the fiscal year end, the annual report of the
auditors with respect to the consolidated financial statements
of the Company, (ii) the Holder shall be entitled to
promptly receive copies (after the receipt by the Company) of
all appraisals or determinations, prepared by the Company or any
third party, with respect to the value of the Company or its
securities to include without limitation appraisals or
determinations made in connection with any consummated or
proposed capital financing by the Company, investment in the
Company by any third party or the sale of the Company, and
(iii) the Holder shall be entitled to inspect the books and
records of the Company (including, without limitation, the
financial statements of the Company) upon reasonable prior
notice and during business hours.
(b) Appraisal Rights. From the date
hereof until the earlier of (x) the expiration of the
exercise period set forth in Section 7, or (y) the
date the Holder has exercised this Class A Warrant in full,
the Holder shall have the right once per calendar year to have
the Company conduct an appraisal of the Company at the
Company’s costs. In the event the Holder requests an
appraisal in writing pursuant to this Section, an independent
investment bank mutually agreed to by the Holder and the Company
shall determine the fair market value of the Company. If the
Holder and the Company cannot mutually agree on an investment
bank,
[ ]
shall be deemed to be the bank engaged by the parties hereto.
12. Miscellaneous.
(a) Amendments. Except as expressly
provided herein, neither this Class A Warrant nor any term
hereof may be amended, waived, discharged or terminated other
than by a written instrument referencing this Class A
Warrant and signed by the Company and the holders of warrants
representing not less than 75% of the shares of Common Stock
issuable upon exercise of any and all outstanding Class A
Warrants, which 75% does not need to include the consent of the
Holder. Any amendment, waiver, discharge or termination effected
in accordance with this Section 12(a) shall be binding upon
each holder of the Class A Warrants, each future holder of
such Class A Warrants and the Company; provided,
however, that no special consideration or inducement may
be given to any such holder in connection with such consent that
is not given ratably to all such holders, and that such
amendment must apply to all such holders equally and ratably in
accordance with the number of shares of Common Stock issuable
upon exercise of the Class A Warrants. The Company shall
promptly give notice to all holders of Class A Warrants of
any amendment effected in accordance with this
Section 12(a).
(b) Waivers. No waiver of any single
breach or default shall be deemed a waiver of any other breach
or default theretofore or thereafter occurring.
(c) Notices. All notices and other
communications required or permitted hereunder shall be in
writing and shall be mailed by registered or certified mail,
postage prepaid, sent by facsimile or electronic mail (if to the
Holder) or otherwise delivered by hand, messenger or courier
service addressed:
(i) if to the Holder, to the Holder at the Holder’s
address, facsimile number or electronic mail address as shown in
the Company’s records, as may be updated in accordance with
the provisions hereof, or until any such Holder so furnishes an
address, facsimile number or electronic mail address to the
Company, then to and at the address, facsimile number or
electronic mail address of the last holder of this Class A
Warrant for which the Company has contact information in its
records; or
Jefferson National Life Insurance Co.
9920 Corporate Campus Drive, Suite 1000 Louisville, Kentucky40223
Facsimile:
502-213-2970
Electronic Mail: chawley@jeffnat.com
Attention: Craig A Hawley
General
Counsel & Secretary
Each such notice or other communication shall for all purposes
of this Class A Warrant be treated as effective or having
been given (i) if delivered by hand, messenger or courier
service, when delivered, or (ii) if sent by mail, at the
earlier of its receipt or 72 hours after the same has been
deposited in a regularly maintained receptacle for the deposit
of the United States mail, addressed and mailed as aforesaid, or
(iii) if sent by facsimile, upon confirmation of facsimile
transfer or, if sent by electronic mail, upon confirmation of
delivery when directed to the relevant electronic mail address.
In the event of any conflict between the Company’s books
and records and this Class A Warrant or any notice
delivered hereunder, the Company’s books and records will
control absent fraud or error.
(d) Governing Law. This Class A
Warrant and all actions arising out of or in connection with
this Class A Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware, without
regard to the conflicts of law provisions of the State of
Delaware, or of any other state.
(e) Jurisdiction and Venue. Each of the
Holder and the Company irrevocably consents to the exclusive
jurisdiction and venue of any state or federal court within the
State of Delaware, in connection with any matter based upon or
arising out of this Class A Warrant or the matters
contemplated herein, and agrees that process may be served upon
them in any manner authorized by the laws of the State of
Delaware for such persons.
(f) Titles and Subtitles. The titles and
subtitles used in this Class A Warrant are used for
convenience only and are not to be considered in construing or
interpreting this Class A Warrant. All references in this
Class A Warrant to sections, paragraphs and exhibits shall,
unless otherwise provided, refer to sections and paragraphs
hereof and exhibits attached hereto.
(g) Severability. If any provision of
this Class A Warrant becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void,
portions of such provision, or such provision in its entirety,
to the extent necessary, shall be severed from this Class A
Warrant, and such illegal, unenforceable or void provision shall
be replaced with a valid and enforceable provision that will
achieve, to the extent possible, the same economic, business and
other purposes of the illegal, unenforceable or void provision.
The balance of this Class A Warrant shall be enforceable in
accordance with its terms.
(h) Waiver of Jury Trial. EACH OF THE
HOLDER AND THE COMPANY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATED TO THIS CLASS A WARRANT.
(i) Saturdays, Sundays and Holidays. If
the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a
Saturday, Sunday or U.S. federal holiday, then
such action may be taken or such right may be exercised on the
next succeeding day that is not a Saturday, Sunday or
U.S. federal holiday.
(j) Rights and Obligations Survive Exercise of the
Class A Warrant. Except as otherwise
provided herein, the rights and obligations of the Company and
the Holder under this Class A Warrant shall survive
exercise of this Class A Warrant.
(k) Entire Agreement. Except as expressly
set forth herein, this Class A Warrant (including the
exhibits attached hereto) constitutes the entire agreement and
understanding of the Company and the Holder with respect to the
subject matter hereof and supersede all prior agreements and
understandings relating to the subject matter hereof.
Jefferson National Financial Corp. (the
“Company”)
Attention:
President
(1)
Exercise. The undersigned elects to purchase
the following pursuant to the terms of the attached warrant:
Number of shares:
Type of security:
(2)
Method of Exercise. The undersigned elects to
exercise the attached warrant pursuant to:
o
The cashless exercise provisions of Section 2(b) of the
attached warrant.
(3)
Stock Certificate. Please issue a certificate
or certificates representing the shares in the name of:
o
The undersigned
o Other —
Name:
Address:
(4)
Unexercised Portion of the Warrant. Please
issue a new warrant for the unexercised portion of the attached
warrant in the name of:
o
The undersigned
o Other —
Name:
o Address:
o
Not applicable
(5)
Investment Intent. The undersigned represents
and warrants that the aforesaid shares are being acquired for
investment for its own account, not as a nominee or agent, and
not with a view to, or for resale in connection with, the
distribution thereof, and that the undersigned has no present
intention of selling, granting any participation in, or
otherwise distributing the shares in violation of applicable
law, nor does it have any contract, undertaking, agreement or
arrangement for the same.
(6)
Consent to Receipt of Electronic
Notice. Subject to the limitations set forth in
Delaware General Corporation Law § 232(e), the
undersigned consents to the delivery of any notice to
stockholders given by the Company under the Delaware General
Corporation Law or the Company’s certificate of
incorporation or bylaws by (i) facsimile telecommunication
to the facsimile number provided below (or to any other
facsimile number for the undersigned in the Company’s
records), (ii) electronic mail to the electronic mail
address provided below (or to any other electronic mail address
for the undersigned in the Company’s records),
(iii) posting on an electronic network together with
separate notice to the undersigned of such specific posting or
(iv) any other form of electronic transmission (as defined
in the Delaware General Corporation Law) directed to the
undersigned. This consent may be revoked by the
THE WARRANT TO PURCHASE SHARES OF COMMON STOCK
ISSUED
ON ,
2009 (THE “WARRANT”)
DATE:
(1)
Assignment. The undersigned registered holder
of the Class A Warrant (“Assignor”)
assigns and transfers to the assignee named below
(“Assignee”) all of the rights of
Assignor under the Class A Warrant, with respect to the
number of shares set forth below:
Name of Assignee:
Address of Assignee:
Number of Shares Assigned:
and does irrevocably constitute and
appoint
as attorney to make such transfer on the books of Jefferson
National Financial Corp., maintained for the purpose, with full
power of substitution in the premises.
(2)
Obligations of Assignee. Assignee agrees to
take and hold the Class A Warrant and any shares of stock to be
issued upon exercise of the rights thereunder (and any shares
issuable upon conversion thereof) (the
“Securities”) subject to, and to be
bound by, the terms and conditions set forth in the Class A
Warrant and the Warrant Purchase Agreement to the same extent as
if Assignee were the original holder thereof.
(3)
Investment Intent. Assignee represents and
warrants that the Securities are being acquired for investment
for its own account, not as a nominee or agent, and not with a
view to, or for resale in connection with, the distribution
thereof, and that Assignee has no present intention of selling,
granting any participation in, or otherwise distributing the
shares in violation of applicable law, nor does it have any
contract, undertaking, agreement or arrangement for the same.
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR UNDER THE
SECURITIES LAWS OF ANY STATE AND THEY MAY NOT BE TRANSFERRED IN
VIOLATIONS OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS
THEREUNDER OF THE PROVISIONS OF THIS WARRANT. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
CLASS B
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
of
JEFFERSON NATIONAL FINANCIAL CORP.
Dated as
of
[ ],
2009
Void
after the date specified in Section 7
No.
[ ]
Class B Warrant to
Purchase
[
]
Shares of Common Stock
(subject to adjustment)
THIS CERTIFIES THAT, for value received, Jefferson National
Financial Corp., a Delaware corporation (the
“Company”) hereby grants to [insert
name of warrant holder], or its registered assigns (the
“Holder”), the right, subject to the
provisions and upon the terms and conditions set forth herein,
to purchase from the Company,
[ ] shares of the
Company’s Common Stock, $0.0001 par value per share
(the “Common Stock”), in the amounts, at
such times and at the price per share set forth in
Section 1. The term “Class B
Warrant” as used herein shall include this
Class B Warrant and any warrants delivered in substitution
or exchange therefor as provided herein. This Class B
Warrant is issued in connection with the transactions described
in the Warrant Purchase Agreement, dated
[ ],
2009, by and among the Company and the purchasers described
therein (the “Purchase Agreement”).
For income tax purposes, the value of this Class B Warrant
on the date hereof is equal to $0.0001 per share of Common Stock
for which it may be exercised.
The following is a statement of the rights of the Holder and the
conditions to which this Class B Warrant is subject, and to
which Holder, by acceptance of this Class B Warrant, agrees:
1. Number and Price of Common Stock; Exercise Period.
(a) Number of shares of Common
Stock. Subject to any previous exercise of the
Class B Warrant, the Holder shall have the right to
purchase up to
[ ] shares
of Common Stock, as may be adjusted pursuant hereto.
(b) Exercise Price. (i) The exercise
price per share of Common Stock shall be, subject to adjustment
pursuant hereto, (1) equal to $125.00, or (2) equal to
the Floating Exercise Price if determined in accordance with
clause (ii) below that the increase or decrease in the fair
market value of the Company can be attributed to an acquisition
made by the Company (the “Exercise
Price”).
(c) (ii) The exercise price per share of the Company
may be increased up to $187.50 or decreased to $62.50 if there
is a corresponding increase or decrease in the fair market value
of the Company which can be attributed to an acquisition made by
the Company (the “Floating Exercise
Price”). An independent investment bank mutually
agreed to by the Holder and the Company shall determine:
(1) the Floating Exercise Price by adjusting the exercise
price per share of Common Stock by an amount corresponding to
the increase or decrease in the fair market value of the
Company; (2) the determination of the fair market value of
the
Company, and (3) whether such increase or decrease in the
fair market value is attributable to an acquisition made by the
Company by reviewing the balance sheet of the Company to
determine if the acquisition made a net positive contribution on
such balance sheet. If the Holder and the Company cannot
mutually agree on an investment bank,
[ ] shall be deemed to
be the bank engaged by the parties hereto.
(d) Exercise Period. This Class B
Warrant shall be exercisable, in whole or in part, after the
issuance hereof and prior to (or in connection with) the
expiration of this Class B Warrant as set forth in
Section 7.
2. Exercise of the Class B Warrant.
(a) Exercise. The purchase rights
represented by this Class B Warrant may be exercised at the
election of the Holder, in whole or in part, in accordance with
Section 1, by the tender to the Company at its principal
office (or such other office or agency as the Company may
designate) of a notice of exercise in the form of Exhibit A
(the “Notice of Exercise”), duly
completed and executed by or on behalf of the Holder, together
with the surrender of this Class B Warrant. The Holder may
only exercise the purchase rights represented by this
Class B Warrant in accordance with Section 2(b) below.
(b) Cashless Exercise. If the fair market
value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), the
Holder may elect to receive a number of shares of Common Stock
equal to the value of this Class B Warrant (or of any
portion of this Class B Warrant being canceled), in which
event the Company shall issue to the Holder that number of
shares of Common Stock computed using the following formula:
X
=
Y (A — B)
A
Where:
X
=
The number of shares of Common Stock to be issued to the Holder
Y
=
The number of shares of Common Stock purchasable under this
Class B Warrant or, if only a portion of the Class B Warrant is
being exercised, the portion of the Class B Warrant being
cancelled (at the date of such calculation)
A
=
The fair market value of one share of Common Stock (at the date
of such calculation)
B
=
The Exercise Price (as adjusted to the date of such calculation)
For purposes of the calculation above, the fair market value of
one share of Common Stock shall be determined by the Board of
Directors of the Company, acting in good faith; provided,
however, that:
(i) where a public market exists for the Company’s
common stock at the time of such exercise, the fair market value
per share of Common Stock shall be the average of the closing
bid and asked prices of the common stock or the closing price
quoted on the national securities exchange on which the common
stock is listed as published in The Wall Street Journal,
as applicable, for the ten (10) trading day period ending
five (5) trading days prior to the date of determination of
fair market value; (ii) if the Class B Warrant is
exercised in connection with the Company’s initial public
offering of common stock, the fair market value per share of
Common Stock shall be the per share offering price to the public
of the Company’s initial public offering; and
(iii) all such determinations to be appropriately adjusted
for stock dividend, stock split, stock combination or other
similar transactions during the applicable calculation period.
(c) Stock Certificates. The rights under
this Class B Warrant shall be deemed to have been exercised
and the Common Stock issuable upon such exercise shall be deemed
to have been issued immediately prior to the close of business
on the date this Class B Warrant is exercised in accordance
with its terms, and the person entitled to receive the Common
Stock issuable upon such exercise shall be treated for all
purposes as the Holder of record of such Common Stock as of the
close of business on such date. As promptly as reasonably
practicable on or after such date, the Company shall issue and
deliver to the person or persons entitled to receive the same a
certificate or certificates for that number of shares issuable
upon such exercise. In the event that the rights under this
Class B Warrant are exercised in part and have not expired,
the Company shall
execute and deliver a new Class B Warrant reflecting the
number of shares of Common Stock that remain subject to this
Class B Warrant.
(d) No Fractional Shares or Scrip. No
fractional shares or scrip representing fractional shares shall
be issued upon the exercise of the rights under this
Class B Warrant. In lieu of such fractional share to which
the Holder would otherwise be entitled, the Company shall make a
cash payment equal to the Exercise Price multiplied by such
fraction.
(e) Reservation of Stock.The Company
agrees during the term the rights under this Class B
Warrant are exercisable to take all reasonable action to reserve
and keep available from its authorized and unissued shares of
Common Stock for the purpose of effecting the exercise of this
Class B Warrant such number of shares (and shares of common
stock for issuance on conversion of such shares) as shall from
time to time be sufficient to effect the exercise of the rights
under this Class B Warrant; and if at any time the number
of authorized but unissued shares of Common Stock shall not be
sufficient for purposes of the exercise of this Class B
Warrant in accordance with its terms and the conversion of the
Common Stock, without limitation of such other remedies as may
be available to the Holder, the Company will use all reasonable
efforts to take such corporate action as may, in the opinion of
counsel, be necessary to increase its authorized and unissued
shares of its Common Stock (and shares of common stock for
issuance on conversion of such shares) to a number of shares as
shall be sufficient for such purposes. The Company represents
and warrants that all shares that may be issued upon the
exercise of this Class B Warrant will, when issued in
accordance with the terms hereof, be validly issued, fully paid
and nonassessable.
3. Replacement of the Class B
Warrant. Subject to the receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Class B Warrant and, in
the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and
substance to the Company or, in the case of mutilation, on
surrender and cancellation of this Class B Warrant, the
Company shall execute and deliver, in lieu of this Class B
Warrant, a new warrant of like tenor and amount.
4. Transfer of the Class B Warrant.
(a) Class B Warrant Register. The
Company shall maintain a register (the “Class B
Warrant Register”) containing the name and address
of the Holder or Holders. Until this Class B Warrant is
transferred on the Class B Warrant Register in accordance
herewith, the Company may treat the Holder as shown on the
Class B Warrant Register as the absolute owner of this
Class B Warrant for all purposes, notwithstanding any
notice to the contrary. Any Holder of this Class B Warrant
(or of any portion of this Class B Warrant) may change its
address as shown on the Class B Warrant Register by written
notice to the Company requesting a change.
(b) Transferability of the Class B
Warrant. Subject to the provisions of this
Class B Warrant with respect to compliance with the
Securities Act of 1933, as amended (the “Securities
Act”) title to this Class B Warrant may be
transferred, in whole or in part, by endorsement (by the
transferor and the transferee executing the assignment form
attached as Exhibit B (the “Assignment
Form”)) and delivery in the same manner as a
negotiable instrument transferable by endorsement and delivery.
(c) Exchange of the Class B Warrant upon a
Transfer. This Class B Warrant is
exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for new Class B Warrants
of like tenor representing in the aggregate the purchase rights
hereunder, and each of such new Class B Warrants shall
represent such portion of such rights as is designated by the
Holder at the time of such surrender. On surrender of this
Class B Warrant (and a properly endorsed Assignment Form)
for exchange, the Company shall issue to or on the order of the
Holder a new warrant or warrants of like tenor, in the name of
the Holder or as the Holder (on payment by the Holder of any
applicable transfer taxes) may direct, for the number of shares
issuable upon exercise hereof, and the Company shall register
any such transfer upon the Class B Warrant Register. The
date the Company initially issues the Class B Warrant shall
be deemed to the date of issuance of this Class B Warrant
regardless of the number of times new certificates representing
the unexpired and unexercised rights formerly represented by
this Class B Warrant shall be issued. All Class B
Warrants representing portions of the rights hereunder are
referred to herein as the “Class B
Warrants”.
(d) Securities Law Legend. Each
certificate representing a Class B Warrant or the
underlying Common Stock issuable upon exercise hereof, shall
(unless otherwise permitted by the provisions of this
Class B Warrant) be stamped or imprinted with a legend
substantially similar to the following (in addition to any
legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS IN ACCORDANCE WITH APPLICABLE REGISTRATION
REQUIREMENTS OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
(e) Restrictions on Transfer. No
transfer, sale, assignment, hypothecation or other disposition
of this Class B Warrant maybe made except in accordance
with the provisions of this Section 4; provided that
the Holder, by acceptance of this Class B Warrant, agrees
to be bound by the applicable provisions of the Warrant Purchase
Agreement and all applicable benefits of the Warrant Purchase
Agreement shall inure to such Holder.
(f) Removal of Legend. The legend
referring to federal and state securities laws identified in
Section 4(d) stamped on a certificate evidencing the
Class B Warrant (and the Common Stock issuable upon
conversion thereof) and the stock transfer instructions and
record notations with respect to such securities shall be
removed and the Company shall issue a certificate without such
legend to the holder of such securities if (i) such
securities are registered under the Securities Act, or
(ii) such holder provides the Company with an opinion of
counsel reasonably acceptable to the Company to the effect that
a sale or transfer of such securities may be made without
registration or qualification.
5. Adjustments. Subject to the expiration
of this Class B Warrant pursuant to Section 7, the
number and kind of shares purchasable hereunder and the Exercise
Price therefor are subject to adjustment from time to time, as
follows:
(a) Merger or Reorganization. If at any
time there shall be any reorganization, recapitalization, merger
or consolidation (a “Reorganization”)
involving the Company (other than as otherwise provided for
herein or as would cause the expiration of this Class B
Warrant under Section 7) in which shares of the
Company’s stock are converted into or exchanged for
securities, cash or other property, then, as a part of such
Reorganization, lawful provision shall be made so that the
Holder shall thereafter be entitled to receive upon exercise of
this Class B Warrant, the kind and amount of securities,
cash or other property of the successor corporation resulting
from such Reorganization, equivalent in value to that which a
holder of the Common Stock deliverable upon exercise of this
Class B Warrant would have been entitled in such
Reorganization if the right to purchase the Common Stock
hereunder had been exercised immediately prior to such
Reorganization. In any such case, appropriate adjustment (as
determined in good faith by the Board of Directors of the
successor corporation) shall be made in the application of the
provisions of this Class B Warrant with respect to the
rights and interests of the Holder after such Reorganization to
the end that the provisions of this Class B Warrant shall
be applicable after the event, as near as reasonably may be, in
relation to any shares or other securities deliverable after
that event upon the exercise of this Class B Warrant.
(b) Reclassification of Shares. If the
securities issuable upon exercise of this Class B Warrant
are changed into the same or a different number of securities of
any other class or classes by reclassification, capital
reorganization, conversion of all outstanding shares of the
relevant class or series (other than as would cause the
expiration of this Class B Warrant pursuant to
Section 7) or otherwise (other than as otherwise
provided for herein) (a
“Reclassification”), then, in any such
event, in lieu of the number of shares of Common Stock which the
Holder would otherwise have been entitled to receive, the Holder
shall have the right thereafter to exercise this Class B
Warrant for a number of shares of such other class or classes of
stock that a holder of the number of securities deliverable upon
exercise of this Class B
Warrant immediately before that change would have been entitled
to receive in such Reclassification, all subject to further
adjustment as provided herein with respect to such other shares.
(c) Subdivisions and Combinations. In the
event that the outstanding shares of Common Stock are subdivided
(by stock split, by payment of a stock dividend or otherwise)
into a greater number of shares of such securities, the number
of shares of Common Stock issuable upon exercise of the rights
under this Class B Warrant immediately prior to such
subdivision shall, concurrently with the effectiveness of such
subdivision, be proportionately increased, and the Exercise
Price shall be proportionately decreased, and in the event that
the outstanding shares of Common Stock are combined (by
reclassification or otherwise) into a lesser number of shares of
such securities, the number of shares of Common Stock issuable
upon exercise of the rights under this Class B Warrant
immediately prior to such combination shall, concurrently with
the effectiveness of such combination, be proportionately
decreased, and the Exercise Price shall be proportionately
increased.
(d) Redemption. In the event that all of
the outstanding shares of the securities issuable upon exercise
of this Class B Warrant are redeemed in accordance with the
Company’s certificate of incorporation, this Class B
Warrant shall thereafter be exercisable for a number of shares
of the Company’s common stock equal to the number of shares
of common stock that would have been received if this
Class B Warrant had been exercised in full immediately
prior to such redemption and the preferred stock received
thereupon had been simultaneously converted into common stock.
(e) Stock Dividends. If the Company at
any time while this Class B Warrant is outstanding and
unexpired shall pay a dividend or make a distribution to all of
its stockholders with respect to its Common Stock payable in
Common Stock, then the Exercise Price shall be adjusted, from
and after the date of determination of stockholders entitled to
receive such dividend or distribution, to that price determined
by multiplying the Exercise Price in effect immediately prior to
such date of determination by a fraction (A) the numerator
of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution,
and (B) the denominator of which shall be the total number
of shares of Common Stock outstanding immediately after such
dividend or distribution.
(f) Notice of Adjustments. Upon any
adjustment in accordance with this Section 5, the Company
shall give notice thereof to the Holder, which notice shall
state the event giving rise to the adjustment, the Exercise
Price as adjusted and the number of securities or other property
purchasable upon the exercise of the rights under this
Class B Warrant, setting forth in reasonable detail the
method of calculation of each. The Company shall, upon the
written request of any Holder, furnish or cause to be furnished
to such Holder a certificate setting forth (i) such
adjustments, (ii) the Exercise Price at the time in effect
and (iii) the number of securities and the amount, if any,
of other property that at the time would be received upon
exercise of this Class B Warrant.
6. Notification of Certain Events. Prior
to the expiration of this Class B Warrant pursuant to
Section 7, in the event that the Company shall authorize:
(a) the voluntary liquidation, dissolution or winding up of
the Company; or
(b) any transaction resulting in the expiration of this
Class B Warrant pursuant to Section 7(b) or 7(c);
the Company shall send to the Holder of this Class B
Warrant at least ten (10) days prior written notice of the
date on which a record shall be taken for any such dividend or
distribution or the expected effective date of any such other
event specified in clause (a) or (b), as applicable. The
notice provisions set forth in this section may be shortened or
waived prospectively or retrospectively by the consent of the
holders of at least 75% of the shares of Common Stock issuable
upon exercise of the rights under the Class B Warrants.
7. Expiration of the Class B
Warrant. This Class B Warrant shall expire
and shall no longer be exercisable as of the earlier of:
(a) 5:00 p.m., Eastern time, on the date which is four
(4) years from the date hereof;
(b) (i) an acquisition of the Company by another
entity by means of any transaction or series of related
transactions to which the Company is a party (including, without
limitation, any stock acquisition, reorganization, merger or
consolidation, but excluding any sale of stock for capital
raising purposes and any transaction effected primarily for
purposes of changing the Company’s jurisdiction of
incorporation) approved by the holders of not less than eighty
five (85%) percent of the Common Stock (on a fully diluted
basis, including shares issuable upon exercise of the
Class B Warrants), other than a transaction or series of
related transactions in which the holders of the voting
securities of the Company outstanding immediately prior to such
transaction or series of related transactions retain,
immediately after such transaction or series of transactions, as
a result of shares in the Company held by such holders prior to
such transaction or series of transactions, at least a majority
of the total voting power represented by the outstanding voting
securities of the Company or such other surviving or resulting
entity (or if the Company or such other surviving or resulting
entity is a wholly-owned subsidiary immediately following such
acquisition, its parent), or (ii) a sale, lease or other
disposition of all or substantially all of the assets of the
Company and its subsidiaries taken as a whole by means of any
transaction or series of related transactions, except where such
sale, lease or other disposition is to a wholly-owned subsidiary
of the Company.
8. No Rights as a Stockholder. Nothing
contained herein shall entitle the Holder to any rights as a
stockholder of the Company or to be deemed the holder of any
securities that may at any time be issuable on the exercise of
the rights hereunder for any purpose nor shall anything
contained herein be construed to confer upon the Holder, as
such, any right to vote for the election of directors or upon
any matter submitted to stockholders at any meeting thereof, or
to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification
of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance or otherwise) or to
receive notice of meetings, or, except as provided above, to
receive dividends or subscription rights or any other rights of
a stockholder of the Company until the rights under the
Class B Warrant shall have been exercised and the Common
Stock purchasable upon exercise of the rights hereunder shall
have become deliverable as provided herein.
9. Market Stand-off. If requested in
writing by the underwriters for the initial underwritten public
offering of securities of the Company, the Holder shall agree to
enter into the form of
lock-up
agreement provided by such underwriters to holders of capital
stock of the Company providing that the Holder shall not sell
any shares of capital stock of the Company without the consent
of such underwriters for a period of not more than 180 days
following the effective date of the registration statement
relating to such offering; provided that all officers and
directors and greater-than-1% shareholders of the Company enter
into substantially the same agreement and any discretionary
waiver or termination of the restrictions of such agreements by
the Company or representatives of the underwriters shall apply
to all person subject to such agreements pro rata based on the
number of shares subject to such agreements.
10. Representations and Class B Warranties of the
Holder. By acceptance of this Class B
Warrant, the initial Holder represents and warrants to the
Company as follows:
(a) No Registration. The Holder
understands that this Class B Warrant and the Common Stock
(the “Securities”) have not been, and
will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and
the accuracy of the Holder’s representations as expressed
herein or otherwise made pursuant hereto.
(b) Investment Intent. The Holder is
acquiring the Securities for investment for its own account, not
as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof. The Holder has no
present intention of selling, granting any participation in, or
otherwise distributing the Securities, nor does it have any
contract, undertaking, agreement or arrangement for the same.
(c) Investment Experience. The Holder has
substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the
Company, and has such knowledge
and experience in financial or business matters so that it is
capable of evaluating the merits and risks of its investment in
the Company.
(d) Speculative Nature of Investment. The
Holder understands and acknowledges that an investment in the
Company is highly speculative and involves substantial risks.
The Holder can bear the economic risk of its investment and is
able, without impairing its financial condition, to hold the
Securities for an indefinite period of time and to suffer a
complete loss of its investment.
(e) Accredited Investor. The Holder is an
“accredited investor” within the meaning of
Regulation D, Rule 501(a), promulgated by the
Securities and Exchange Commission under the Securities Act and
shall submit to the Company such further assurances of such
status as may be reasonably requested by the Company.
11. Information and Appraisal Rights.
(a) Information Rights. From the date
hereof until the earlier of (x) the expiration of the
exercise period set forth in Section 7, or (y) the
date the Holder has exercised this Class B Warrant in full,
subject to an obligation to keep the following confidential,
(i) the Company shall furnish to the Holder, within
90 days of the fiscal year end, the annual report of the
auditors with respect to the consolidated financial statements
of the Company, (ii) the Holder shall be entitled to
promptly receive copies (after the receipt by the Company) of
all appraisals or determinations, prepared by the Company or any
third party, with respect to the value of the Company or its
securities to include without limitation appraisals or
determinations made in connection with any consummated or
proposed capital financing by the Company, investment in the
Company by any third party or the sale of the Company, and
(iii) the Holder shall be entitled to inspect the books and
records of the Company (including, without limitation, the
financial statements of the Company) upon reasonable prior
notice and during business hours.
(b) Appraisal Rights. From the date
hereof until the earlier of (x) the expiration of the
exercise period set forth in Section 7, or (y) the
date the Holder has exercised this Class B Warrant in full,
the Holder shall have the right once per calendar year to have
the Company conduct an appraisal of the Company at the
Company’s costs. In the event the Holder requests an
appraisal in writing pursuant to this Section, an independent
investment bank mutually agreed to by the Holder and the Company
shall determine the fair market value of the Company. If the
Holder and the Company cannot mutually agree on an investment
bank,
[ ]
shall be deemed to be the bank engaged by the parties hereto.
12. Miscellaneous.
(a) Amendments. Except as expressly
provided herein, neither this Class B Warrant nor any term
hereof may be amended, waived, discharged or terminated other
than by a written instrument referencing this Class B
Warrant and signed by the Company and the holders of warrants
representing not less than 75% of the shares of Common Stock
issuable upon exercise of any and all outstanding Class B
Warrants, which 75% does not need to include the consent of the
Holder. Any amendment, waiver, discharge or termination effected
in accordance with this Section 12(a) shall be binding upon
each holder of the Class B Warrants, each future holder of
such Class B Warrants and the Company; provided,
however, that no special consideration or inducement may
be given to any such holder in connection with such consent that
is not given ratably to all such holders, and that such
amendment must apply to all such holders equally and ratably in
accordance with the number of shares of Common Stock issuable
upon exercise of the Class B Warrants. The Company shall
promptly give notice to all holders of Class B Warrants of
any amendment effected in accordance with this
Section 12(a).
(b) Waivers. No waiver of any single
breach or default shall be deemed a waiver of any other breach
or default theretofore or thereafter occurring.
(c) Notices. All notices and other
communications required or permitted hereunder shall be in
writing and shall be mailed by registered or certified mail,
postage prepaid, sent by facsimile or electronic mail (if to the
Holder) or otherwise delivered by hand, messenger or courier
service addressed:
(i) if to the Holder, to the Holder at the Holder’s
address, facsimile number or electronic mail address as shown in
the Company’s records, as may be updated in accordance with
the provisions hereof, or until any such Holder so furnishes an
address, facsimile number or electronic mail address to the
Company, then to and at the address, facsimile number or
electronic mail address of the last holder of this Class B
Warrant for which the Company has contact information in its
records; or
Jefferson National Life Insurance Co.
9920 Corporate Campus Drive, Suite 1000 Louisville, Kentucky40223
Facsimile:
502-213-2970
Electronic Mail: chawley@jeffnat.com
Attention: Craig A Hawley
General
Counsel & Secretary
Each such notice or other communication shall for all purposes
of this Class B Warrant be treated as effective or having
been given (i) if delivered by hand, messenger or courier
service, when delivered, or (ii) if sent by mail, at the
earlier of its receipt or 72 hours after the same has been
deposited in a regularly maintained receptacle for the deposit
of the United States mail, addressed and mailed as aforesaid, or
(iii) if sent by facsimile, upon confirmation of facsimile
transfer or, if sent by electronic mail, upon confirmation of
delivery when directed to the relevant electronic mail address.
In the event of any conflict between the Company’s books
and records and this Class B Warrant or any notice
delivered hereunder, the Company’s books and records will
control absent fraud or error.
(d) Governing Law. This Class B
Warrant and all actions arising out of or in connection with
this Class B Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware, without
regard to the conflicts of law provisions of the State of
Delaware, or of any other state.
(e) Jurisdiction and Venue. Each of the
Holder and the Company irrevocably consents to the exclusive
jurisdiction and venue of any state or federal court within the
State of Delaware, in connection with any matter based upon or
arising out of this Class B Warrant or the matters
contemplated herein, and agrees that process may be served upon
them in any manner authorized by the laws of the State of
Delaware for such persons.
(f) Titles and Subtitles. The titles and
subtitles used in this Class B Warrant are used for
convenience only and are not to be considered in construing or
interpreting this Class B Warrant. All references in this
Class B Warrant to sections, paragraphs and exhibits shall,
unless otherwise provided, refer to sections and paragraphs
hereof and exhibits attached hereto.
(g) Severability. If any provision of
this Class B Warrant becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void,
portions of such provision, or such provision in its entirety,
to the extent necessary, shall be severed from this Class B
Warrant, and such illegal, unenforceable or void provision shall
be replaced with a valid and enforceable provision that will
achieve, to the extent possible, the same economic, business and
other purposes of the illegal, unenforceable or void provision.
The balance of this Class B Warrant shall be enforceable in
accordance with its terms.
(h) Waiver of Jury Trial. EACH OF THE
HOLDER AND THE COMPANY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATED TO THIS CLASS B WARRANT.
(i) Saturdays, Sundays and Holidays. If
the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a
Saturday, Sunday or U.S. federal holiday, then
such action may be taken or such right may be exercised on the
next succeeding day that is not a Saturday, Sunday or
U.S. federal holiday.
(j) Rights and Obligations Survive Exercise of the
Class B Warrant. Except as otherwise
provided herein, the rights and obligations of the Company and
the Holder under this Class B Warrant shall survive
exercise of this Class B Warrant.
(k) Entire Agreement. Except as expressly
set forth herein, this Class B Warrant (including the
exhibits attached hereto) constitutes the entire agreement and
understanding of the Company and the Holder with respect to the
subject matter hereof and supersede all prior agreements and
understandings relating to the subject matter hereof.
Jefferson National Financial Corp. (the
“Company”)
Attention:
President
(1)
Exercise. The undersigned elects to purchase
the following pursuant to the terms of the attached warrant:
Number of shares:
Type of security:
(2)
Method of Exercise. The undersigned elects to
exercise the attached warrant pursuant to:
o
The cashless exercise provisions of Section 2(b) of the
attached warrant.
(3)
Stock Certificate. Please issue a certificate
or certificates representing the shares in the name of:
o
The undersigned
o Other —
Name:
Address:
(4)
Unexercised Portion of the Warrant. Please
issue a new warrant for the unexercised portion of the attached
warrant in the name of:
o
The undersigned
o Other —
Name:
Address:
o
Not applicable
(5)
Investment Intent. The undersigned represents
and warrants that the aforesaid shares are being acquired for
investment for its own account, not as a nominee or agent, and
not with a view to, or for resale in connection with, the
distribution thereof, and that the undersigned has no present
intention of selling, granting any participation in, or
otherwise distributing the shares in violation of applicable
law, nor does it have any contract, undertaking, agreement or
arrangement for the same.
(6)
Consent to Receipt of Electronic
Notice. Subject to the limitations set forth in
Delaware General Corporation Law § 232(e), the
undersigned consents to the delivery of any notice to
stockholders given by the Company under the Delaware General
Corporation Law or the Company’s certificate of
incorporation or bylaws by (i) facsimile telecommunication
to the facsimile number provided below (or to any other
facsimile number for the undersigned in the Company’s
records), (ii) electronic mail to the electronic mail
address provided below (or to any other electronic mail address
for the undersigned in the Company’s records),
(iii) posting on an electronic network together with
separate notice to the undersigned of such specific posting or
(iv) any other form of electronic transmission (as defined
in the Delaware General Corporation Law) directed to the
undersigned. This consent may be revoked by the
THE WARRANT TO PURCHASE SHARES OF COMMON STOCK
ISSUED
ON ,
2009 (THE “WARRANT”)
DATE:
(1)
Assignment. The undersigned registered holder
of the Class B Warrant (“Assignor”)
assigns and transfers to the assignee named below
(“Assignee”) all of the rights of
Assignor under the Class B Warrant, with respect to the
number of shares set forth below:
Name of Assignee:
Address of Assignee:
Number of Shares Assigned:
and does irrevocably constitute and
appoint
as attorney to make such transfer on the books of Jefferson
National Financial Corp., maintained for the purpose, with full
power of substitution in the premises.
(2)
Obligations of Assignee. Assignee agrees to
take and hold the Class B Warrant and any shares of stock to be
issued upon exercise of the rights thereunder (and any shares
issuable upon conversion thereof) (the
“Securities”) subject to, and to be
bound by, the terms and conditions set forth in the Class B
Warrant and the Warrant Purchase Agreement to the same extent as
if Assignee were the original holder thereof.
(3)
Investment Intent. Assignee represents and
warrants that the Securities are being acquired for investment
for its own account, not as a nominee or agent, and not with a
view to, or for resale in connection with, the distribution
thereof, and that Assignee has no present intention of selling,
granting any participation in, or otherwise distributing the
shares in violation of applicable law, nor does it have any
contract, undertaking, agreement or arrangement for the same.
THIS REGISTRATION RIGHTS AGREEMENT (this
“Agreement”) is entered into as of the
[ ] day of
[ ],
2009, by and among Overture Acquisition Corp., an exempted
company formed in the Cayman Islands (the
“Company”), and Jefferson National Life
Insurance Co., a Texas insurance company
(“Investor”).
RECITALS
WHEREAS, Investor owns or will own issued and outstanding
Ordinary Shares (as defined below) of the Company, all of which
were or will be acquired by private placement and are or will be
held of record by Investor;
WHEREAS, Investor may, in certain circumstances and subject to
certain transfer restrictions and other restrictions, transfer
(or cause to be transferred) to Permitted Transferees (as
defined below) some or all of the securities held by
Investor; and
WHEREAS, Investor and the Company desire to enter into this
Agreement to provide Investor with certain rights relating to
the registration of the Ordinary Shares held by it and to
provide for any Permitted Transferee who receives the Ordinary
Shares from Investor from time to time to accede to this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. The following capitalized
terms used herein have the following meanings:
“Adverse Disclosure”means public disclosure of
material non-public information, which disclosure, in the good
faith judgment of the chief executive officer or principal
financial officer of the Company after consultation with counsel
to the Company, (i) would be required to be made in any
Registration Statement or prospectus in order for the applicable
Registration Statement or prospectus not to contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein (in the case of any
prospectus and any preliminary prospectus, in the light of the
circumstances under which they were made) not misleading,
(ii) would not be required to be made at such time if the
Registration Statement were not being filed, and (iii) the
Company has a bona fide business purpose for not publicly
making it.
“Agreement”means this Agreement, as amended,
restated, supplemented, or otherwise modified from time to time.
“business day”means any day, except a
Saturday, Sunday or legal holidays on which the banking
institutions in the city of New York or the Cayman Islands are
authorized or obligated by law or executive order to close.
“Commission”means the Securities and Exchange
Commission, or any other federal agency then administering the
Securities Act or the Exchange Act.
“Company”is defined in the preamble to this
Agreement and shall include the Company’s successors by
merger, acquisition, reorganization or otherwise.
“Demanding Holder”is defined in
Section 2.1.1.
“Demand Registration”is defined in
Section 2.1.1.
“Exchange Act”means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in
effect at the time.
“Initial Business Combination”means a
consummated merger, share capital exchange, asset acquisition,
share purchase, reorganization or similar business combination
by the Company with one or more operating businesses.
“Investor”is defined in the preamble to this
Agreement.
“Investor Indemnified Party”is defined in
Section 4.1.
“IPO”means the Company’s initial public
offering of Units.
“Lock-Up
Period” has the meaning ascribed to that term in the
Shareholders Agreement dated
[ ],
between the Company, Investor and the Sponsors (as defined
therein).
“Maximum Number of Securities”is defined in
Section 2.1.4.
“Notices”is defined in Section 7.3.
“Ordinary Shares”means the ordinary shares,
$0.0001 par value of the Company.
“Permitted Transferee”means a Person who
agrees in writing to be treated as the Investor hereunder, and
to be bound by the terms and comply with all applicable
provisions hereof.
“Person”shall be construed as broadly as
possible and shall include an individual, corporation,
association, partnership (including a limited liability
partnership or a limited liability limited partnership), limited
liability company, estate, trust, joint venture, unincorporated
organization or a government or any department, agency or
political subdivision thereof.
“Piggy-Back Registration”is defined in
Section 2.2.1.
“register,”“registered”and
“registration”mean a registration effected by
preparing and filing a Registration Statement or similar
document in compliance with the requirements of the Securities
Act, and the applicable rules and regulations promulgated
thereunder, and such Registration Statement becoming effective.
“Registrable Securities”means all of the
Ordinary Shares to be purchased by Investor in open market
purchases, privately negotiated transfers and pursuant to the
Securities Purchase Agreement between the parties to this
Agreement. Registrable Securities include any warrants, share
capital or other securities of the Company issued as a dividend
or other distribution with respect to or in exchange for or in
replacement of such Ordinary Shares as the case may be. As to
any particular Registrable Securities, such securities shall
cease to be Registrable Securities when: (a) a Registration
Statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities
shall have been sold, transferred, disposed of or exchanged in
accordance with such Registration Statement; (b) such
securities shall have been otherwise transferred pursuant to
Rule 144 under the Securities Act (or any similar rule or
regulation then in force), new certificates for them not bearing
a legend restricting further transfer shall have been delivered
by the Company and subsequent public distribution of them shall
not require registration under the Securities Act; or
(c) such securities shall have ceased to be outstanding. A
“percentage” (or a “majority”) of the
Registrable Securities (or, where applicable, of any other
securities) shall be determined based on the total number of
such securities outstanding at the relevant time.
“Registration Statement”means a registration
statement filed by the Company with the Commission in compliance
with the Securities Act and the rules and regulations
promulgated thereunder for a public offering and sale of the
Ordinary Shares including the prospectus, amendments and
supplements to such registration statement, including
post-effective amendments and all exhibits and all material
incorporated by reference in such registration statement (other
than a registration statement on
Form S-4
or
Form S-8,
or their successors, or any registration statement covering only
securities proposed to be issued in exchange for securities or
assets of another entity).
“Securities Act”means the Securities Act of
1933, as amended, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in
effect at the time.
“Underwriter”means a securities dealer who
purchases any Registrable Securities as principal in an
Underwritten Offering and not as part of such dealer’s
market-making activities.
“Underwritten Offering”means a registration in
which securities of the Company are sold to an Underwriter or
Underwriters on a firm commitment basis for reoffering to the
public.
2. Registration Rights.
2.1. Demand Registration.
2.1.1. Request for Registration. At any
time and from time to time on or after the expiration of the
Lock-Up
Period, the Investor or the Permitted Transferees of Investor
may make a written demand (for a total of two demands) for
registration under the Securities Act of all or part of
Registrable Securities held the Investor, provided that
the estimated market value of Registrable Securities to be so
registered thereunder is at least $500,000 in the aggregate. Any
such requested registration shall be referred to as a
“Demand Registration.”Any demand for a Demand
Registration shall specify the number of Registrable Securities
proposed to be sold and the intended method(s) of distribution
thereof. Within five (5) business days following receipt of
any request for a Demand Registration, the Company will notify
in writing all holders of Registrable Securities of the demand,
and each holder of Registrable Securities who wishes to include
all or a portion of such holder’s Registrable Securities in
the Demand Registration (each such holder including Registrable
Securities in such registration, a “Demanding
Holder”) shall so notify the Company in writing,
provided that such notice shall be received by the
Company within ten (10) business days of the Company’s
having sent the applicable notice to such holder or holders. All
such requests shall specify the nature and aggregate amount of
Registrable Securities to be registered and the intended method
of distribution. The Company may include in such registration
securities to be sold for the Company’s own account or the
account of Persons who are not holders of Registrable
Securities. Upon any such request, the Demanding Holders shall
be entitled to have their Registrable Securities included in the
Demand Registration, subject to Section 2.1.4 and the
provisos set forth in Section 3.1.1. The Company, if so
requested, shall not be obligated to effect more than an
aggregate of two (2) Demand Registrations under this
Section 2.1.1 in respect of the Registrable Securities. In
addition, the Company shall not be required to file a
Registration Statement for a Demand Registration at any time
during the six (6)-month period following the effective date of
another Registration Statement filed pursuant to this
Section 2.1.
2.1.2. Effective Registration. A
registration will not count as a Demand Registration until the
Registration Statement filed with the Commission with respect to
such Demand Registration has been declared effective and remains
effective for not less than 180 days (or such shorter
period as will terminate when all Registrable Securities covered
by such Registration Statement have been sold or withdrawn);
provided, however, that if, after such
Registration Statement has been declared effective, the offering
of Registrable Securities pursuant to a Demand Registration is
interfered with by any stop order or injunction of the
Commission or any other governmental agency or court, the
Registration Statement with respect to such Demand Registration
will be deemed not to have been declared effective, unless and
until, (i) such stop order or injunction is removed,
rescinded or otherwise terminated and (ii) a
majority-in-interest
of the Demanding Holders thereafter elects to continue the
offering; provided, further, that the Company
shall not be obligated to file a second Registration Statement
until a Registration Statement that has been filed is counted as
a Demand Registration or is terminated.
2.1.3. Underwritten Offering. If a
majority-in-interest
of the Demanding Holders so elect and such holders so advise the
Company as part of their written demand for a Demand
Registration, the offering of such Registrable Securities
pursuant to such Demand Registration shall be in the form of an
Underwritten Offering. In such event, the right of any holder to
include its Registrable Securities in such registration shall be
conditioned upon such holder’s participation in such
Underwritten Offering and the inclusion of such holder’s
Registrable Securities in the Underwritten Offering to the
extent provided herein. The holders of a majority of the
Registrable Securities included in such Underwritten Offering
shall, in consultation with the Company, have the right to
select the managing Underwriter or Underwriters for the
offering, subject to the right of the Company should it so
choose to select one co-managing Underwriter
reasonably acceptable to such holders. All Demanding Holders
proposing to distribute their securities through such
Underwritten Offering shall enter into an underwriting agreement
in customary form with the Underwriter or Underwriters selected
for such underwriting by a
majority-in-interest
of the holders initiating the Demand Registration and consistent
with Section 3.2.1.
2.1.4. Reduction of Offering. If the
managing Underwriter or Underwriters for a Demand Registration
that is to be an Underwritten Offering advises the Company and
the Demanding Holders in writing that the dollar amount or
number of Registrable Securities which the Demanding Holders
desire to sell, taken together with all other Registrable
Securities which the Company desires to sell and the Registrable
Securities, if any, as to which registration has been requested
pursuant to written contractual demand or piggy-back
registration rights held by other security holders of the
Company who desire to sell, exceeds the maximum dollar amount or
maximum number of securities that can be sold in such offering
without adversely affecting the proposed offering price, the
timing, the distribution method, or the probability of success
of such offering (such maximum dollar amount or maximum number
of securities, as applicable, the “Maximum Number of
Securities”), then the Company shall include in such
registration: (i) the Registrable Securities as to which
any Demand Registration has been requested by the Demanding
Holders under this Agreement and the Amended and Restated
Registration Rights Agreement (as that term is defined in the
Master Agreement) pro rata among the holders who have requested
participation in the Demand Registration based, for each, on the
percentage derived by dividing (x) the number of
Registrable Securities which such holders have requested to
include in such Demand Registration by (y) the aggregate
number of Registrable Securities which all such Demanding
Holders (under this Agreement and the Amended and Restated
Registration Rights Agreement) desire to sell (such proportion
is referred to herein as “Pro Rata”) that can
be sold without exceeding the Maximum Number of Securities;
(ii) second, to the extent that the Maximum Number of
Securities has not been reached under the foregoing clause (i),
the Ordinary Shares that the Company desires to sell that can be
sold without exceeding the Maximum Number of Securities;
(iii) third, to the extent that the Maximum Number of
Securities have not been reached under the foregoing
clauses (i) and (ii), the Ordinary Shares for the account
of other Persons that the Company is obligated to register
pursuant to written contractual arrangements with such Persons,
Pro Rata, and that can be sold without exceeding the Maximum
Number of Shares; and (iv) fourth, to the extent that the
Maximum Number of Securities have not been reached under the
foregoing clauses (i), (ii) and (iii), securities that
other security holders of the Company desire to sell, Pro Rata,
that can be sold without exceeding the Maximum Number of
Securities. To the extent that any Registrable Securities
requested to be registered are excluded pursuant to the
foregoing provisions, the holders shall have the right to one
additional Demand Registration under this Section 2.1.4.
2.1.5. Withdrawal. A holder may withdraw
its Registrable Securities from a Demand Registration at any
time. If any holder or holders withdraw Registrable Securities
from a Demand Registration in such amounts that the Registrable
Securities that remain covered by the relevant Registration
Statement have an estimated market value of less than $500,000,
the Company shall cease all efforts to secure registration and
such withdrawn registration shall be deemed a Demand
Registration for purposes of Section 2.1 unless the
withdrawal is based on the reasonable determination of the
Demanding Holders that there has been, since the date of such
request, a material adverse change in the business or prospects
of the Company or in general market conditions and the Demanding
Holders who requested such registration shall have paid or
reimbursed the Company for all of the reasonable out-of-pocket
fees and expenses incurred by the Company in connection with the
withdrawn registration.
2.1.6. Suspension of Registration. The
Company may defer the filing (but not the preparation) or the
effectiveness, or suspend the use, of any Registration Statement
required by or filed pursuant to Section 2.1, because of
the existence of material non-public information. In making any
such determination to defer the filing or effectiveness, or
suspend the use, of a Registration Statement required by Section
2.1, the Company shall not be required to consult with or obtain
the consent of any holder, and any such determination shall be
in the sole discretion of the Company, and the holders shall not
be responsible or have any liability therefor. The Company shall
promptly notify the holders of any deferral
or suspension pursuant to this Section 2.1.6 and the
Company shall not exercise its rights to deferral or suspension
pursuant to this Section 2.1.6, and shall not so effect any
such deferral or suspension, for more than a total of ninety
(90) days (which need not be consecutive) in any
consecutive twelve (12) month period. After a total of
ninety (90) days, the Company shall notify each holder in
writing of the termination of any such deferral or suspension
and shall promptly disclose such material non-public information
and file with the Commission a Registration Statement or
prospectus or any amendment or supplement thereto.
2.1.7. Registration Statement
Form. Registrations under this Section 2.1
shall be on such appropriate registration form of the Commission
(i) as shall be selected by the Company and as shall be
reasonably acceptable to the holders of a
majority-in-interest
of the Registrable Securities requesting participation in the
Demand Registration and (ii) as shall permit the
disposition of the Registrable Securities in accordance with the
intended method or methods of disposition specified in the
applicable holders’ requests for such registration.
Notwithstanding the foregoing, if, pursuant to a Demand
Registration, (x) the Company proposes to effect
registration by filing a Registration Statement on
Form S-3,
(y) such registration is in connection with an Underwritten
Offering, and (z) the managing Underwriter or Underwriters
shall advise the Company in writing that, in its or their
opinion, the use of another form of Registration Statement (or
the inclusion, rather than the incorporation by reference, of
information in the prospectus related to a Registration
Statement on
Form S-3)
is of material importance to the success of such proposed
offering, then such registration shall be effected on such other
form (or such information shall be so included in such
prospectus).
2.2. Piggy-Back Registration.
2.2.1. Piggy-Back Rights. If at any time
on or after the expiration of the
Lock-Up
Period, the Company proposes to file a Registration Statement
under the Securities Act with respect to an offering of equity
securities, or securities or other obligations exercisable or
exchangeable for, or convertible into, equity securities, by the
Company for its own account or for securityholders of the
Company for their account (or by the Company and by
securityholders of the Company including, without limitation,
pursuant to Section 2.1), other than a Registration
Statement (i) filed in connection with an offering of
securities to employees or directors of the Company pursuant to
any employee stock option or other benefit plan, (ii) filed
on
Form S-4
or S-8 or
any successor to such forms, (iii) for an exchange offer or
offering of securities solely to the Company’s existing
securityholders, (iv) for an offering of debt that is
convertible into equity securities of the Company, (v) for
a dividend reinvestment plan, or (vi) solely in connection
with a merger, share capital exchange, asset acquisition, share
purchase, reorganization, amalgamation, subsequent liquidation,
or other similar business transaction that results in all of the
Company’s shareholders having the right to exchange their
Ordinary Shares for cash, securities or other property of a
non-capital raising bona fide business transaction, then the
Company shall (x) give written notice of such proposed
filing to the holders of Registrable Securities as soon as
practicable but in no event less than ten (10) business
days before the anticipated filing date, which notice shall
describe the amount and type of securities to be included in
such offering, the intended method(s) of distribution, and the
name of the proposed managing Underwriter or Underwriters, if
any, of the offering, and (y) offer to the holders of
Registrable Securities in such notice the opportunity to
register the sale of such number of the Registrable Securities
as such holders may request in writing within five
(5) business days following receipt by such holder of such
notice (a “Piggy-Back Registration”). Subject
to Section 2.2.2, the Company shall include in such
Registration Statement such Registrable Securities that are
requested to be included therein within five (5) business
days after the receipt by such holder of any such notice, on the
same terms and conditions as any similar securities of the
Company. If at any time after giving written notice of its
intention to register any securities and prior to the effective
date of the Registration Statement filed in connection with such
registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the
Company may, at its election, give written notice of such
determination to each holder of Registrable Securities, and
(x) in the case of a determination not to register, shall
be relieved of its obligation to register any Registrable
Securities in connection with such registration, and (y) in
the case of a determination to delay registering, shall be
permitted to delay
registering any Registrable Securities for the same period as
the delay in registering such other securities. If the offering
pursuant to a Piggy-Back Registration is to be an Underwritten
Offering, then each holder making a request for its Registrable
Securities to be included therein must, and the Company shall
use commercially reasonable efforts to cause the managing
Underwriter or Underwriters of a proposed Underwritten Offering
to permit the Registrable Securities requested to be included in
a Piggy-Back Registration on the same terms and conditions as
any similar securities of the Company and other Persons selling
securities in such Underwritten Offering and to permit the sale
or other disposition of such Registrable Securities in
accordance with the intended method(s) of distribution thereof.
All holders of Registrable Securities proposing to distribute
their securities through a Piggy-Back Registration that involves
an Underwriter or Underwriters shall enter into an underwriting
agreement in customary form with the Underwriter or Underwriters
selected for such Piggy-Back Registration.
2.2.2. Reduction of Offering. If the
managing Underwriter or Underwriters for a Piggy-Back
Registration that is to be an Underwritten Offering advises the
Company and the holders of Registrable Securities in writing
that the dollar amount or number of the Ordinary Shares which
the Company desires to sell, as to which registration has been
demanded pursuant to written contractual arrangements with
Persons other than the holders of Registrable Securities, the
Registrable Securities as to which registration has been
requested under this Section 2.2, as to which registration
has been requested pursuant to the written contractual
piggy-back registration rights of other securityholders of the
Company, exceeds the Maximum Number of Securities, then the
Company shall include in any such registration:
1. If the registration is undertaken for the Company’s
account: (A) first, the Ordinary Shares that the Company
desires to sell that can be sold without exceeding the Maximum
Number of Securities; (B) second, to the extent that the
Maximum Number of Securities has not been reached under the
foregoing clause (A), the Ordinary Shares, if any, comprised of
Registrable Securities under this Agreement and Amended and
Restated Registration Rights Agreement, Pro Rata, as to which
registration has been requested pursuant to this
Section 2.2, that can be sold without exceeding the Maximum
Number of Securities; and (C) third, to the extent that the
Maximum Number of Securities has not been reached under the
foregoing clauses (A) and (B), the Ordinary Shares for the
account of other Persons that the Company is obligated to
register pursuant to written contractual piggy-back registration
rights with such Persons, Pro Rata, and that can be sold without
exceeding the Maximum Number of Securities; and
2. If the registration is a “demand” registration
undertaken at the demand of Persons other than the holders of
Registrable Securities, (A) first, the Ordinary Shares for
the account of the demanding Persons under this Agreement and
the Amended and Restated Registration Rights Agreement that can
be sold without exceeding the Maximum Number of Securities;
(B) second, to the extent that the Maximum Number of
Securities has not been reached under the foregoing clause (A),
the Ordinary Shares that the Company desires to sell that can be
sold without exceeding the Maximum Number of Securities;
(C) third, to the extent that the Maximum Number of
Securities has not been reached under the foregoing
clauses (A) and (B), the Ordinary Shares, if any, comprised
of Registrable Securities, Pro Rata, as to which registration
has been requested pursuant to this Section 2.2 and
Section 2.2 of the Amended and Restated Registration Rights
Agreement, that can be sold without exceeding the Maximum Number
of Securities; and (D) fourth, to the extent that the
Maximum Number of Securities has not been reached under the
foregoing clauses (A), (B) and (C), the Ordinary Shares for
the account of other Persons that the Company is obligated to
register pursuant to written contractual arrangements with such
Persons, Pro Rata, that can be sold without exceeding the
Maximum Number of Securities.
2.2.3. Withdrawal. Any holder of
Registrable Securities may elect to withdraw such holder’s
request for inclusion of Registrable Securities in any
Piggy-Back Registration by giving written notice to the Company
of such request to withdraw prior to the effectiveness of the
Registration Statement. The Company (whether on its own
determination or as the result of a withdrawal by Persons making
a demand pursuant to written contractual obligations) may
withdraw a Registration Statement at any time prior to the
effectiveness of the Registration Statement. Notwithstanding any
such withdrawal, the
Company shall pay all expenses incurred by the holders of
Registrable Securities in connection with such Piggy-Back
Registration as provided in Section 3.3.
2.3. Registrations on
Form S-3.
2.3.1. Filing. The holders of Registrable
Securities may at any time and from time to time, request in
writing that the Company register the resale of any or all of
such Registrable Securities on a
Form S-3,
a
Form S-3
or any similar short-form registration which may be available at
such time
(“Form S-3”);
provided, however, that (i) the Company shall
not be obligated to effect such request through an Underwritten
Offering and (ii) the Company shall not be obligated to
effect such a request if the Company has within the preceding
six (6) months effected a registration on
Form S-3
or a registration on
Form S-1
pursuant to Section 2.1 hereof. Upon receipt of such
written request, the Company will promptly give written notice
of the proposed registration to all other holders of Registrable
Securities, and, as soon as practicable thereafter, effect the
registration of all or such portion of such holder’s or
holders’ Registrable Securities as are specified in such
request, together with all or such portion of the Registrable
Securities or other securities of the Company, if any, of any
other holder or holders joining in such request as are specified
in a written request given within fifteen (15) business
days after receipt of such written notice from the Company;
provided, however, that the Company shall not be
obligated to effect any such registration pursuant to this
Section 2.3: (i) if
Form S-3
is not available for such offering; or (ii) if the holders
of the Registrable Securities, together with the holders of any
other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities, and such
other securities (if any) at any aggregate price to the public
of less than $500,000. Registrations effected pursuant to this
Section 2.3 on
Form S-3
shall not be counted as Demand Registrations effected pursuant
to Section 2.1.
2.3.2. Suspension of Registration. If the
filing, initial effectiveness, or continued use of
Form S-3
at any time would require the Company to make an Adverse
Disclosure or would require the inclusion in such
Form S-3
of financial statements that are unavailable to the Company for
reasons beyond the Company’s control, the Company may, upon
giving prompt written notice of such actions to the holders,
delay the filing or initial effectiveness of, or suspend use of,
the
Form S-3
for the shortest period of time determined in good faith by the
Company to be necessary for such purpose. In the event the
Company exercises its rights under the preceding sentence, the
holders agree to suspend, immediately upon their receipt of the
notice referred to above, their use of the prospectus relating
to the registration on such
Form S-3
in connection with any sale or offer to sell Registrable
Securities and agree not to disclose to any other Person the
fact that the Company has exercised such rights or any related
facts. The Company shall immediately notify the holders upon the
expiration of any period during which it exercised its rights
under this Section 2.3.2
3. Registration Procedures.
3.1. Filings; Information. Whenever
the Company is required to effect the registration of any
Registrable Securities pursuant to Section 2, the Company
shall use its best efforts to effect the registration and sale
of such Registrable Securities in accordance with the intended
method(s) of distribution thereof as expeditiously as reasonably
practicable, and in connection with any such request:
3.1.1. Filing Registration Statement. The
Company shall, as expeditiously as reasonably possible, but in
any event within 45 days of the date of delivery to the
Company of the request for Demand Registration, use its
reasonable best efforts to prepare and file with the Commission
a Registration Statement on any form for which the Company then
qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of
all Registrable Securities to be registered thereunder in
accordance with the intended method(s) of distribution thereof;
and the Company shall use its reasonable best efforts to cause
such Registration Statement to become effective within
120 days of the filing of such Registration Statement; and
the Company shall use its reasonable best efforts to remain
effective for a period of 180 days; provided,
however, that the Company shall have the right to defer
any Demand Registration for up to thirty (30) calendar
days, and any Piggy-Back Registration for such period as may be
applicable to deferment of any demand registration to which such
Piggy-Back Registration relates, in each case if the Company
shall furnish to the holders a certificate signed by the
Chairman of the Board or Chief Executive Officer of the Company
stating that, in the good faith judgment of the Board of
Directors of the Company, it would be materially detrimental to
the Company and its shareholders for such Registration Statement
to be effected at such time; provided, further,
however, that the Company shall not have the right to
exercise the right set forth in the immediately preceding
proviso more than once in any
365-day
period in respect of a Demand Registration hereunder. The
Company shall use its reasonable best efforts to (x) file a
Registration Statement with the Commission within 45 days
of the date of the delivery to the Company of the request for
Demand Registration, and (y) make such Registration
Statement become effective within 120 days, and
(z) maintain the effectiveness of such registration for
180 days (or such shorter period as will terminate when all
Registrable Securities covered by such Registration Statement
have been sold or withdrawn). If the Company has not used
reasonable best efforts to file by the end of the 45 day
period referenced in clause (x) above, or if the
Registration Statement has not become effective within
120 days as referenced in clause (y) above, or if the
Registration Statement has not remained effective for
180 days as referenced in clause (z) above, the
Investor may provide notice to the Company of such default by
the Company. If the Company has not cured such default within
30 days of receipt of such notice and provided the Investor
has not in any way caused or contributed to such default by the
Company, the Investor shall be entitled to receive an issuance
of Ordinary Shares from the Company equal to 2% of such
Investor’s current holding of Ordinary Shares for each
30 day period in which the default is not cured by the
Company; provided that such issuance is made in accordance with
all applicable U.S. federal and state laws, Cayman Island
laws and the Amended and Restated Memorandum and Articles of
Association of the Company, as amended from time to time.
Investor may nominate another Person to participate in such
issuance of Ordinary Shares instead of the Investor at the time
of such issuance.
3.1.2. Copies. The Company shall, prior
to filing a Registration Statement or prospectus, or any
amendment or supplement thereto, furnish without charge to the
holders of Registrable Securities included in such registration,
and such holders’ legal counsel, copies of such
Registration Statement as proposed to be filed, each amendment
and supplement to such Registration Statement (in each case
including all exhibits thereto and documents incorporated by
reference therein), the prospectus included in such Registration
Statement (including each preliminary prospectus), and such
other documents as the holders of Registrable Securities
included in such registration or legal counsel for any such
holders may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such holders.
3.1.3. Amendments and Supplements. The
Company shall use its best efforts to prepare and file with the
Commission such amendments, including post-effective amendments,
and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to
make such Registration Statement effective and in compliance
with the provisions of the Securities Act within 120 days
of filing such Registration Statement, and the Company shall
keep such Registration Statement effective until all Registrable
Securities and other securities covered by such Registration
Statement have been disposed of in accordance with the intended
method(s) of distribution set forth in such Registration
Statement (which period shall not exceed the sum of one hundred
eighty (180) calendar days plus any period during which any
such disposition is interfered with by any stop order or
injunction of the Commission or any governmental agency or
court) or such securities have been withdrawn.
3.1.4. Notification. After the filing of
a Registration Statement, the Company shall as soon as
reasonably practical, notify the holders of Registrable
Securities included in such Registration Statement of such
filing and the managing Underwriter or Underwriters, and shall
further notify such holders and such managing Underwriter or
Underwriters and, if requested, confirm such advice in writing,
in all events as soon as reasonably practical after the
occurrence of any of the following: (i) when such
Registration Statement becomes effective; (ii) when any
post-effective amendment to such Registration Statement becomes
effective; (iii) the issuance or threatened issuance by the
Commission of any stop order (and the Company shall use its best
efforts to take all actions required to prevent the entry of
such stop order or to remove it if entered); and (iv) any
request by the Commission for any amendment or
supplement to such Registration Statement or any prospectus
relating thereto or for additional information or of the
occurrence of an event requiring the preparation of a supplement
or amendment to such prospectus so that, as thereafter delivered
to the purchasers of the securities covered by such Registration
Statement, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein
not misleading, and promptly make available to the holders of
Registrable Securities included in such Registration Statement
any such supplement or amendment; except that before filing with
the Commission a Registration Statement or prospectus or any
amendment or supplement thereto, including documents
incorporated by reference, except in the case of registration
under Section 2.2; the Company shall furnish to the holders
of Registrable Securities included in such Registration
Statement and to the legal counsel for any such holders, copies
of all such documents proposed to be filed sufficiently in
advance of filing to provide such holders and legal counsel with
a reasonable opportunity to review such documents and comment
thereon, and the Company shall not file any Registration
Statement or prospectus or amendment or supplement thereto,
including documents incorporated by reference, to which such
holders or their legal counsel shall reasonably object.
3.1.5. State Securities Laws
Compliance. The Company, on or prior to the date
on which the applicable Registration Statement is declared
effective, shall use its best efforts to (i) register or
qualify the Registrable Securities covered by the Registration
Statement under such securities or “blue sky” laws of
such jurisdictions in the United States as the holders of
Registrable Securities included in such Registration Statement
(in light of their intended plan of distribution) or
Underwriter, if any, or their respective counsel may reasonably
request in writing and (ii) take such action necessary to
cause such Registrable Securities covered by the Registration
Statement to be registered with or approved by such other
Governmental Authorities as may be necessary by virtue of the
business and operations of the Company and do any and all other
acts and things that may be necessary or advisable to enable the
holders of Registrable Securities included in such Registration
Statement to consummate the disposition of such Registrable
Securities in such jurisdictions; provided,
however, that the Company shall not be required to
qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this
paragraph or subject itself to taxation in any such jurisdiction.
3.1.6. Cooperation. The principal
executive officer of the Company, the principal financial
officer of the Company, the principal accounting officer of the
Company, and all other officers and members of the management of
the Company shall cooperate fully in any offering of Registrable
Securities hereunder, which cooperation shall include, without
limitation, the preparation of the Registration Statement with
respect to such offering and all other offering materials and
related documents, and participation in meetings with
Underwriters, attorneys, accountants and potential investors.
3.1.7. Records. The Company shall make
available for inspection by the holders of Registrable
Securities included in such Registration Statement, any
Underwriter participating in any disposition pursuant to such
Registration Statement and any attorney, accountant, or other
professional retained by any holder of Registrable Securities
included in such Registration Statement or any Underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause all of the Company’s
officers, directors, and employees and the independent public
accountants who have certified its financial statements to make
themselves available to discuss the business of the Company and
to supply all information reasonably requested by any such
seller, Underwriter, attorney, accountant or agent in connection
with such Registration Statement as shall be necessary to enable
them to exercise their due diligence responsibility, and cause
the Company’s officers, directors, and employees to supply
all information requested by any of them in connection with such
Registration Statement.
3.1.8. Opinions and Comfort Letters. The
Company shall furnish to each holder of Registrable Securities
included in any Registration Statement a signed counterpart,
addressed to such holder, of (i) any opinion of counsel to
the Company delivered to any Underwriter dated the effective
date of the Registration Statement or, in the event of an
Underwritten Offering, the date of the closing under the
applicable underwriting agreement, in customary form, scope, and
substance, at a minimum to the effect that the Registration
Statement has been declared effective and that no stop order is
in effect, which
counsel and opinions shall be reasonably satisfactory to a
majority of the holders of the Registrable Securities and
Underwriter or Underwriters, if any, and their respective
counsel and (ii) any comfort letter from the Company’s
independent public accountants delivered to any Underwriter in
customary form and covering such matters of the type customarily
covered by comfort letters as the managing Underwriter or
Underwriters reasonably request. In the event no legal opinion
is delivered to any Underwriter, the Company shall furnish to
each holder of Registrable Securities included in such
Registration Statement, at any time that such holder elects to
use a prospectus, an opinion of counsel to the Company to the
effect that the Registration Statement containing such
prospectus has been declared effective and that no stop order is
in effect.
3.1.9. Earnings Statement. The Company
shall comply with all applicable rules and regulations of the
Commission and the Securities Act, and make available to its
shareholders, as soon as reasonably practicable but not more
than fifteen (15) months after the effective date of the
Registration Statement, an earnings statement which earnings
statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder.
3.1.10. Listing. The Company shall use
its best efforts to cause all Registrable Securities included in
any registration to be listed on such exchanges or otherwise
designated for trading in the same manner as similar securities
issued by the Company are then listed or designated or, if no
such similar securities are then listed or designated, in a
manner satisfactory (i) in the case of a Demand
Registration, to the holders of a
majority-in-interest
of the Registrable Securities held by the Demanding Holders and
(ii) in the case of all other Registrable Securities, to
the holders of a
majority-in-interest
of the Registrable Securities included in such registration, and
on each inter-dealer quotation system on which any of the
Company’s securities are then quoted.
3.1.11. Withdrawal of Stop Order. The
Company shall make every reasonable effort to prevent or obtain
at the earliest possible moment the withdrawal of any stop order
with respect to the applicable Registration Statement or other
order suspending the use of any preliminary or final prospectus.
3.1.12. CUSIP Number. The Company shall,
not later than the effective date of the applicable Registration
Statement, provide a CUSIP number for all Registrable Securities
and provide the applicable transfer agent with printed
certificates for the Registrable Securities which certificates
shall be in a form eligible for deposit with The Depository
Trust Company.
3.1.13. FINRA. The Company shall
cooperate with each seller of Registrable Securities and each
Underwriter or agent, if any, participating in the disposition
of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the
Financial Industry Regulatory Authority.
3.1.14. Transfer Agent. The Company shall
provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the
applicable Registration Statement from and after a date not
later than the effective date of such Registration Statement.
3.1.15. Road Show. The Company shall, in
the case of an Underwritten Offering, cause senior executive
officers of the Company to participate in customary “road
show” presentations that may be reasonably requested by the
managing Underwriter in any such Underwritten Offering and
otherwise to facilitate, cooperate with, and participate in each
proposed offering contemplated herein and customary selling
efforts related thereto.
3.2. Underwritten Offerings.
3.2.1. Underwriting Agreements. If
requested by the Underwriters for any Underwritten Offering
requested by holders pursuant to Section 2.1 or 2.3, the
Company and the holders of Registrable Securities to be included
therein shall enter into an underwriting agreement with such
Underwriters, such agreement to be reasonably satisfactory in
substance and form to the Company, the holders of a
majority-in-interest
of the Registrable Securities to be included in such
Underwritten Offering and the Underwriters, and to contain such
terms and conditions as are generally prevailing in agreements
of that
type, including, without limitation, indemnities no less
favorable to the recipient thereof than those provided in
Section 2.4. The holders of any Registrable Securities to
be included in any Underwritten Offering pursuant to
Section 2.2 shall enter into such an underwriting agreement
at the request of the Company. All of the representations and
warranties and the other agreements by and on the part of the
Company to and for the benefit of the Underwriters included in
any such underwriting agreement shall also be made to and for
the benefit of such holders, and any or all of the conditions
precedent to the obligations of the Underwriters under such
underwriting agreement shall be conditions precedent to the
obligations of such holders. No holder shall be required in any
such underwriting agreement to make any representations or
warranties to or agreements with the Company or the Underwriters
other than representations, warranties or agreements regarding
such holder, such holder’s Registrable Securities, such
holder’s intended method of distribution and any other
representations required by law.
3.2.2. Price and Underwriting
Discounts. In the case of an Underwritten
Offering requested by holders pursuant to Section 2.1 or
2.3, the price, underwriting discount and other financial terms
of the related underwriting agreement for the Registrable
Securities shall be determined by the holders of a
majority-in-interest
of the holders of such Registrable Securities. In the case of
any Underwritten Offering pursuant to Section 2.2, such
price, discount and other terms shall be determined by the
Company, subject to the right of the holders to withdraw their
request to participate in the registration pursuant to
Section 2.3 after being advised of such price, discount and
other terms.
3.2.3. Participation in Underwritten
Offerings. No Person may participate in an
Underwritten Offering unless such Person (i) agrees to sell
such Person’s securities on the basis provided in the
underwriting arrangements approved by the Persons entitled to
approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements.
3.3. Obligation to Suspend
Distribution. Upon receipt of any notice from the
Company of the happening of any event of the kind described in
Section 3.1.4(iii) or 3.1.4(iv), or, in the case of a
resale registration on
Form S-3
pursuant to Section 2.3 hereof, upon any suspension by the
Company, pursuant to a written insider trading compliance
program adopted by the Company’s board of directors, of the
ability of all “insiders” covered by such program to
transact in the Company’s securities because of the
existence of material non-public information, such holder of
Registrable Securities included in any registration shall
immediately discontinue disposition of such Registrable
Securities pursuant to the Registration Statement covering such
Registrable Securities in the case of Section 3.1.4(iv)
until such holder receives the supplemented or amended
prospectus contemplated by Section 3.1.4(iv) or the
restriction on the ability of “insiders” to transact
in the Company’s securities is removed, as applicable, or
in any case until the holder is advised in writing by the
Company that the use of the prospectus may be resumed, and
receives copies of any additional or supplemental filings that
are incorporated by reference in the prospectus and, if so
directed by the Company, each such holder will deliver to the
Company (at the Company’s expense) all copies, other than
permanent file copies then in such holder’s possession, of
the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice. In the event that the
Company shall give any such notice in respect of a Demand
Registration, the period during which the applicable
Registration Statement is required to be maintained effective
shall be extended by the number of days during the period from
and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities
covered by such Registration Statement either receives the
copies of the supplemented or amended prospectus contemplated by
Section 3.1.4(iv) or is advised in writing by the Company
that the use of the prospectus may be resumed.
3.4. Registration Expenses. The Company
shall bear all costs and expenses incurred in connection with
any Demand Registration pursuant to Section 2.1, any
Piggy-Back Registration pursuant to Section 2.2, and any
registration on
Form S-3
effected pursuant to Section 2.3, and all expenses incurred
in performing or complying with its other obligations under this
Agreement, including, without limitation: (i) all
registration and filing fees and any other fees and expenses
associated with filings required to be made with the SEC;
(ii) fees and expenses of compliance with securities or
“blue sky” laws (including fees and disbursements of
counsel in connection with blue sky qualifications of the
Registrable Securities); (iii) printing expenses,
duplicating, word processing, messenger, telephone, facsimile
and delivery expenses (including expenses of
printing certificates for the Registrable Securities in a form
eligible for deposit with The Depository Trust Company and
of printing prospectuses); (iv) the Company’s internal
expenses (including, without limitation, all salaries and
expenses of its officers and employees); (v) the fees and
expenses incurred in connection with the listing of the
Registrable Securities as required by Section 3.1.10;
(vi) Financial Industry Regulatory Authority fees;
(vii) fees and disbursements of counsel for the Company and
fees and expenses for independent certified public accountants
retained by the Company (including the expenses or costs
associated with the delivery of any opinions or comfort letters
requested pursuant to Section 3.1.8); (viii) the fees
and disbursements not to exceed $150,000 of any special experts
retained by the Company in connection with such registration;
(ix) the reasonable fees and expenses of one legal counsel
selected by the holders of a
majority-in-interest
of the Registrable Securities included in such registration; and
(x) Securities Act liability insurance if the Company so
desires. The Company shall have no obligation to pay any other
costs or expenses in the course of the transactions contemplated
hereby, including underwriting discounts or selling commissions
attributable to the Registrable Securities being sold by the
holders thereof, which underwriting discounts or selling
commissions shall be borne by such holders. Additionally, in an
Underwritten Offering, all selling shareholders and the Company
shall bear the expenses of the Underwriter Pro Rata in
proportion to the respective amount of securities each is
selling in such offering.
3.5. Information. The holders of
Registrable Securities shall provide such information as may
reasonably be requested by the Company, or the managing
Underwriter, if any, in connection with the preparation of any
Registration Statement, including amendments and supplements
thereto, in order to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 2
and in connection with the Company’s obligation to comply
with federal and applicable state securities laws. The Company
shall have the right to exclude any holder that does not comply
with the preceding sentence from the applicable registration.
4. Indemnification and Contribution.
4.1. Indemnification by the Company. The
Company agrees to indemnify and hold harmless to the extent
permitted by law the Investor and each other selling holder of
Registrable Securities, and each of their respective officers,
employees, affiliates, directors, partners, members, attorneys,
and agents, and each person, if any, who controls the Investor
and each other selling holder of Registrable Securities (within
the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) (each, an “Investor
Indemnified Party”), from and against any expenses
(including reasonable costs of investigation and legal
expenses), losses, claims, damages, or liabilities (or actions
or proceedings in respect thereof, whether or not such
indemnified party is a party thereto), whether joint or several,
arising out of or based upon any untrue statement (or allegedly
untrue statement) of a material fact contained in any
Registration Statement under which the sale of such Registrable
Securities was registered under the Securities Act, any
preliminary prospectus, final prospectus, or summary prospectus
contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arising out of or
based upon any omission (or alleged omission) to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading; provided,
however, that the Company will not be liable in any such
case to the extent that any such expense, loss, claim, damage,
or liability arises out of or is based upon any untrue statement
or allegedly untrue statement or omission or alleged omission
made in such Registration Statement, preliminary prospectus,
final prospectus, or summary prospectus, or any such amendment
or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by such
selling holder expressly for use therein. The Company also shall
indemnify any Underwriter of the Registrable Securities, their
officers, affiliates, directors, partners, members, and agents
on substantially the same basis as that of the indemnification
provided above in this Section 4.1.
4.2. Indemnification by Holders of Registrable
Securities. Each selling holder of Registrable
Securities will severally and not jointly, in the event that any
registration is being effected under the Securities Act pursuant
to this Agreement of any Registrable Securities held by such
selling holder, indemnify and hold harmless to the fullest
extent permitted by law the Company, each of its directors,
officers, employees, and agents and each Person who controls the
Company within the meaning of the Securities Act, against any
losses, claims, judgments, damages, liabilities, or expenses
(including reasonable costs of investigation and legal expenses)
whether joint or several, insofar as such losses, claims,
damages, liabilities, or expenses (or actions or proceedings in
respect thereof, whether or not such indemnified party is a
party thereto) arise out of
or are based upon any untrue statement or allegedly untrue
statement of a material fact contained in any Registration
Statement under which the sale of such Registrable Securities
was registered under the Securities Act, any preliminary
prospectus, final prospectus, or summary prospectus contained in
the Registration Statement, or any amendment or supplement to
the Registration Statement, or arise out of or are based upon
any omission or the alleged omission to state a material fact
required to be stated therein or necessary to make the statement
therein not misleading, to the extent and only to the extent
that the statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company
by such selling holder expressly for use therein, and shall
reimburse the Company, its directors and officers, and each
other selling holder or controlling person for any legal or
other expenses reasonably incurred by any of them in connection
with investigation or defending any such loss, claim, damage,
liability or action. Each selling holder’s indemnification
obligations hereunder shall be several and not joint and shall
be limited to the amount of any net proceeds actually received
by such selling holder. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on
behalf of the Company or any indemnified party.
4.3. Conduct of Indemnification
Proceedings. Promptly after receipt by any person
of any notice of any loss, claim, damage, or liability or any
action in respect of which indemnity may be sought pursuant to
Section 4.1 or 4.2, such person (the “Indemnified
Party”) shall, if a claim in respect thereof is to be
made against any other person for indemnification hereunder,
notify such other person (the “Indemnifying
Party”) in writing of the loss, claim, judgment,
damage, liability, or action; provided, however,
that the failure by the Indemnified Party to notify the
Indemnifying Party shall not relieve the Indemnifying Party from
any liability which the Indemnifying Party may have to such
Indemnified Party hereunder, except and solely to the extent the
Indemnifying Party is actually prejudiced by such failure. If
the Indemnified Party is seeking indemnification with respect to
any claim or action brought against the Indemnified Party, then
the Indemnifying Party shall be entitled to participate in such
claim or action, and, to the extent that it wishes, jointly with
all other Indemnifying Parties, to assume control of the defense
thereof with counsel satisfactory to the Indemnified Party.
After notice from the Indemnifying Party to the Indemnified
Party of its election to assume control of the defense of such
claim or action, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of
investigation; provided, however, that in any
action in which both the Indemnified Party and the Indemnifying
Party are named as defendants, the Indemnified Party shall have
the right to employ separate counsel (but no more than one such
separate counsel) to represent the Indemnified Party and its
controlling persons who may be subject to liability arising out
of any claim in respect of which indemnity may be sought by the
Indemnified Party against the Indemnifying Party, with the fees
and expenses of such counsel to be paid by the Indemnifying
Party based upon the written opinion of counsel of such
Indemnified Party, representation of both parties by the same
counsel would be inappropriate due to actual or potential
differing interests between them (in which case, if the
Indemnified Party notifies the Indemnifying Party in writing
that such Indemnified Party elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense of such claim on
behalf of such Indemnified Party). If such defense is not
assumed by the Indemnifying Party, the Indemnifying Party will
not be subject to any liability for any settlement made without
its consent, but such consent may not be unreasonably withheld;
provided, however, that an Indemnifying Party
shall not be required to consent to any settlement involving the
imposition of equitable remedies or involving the imposition of
any material obligations on such Indemnifying Party other than
financial obligations for which such Indemnified Party will be
indemnified hereunder. If the Indemnifying Party assumes the
defense, the Indemnifying Party shall have the right to settle
such action without the consent of the Indemnified Party;
provided, however, that the Indemnifying Party
shall be required to obtain such consent (which consent shall
not be unreasonably withheld) if the settlement includes any
admission of wrongdoing on the part of the Indemnified Party or
any restriction on the Indemnified Party or its officers or
directors. No Indemnifying Party shall 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 each Indemnified Party of an unconditional release
from all liability in respect to such claim or litigation. The
Indemnifying Party or Parties shall not, in connection with any
proceeding or related proceedings, be liable for the reasonable
fees, disbursements and other charges of more than one separate
firm at any one time for all such Indemnified Party or Parties
unless (x) the employment of more
than one counsel has been authorized in writing by the
Indemnifying Party or parties, (y) a conflict or potential
conflict exists or may exist (based on advice of counsel to an
Indemnified Party) between such Indemnified Party and the other
Indemnified Parties or (z) based on advice of counsel, an
Indemnified Party has reasonably concluded that there may be
legal defenses available to it that are different from or in
addition to those available to the other Indemnified Parties, in
each of which cases the Indemnifying Party shall be obligated to
pay the reasonable fees and expenses of such additional counsel
or counsels.
4.4. Contribution.
4.4.1. If the indemnification provided for in the foregoing
Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified
Party or insufficient to hold it harmless in respect of any
loss, claim, damage, liability, or action referred to herein,
then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such loss,
claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the Indemnified
Parties and the Indemnifying Parties in connection with the
actions or omissions which resulted in such loss, claim, damage,
liability, or action, as well as any other relevant equitable
considerations. The relative fault of any Indemnified Party and
any Indemnifying Party 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 such
Indemnified Party or such Indemnifying Party and the
parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
4.4.2. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 4.4
were determined by Pro Rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding Section
4.4.1. The amount paid or payable by an Indemnified Party as a
result of any loss, claim, damage, liability or action referred
to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal
or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 4.4,
no holder of Registrable Securities shall be required to
contribute any amount in excess of the dollar amount of the net
proceeds (after payment of any underwriting fees, discounts,
commissions or taxes) actually received by such holder from the
sale of Registrable Securities which gave rise to such
contribution obligation. 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.
If indemnification is available under this Section 4, the
indemnifying parties shall indemnify each indemnified party to
the full extent provided in Sections 4.1 and 4.2 hereof
without regard to the relative fault of said Indemnifying
Parties or Indemnified Party.
5. Underwriting and Distribution.
5.1. Rule 144. The Company covenants
that it shall file any reports required to be filed by it under
the Securities Act and the Exchange Act and shall take such
further action as the holders of Registrable Securities may
reasonably request, all to the extent required from time to time
to enable such holders to sell Registrable Securities without
registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 under the Securities
Act, as such Rules may be amended from time to time, or any
similar Rule or regulation hereafter adopted by the Commission.
6. No Inconsistent Agreements; Additional Rights.
6.1. The Company will not enter into, and is not currently
a party to, any agreement that is inconsistent with the rights
granted to the holders of Registrable Securities by this
Agreement other than the Amended and Restated Registration
Rights Agreement.
7. Miscellaneous.
7.1. Term. This Agreement shall terminate
upon the earlier of (a) the tenth anniversary of the date
of this Agreement or (b) the date as of which (i) all
of the Registrable Securities have been sold pursuant to a
Registration Statement (but in no event prior to the applicable
period referred to in Section 4(3) of the Securities Act
and Rule 174 thereunder) or (ii) the holders are
permitted to sell their Registrable Securities under
Rule 144(k) under the Securities Act (or any similar
provision then in force permitting the sale of restricted
securities without limitation on the amount of securities sold
or the manner of sale). The provisions of Section 4 and
Section 5 shall survive any termination.
7.2. Assignment; No Third Party
Beneficiaries. The registration rights of any
holder under this Agreement with respect to any Registrable
Securities may be transferred and assigned upon a sale or
transfer of the Registrable Securities; provided,
however, that no such transfer or assignment shall be
binding upon or obligate the Company to any such assignee unless
and until the Company shall have received written notice of such
transfer or assignment as herein provided and a written
agreement of the assignee to be bound by the provisions of this
Agreement. Any transfer or assignment made other than as
provided in the first sentence of this Section 7.2 shall be
null and void. This Agreement and the provisions hereof shall be
binding upon and shall inure to the benefit of each of the
parties and the permitted assigns of Investor or holder of
Registrable Securities or of any assignee of Investor or holder
of Registrable Securities. This Agreement is not intended to
confer any rights or benefits on any persons that are not party
hereto other than as expressly set forth in Article 4 and
this Section 7.2.
7.3. Notices. All notices, demands,
requests, consents, approvals or other communications
(collectively, “Notices”) required or permitted
to be given hereunder or which are given with respect to this
Agreement shall be in writing and shall be either personally
served, delivered by reputable air courier service with charges
prepaid guaranteeing overnight delivery, or transmitted by hand
delivery, telegram, telex, facsimile, or by mailing in the same
sealed envelope, or registered first-class mail, postage
prepaid, return receipt requested addressed as set forth below,
or to such other address as such party shall have specified most
recently by written notice. Notice shall be deemed given
(i) on the date of delivery if personally served,
(ii) when receipt is acknowledged in writing by addressee,
if transmitted by telegram, telex or facsimile, provided
that, if such service or transmission is not on a business day
or is after normal business hours, then such notice shall be
deemed given on the next business day, and (iii) five
(5) business days after having been deposited in the mail,
postage prepaid, if mailed by first-class mail. Notice otherwise
sent as provided herein shall be deemed given on the next
business day following timely delivery of such notice to a
reputable air courier service with an order for
next-day
delivery; provided, however, that notice of a
change in address shall be effective only upon receipt.
Jefferson National Life Insurance Company
9920 Corporate Campus Drive, Suite 1000 Louisville, Kentucky40223
Facsimile:
502-213-2970
Electronic Mail: chawley@jeffnat.com
Attention: Craig A. Hawley
General Counsel & Secretary
With a copy to:
Cadwalader, Wickersham & Taft LLP
One World Financial Center New York, NY10281
Facsimile:
(212) 504-6666
Electronic Mail: ira.schacter@cwt.com
Attention: Ira J. Schacter, Esq.
7.4. Severability. This Agreement shall
be deemed severable, and the invalidity or unenforceability of
any term or provision hereof shall not affect the validity or
enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties hereto intend that
there shall be added as a part of this Agreement a provision as
similar in terms to such invalid or unenforceable provision as
may be possible that is valid and enforceable.
7.5. Counterparts. This Agreement may be
executed in multiple counterparts, each of which shall be deemed
an original, and all of which taken together shall constitute
one and the same instrument.
7.6. Entire Agreement. This Agreement
(including all agreements entered into pursuant hereto and all
certificates and instruments delivered pursuant hereto and
thereto) and the Amended and Restated Registration Rights
Agreement constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede all prior and
contemporaneous agreements, representations, understandings,
negotiations and discussions between the parties, whether oral
or written.
7.7. Modifications and Amendments. No
amendment, modification or termination of this Agreement shall
be binding upon any party unless executed in writing by such
party and signed by the Company and the holders of a majority of
Registrable Securities then outstanding. Each holder of any
Registrable Securities at the time or thereafter outstanding
shall be bound by any amendment, modification, waiver or consent
authorized by this Section 7.7 whether or not such
Registrable Securities shall have been marked accordingly.
7.8. Titles and Headings. Titles and
headings of sections of this Agreement are for convenience only
and shall not affect the construction of any provision of this
Agreement.
7.9. Waivers and Extensions. Any party to
this Agreement may waive any right, breach or default which such
party has the right to waive, provided that such waiver
will not be effective against the waiving party unless it is in
writing, is signed by such party, and specifically refers to
this Agreement. Waivers may be made in advance or after the
right waived has arisen or the breach or default waived has
occurred. Any waiver may be conditional. No waiver of any breach
of any agreement or provision herein contained shall be deemed a
waiver of any preceding or succeeding breach thereof nor of any
other agreement or provision herein contained. No waiver or
extension of time for performance of any obligations or acts
shall be deemed a waiver or extension of the time for
performance of any other obligations or acts. Except as
otherwise expressly provided herein, no failure on the part of
any party to exercise, and no delay in exercising, any right,
power or remedy hereunder, or otherwise available in respect
hereof at law or in equity, shall operate as a waiver thereof,
nor shall any single or partial exercise of such right, power or
remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power, or remedy.
7.10.1. This Agreement shall be governed by, interpreted
under, and construed in accordance with the internal laws of the
State of New York applicable to agreements made and to be
performed within the State of New York, without giving effect to
any choice-of-law provisions thereof that would compel the
application of the substantive laws of any other jurisdiction.
7.10.2. To the fullest extent permitted by applicable law,
each party hereto (i) agrees that any claim, action or
proceeding by such party seeking any relief whatsoever arising
out of, or in connection with, this Agreement or the
transactions contemplated hereby shall be brought only in the
United States District Court for the Southern District of New
York and in any New York State court located in the Borough of
Manhattan and not in any other State or Federal court in the
United States of America or any court in any other country,
(ii) agrees to submit to the exclusive jurisdiction of such
courts located in the State of New York for purposes of all
legal proceedings arising out of, or in connection with, this
Agreement or the transactions contemplated hereby, and
(iii) irrevocably waives any objection which it may now or
hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient
forum.
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be executed and delivered by their duly
authorized representatives as of the date first written above.
OVERTURE ACQUISITION CORP., a Cayman Islands Company
By:
Name:
Title:
JEFFERSON NATIONAL LIFE INSURANCE CO., a Texas Insurance
company
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
“Agreement”) is entered into as of the
[ ] day
of
[ ],
2009, by and among Overture Acquisition Corp., an exempted
company formed in the Cayman Islands (the
“Company”), and the undersigned parties listed
under Investor on the signature page hereto (each an
“Investor” and collectively the
“Investors”) pursuant to Section 7.7 of
the certain registration rights agreement (the “Original
Agreement”) dated as of the 30th day of January
2008 by and among the Company and the Investors. All capitalized
terms not defined herein shall have the same meaning as set
forth in the Original Agreement.
RECITALS
WHEREAS, Section 7.7 of the Original Agreement provides
that any amendment thereto shall be made in writing and signed
by the Company and the holders of a majority of Registrable
Securities (as defined therein) of each class then
outstanding; and
WHEREAS, the Company and the undersigned Investors constitutes
the holders of such a majority of Registrable
Securities; and
WHEREAS, the Company and the Investors have entered into the
Master Agreement dated December 7, 2009 along with Overture
Re Holdings Ltd., Jefferson National Life Insurance Company,
Jefferson National Financial Corp., JNF Asset Management, LLC,
and JNL Bermuda LLC (the “Master
Agreement”); and
WHEREAS, pursuant to the Master Agreement, the Ordinary Shares
owned by the Investors as of the Closing Date (as that term is
defined in the Master Agreement) will be repurchased by the
Company; and
WHEREAS, the Investors collectively beneficially own warrants to
purchase 4,380,000 ordinary shares of the Company (the
“Sponsors’ Warrants”) and may after the
Closing Date own up to 2,812,500 Ordinary Shares in the
aggregate to be issued by the Company based on certain
performance targets (the “Performance-Based
Shares”) pursuant to the Sponsors’ Agreement dated
on or about the date hereof between the Company and the
Investors (the “Sponsors’
Agreement”); and
WHEREAS, Investor may, in certain circumstances and subject to
certain transfer restrictions and other restrictions, transfer
(or cause to be transferred) to Permitted Transferees (as
defined below) some or all of the securities held by such
Investor; and
WHEREAS, the Company and the Investors seek to amend and restate
the Original Agreement to provide that the Investors shall have
registration rights with respect to the Sponsors’ Warrants
and the Performance-Based Shares held by them and to provide for
any Permitted Transferee who receives the Ordinary Shares from
Investor from time to time to accede to this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to amend and restate the
Original Agreement as follows:
1. Definitions. The following capitalized
terms used herein have the following meanings:
“Adverse Disclosure” means public disclosure of
material non-public information, which disclosure, in the good
faith judgment of the chief executive officer or principal
financial officer of the Company after consultation with counsel
to the Company, (i) would be required to be made in any
Registration Statement or prospectus in order for the applicable
Registration Statement or prospectus not to contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein (in the case of any
prospectus and any preliminary prospectus, in the light of the
circumstances under which they were made) not misleading,
(ii) would not be required to be made at such time if the
Registration Statement were not being filed, and (iii) the
Company has a bona fide business purpose for not publicly
making it.
“Agreement” means this Agreement, as amended,
restated, supplemented, or otherwise modified from time to time.
“business day” means any day, except a
Saturday, Sunday or legal holidays on which the banking
institutions in the city of New York or the Cayman Islands are
authorized or obligated by law or executive order to close.
“Commission” means the Securities and Exchange
Commission, or any other federal agency then administering the
Securities Act or the Exchange Act.
“Company” is defined in the preamble to this
Agreement and shall include the Company’s successors by
merger, acquisition, reorganization or otherwise.
“Demanding Holder” is defined in
Section 2.1.1.
“Demand Registration” is defined in
Section 2.1.1.
“Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in
effect at the time.
“Form S-3”
is defined in Section 2.3.
“Indemnified Party” is defined in
Section 4.3.
“Indemnifying Party” is defined in
Section 4.3.
“Initial Business Combination” means a
consummated merger, share capital exchange, asset acquisition,
share purchase, reorganization or similar business combination
by the Company with one or more operating businesses.
“Investor” is defined in the preamble to this
Agreement.
“Investor Indemnified Party” is defined in
Section 4.1.
“IPO” means the Company’s initial public
offering of Units.
“Lock-Up
Period” means the
lock-up
periods that are applicable to the Investors set forth in those
certain agreements between the Investors and the Company dated
[ ].
“Maximum Number of Securities” is defined in
Section 2.1.4.
“Notices” is defined in Section 7.3.
“Ordinary Shares” means the ordinary shares,
$0.0001 par value of the Company.
“Permitted Transferee” means a Person who
agrees in writing to be treated as the Investor hereunder, and
to be bound by the terms and comply with all applicable
provisions hereof.
“Person” shall be construed as broadly as
possible and shall include an individual, corporation,
association, partnership (including a limited liability
partnership or a limited liability limited partnership), limited
liability company, estate, trust, joint venture, unincorporated
organization or a government or any department, agency or
political subdivision thereof.
“Piggy-Back Registration” is defined in
Section 2.2.1.
“register,” “registered” and
“registration” mean a registration effected by
preparing and filing a Registration Statement or similar
document in compliance with the requirements of the Securities
Act, and the applicable rules and regulations promulgated
thereunder, and such Registration Statement becoming effective.
“Registrable Securities” means (i) all of
the Performance Shares (ii) all of the Sponsors’
Warrants (and underlying Ordinary Shares) and (iii) all
other Ordinary Shares, Units or Warrants held or deemed to be
held by an Investor. Registrable Securities include any
warrants, share capital or other securities of the Company
issued as a dividend or other distribution with respect to or in
exchange for or in replacement of such Ordinary Shares as the
case may be. As to any particular Registrable Securities, such
securities shall cease to be
Registrable Securities when: (a) a Registration Statement
with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall
have been sold, transferred, disposed of or exchanged in
accordance with such Registration Statement; (b) such
securities shall have been otherwise transferred pursuant to
Rule 144 under the Securities Act (or any similar rule or
regulation then in force), new certificates for them not bearing
a legend restricting further transfer shall have been delivered
by the Company and subsequent public distribution of them shall
not require registration under the Securities Act; or
(c) such securities shall have ceased to be outstanding. A
“percentage” (or a “majority”) of the
Registrable Securities (or, where applicable, of any other
securities) shall be determined based on the total number of
such securities outstanding at the relevant time.
“Registration Statement” means a registration
statement filed by the Company with the Commission in compliance
with the Securities Act and the rules and regulations
promulgated thereunder for a public offering and sale of the
Ordinary Shares including the prospectus, amendments and
supplements to such registration statement, including
post-effective amendments and all exhibits and all material
incorporated by reference in such registration statement (other
than a registration statement on
Form S-4
or
Form S-8,
or their successors, or any registration statement covering only
securities proposed to be issued in exchange for securities or
assets of another entity).
“Securities Act” means the Securities Act of
1933, as amended, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in
effect at the time.
“Underwriter” means a securities dealer who
purchases any Registrable Securities as principal in an
Underwritten Offering and not as part of such dealer’s
market-making activities.
“Underwritten Offering” means a registration in
which securities of the Company are sold to an Underwriter or
Underwriters on a firm commitment basis for reoffering to the
public.
2. Registration Rights.
2.1. Demand Registration.
2.1.1. Request for Registration. At any
time and from time to time on or after the expiration of the
Lock-Up
Period, the holders of a
majority-in-interest
of Registrable Securities, held by Investor or the Permitted
Transferees of Investor may make a written demand (for a total
of two demands) for registration (the “Demand”)
under the Securities Act of all or part of Registrable
Securities held by such holders, provided that the
estimated market value of Registrable Securities to be so
registered thereunder is at least $500,000 in the aggregate. Any
such requested registration shall be referred to as a
“Demand Registration.”Any demand for a Demand
Registration shall specify the number of Registrable Securities
proposed to be sold and the intended method(s) of distribution
thereof. Within five (5) business days following receipt of
any request for a Demand Registration, the Company will notify
in writing all holders of Registrable Securities of the demand,
and each holder of Registrable Securities who wishes to include
all or a portion of such holder’s Registrable Securities in
the Demand Registration (each such holder including Registrable
Securities in such registration, a “Demanding
Holder”) shall so notify the Company in writing,
provided that such notice shall be received by the
Company within ten (10) business days of the Company’s
having sent the applicable notice to such holder or holders. All
such requests shall specify the nature and aggregate amount of
Registrable Securities to be registered and the intended method
of distribution. The Company may include in such registration
securities to be sold for the Company’s own account or the
account of Persons who are not holders of Registrable
Securities. Upon any such request, the Demanding Holders shall
be entitled to have their Registrable Securities included in the
Demand Registration, subject to Section 2.1.4 and the
provisos set forth in Section 3.1.1. The Company, if so
requested, shall not be obligated to effect more than an
aggregate of two (2) Demand Registrations under this
Section 2.1.1 in respect of the Registrable Securities. In
addition, the Company shall not be required to file a
Registration Statement for a Demand Registration at any time
during the six (6)-month period following the effective date of
another Registration Statement filed pursuant to this
Section 2.1.
2.1.2. Effective Registration. A
registration will not count as a Demand Registration until the
Registration Statement filed with the Commission with respect to
such Demand Registration has been declared effective and remains
effective for not less than 180 days (or such shorter
period as will terminate when all Registrable Securities covered
by such Registration Statement have been sold or withdrawn);
provided, however, that if, after such
Registration Statement has been declared effective, the offering
of Registrable Securities pursuant to a Demand Registration is
interfered with by any stop order or injunction of the
Commission or any other governmental agency or court, the
Registration Statement with respect to such Demand Registration
will be deemed not to have been declared effective, unless and
until, (i) such stop order or injunction is removed,
rescinded or otherwise terminated and (ii) a
majority-in-interest
of the Demanding Holders thereafter elects to continue the
offering; provided, further, that the Company
shall not be obligated to file a second Registration Statement
until a Registration Statement that has been filed is counted as
a Demand Registration or is terminated.
2.1.3. Underwritten Offering. If a
majority-in-interest
of the Demanding Holders so elect and such holders so advise the
Company as part of their written demand for a Demand
Registration, the offering of such Registrable Securities
pursuant to such Demand Registration shall be in the form of an
Underwritten Offering. In such event, the right of any holder to
include its Registrable Securities in such registration shall be
conditioned upon such holder’s participation in such
Underwritten Offering and the inclusion of such holder’s
Registrable Securities in the Underwritten Offering to the
extent provided herein. The holders of a majority of the
Registrable Securities included in such Underwritten Offering
shall, in consultation with the Company, have the right to
select the managing Underwriter or Underwriters for the
offering, subject to the right of the Company should it so
choose to select one co-managing Underwriter reasonably
acceptable to such holders. All Demanding Holders proposing to
distribute their securities through such Underwritten Offering
shall enter into an underwriting agreement in customary form
with the Underwriter or Underwriters selected for such
underwriting by a
majority-in-interest
of the holders initiating the Demand Registration and consistent
with Section 3.2.1.
2.1.4. Reduction of Offering. If the
managing Underwriter or Underwriters for a Demand Registration
that is to be an Underwritten Offering advises the Company and
the Demanding Holders in writing that the dollar amount or
number of Registrable Securities which the Demanding Holders
desire to sell, taken together with all other Registrable
Securities which the Company desires to sell and the Registrable
Securities, if any, as to which registration has been requested
pursuant to written contractual demand or piggy-back
registration rights held by other security holders of the
Company who desire to sell, exceeds the maximum dollar amount or
maximum number of securities that can be sold in such offering
without adversely affecting the proposed offering price, the
timing, the distribution method, or the probability of success
of such offering (such maximum dollar amount or maximum number
of securities, as applicable, the “Maximum Number of
Securities”), then the Company shall include in such
registration: (i) the Registrable Securities as to which
any Demand Registration has been requested by the Demanding
Holders under this Agreement and by the Demanding Holders under
the Registration Rights Agreement by and between the Company and
Jefferson National Life Insurance Company (the “JNL
Agreement”) pro rata among the holders who have
requested participation in the Demand Registration based, for
each, on the percentage derived by dividing (x) the number
of Registrable Securities which such holders have requested to
include in such Demand Registration by (y) the aggregate
number of Registrable Securities which all such Demanding
Holders (under this Agreement and the JNL Agreement) desire to
sell (such proportion is referred to herein as “Pro
Rata”) that can be sold without exceeding the Maximum
Number of Securities; (ii) second, to the extent that the
Maximum Number of Securities has not been reached under the
foregoing clause (i), the Ordinary Shares that the Company
desires to sell that can be sold without exceeding the Maximum
Number of Securities; (iii) third, to the extent that the
Maximum Number of Securities have not been reached under the
foregoing clauses (i) and (ii), the Ordinary Shares for the
account of other Persons that the Company is obligated to
register pursuant to written contractual arrangements with such
Persons, Pro Rata, and that can be sold without exceeding the
Maximum Number of Shares; and (iv) fourth, to the extent
that the Maximum Number of Securities have not been reached
under the foregoing clauses (i), (ii) and (iii), securities
that other security holders of the Company desire to sell, Pro
Rata, that can be sold without exceeding the Maximum Number of
Securities. To the extent
that any Registrable Securities requested to be registered are
excluded pursuant to the foregoing provisions, the holders shall
have the right to one additional Demand Registration under this
Section 2.1.4.
2.1.5. Withdrawal. A holder may withdraw
its Registrable Securities from a Demand Registration at any
time. If any holder or holders withdraw Registrable Securities
from a Demand Registration in such amounts that the Registrable
Securities that remain covered by the relevant Registration
Statement have an estimated market value of less than $500,000,
the Company shall cease all efforts to secure registration and
such withdrawn registration shall be deemed a Demand
Registration for purposes of Section 2.1 unless the
withdrawal is based on the reasonable determination of the
Demanding Holders that there has been, since the date of such
request, a material adverse change in the business or prospects
of the Company or in general market conditions and the Demanding
Holders who requested such registration shall have paid or
reimbursed the Company for all of the reasonable out-of-pocket
fees and expenses incurred by the Company in connection with the
withdrawn registration.
2.1.6. Suspension of Registration. The
Company may defer the filing (but not the preparation) or the
effectiveness, or suspend the use, of any Registration Statement
required by or filed pursuant to Section 2.1, because of
the existence of material non-public information. In making any
such determination to defer the filing or effectiveness, or
suspend the use, of a Registration Statement required by
Section 2.1, the Company shall not be required to consult
with or obtain the consent of any holder, and any such
determination shall be in the sole discretion of the Company,
and the holders shall not be responsible or have any liability
therefor. The Company shall promptly notify the holders of any
deferral or suspension pursuant to this Section 2.1.6 and
the Company shall not exercise its rights to deferral or
suspension pursuant to this Section 2.1.6, and shall not so
effect any such deferral or suspension, for more than a total of
ninety (90) days (which need not be consecutive) in any
consecutive twelve (12) month period. After a total of
ninety (90) days, the Company shall notify each holder in
writing of the termination of any such deferral or suspension
and shall promptly disclose such material non-public information
and file with the Commission a Registration Statement or
prospectus or any amendment or supplement thereto.
2.1.7. Registration Statement
Form. Registrations under this Section 2.1
shall be on such appropriate registration form of the Commission
(i) as shall be selected by the Company and as shall be
reasonably acceptable to the holders of a
majority-in-interest
of the Registrable Securities requesting participation in the
Demand Registration and (ii) as shall permit the
disposition of the Registrable Securities in accordance with the
intended method or methods of disposition specified in the
applicable holders’ requests for such registration.
Notwithstanding the foregoing, if, pursuant to a Demand
Registration, (x) the Company proposes to effect
registration by filing a Registration Statement on
Form S-3,
(y) such registration is in connection with an Underwritten
Offering, and (z) the managing Underwriter or Underwriters
shall advise the Company in writing that, in its or their
opinion, the use of another form of Registration Statement (or
the inclusion, rather than the incorporation by reference, of
information in the prospectus related to a Registration
Statement on Form
S-3) is of
material importance to the success of such proposed offering,
then such registration shall be effected on such other form (or
such information shall be so included in such prospectus).
2.2. Piggy-Back Registration.
2.2.1. Piggy-Back Rights. If at any time
on or after the expiration of the
Lock-Up
Period, the Company proposes to file a Registration Statement
under the Securities Act with respect to an offering of equity
securities, or securities or other obligations exercisable or
exchangeable for, or convertible into, equity securities, by the
Company for its own account or for securityholders of the
Company for their account (or by the Company and by
securityholders of the Company including, without limitation,
pursuant to Section 2.1), other than a Registration
Statement (i) filed in connection with an offering of
securities to employees or directors of the Company pursuant to
any employee stock option or other benefit plan, (ii) filed
on
Form S-4
or S-8 or
any successor to such forms, (iii) for an exchange offer or
offering of securities solely to the Company’s existing
securityholders, (iv) for an offering of debt that is
convertible into equity securities of the Company, (v) for
a dividend reinvestment plan, or (vi) solely in connection
with a merger, share capital exchange, asset acquisition, share
purchase, reorganization, amalgamation, subsequent liquidation,
or other similar business transaction that results in all of the
Company’s shareholders having the right to exchange their
Ordinary Shares for cash, securities or other property of a
non-capital raising bona fide business transaction, then the
Company shall (x) give written notice of such proposed
filing to the holders of Registrable Securities as soon as
practicable but in no event less than ten (10) business
days before the anticipated filing date, which notice shall
describe the amount and type of securities to be included in
such offering, the intended method(s) of distribution, and the
name of the proposed managing Underwriter or Underwriters, if
any, of the offering, and (y) offer to the holders of
Registrable Securities in such notice the opportunity to
register the sale of such number of the Registrable Securities
as such holders may request in writing within five
(5) business days following receipt by such holder of such
notice (a “Piggy-Back Registration”). Subject
to Section 2.2.2, the Company shall include in such
Registration Statement such Registrable Securities that are
requested to be included therein within five (5) business
days after the receipt by such holder of any such notice, on the
same terms and conditions as any similar securities of the
Company. If at any time after giving written notice of its
intention to register any securities and prior to the effective
date of the Registration Statement filed in connection with such
registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the
Company may, at its election, give written notice of such
determination to each holder of Registrable Securities, and
(x) in the case of a determination not to register, shall
be relieved of its obligation to register any Registrable
Securities in connection with such registration, and (y) in
the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities for
the same period as the delay in registering such other
securities. If the offering pursuant to a Piggy-Back
Registration is to be an Underwritten Offering, then each holder
making a request for its Registrable Securities to be included
therein must, and the Company shall use commercially reasonable
efforts to cause the managing Underwriter or Underwriters of a
proposed Underwritten Offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration
on the same terms and conditions as any similar securities of
the Company and other Persons selling securities in such
Underwritten Offering and to permit the sale or other
disposition of such Registrable Securities in accordance with
the intended method(s) of distribution thereof. All holders of
Registrable Securities proposing to distribute their securities
through a Piggy-Back Registration that involves an Underwriter
or Underwriters shall enter into an underwriting agreement in
customary form with the Underwriter or Underwriters selected for
such Piggy-Back Registration.
2.2.2. Reduction of Offering. If the
managing Underwriter or Underwriters for a Piggy-Back
Registration that is to be an Underwritten Offering advises the
Company and the holders of Registrable Securities in writing
that the dollar amount or number of the Ordinary Shares which
the Company desires to sell, as to which registration has been
demanded pursuant to written contractual arrangements with
Persons other than the holders of Registrable Securities, the
Registrable Securities as to which registration has been
requested under this Section 2.2, as to which registration has
been requested pursuant to the written contractual piggy-back
registration rights of other securityholders of the Company,
exceeds the Maximum Number of Securities, then the Company shall
include in any such registration:
1. If the registration is undertaken for the Company’s
account: (A) first, the Ordinary Shares that the Company
desires to sell that can be sold without exceeding the Maximum
Number of Securities; (B) second, to the extent that the
Maximum Number of Securities has not been reached under the
foregoing clause (A), the Ordinary Shares, if any, comprised of
Registrable Securities under this Agreement and the JNL
Agreement, Pro Rata, as to which registration has been requested
pursuant to this Section 2.2, that can be sold without
exceeding the Maximum Number of Securities; and (C) third,
to the extent that the Maximum Number of Securities has not been
reached under the foregoing clauses (A) and (B), the
Ordinary Shares for the account of other Persons that the
Company is obligated to register pursuant to written contractual
piggy-back registration rights with such Persons, Pro Rata, and
that can be sold without exceeding the Maximum Number of
Securities; and
2. If the registration is a “demand” registration
undertaken at the demand of Persons other than the holders of
Registrable Securities, (A) first, the Ordinary Shares for
the account of the demanding Persons under this Agreement and
the JNL Agreement that can be sold without exceeding the Maximum
Number of Securities; (B) second, to the extent that the
Maximum Number of Securities has not been reached under the
foregoing clause (A), the Ordinary Shares that the Company
desires to sell that can be sold without exceeding the Maximum
Number of Securities; (C) third, to the extent that the
Maximum Number of Securities has not been reached under the
foregoing clauses (A) and (B), the Ordinary Shares, if any,
comprised of Registrable Securities, Pro Rata, as to which
registration has been requested pursuant to this
Section 2.2 and pursuant to Section 2.2 of the JNL
Agreement, that can be sold without exceeding the Maximum Number
of Securities; and (D) fourth, to the extent that the
Maximum Number of Securities has not been reached under the
foregoing clauses (A), (B) and (C), the Ordinary Shares for
the account of other Persons that the Company is obligated to
register pursuant to written contractual arrangements with such
Persons, Pro Rata, that can be sold without exceeding the
Maximum Number of Securities.
2.2.3. Withdrawal. Any holder of
Registrable Securities may elect to withdraw such holder’s
request for inclusion of Registrable Securities in any
Piggy-Back Registration by giving written notice to the Company
of such request to withdraw prior to the effectiveness of the
Registration Statement. The Company (whether on its own
determination or as the result of a withdrawal by Persons making
a demand pursuant to written contractual obligations) may
withdraw a Registration Statement at any time prior to the
effectiveness of the Registration Statement. Notwithstanding any
such withdrawal, the Company shall pay all expenses incurred by
the holders of Registrable Securities in connection with such
Piggy-Back Registration as provided in Section 3.3.
2.3. Registrations on
Form S-3.
2.3.1. Filing. The holders of Registrable
Securities may at any time and from time to time, request in
writing that the Company register the resale of any or all of
such Registrable Securities on a
Form S-3
or any similar short-form registration which may be available at
such time
(“Form S-3”);
provided, however, that (i) the Company shall
not be obligated to effect such request through an Underwritten
Offering and (ii) the Company shall not be obligated to
effect such a request if the Company has within the preceding
six (6) months effected a registration on
Form S-3
or a registration on
Form S-1
pursuant to Section 2.1 hereof. Upon receipt of such
written request, the Company will promptly give written notice
of the proposed registration to all other holders of Registrable
Securities, and, as soon as practicable thereafter, effect the
registration of all or such portion of such holder’s or
holders’ Registrable Securities as are specified in such
request, together with all or such portion of the Registrable
Securities or other securities of the Company, if any, of any
other holder or holders joining in such request as are specified
in a written request given within fifteen (15) business
days after receipt of such written notice from the Company;
provided, however, that the Company shall not be
obligated to effect any such registration pursuant to this
Section 2.3: (i) if
Form S-3
is not available for such offering; or (ii) if the holders
of the Registrable Securities, together with the holders of any
other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities, and such
other securities (if any) at any aggregate price to the public
of less than $500,000. Registrations effected pursuant to this
Section 2.3 on
Form S-3
shall not be counted as Demand Registrations effected pursuant
to Section 2.1.
2.3.2. Suspension of Registration. If the
filing, initial effectiveness, or continued use of
Form S-3
at any time would require the Company to make an Adverse
Disclosure or would require the inclusion in such
Form S-3
of financial statements that are unavailable to the Company for
reasons beyond the Company’s control, the Company may, upon
giving prompt written notice of such actions to the holders,
delay the filing or initial effectiveness of, or suspend use of,
the
Form S-3
for the shortest period of time determined in good faith by the
Company to be necessary for such purpose. In the event the
Company exercises its rights under the preceding sentence, the
holders agree to suspend, immediately upon their receipt of the
notice referred to above, their use of the prospectus relating
to the registration on such
Form S-3
in connection with any sale or offer to sell Registrable
Securities and agree not to disclose to
any other Person the fact that the Company has exercised such
rights or any related facts. The Company shall immediately
notify the holders upon the expiration of any period during
which it exercised its rights under this Section 2.3.2
3. Registration Procedures.
3.1. Filings; Information. Whenever the
Company is required to effect the registration of any
Registrable Securities pursuant to Section 2, the Company
shall use its best efforts to effect the registration and sale
of such Registrable Securities in accordance with the intended
method(s) of distribution thereof as expeditiously as reasonably
practicable, and in connection with any such request:
3.1.1. Filing Registration Statement. The
Company shall, as expeditiously as reasonably possible, but in
any event within 45 days of the date of delivery to the
Company of the request for Demand Registration, use its
reasonable best efforts to prepare and file with the Commission
a Registration Statement on any form for which the Company then
qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of
all Registrable Securities to be registered thereunder in
accordance with the intended method(s) of distribution thereof;
and the Company shall use its reasonable best efforts to cause
such Registration Statement to become effective within
120 days of the filing of such Registration Statement; and
the Company shall use its reasonable best efforts to remain
effective for a period of 180 days; provided,
however, that the Company shall have the right to defer
any Demand Registration for up to thirty (30) calendar
days, and any Piggy-Back Registration for such period as may be
applicable to deferment of any demand registration to which such
Piggy-Back Registration relates, in each case if the Company
shall furnish to the holders a certificate signed by the
Chairman of the Board or Chief Executive Officer of the Company
stating that, in the good faith judgment of the Board of
Directors of the Company, it would be materially detrimental to
the Company and its shareholders for such Registration Statement
to be effected at such time; provided, further,
however, that the Company shall not have the right to
exercise the right set forth in the immediately preceding
proviso more than once in any
365-day
period in respect of a Demand Registration hereunder. The
Company shall use its reasonable best efforts to (x) file a
Registration Statement with the Commission within 45 days
of the date of the delivery to the Company of the request for
Demand Registration, and (y) make such Registration
Statement become effective within 120 days, and
(z) maintain the effectiveness of such registration for
180 days (or such shorter period as will terminate when all
Registrable Securities covered by such Registration Statement
have been sold or withdrawn). If the Company has not used
reasonable best efforts to file by the end of the 45 day
period referenced in clause (x) above, or if the
Registration Statement has not become effective within
120 days as referenced in clause (y) above, or if the
Registration Statement has not remained effective for
180 days as referenced in clause (z) above, an
Investor may provide notice to the Company of such default by
the Company. If the Company has not cured such default within
30 days of receipt of such notice and provided the Investor
has not in any way caused or contributed to such default by the
Company, such Investor shall be entitled to receive an issuance
of Ordinary Shares from the Company equal to 2% of such
Investor’s current holding of Ordinary Shares for each
30 day period in which the default is not cured by the
Company; provided that such issuance is made in accordance with
all applicable U.S. federal and state laws, Cayman Island
laws and the Amended and Restated Memorandum and Articles of
Association of the Company, as amended from time to time.
Investor may nominate another Person to participate in such
issuance of Ordinary Shares instead of the Investor at the time
of such issuance.
3.1.2. Copies. The Company shall, prior
to filing a Registration Statement or prospectus, or any
amendment or supplement thereto, furnish without charge to the
holders of Registrable Securities included in such registration,
and such holders’ legal counsel, copies of such
Registration Statement as proposed to be filed, each amendment
and supplement to such Registration Statement (in each case
including all exhibits thereto and documents incorporated by
reference therein), the prospectus included in such Registration
Statement (including each preliminary prospectus), and such
other documents as the holders of Registrable Securities
included in such registration or legal counsel for any such
holders may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such holders.
3.1.3. Amendments and Supplements. The
Company shall use its best efforts to prepare and file with the
Commission such amendments, including post-effective amendments,
and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to
make such Registration Statement effective and in compliance
with the provisions of the Securities Act within 120 days
of filing such Registration Statement, and the Company shall
keep such Registration Statement effective until all Registrable
Securities and other securities covered by such Registration
Statement have been disposed of in accordance with the intended
method(s) of distribution set forth in such Registration
Statement (which period shall not exceed the sum of one hundred
eighty (180) calendar days plus any period during which any
such disposition is interfered with by any stop order or
injunction of the Commission or any governmental agency or
court) or such securities have been withdrawn.
3.1.4. Notification. After the filing of
a Registration Statement, the Company shall as soon as
reasonably practical, notify the holders of Registrable
Securities included in such Registration Statement of such
filing and the managing Underwriter or Underwriters, and shall
further notify such holders and such managing Underwriter or
Underwriters and, if requested, confirm such advice in writing,
in all events as soon as reasonably practical after the
occurrence of any of the following: (i) when such
Registration Statement becomes effective; (ii) when any
post-effective amendment to such Registration Statement becomes
effective; (iii) the issuance or threatened issuance by the
Commission of any stop order (and the Company shall use its best
efforts to take all actions required to prevent the entry of
such stop order or to remove it if entered); and (iv) any
request by the Commission for any amendment or supplement to
such Registration Statement or any prospectus relating thereto
or for additional information or of the occurrence of an event
requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of
the securities covered by such Registration Statement, such
prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and promptly make available to the holders of
Registrable Securities included in such Registration Statement
any such supplement or amendment; except that before filing with
the Commission a Registration Statement or prospectus or any
amendment or supplement thereto, including documents
incorporated by reference, except in the case of registration
under Section 2.2; the Company shall furnish to the holders
of Registrable Securities included in such Registration
Statement and to the legal counsel for any such holders, copies
of all such documents proposed to be filed sufficiently in
advance of filing to provide such holders and legal counsel with
a reasonable opportunity to review such documents and comment
thereon, and the Company shall not file any Registration
Statement or prospectus or amendment or supplement thereto,
including documents incorporated by reference, to which such
holders or their legal counsel shall reasonably object.
3.1.5. State Securities Laws
Compliance. The Company, on or prior to the date
on which the applicable Registration Statement is declared
effective, shall use its best efforts to (i) register or
qualify the Registrable Securities covered by the Registration
Statement under such securities or “blue sky” laws of
such jurisdictions in the United States as the holders of
Registrable Securities included in such Registration Statement
(in light of their intended plan of distribution) or
Underwriter, if any, or their respective counsel may reasonably
request in writing and (ii) take such action necessary to
cause such Registrable Securities covered by the Registration
Statement to be registered with or approved by such other
Governmental Authorities as may be necessary by virtue of the
business and operations of the Company and do any and all other
acts and things that may be necessary or advisable to enable the
holders of Registrable Securities included in such Registration
Statement to consummate the disposition of such Registrable
Securities in such jurisdictions; provided,
however, that the Company shall not be required to
qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this
paragraph or subject itself to taxation in any such jurisdiction.
3.1.6. Cooperation. The principal
executive officer of the Company, the principal financial
officer of the Company, the principal accounting officer of the
Company, and all other officers and members of the management of
the Company shall cooperate fully in any offering of Registrable
Securities hereunder, which cooperation shall include, without
limitation, the preparation of the Registration Statement with
respect to such offering and all other offering materials and
related documents, and participation in meetings with
Underwriters, attorneys, accountants and potential investors.
3.1.7. Records. The Company shall make
available for inspection by the holders of Registrable
Securities included in such Registration Statement, any
Underwriter participating in any disposition pursuant to such
Registration Statement and any attorney, accountant, or other
professional retained by any holder of Registrable Securities
included in such Registration Statement or any Underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause all of the Company’s
officers, directors, and employees and the independent public
accountants who have certified its financial statements to make
themselves available to discuss the business of the Company and
to supply all information reasonably requested by any such
seller, Underwriter, attorney, accountant or agent in connection
with such Registration Statement as shall be necessary to enable
them to exercise their due diligence responsibility, and cause
the Company’s officers, directors, and employees to supply
all information requested by any of them in connection with such
Registration Statement.
3.1.8. Opinions and Comfort Letters. The
Company shall furnish to each holder of Registrable Securities
included in any Registration Statement a signed counterpart,
addressed to such holder, of (i) any opinion of counsel to
the Company delivered to any Underwriter dated the effective
date of the Registration Statement or, in the event of an
Underwritten Offering, the date of the closing under the
applicable underwriting agreement, in customary form, scope, and
substance, at a minimum to the effect that the Registration
Statement has been declared effective and that no stop order is
in effect, which counsel and opinions shall be reasonably
satisfactory to a majority of the holders of the Registrable
Securities and Underwriter or Underwriters, if any, and their
respective counsel and (ii) any comfort letter from the
Company’s independent public accountants delivered to any
Underwriter in customary form and covering such matters of the
type customarily covered by comfort letters as the managing
Underwriter or Underwriters reasonably request. In the event no
legal opinion is delivered to any Underwriter, the Company shall
furnish to each holder of Registrable Securities included in
such Registration Statement, at any time that such holder elects
to use a prospectus, an opinion of counsel to the Company to the
effect that the Registration Statement containing such
prospectus has been declared effective and that no stop order is
in effect.
3.1.9. Earnings Statement. The Company
shall comply with all applicable rules and regulations of the
Commission and the Securities Act, and make available to its
shareholders, as soon as reasonably practicable but not more
than fifteen (15) months after the effective date of the
Registration Statement, an earnings statement which earnings
statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder.
3.1.10. Listing. The Company shall use
its best efforts to cause all Registrable Securities included in
any registration to be listed on such exchanges or otherwise
designated for trading in the same manner as similar securities
issued by the Company are then listed or designated or, if no
such similar securities are then listed or designated, in a
manner satisfactory (i) in the case of a Demand
Registration, to the holders of a
majority-in-interest
of the Registrable Securities held by the Demanding Holders and
(ii) in the case of all other Registrable Securities, to
the holders of a
majority-in-interest
of the Registrable Securities included in such registration, and
on each inter-dealer quotation system on which any of the
Company’s securities are then quoted.
3.1.11. Withdrawal of Stop Order. The
Company shall make every reasonable effort to prevent or obtain
at the earliest possible moment the withdrawal of any stop order
with respect to the applicable Registration Statement or other
order suspending the use of any preliminary or final prospectus.
3.1.12. CUSIP Number. The Company shall,
not later than the effective date of the applicable Registration
Statement, provide a CUSIP number for all Registrable Securities
and provide the applicable transfer agent with printed
certificates for the Registrable Securities which certificates
shall be in a form eligible for deposit with The Depository
Trust Company.
3.1.13. FINRA. The Company shall
cooperate with each seller of Registrable Securities and each
Underwriter or agent, if any, participating in the disposition
of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the
Financial Industry Regulatory Authority.
3.1.14. Transfer Agent. The Company shall
provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the
applicable Registration Statement from and after a date not
later than the effective date of such Registration Statement.
3.1.15. Road Show. The Company shall, in
the case of an Underwritten Offering, cause senior executive
officers of the Company to participate in customary “road
show” presentations that may be reasonably requested by the
managing Underwriter in any such Underwritten Offering and
otherwise to facilitate, cooperate with, and participate in each
proposed offering contemplated herein and customary selling
efforts related thereto.
3.2. Underwritten Offerings.
3.2.1. Underwriting Agreements. If
requested by the Underwriters for any Underwritten Offering
requested by holders pursuant to Section 2.1 or 2.3, the
Company and the holders of Registrable Securities to be included
therein shall enter into an underwriting agreement with such
Underwriters, such agreement to be reasonably satisfactory in
substance and form to the Company, the holders of a
majority-in-interest
of the Registrable Securities to be included in such
Underwritten Offering and the Underwriters, and to contain such
terms and conditions as are generally prevailing in agreements
of that type, including, without limitation, indemnities no less
favorable to the recipient thereof than those provided in
Section 2.4. The holders of any Registrable Securities to
be included in any Underwritten Offering pursuant to
Section 2.2 shall enter into such an underwriting agreement
at the request of the Company. All of the representations and
warranties and the other agreements by and on the part of the
Company to and for the benefit of the Underwriters included in
any such underwriting agreement shall also be made to and for
the benefit of such holders, and any or all of the conditions
precedent to the obligations of the Underwriters under such
underwriting agreement shall be conditions precedent to the
obligations of such holders. No holder shall be required in any
such underwriting agreement to make any representations or
warranties to or agreements with the Company or the Underwriters
other than representations, warranties or agreements regarding
such holder, such holder’s Registrable Securities, such
holder’s intended method of distribution and any other
representations required by law.
3.2.2. Price and Underwriting
Discounts. In the case of an Underwritten
Offering requested by holders pursuant to Section 2.1 or
2.3, the price, underwriting discount and other financial terms
of the related underwriting agreement for the Registrable
Securities shall be determined by the holders of a
majority-in-interest
of the holders of such Registrable Securities. In the case of
any Underwritten Offering pursuant to Section 2.2, such
price, discount and other terms shall be determined by the
Company, subject to the right of the holders to withdraw their
request to participate in the registration pursuant to
Section 2.3 after being advised of such price, discount and
other terms.
3.2.3. Participation in Underwritten
Offerings. No Person may participate in an
Underwritten Offering unless such Person (i) agrees to sell
such Person’s securities on the basis provided in the
underwriting arrangements approved by the Persons entitled to
approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements.
3.3. Obligation to Suspend
Distribution. Upon receipt of any notice from the
Company of the happening of any event of the kind described in
Section 3.1.4(iii) or 3.1.4(iv), or, in the case of a
resale registration on
Form S-3
pursuant to Section 2.3 hereof, upon any suspension by the
Company, pursuant to a written insider trading compliance
program adopted by the Company’s board of directors, of the
ability of all “insiders” covered by such program to
transact in the Company’s securities because of the
existence of material non-public information, such holder of
Registrable Securities included in any registration shall
immediately discontinue disposition of such Registrable
Securities pursuant to the Registration Statement covering such
Registrable Securities in the case of Section 3.1.4(iv)
until such holder receives the supplemented or amended
prospectus contemplated by Section 3.1.4(iv) or the
restriction on the ability of “insiders” to transact
in the Company’s securities is removed, as applicable, or
in any case until the holder is advised in writing by the
Company that the use of the prospectus may be resumed, and
receives copies of any additional or supplemental filings that
are incorporated by reference in the prospectus and, if so
directed by the Company, each such holder will deliver to the
Company (at the Company’s expense) all copies, other than
permanent file copies then in such holder’s possession, of
the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice. In the event that the
Company shall give any such notice in respect of a Demand
Registration, the period during which the applicable
Registration Statement is required to be maintained effective
shall be extended by the number of days during the period from
and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities
covered by such Registration Statement either receives the
copies of the supplemented or amended prospectus contemplated by
Section 3.1.4(iv) or is advised in writing by the Company
that the use of the prospectus may be resumed.
3.4. Registration Expenses. The Company
shall bear all costs and expenses incurred in connection with
any Demand Registration pursuant to Section 2.1, any
Piggy-Back Registration pursuant to Section 2.2, and any
registration on
Form S-3
effected pursuant to Section 2.3, and all expenses incurred
in performing or complying with its other obligations under this
Agreement, including, without limitation: (i) all
registration and filing fees and any other fees and expenses
associated with filings required to be made with the SEC;
(ii) fees and expenses of compliance with securities or
“blue sky” laws (including fees and disbursements of
counsel in connection with blue sky qualifications of the
Registrable Securities); (iii) printing expenses,
duplicating, word processing, messenger, telephone, facsimile
and delivery expenses (including expenses of printing
certificates for the Registrable Securities in a form eligible
for deposit with The Depository Trust Company and of
printing prospectuses); (iv) the Company’s internal
expenses (including, without limitation, all salaries and
expenses of its officers and employees); (v) the fees and
expenses incurred in connection with the listing of the
Registrable Securities as required by Section 3.1.10;
(vi) Financial Industry Regulatory Authority fees;
(vii) fees and disbursements of counsel for the Company and
fees and expenses for independent certified public accountants
retained by the Company (including the expenses or costs
associated with the delivery of any opinions or comfort letters
requested pursuant to Section 3.1.8); (viii) the fees
and disbursements not to exceed $150,000 of any special experts
retained by the Company in connection with such registration;
(ix) the reasonable fees and expenses of one legal counsel
selected by the holders of a
majority-in-interest
of the Registrable Securities included in such registration; and
(x) Securities Act liability insurance if the Company so
desires. The Company shall have no obligation to pay any other
costs or expenses in the course of the transactions contemplated
hereby, including underwriting discounts or selling commissions
attributable to the Registrable Securities being sold by the
holders thereof, which underwriting discounts or selling
commissions shall be borne by such holders. Additionally, in an
Underwritten Offering, all selling shareholders and the Company
shall bear the expenses of the Underwriter Pro Rata in
proportion to the respective amount of securities each is
selling in such offering.
3.5. Information. The holders of
Registrable Securities shall provide such information as may
reasonably be requested by the Company, or the managing
Underwriter, if any, in connection with the preparation of any
Registration Statement, including amendments and supplements
thereto, in order to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 2
and in connection with the Company’s obligation to comply
with federal and applicable state securities laws. The Company
shall have the right to exclude any holder that does not comply
with the preceding sentence from the applicable registration.
4. Indemnification and Contribution.
4.1. Indemnification by the Company. The
Company agrees to indemnify and hold harmless to the extent
permitted by law the Investor and each other selling holder of
Registrable Securities, and each of their respective officers,
employees, affiliates, directors, partners, members, attorneys,
and agents, and each person, if any, who controls the Investor
and each other selling holder of Registrable Securities (within
the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) (each, an “Investor
Indemnified Party”), from and against any expenses
(including reasonable costs of investigation and legal
expenses), losses, claims, damages, or liabilities (or actions
or proceedings in respect thereof, whether or not such
indemnified party is a
party thereto), whether joint or several, arising out of or
based upon any untrue statement (or allegedly untrue statement)
of a material fact contained in any Registration Statement under
which the sale of such Registrable Securities was registered
under the Securities Act, any preliminary prospectus, final
prospectus, or summary prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration
Statement, or arising out of or based upon any omission (or
alleged omission) to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, however, that the Company
will not be liable in any such case to the extent that any such
expense, loss, claim, damage, or liability arises out of or is
based upon any untrue statement or allegedly untrue statement or
omission or alleged omission made in such Registration
Statement, preliminary prospectus, final prospectus, or summary
prospectus, or any such amendment or supplement, in reliance
upon and in conformity with information furnished to the
Company, in writing, by such selling holder expressly for use
therein. The Company also shall indemnify any Underwriter of the
Registrable Securities, their officers, affiliates, directors,
partners, members, and agents on substantially the same basis as
that of the indemnification provided above in this
Section 4.1.
4.2. Indemnification by Holders of Registrable
Securities. Each selling holder of Registrable
Securities will severally and not jointly, in the event that any
registration is being effected under the Securities Act pursuant
to this Agreement of any Registrable Securities held by such
selling holder, indemnify and hold harmless to the fullest
extent permitted by law the Company, each of its directors,
officers, employees, and agents and each Person who controls the
Company within the meaning of the Securities Act, against any
losses, claims, judgments, damages, liabilities, or expenses
(including reasonable costs of investigation and legal expenses)
whether joint or several, insofar as such losses, claims,
damages, liabilities, or expenses (or actions or proceedings in
respect thereof, whether or not such indemnified party is a
party thereto) arise out of or are based upon any untrue
statement or allegedly untrue statement of a material fact
contained in any Registration Statement under which the sale of
such Registrable Securities was registered under the Securities
Act, any preliminary prospectus, final prospectus, or summary
prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise
out of or are based upon any omission or the alleged omission to
state a material fact required to be stated therein or necessary
to make the statement therein not misleading, to the extent and
only to the extent that the statement or omission was made in
reliance upon and in conformity with information furnished in
writing to the Company by such selling holder expressly for use
therein, and shall reimburse the Company, its directors and
officers, and each other selling holder or controlling person
for any legal or other expenses reasonably incurred by any of
them in connection with investigation or defending any such
loss, claim, damage, liability or action. Each selling
holder’s indemnification obligations hereunder shall be
several and not joint and shall be limited to the amount of any
net proceeds actually received by such selling holder. Such
indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any
indemnified party.
4.3. Conduct of Indemnification
Proceedings. Promptly after receipt by any person
of any notice of any loss, claim, damage, or liability or any
action in respect of which indemnity may be sought pursuant to
Section 4.1 or 4.2, such person (the “Indemnified
Party”) shall, if a claim in respect thereof is to be
made against any other person for indemnification hereunder,
notify such other person (the “Indemnifying
Party”) in writing of the loss, claim, judgment,
damage, liability, or action; provided, however,
that the failure by the Indemnified Party to notify the
Indemnifying Party shall not relieve the Indemnifying Party from
any liability which the Indemnifying Party may have to such
Indemnified Party hereunder, except and solely to the extent the
Indemnifying Party is actually prejudiced by such failure. If
the Indemnified Party is seeking indemnification with respect to
any claim or action brought against the Indemnified Party, then
the Indemnifying Party shall be entitled to participate in such
claim or action, and, to the extent that it wishes, jointly with
all other Indemnifying Parties, to assume control of the defense
thereof with counsel satisfactory to the Indemnified Party.
After notice from the Indemnifying Party to the Indemnified
Party of its election to assume control of the defense of such
claim or action, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of
investigation; provided, however, that in any
action in which both the Indemnified Party and the Indemnifying
Party are named as defendants, the Indemnified Party shall have
the right to employ separate counsel (but no more than one such
separate counsel) to represent the Indemnified Party and its
controlling persons who may be subject to liability arising out
of any claim in respect of which
indemnity may be sought by the Indemnified Party against the
Indemnifying Party, with the fees and expenses of such counsel
to be paid by the Indemnifying Party based upon the written
opinion of counsel of such Indemnified Party, representation of
both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them (in which
case, if the Indemnified Party notifies the Indemnifying Party
in writing that such Indemnified Party elects to employ separate
counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the
defense of such claim on behalf of such Indemnified Party). If
such defense is not assumed by the Indemnifying Party, the
Indemnifying Party will not be subject to any liability for any
settlement made without its consent, but such consent may not be
unreasonably withheld; provided, however, that an
Indemnifying Party shall not be required to consent to any
settlement involving the imposition of equitable remedies or
involving the imposition of any material obligations on such
Indemnifying Party other than financial obligations for which
such Indemnified Party will be indemnified hereunder. If the
Indemnifying Party assumes the defense, the Indemnifying Party
shall have the right to settle such action without the consent
of the Indemnified Party; provided, however, that
the Indemnifying Party shall be required to obtain such consent
(which consent shall not be unreasonably withheld) if the
settlement includes any admission of wrongdoing on the part of
the Indemnified Party or any restriction on the Indemnified
Party or its officers or directors. No Indemnifying Party shall
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 each Indemnified Party of
an unconditional release from all liability in respect to such
claim or litigation. The Indemnifying Party or Parties shall
not, in connection with any proceeding or related proceedings,
be liable for the reasonable fees, disbursements and other
charges of more than one separate firm at any one time for all
such Indemnified Party or Parties unless (x) the employment
of more than one counsel has been authorized in writing by the
Indemnifying Party or parties, (y) a conflict or potential
conflict exists or may exist (based on advice of counsel to an
Indemnified Party) between such Indemnified Party and the other
Indemnified Parties or (z) based on advice of counsel, an
Indemnified Party has reasonably concluded that there may be
legal defenses available to it that are different from or in
addition to those available to the other Indemnified Parties, in
each of which cases the Indemnifying Party shall be obligated to
pay the reasonable fees and expenses of such additional counsel
or counsels.
4.4. Contribution.
4.4.1. If the indemnification provided for in the foregoing
Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified
Party or insufficient to hold it harmless in respect of any
loss, claim, damage, liability, or action referred to herein,
then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such loss,
claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the Indemnified
Parties and the Indemnifying Parties in connection with the
actions or omissions which resulted in such loss, claim, damage,
liability, or action, as well as any other relevant equitable
considerations. The relative fault of any Indemnified Party and
any Indemnifying Party 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 such
Indemnified Party or such Indemnifying Party and the
parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
4.4.2. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 4.4
were determined by Pro Rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding
Section 4.4.1. The amount paid or payable by an Indemnified
Party as a result of any loss, claim, damage, liability or
action referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified
Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section
4.4, no holder of Registrable Securities shall be required to
contribute any amount in excess of the dollar amount of the net
proceeds (after payment of any underwriting fees, discounts,
commissions or taxes) actually received by such holder from the
sale of Registrable Securities which gave rise to such
contribution obligation. 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. If indemnification is available
under this Section 4, the indemnifying parties shall
indemnify each indemnified party to the full extent provided in
Sections 4.1 and 4.2 hereof without regard to the relative
fault of said Indemnifying Parties or Indemnified Party.
5. Underwriting and Distribution.
5.1. Rule 144. The Company covenants
that it shall file any reports required to be filed by it under
the Securities Act and the Exchange Act and shall take such
further action as the holders of Registrable Securities may
reasonably request, all to the extent required from time to time
to enable such holders to sell Registrable Securities without
registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 under the Securities
Act, as such Rules may be amended from time to time, or any
similar Rule or regulation hereafter adopted by the Commission.
6. No Inconsistent Agreements; Additional Rights.
6.1. The Company will not enter into, and is not currently
a party to, any agreement that is inconsistent with the rights
granted to the holders of Registrable Securities by this
Agreement other than the JNL Agreement.
7. Miscellaneous.
7.1. Term. This Agreement shall terminate
upon the earlier of (a) the tenth anniversary of the date
of this Agreement or (b) the date as of which (i) all
of the Registrable Securities have been sold pursuant to a
Registration Statement (but in no event prior to the applicable
period referred to in Section 4(3) of the Securities Act
and Rule 174 thereunder) or (ii) the holders are
permitted to sell their Registrable Securities under
Rule 144(k) under the Securities Act (or any similar
provision then in force permitting the sale of restricted
securities without limitation on the amount of securities sold
or the manner of sale). The provisions of Section 4 and
Section 5 shall survive any termination.
7.2. Assignment; No Third Party
Beneficiaries. The registration rights of any
holder under this Agreement with respect to any Registrable
Securities may be transferred and assigned upon a sale or
transfer of the Registrable Securities; provided,
however, that no such transfer or assignment shall be
binding upon or obligate the Company to any such assignee unless
and until the Company shall have received written notice of such
transfer or assignment as herein provided and a written
agreement of the assignee to be bound by the provisions of this
Agreement. Any transfer or assignment made other than as
provided in the first sentence of this Section 7.2 shall be
null and void. This Agreement and the provisions hereof shall be
binding upon and shall inure to the benefit of each of the
parties and the permitted assigns of Investor or holder of
Registrable Securities or of any assignee of Investor or holder
of Registrable Securities. This Agreement is not intended to
confer any rights or benefits on any persons that are not party
hereto other than as expressly set forth in Article 4 and
this Section 7.2.
7.3. Notices. All notices, demands,
requests, consents, approvals or other communications
(collectively, “Notices”) required or permitted
to be given hereunder or which are given with respect to this
Agreement shall be in writing and shall be either personally
served, delivered by reputable air courier service with charges
prepaid guaranteeing overnight delivery, or transmitted by hand
delivery, telegram, telex, facsimile, or by mailing in the same
sealed envelope, or registered first-class mail, postage
prepaid, return receipt requested addressed as set forth below,
or to such other address as such party shall have specified most
recently by written notice. Notice shall be deemed given
(i) on the date of delivery if personally served,
(ii) when receipt is acknowledged in writing by addressee,
if transmitted by telegram, telex or facsimile, provided
that, if such service or transmission is not on a business day
or is after normal business hours, then such notice shall be
deemed given on the next business day, and (iii) five
(5) business days after having been deposited in the mail,
postage prepaid, if mailed by first-class mail. Notice otherwise
sent as provided herein shall be deemed given on the next
business day following timely delivery of such notice to a
reputable air courier service with an order for
next-day
delivery; provided, however, that notice of a
change in address shall be effective only upon receipt.
If to an Investor to the addressee and address set forth on the
signature page(s) hereto.
7.4. Severability. This Agreement shall
be deemed severable, and the invalidity or unenforceability of
any term or provision hereof shall not affect the validity or
enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties hereto intend that
there shall be added as a part of this Agreement a provision as
similar in terms to such invalid or unenforceable provision as
may be possible that is valid and enforceable.
7.5. Counterparts. This Agreement may be
executed in multiple counterparts, each of which shall be deemed
an original, and all of which taken together shall constitute
one and the same instrument.
7.6. Entire Agreement. This Agreement
(including all agreements entered into pursuant hereto and all
certificates and instruments delivered pursuant hereto and
thereto) and the JNL Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements,
representations, understandings, negotiations and discussions
between the parties, whether oral or written.
7.7. Modifications and Amendments. No
amendment, modification or termination of this Agreement shall
be binding upon any party unless executed in writing by such
party and signed by the Company and the holders of a majority of
Registrable Securities then outstanding. Each holder of any
Registrable Securities at the time or thereafter outstanding
shall be bound by any amendment, modification, waiver or consent
authorized by this Section 7.7 whether or not such
Registrable Securities shall have been marked accordingly.
7.8. Titles and Headings. Titles and
headings of sections of this Agreement are for convenience only
and shall not affect the construction of any provision of this
Agreement.
7.9. Waivers and Extensions. Any party to
this Agreement may waive any right, breach or default which such
party has the right to waive, provided that such waiver
will not be effective against the waiving party unless it is in
writing, is signed by such party, and specifically refers to
this Agreement. Waivers may be made in advance or after the
right waived has arisen or the breach or default waived has
occurred. Any waiver may be conditional. No waiver of any breach
of any agreement or provision herein contained shall be deemed a
waiver of any preceding or succeeding breach thereof nor of any
other agreement or provision herein contained. No waiver or
extension of time for performance of any obligations or acts
shall be deemed a waiver or extension of the time for
performance of any other obligations or acts. Except as
otherwise expressly provided herein, no failure on the part of
any party to exercise, and no delay in exercising, any right,
power or remedy hereunder, or otherwise available in respect
hereof at law or in equity, shall operate as a waiver thereof,
nor shall any single or partial exercise of such right, power or
remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power, or remedy.
7.10.1. This Agreement shall be governed by, interpreted
under, and construed in accordance with the internal laws of the
State of New York applicable to agreements made and to be
performed within the State of New York, without giving effect to
any choice-of-law provisions thereof that would compel the
application of the substantive laws of any other jurisdiction.
7.10.2. To the fullest extent permitted by applicable law,
each party hereto (i) agrees that any claim, action or
proceeding by such party seeking any relief whatsoever arising
out of, or in connection with, this Agreement or the
transactions contemplated hereby shall be brought only in the
United States District Court for the Southern District of New
York and in any New York State court located in the Borough of
Manhattan and not in any other State or Federal court in the
United States of America or any court in any other country,
(ii) agrees to submit to the exclusive jurisdiction of such
courts located in the State of New York for purposes of all
legal proceedings arising out of, or in connection with, this
Agreement or the transactions contemplated hereby, and
(iii) irrevocably waives any objection which it may now or
hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient
forum.
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be executed and delivered by their duly
authorized representatives as of the date first written above.
OVERTURE ACQUISITION CORP., a Cayman Islands Company
THIS SHAREHOLDERS’ AGREEMENT (this
“Agreement”), dated as of
[ ,
2010], among Overture Acquisition Corp., a Cayman Island
corporation (“Overture”), Jefferson National
Life Insurance Co., a Texas insurance company, and any
Affiliates of JNL that may own ordinary shares of Overture from
time to time (together herein referred to as
“JNL”), and the Persons listed on
Schedule I hereto (each, a “Founder” and,
collectively, the “Founders”).
WHEREAS, the parties hereto have entered into the Master
Agreement dated December 10, 2009, along with Jefferson
National Financial Corp., JNF Asset Management, LLC, JNL Bermuda
LLC and Overture Holdings Ltd. (the “Master
Agreement”); and
WHEREAS, pursuant to the terms of the Master Agreement, the
parties hereto have agreed to enter into this Agreement upon the
Closing of the Transactions as contemplated in the Master
Agreement.
In consideration of the mutual covenants and agreements herein
contained and other good and valid consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties to
this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Capitalized
terms used herein but not defined shall have the meaning
ascribed to such term in the Master Agreement. The following
capitalized terms used herein have the following meanings:
“Agreement” means this Shareholders’
Agreement, as amended, restated, supplemented or otherwise
modified from time to time.
“Board” means the board of directors of
Overture.
“Change of Control or Reorganization Event”
means the occurrence of any of the following events:
(a) the acquisition by any Person of a beneficial ownership
within the meaning of
Rule 13d-3
promulgated under the Exchange Act, of more than 50% of the
voting power of the Overture Ordinary Shares;
(b) the liquidation, dissolution or termination of
Overture; or
(c) a sale of all or substantially all of the assets of
Overture and its Affiliates, taken as a whole.
“Founder” has the meaning set forth in the
preamble.
“Founder Replacement Director” has the meaning
set forth in Section 2.2.
“Governmental Authority” means any federal,
state, local or foreign government, executive official thereof,
governmental or regulatory authority, agency or commission,
including courts of competent jurisdiction, domestic or foreign.
“JNL” has the meaning set forth in the preamble.
“JNL Replacement Director” has the meaning set
forth in Section 2.3.
“Majority-in-interest” means, as to any group
of Persons from time to time, the owners of greater than fifty
percent (50%) of the Overture Ordinary Shares held by such
Persons.
“Master Agreement” has the meaning set forth in
the recitals.
“Overture” has the meaning set forth in the
preamble.
“Overture Ordinary Shares” means the ordinary
shares, par value $0.0001 per share, of Overture and any other
share capital of any class or series of Overture and any
ordinary shares issuable upon the
conversion, exercise or exchange of securities of Overture
convertible into, or exercisable or exchangeable for, any such
ordinary shares or other share capital of Overture.
ARTICLE II
BOARD
RIGHTS; MANAGEMENT ARRANGEMENTS
Section 2.1 Board
of Directors. Simultaneously with the
Closing, Overture shall take all necessary actions within its
control, in order to cause:
(a) Authorized Number. The number
of directors serving on the Board to be seven (7).
(b) Members. The election to the
Board of the following persons: (i) John F.W. Hunt, Marc J.
Blazer and Andrew H. Lufkin, each of whom was designated by the
Founders (each, a “Founders Designee”),
(ii) David Smilow, Mitchell H. Caplan, Dean C. Kehler and
Antoine Swartz, each of whom was designated by JNL (each, a
“JNL Designee”).
(c) David Smilow is to be the Executive Chairman of
Overture and Mitchell H. Caplan is to be the Vice Chairman and
Chief Executive Officer of Overture.
Section 2.2 Founder
Replacement Director. In the event of the
death, disability, disqualification, resignation or removal of a
Founder Designee or the failure of a Founder Designees to be
elected prior to the expiration of the
Lock-Up
Period, Overture shall nominate for election to the Board a
replacement (the “Founder Replacement
Director”) identified by a
Majority-in-interest
of the Founders, who shall be entitled to serve until the
expiration of the
Lock-Up
Period. In the event of the death, disability, disqualification,
resignation or removal of the Founder Replacement Director prior
to the expiration of the
Lock-Up
Period, a new Founder Replacement Director shall be identified
by a
Majority-in-interest
of the Founders, who shall be entitled to serve until the
expiration of the
Lock-Up
Period. Such Founder Replacement Director must meet all
applicable requirements or qualifications under applicable law,
stock exchange rules and Overture’s organizational
documents to be a member of the Board. Nothing herein shall be
deemed to require that any party hereto, or any Affiliate
thereof, act or be in violation of any applicable provision of
law, legal duty or requirement, or stock exchange or stock
market rule.
Section 2.3 JNL
Replacement Director. In the event of the
death, disability, disqualification, resignation or removal of
any JNL Designee or failure of any JNL Designee to be elected
prior to the expiration of the
Lock-Up
Period, JNL shall nominate for election to the Board a
replacement (the “JNL Replacement Director”)
identified by JNL, who shall be entitled to serve until the
expiration of the
Lock-Up
Period. In the event of the death, disability, disqualification,
resignation or removal of the JNL Replacement Director prior to
the expiration of the
Lock-Up
Period, a new JNL Replacement Director shall be identified by
JNL, who shall be entitled to serve until the expiration of the
Lock-Up
Period. Such JNL Replacement Director shall meet any applicable
requirements or qualifications under applicable law, stock
exchange rules and Overture’s organizational documents to
be a member of the Board. Nothing herein shall be deemed to
require that any party hereto, or any Affiliate thereof, act or
be in violation of any applicable provision of law, legal duty
or requirement, or stock exchange or stock market rule.
Section 2.4 Termination
of Director Appointment Right. JNL shall vote
all Overture Ordinary Shares held of record or beneficially
owned by JNL, but only to the extent it exercises voting power
with respect to such shares, in favor of the Founders Designees
and the Founder Replacement Director nominated by Overture until
the termination of the
Lock-Up
Period. The Founders shall vote all Overture Ordinary Shares
held of record or beneficially owned by the Founders, but only
to the extent it exercises voting powers with respect to such
shares, in favor of the JNL Designees and the JNL Replacement
Director until the termination of the
Lock-Up
Period.
Section 3.1 Corporate
Opportunities. (a) In the event that a
director or officer of Overture who is also a director or
officer of JNL acquires knowledge of a potential transaction or
matter that may be a corporate opportunity for both Overture and
JNL, Overture shall not claim that such director or officer has
breached his or her fiduciary duty to Overture and its
shareholders with respect to such corporate opportunity if such
director or officer acts in a manner consistent with the
following policy:
(i) If any officer or director of Overture who also serves
as an officer or director of JNL becomes aware of a potential
transaction related primarily to the reinsurance business that
may represent a corporate opportunity for both Overture and JNL,
such officer or director shall first present such opportunity to
Overture, which will have the sole right to pursue such
transaction if the Board so determines.
(ii) If any officer or director of Overture who also serves
as an officer or director of JNL becomes aware of any other
potential transaction outside of the reinsurance business
and/or
related to JNL’s current lines of business as of the date
hereof that may represent a corporate opportunity for both the
Overture and JNL, such officer or director shall first present
such opportunity to JNL, which JNL will have the sole right to
pursue such transaction if JNL so determines.
(b) If any officer or director of Overture who does not
serve as an officer or director of JNL becomes aware of a
potential transaction that may represent a corporate opportunity
for both Overture or JNL, neither Overture nor such officer or
director has a duty to present that opportunity to JNL, and
Overture may pursue the transaction if the Board so determines.
(c) If any officer or director of JNL who does not serve as
an officer or director of Overture becomes aware of a potential
transaction that may represent a corporate opportunity for both
JNL and Overture, neither JNL nor any such officer or director
has a duty to present that opportunity to Overture, and JNL may
pursue the transaction if JNL so determines.
Section 3.2 Business
Activities. (a) JNL shall have no duty
to refrain from: (i) engaging in the same or similar
activities or lines of business as Overture; (ii) doing
business with any customer of Overture; and (iii) subject
to Section 9.07 of the Master Agreement, employing or
engaging any officer or director of Overture.
(b) Overture shall have no duty to refrain from:
(i) engaging in the same or similar activities or lines of
business as JNL; (ii) doing business with any customer of
JNL; and (iii) subject to Section 9.07 of the Master
Agreement, employing or engaging any officer or director of JNL.
ARTICLE IV
TRANSFER
RESTRICTIONS
Section 4.1 Lock-Up. (a) With
respect to the Overture Ordinary Shares owned by JNL, JNL agrees
not to (i) offer, sell, contract to sell, pledge,
hypothecate, grant any option to purchase or otherwise dispose
of, or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash
settlement or otherwise) by JNL, directly or indirectly,
including the participation in the filing of a registration
statement with the SEC in respect of; (ii) establish or
increase a put equivalent position or liquidate or decrease a
call equivalent position within the meaning of Section 16
of the Exchange Act, with respect to; or (iii) enter into
any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership
of, or any securities convertible into or exercisable or
exchangeable for, or other rights to purchase, whether any such
transaction is to be settled by delivery of the Overture
Ordinary Shares or such other securities, in cash or otherwise,
or publicly announce an intention to effect any such
transaction, for a period of one year from the date hereof or
earlier if, subsequent to the date hereof, (A) the closing
price of the Overture Ordinary
Shares equals or exceeds $12.00 per share for any 20 trading
days within any 30- trading day period, or (B) Overture
consummates a subsequent liquidation, merger, share exchange or
other similar transaction which results in all of
Overture’s shareholders having the right to exchange their
Overture Ordinary Shares for cash, securities or other property
(the “Lock-Up Period”); provided,
however, that transfers of Overture Ordinary
Shares can be made by JNL to (I) an Affiliate of JNL, or
(II) a transferee specified by JNL that Overture has
consented to in writing (such consent not to be unreasonably
withheld) and such transferee agrees in writing to be bound to
these transfer restrictions.
(b) JNL agrees that prior to any transfer of any Overture
Ordinary Shares owned by JNL, JNL shall give written notice to
Overture expressing its desire to effect such transfer and
describing briefly the proposed transfer. Upon receiving such
notice, Overture shall present copies thereof to its counsel and
JNL agrees not to make any disposition of all or any portion of
the Overture Ordinary Shares owned by JNL unless and until:
(i) there is then in effect a registration statement under
the Securities Act of 1933, as amended (the “Securities
Act”), covering such proposed disposition and such
disposition is made in accordance with such registration
statement, in which case the required legends with respect to
the Overture Ordinary Shares owned by JNL and sold pursuant to
such registration statement shall be removed; or
(ii) if reasonably requested by Overture, (A) JNL
shall have furnished Overture with an opinion of counsel,
reasonably satisfactory to Overture, that such disposition will
not require registration of such Overture Ordinary Shares owned
by JNL under the Securities Act, (B) Overture shall have
received customary representations and warranties regarding the
transferee that are reasonably satisfactory to Overture signed
by the proposed transferee, and (C) Overture shall have
received an agreement by such transferee to the restrictions
contained in the legend required with respect to the Overture
Ordinary Shares owned by JNL and if applicable, those referred
to in the first paragraph of this Section 4.1.
ARTICLE V
TERMINATION
Section 5.1 Termination. This
Agreement shall terminate (a) with respect to JNL, on the
date when JNL holds a number of Overture Ordinary Shares that is
less than ten percent (10%) of the number of outstanding
Overture Ordinary Shares on a fully-diluted basis, (b) with
respect to the Founders, on the date when the Founders hold an
aggregate number of securities of Overture that is less than ten
percent (10%) of the number of outstanding Overture Ordinary
Shares on a fully-diluted basis, or (c) upon the mutual
written consent of JNL and the Founders.
Section 5.2 Change
of Control or Reorganization Event. Overture
shall not, directly or indirectly, effect a Change of Control or
Reorganization Event in which Overture shall not be the
surviving entity, unless the proposed surviving entity shall,
prior to effecting a Change of Control or Reorganization Event,
agree in writing to assume the obligations of Overture under
this Agreement.
Section 5.3 Effectiveness. This
Agreement shall be effective upon, and is subject to, the
Closing. In the event that the Master Agreement is terminated
prior to Closing, this Agreement shall cease to have any further
power or effect.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Charter. The
parties hereto shall take or cause to be taken all lawful action
necessary to ensure at all times as of and following the Closing
that the amended and restated memorandum and articles of
association, as amended from time to time, of Overture are not
inconsistent with the provisions of this Agreement.
Section 6.2 Registration
Rights. Overture represents and warrants that
other than the Registration Rights Agreement between JNL and
Overture dated on or about the date of this Agreement, and the
Amended
and Restated Registration Rights Agreement between the Founders
and Overture dated on or about the date of this Agreement, no
Person has any right to require Overture to register any
Overture Ordinary Shares for sale or to include Overture
Ordinary Shares in any registration statement filed by Overture
for the sale of Overture Ordinary Shares for its own account or
for the account of any other Person.
Section 6.3 Assignment. This
Agreement and the rights, duties and obligations of Overture
hereunder may not be assigned or delegated by Overture in whole
or in part. This Agreement and the rights, duties and
obligations of JNL and the Founders hereunder may be assigned,
in whole or in part, (i) to an Affiliate of JNL or the
Founders without the consent of the other parties hereto, or
(ii) to a third party upon the written consent of the other
parties hereto (such consent not to be unreasonably withheld).
Section 6.4 Notices. All
notices, demands, requests, consents, approvals or other
communications required or permitted to be given hereunder or
which are given with respect to this Agreement shall be given in
accordance with Section 12.04 of the Master Agreement.
Section 6.5 Severability. This
Agreement shall be deemed severable, and the invalidity or
unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of
any other term or provision hereof. Furthermore, in lieu of any
such invalid or unenforceable term or provision, the parties
hereto intend that there shall be added as a part of this
Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible that is valid and
enforceable.
Section 6.6 Counterparts. This
Agreement may be executed in multiple counterparts (including by
facsimile or .pdf), each of which shall be deemed an original,
and all of which taken together shall constitute one and the
same instrument. This Agreement shall become effective when each
party hereto shall have received counterparts hereof signed by
all of the other parties hereto.
Section 6.7 Entire
Agreement. This Agreement (including all
agreements entered into pursuant hereto and all certificates and
instruments delivered pursuant hereto and thereto), the
Registration Rights Agreement and the Amended and Restated
Registration Rights Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements,
representations, understandings, negotiations and discussions
between the parties, whether oral or written.
Section 6.8 Modifications
and Amendments. Upon the approval of the JNL,
Overture may amend or modify any term or provision of this
Agreement affecting the rights of JNL hereunder. Upon the
written approval of the
Majority-in-interest
of the Founders, Overture may amend or modify any term or
provision of this Agreement affecting the rights of the Founders
hereunder.
Section 6.9 Waivers
and Extensions. Any waiver made pursuant to
this Section 6.9 will not be effective against the waiving
party unless it is in writing, is signed by such party and
specifically refers to this Agreement. Waivers may be made in
advance or after the right waived has arisen or the breach or
default waived has occurred. Any waiver may be conditional. No
waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or
succeeding breach thereof or of any other agreement or provision
herein contained. No waiver or extension of time for performance
of any obligations or acts shall be deemed a waiver or extension
of the time for performance of any other obligations or acts.
Section 6.10 Governing
Law. This Agreement shall be governed by,
interpreted under and construed in accordance with the internal
laws of the State of New York applicable to agreements made and
to be performed within the State of New York, without giving
effect to any choice-of-law provisions thereof that would compel
the application of the substantive laws of any other
jurisdiction.
Section 6.11 Waiver
of Trial by Jury. Each party hereby
irrevocably and unconditionally waives the right to a trial by
jury in any action, suit, counterclaim or other proceeding
(whether based on contract, tort or otherwise) arising out of,
connected with or relating to this Agreement, the transactions
contemplated hereby, or the actions of Overture, JNL and the
Founders in the negotiation, administration, performance or
enforcement hereof.
Section 6.12 Exclusive
Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the
transactions
contemplated hereby may only be brought in any federal or state
court located in the County and State of New York, and each of
the parties hereby consents to the exclusive jurisdiction of
such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection which it
may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such
suit, action or proceeding which is brought in an inconvenient
forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or
without the jurisdiction or any such court. Without limiting the
foregoing, each party agrees that service of process on such
party as provided in Section 12.08 of the Master Agreement
shall be deemed effective service of process on such party.
Section 6.13 Construction. The
rules of interpretation specified in Section 12.12 of the
Master Agreement shall apply to this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized representatives
as of the date first written above.
This Sponsors’ Agreement (this
“Agreement”), is dated as of
[ ,
2009], by and among Overture Acquisition Corp., a Cayman Islands
exempted company (the “Company”), and
those certain sponsors of the Company listed in Schedule A
hereto (each a “Sponsor” and
collectively, the “Sponsors”).
RECITALS
WHEREAS, the Company and the Sponsors have entered into a Master
Agreement dated as of December 10, 2009 along with
Jefferson National Financial Corp., Jefferson National Life
Insurance Company, JNF Asset Management, LLC, JNL Bermuda LLC
and Overture Re Holdings Ltd. (the “Master
Agreement”);
WHEREAS, pursuant to the Master Agreement, the Company and the
Sponsors have agreed that the Company will repurchase the
ordinary shares of the Company, par value $0.0001 per share (the
“Ordinary Shares”), that are owned by
the Sponsors as of the Closing Date (as that term is defined in
the Master Agreement) and held pursuant to that certain Escrow
Agreement, dated January 30, 2008, by and among the
Sponsors, the Company and American Stock Transfer and
Trust Company; and
WHEREAS, pursuant to the terms and conditions herein, the
Company will then issue to the Sponsors in accordance with the
Company’s amended and restated memorandum and articles of
association (as it may from time to time be amended, the
“Articles”) Ordinary Shares in the event
certain earn-out events set forth herein shall have occurred
(the “Earn-Out Shares”).
NOW THEREFORE, in consideration of the mutual promises contained
in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby, intending legally to be bound,
agree as follows:
Section 1. Repurchase
of Ordinary Shares. Subject to the terms and
conditions hereinafter set forth and the Articles, immediately
after the Closing (as that term is defined in the Master
Agreement), the Sponsors shall transfer and convey to the
Company and the Company shall purchase from the Sponsors an
aggregate of 3,750,000 Ordinary Shares, for an aggregate
purchase price of $25,000 (the “Repurchase Purchase
Price”). The amount of the Repurchase Purchase
Price that the Company is to pay to each Sponsor on the Closing
Date is set forth on Schedule A hereto.
Section 2. Issuance
of Earn-Out Shares.
A. Subject to the terms and conditions set forth herein, no
later than the Closing Date, the Company shall deliver
irrevocable instructions, substantially in the form attached
hereto as Exhibit A to the Company’s transfer
agent and a legal opinion from Ellenoff Grossman &
Schole LLP, counsel to the Company, instructing the transfer
agent to issue to the Sponsors an aggregate of 2,812,500
Earn-Out Shares to the Sponsors, as soon as practicable upon
certain triggering events (collectively, the
“Earn-Out Events”) as follows:
(a) upon the closing trade price of the Ordinary Shares
equaling or exceeding $12.00 per share for any 10 day
non-consecutive VWAP trading days within any 30 trading day
period, the Company shall issue to the Sponsors an aggregate of
937,500 Earn-Out Shares as allocated to each Sponsor as set
forth in Schedule B hereto;
(b) upon the closing trade price of the Ordinary Shares
equaling or exceeding $16.00 per share for any 10 day
non-consecutive VWAP trading days within any 30 trading day
period, the Company shall issue to the Sponsors an aggregate of
937,500 Earn-Out Shares as allocated to each Sponsor as set
forth in Schedule B hereto; and
(c) upon the closing trade price of the Ordinary Shares
equaling or exceeding $20.00 per share for any 10 day
non-consecutive VWAP trading days within any 30 trading day
period, the Company shall
issue to the Sponsors an aggregate of 937,500 Earn-Out Shares as
allocated to each Sponsor as set forth in Schedule B hereto.
Except for the payment set forth in Section 2.B below, upon
the occurrence of each Earn-Out Event, the transfer agent shall
issue to the Sponsors the applicable Earn-Out Shares without any
further consideration from the Sponsors or instruction from the
Company. The Company shall not change its transfer agent without
obtaining the prior written consent of the Sponsors (not to be
unreasonably withheld) and the Company agrees that the
irrevocable instructions set forth in Section 2.A above
shall be binding on any successor transfer agent of the Company.
B. Purchase Price for Earn-Out
Shares. Prior to the issuance of the Earn-Out
Shares pursuant to Section 2.A above, if any, each Sponsor
shall pay to the Company a purchase price of $0.0001 per
Earn-Out Share in immediately available funds to the account
designated by the Company as further set forth in
Schedule B.
C. Shareholders: The Sponsors
acknowledge that the Earn-Out Shares are subject to the
obligations and restrictions set forth in that certain
Shareholders’ Agreement, dated of even date hereof, by and
among the Company, the Sponsors and Jefferson National Life
Insurance Company (the “Shareholders’
Agreement”).
D. Registration
Rights: Immediately after the Closing, the
Company and the Sponsors shall enter into an agreement (the
“Amended and Restated Registration Rights
Agreement”) granting the Sponsors registration
rights with respect to the Earn-Out Shares which may be issued
upon the occurrence of the Earn-Out Events.
Section 3. Representations
and Warranties of the Company. As a material
inducement to the Sponsors to enter into this Agreement, the
Company hereby represents and warrants to the Sponsors (which
representations and warranties shall survive the Closing Date)
that:
A. Organization and Corporate
Power. (i) The Company is a corporation
duly organized, validly existing and in good standing under the
laws of the Cayman Islands and is qualified to do business in
every jurisdiction in which the failure to so qualify would
reasonably be expected to have a material adverse effect on the
financial condition, operating results or assets of the Company.
The Company possesses all requisite corporate power and
authority necessary to carry out the transactions contemplated
by this Agreement.
(ii) The execution and delivery by the Company of this
Agreement and the issuance of the Earn-Out Shares and the
fulfillment of and compliance with the respective terms hereof
and thereof by the Company, do not and will not as of the
Closing Date (a) conflict with or result in a breach of the
terms, conditions or provisions of, (b) constitute a
default under, (c) result in the creation of any lien,
security interest, charge or encumbrance upon the Company’s
share capital or assets under, (d) result in a violation of
or (e) require any authorization, consent, approval,
exemption or other action by or notice or declaration to, or
filing with, any court or administrative or governmental body or
agency pursuant to the memorandum and articles of association of
the Company, as may be amended from time to time, or any
material law, statute, rule or regulation to which the Company
is subject, or any agreement, order, judgment or decree to which
the Company is subject, except for any filings required after
the date hereof under Cayman Islands laws or United States
federal or state securities laws.
B. Authorization; No Breach. The
execution, delivery and performance of this Agreement and the
issuance of the Earn-Out Shares have been duly authorized by the
Company as of the Closing Date. This Agreement constitutes the
valid and binding obligation of the Company, enforceable in
accordance with its terms. This Agreement and, upon issuance in
accordance with, and payment pursuant to, the terms of this
Agreement, the Earn-Out Shares constitute valid and binding
obligations of the Company, enforceable in accordance with their
respective terms as of the Closing Date.
C. Title to Securities. Upon
issuance in accordance with, and payment pursuant to, the terms
hereof, the Earn-Out Shares issuable will be duly and validly
issued, fully paid and nonassessable. Upon issuance in
accordance with, and payment pursuant to, the terms hereof, the
Sponsors will have good title
to the Earn-Out Shares, free and clear of all liens, claims and
encumbrances of any kind, other than (i) transfer
restrictions hereunder and under the other agreements
contemplated hereby, (ii) transfer restrictions under
Cayman Islands laws or United States federal and state
securities laws and (iii) liens, claims or encumbrances
imposed due to the actions of the applicable the Sponsor.
D. Governmental Consents. No
permit, consent, approval or authorization of, or declaration to
or filing with, any governmental authority is required in
connection with the execution, delivery and performance by the
Company of this Agreement, or the consummation by the Company of
any other transactions contemplated hereby.
Section 4. Representations
and Warranties of Sponsor. As a material
inducement to the Company to enter into this Agreement and issue
and sell the Earn-Out Shares to the Sponsors, each Sponsor
hereby severally represents and warrants to the Company that:
A. Capacity and State Law
Compliance. Such Sponsor has the legal
capacity to execute and perform the obligations imposed on the
Sponsors hereunder. Such Sponsor has engaged in the transactions
contemplated by this Agreement within a state in which the offer
and sale of Earn-Out Shares is permitted under applicable
securities laws. Such Sponsor understands and acknowledge that
the purchase of the Earn-Out Shares will require the
availability of an exemption from registration under United
States federal
and/or state
securities laws and that any sale of such shares shall require
registration or the availability of an exemption from
registration under United States federal
and/or state
securities laws.
B. Authorization; No
Breach. (i) This Agreement constitutes a
valid and binding obligation of such Sponsor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other laws
of general applicability relating to or affecting
creditors’ rights and to general equitable principles
(whether considered in a proceeding in equity or law).
(ii) If applicable, the execution and delivery by the
Sponsors of this Agreement and the fulfillment of and compliance
with the respective terms hereof by the Sponsors does not and
shall not as of the Closing Date conflict with or result in a
breach of the terms, conditions or provisions of the
organizational documents of the Sponsors, if any, or any other
agreement, instrument, order, judgment or decree to which the
Sponsors are subject.
C. Investment
Representations. (i) Upon issuance, such
Sponsor is acquiring the Earn-Out Shares for his own account for
investment purposes only and not with a view towards, or for
resale in connection with, any public sale or distribution
thereof.
(ii) Such Sponsor is an “accredited investor” as
such term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended (the
“Securities Act”).
(iii) Such Sponsor understands that the Earn-Out Shares are
being offered and will be sold to him in reliance on specific
exemptions from the registration requirements of the United
States federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Sponsors’
compliance with, the representations and warranties of the
Sponsors set forth herein in order to determine the availability
of such exemptions and the eligibility of the Sponsors to
acquire such Earn-Out Shares.
(iv) Such Sponsor did not decide to enter into this
Agreement as a result of any general solicitation or general
advertising within the meaning of Rule 502(c) under the
Securities Act.
(v) Such Sponsor has been furnished with all materials
relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Earn-Out
Shares which have been requested by such Sponsor. Such Sponsor
has been afforded the opportunity to ask questions of the
executive officers and directors of the Company. Such Sponsor
understands that his investment in the Earn-Out Shares involves
a high degree of risk. Such Sponsor has sought such accounting,
legal and tax advice as such Sponsor has considered necessary to
make an informed investment decision with respect to such
Sponsor’s acquisition of the Earn-Out Shares.
(vi) Such Sponsor understands that no United States federal
or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the
Earn-Out Shares or the fairness or suitability of the investment
in the Earn-Out Shares by the Sponsors nor have such authorities
passed upon or endorsed the merits of the offering of the
Earn-Out Shares.
(vii) Such Sponsor understand that: (a) the Earn-Out
Shares have not been and are not being registered under the
Securities Act or any state securities laws and may not be
offered for sale, sold, assigned or transferred unless
(1) subsequently registered thereunder or (2) sold in
reliance on an exemption therefrom; and (b) except as
specifically set forth in the Amended and Restated Registration
Rights Agreement, neither the Company nor any other person is
under any obligation to register the Earn-Out Shares under the
Securities Act or any state securities laws or to comply with
the terms and conditions of any exemption thereunder. In this
regard, such Sponsor understands that the Securities and
Exchange Commission has taken the position that promoters or
affiliates of a blank check company and their transferees, both
before and after a business combination, are deemed to be
“underwriters” under the Securities Act when reselling
the securities of a blank check company. Based on that position,
Rule 144 adopted pursuant to the Securities Act would not
be available for resale transactions of the Earn-Out Shares
despite technical compliance with the requirements of such rule,
and the Earn-Out Shares can be resold only through a registered
offering or in reliance upon another exemption from the
registration requirements of the Securities Act. Such Sponsor is
able to bear the economic risk of his investment in the Earn-Out
Shares for an indefinite period of time.
(viii) Such Sponsors has such knowledge and experience in
financial and business matters, knows of the high degree of risk
associated with investments in the securities of companies in
the development stage, such as the Company, is capable of
evaluating the merits and risks of an investment in the Earn-Out
Shares and is able to bear the economic risk of an investment in
the Earn-Out Shares in the amount contemplated hereunder. Such
Sponsor has adequate means of providing for his current
financial needs and contingencies and will have no current or
anticipated future needs for liquidity which would be
jeopardized by the investment in the Earn-Out Shares. Such
Sponsor can afford a complete loss of his investment in the
Earn-Out Shares.
Section 5.Survival
of Representations and Warranties. All of the
representations and warranties contained herein shall survive
the date hereof.
Section 6.Miscellaneous.
A. Legends. (i) The
certificates evidencing the Earn-Out Shares shall (unless
otherwise permitted by the provisions of this Agreement) be
stamped or imprinted with a legend substantially similar to the
following (in addition to any legend required by state
securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS IN ACCORDANCE WITH APPLICABLE REGISTRATION
REQUIREMENTS OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
The Company may, from time to time, make stop transfer notations
in its records and deliver stop transfer instructions to its
transfer agent to the extent its counsel considers it necessary
to ensure compliance with applicable federal and state
securities laws and the transfer restrictions contained
elsewhere in this Agreement.
B. Successors, Assigns and Permitted
Transferees. Except as otherwise expressly
provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors of
the parties hereto whether so expressed or not.
Additionally, the right to receive the Earn-Out Shares under
this Agreement may be assigned by a Sponsor as set forth in
clauses (i) through (v) without the prior written
consent of the Company:
(i) as a bona fide gift or gifts; or
(ii) to any trust for the direct or indirect benefit of the
Sponsor or the immediate family of the Sponsor; or
(iii) to the Sponsor’s affiliates or to any investment
fund or other entity controlled or managed by the Sponsor,
provided that such affiliate, investment fund or other entity
controlled or managed by the Sponsor shall not be formed for the
sole purpose of transferring, for value or otherwise, the
Earn-Out Shares; or
(iv) to any beneficiary of the Sponsor pursuant to a will
or other testamentary document or applicable laws of
descent; or
(v) to any corporation, partnership, limited liability
company or other entity all of the beneficial ownership
interests of which are held by the Sponsor or immediate family
of the Sponsor.
For purposes of this agreement, “immediate family”
shall mean any relationship by blood, marriage or adoption, not
more remote than first cousin.
C. Severability. Whenever
possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
D. Counterparts. This Agreement
may be executed simultaneously in two or more counterparts, none
of which need contain the signatures of more than one party, but
all such counterparts taken together shall constitute one and
the same agreement.
E. Descriptive Headings;
Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not
constitute a substantive part of this Agreement. The use of the
word “including” in this Agreement shall be by way of
example rather than by limitation.
F. Governing Law. This Agreement
shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in
accordance with the internal laws of the State of New York. The
parties agree that, all actions and proceedings arising out of
this Agreement or any of the transactions contemplated hereby,
shall be brought in the United States District Court for the
Southern District of New York or in a New York State Court in
the County of New York and that, in connection with any such
action or proceeding, submit to the jurisdiction of, and venue
in, such court. Each of the parties hereto also irrevocably
waives all right to trial by jury in any action, proceeding or
counterclaim arising out of, connected with or relating to this
Agreement or the transactions contemplated hereby.
G. Notices. All notices, demands
or other communications to be given or delivered under or by
reason of the provisions of this Agreement shall be in writing
and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid), sent to the recipient by
facsimile, provided the recipient confirms recipient of such
facsimile, or mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid. Such
notices, demands and other communications shall be sent:
Ellenoff Grossman & Schole LLP
150 East 42nd Street New York, New York10017
Facsimile:
(212) 370-7889
Electronic Mail: ellenoff@egsllp.com
Attention: Douglas S. Ellenoff, Esq.
If to any Sponsor, to the address set forth in Schedule A
hereto.
H. No Strict Construction. The
parties hereto have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties hereto,
and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
I. Entire Agreement. This
Agreement, the Schedules hereto, the Master Agreement and the
Amended and Restated Registration Rights Agreement constitutes
the entire agreement of the parties and supersedes all prior
agreements and understandings.
This Amendment No. 1, dated as of
January [ ], 2010 (the “Amendment”),
to the Warrant Agreement, dated as of January 30, 2008 (the
“Warrant Agreement”), by and between Overture
Acquisition Corp., a Cayman Islands exempted company (the
“Company”), and American Stock Transfer &
Trust Company, a New York corporation, as Warrant Agent
(the “Warrant Agent”).
WHEREAS, the Company consummated its initial public offering
(the “IPO”)on February 5, 2008, pursuant to which
the Company issued 15,000,000 units to public
stockholders; and
WHEREAS, each unit consisted of one ordinary share, par value
$0.0001 per share, of the Company (the “Ordinary
Share”) and one warrant to purchase one Ordinary Share at
an exercise price of $7.00 per Ordinary Share (the “Public
Warrants”); and
WHEREAS, in conjunction with its initial public offering, the
Company privately placed 4,380,000 warrants (the “Private
Warrants”), at $1.00 per warrant, to the Company’s
Sponsors (as set forth in the Master Agreement, defined below).
With each such Private Warrant exercisable into one Ordinary
Share at $7.00 per Ordinary Share (the Private Warrants,
together with the Public Warrants, the
“Warrants”); and
WHEREAS, the terms of the Warrants are governed by the Warrant
Agreement and capitalized terms used, but not defined, in
Section 1 shall have the meaning given to such term in the
Warrant Agreement; and
WHEREAS, the Company has entered into that certain Master
Agreement dated as of December 9, 2009 by and among the
Company, the Sponsors, Jefferson National Financial Corp.,
Jefferson National Life Insurance Company, JNL Bermuda LLC, JNF
Asset Management, LLC, and Overture Re Holdings Ltd.
(“Overture Re”) (the “Master
Agreement”), pursuant to which Overture Re will
form Overture Re Ltd., a wholly owned subsidiary which will
merge with and into JNL Bermuda LLC (the
“Transaction”); and
WHEREAS, pursuant to the Master Agreement, the Company agreed to
seek the approval of the holders of its outstanding Warrants to
amend the Warrant Agreement; and
WHEREAS, the Company now proposes to amend the terms of the
Warrants as follows: (i) to increase the exercise price of
the Warrants from $7.00 to $11.00 per share, (ii) to extend
the expiration date of the Warrants to January 30, 2015,
and (iii) to increase the price at which the Ordinary
Shares must trade before the Company would be able to redeem the
Warrants issued in the Company’s IPO from $14.25 to
$20.00; and
WHEREAS, a majority in interest of the outstanding Warrants has
approved the Warrant Amendment Proposal.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree
to amend the Warrant Agreement as set forth herein:
1.
Warrant
Agreement
1.1. Form of Warrants. The
Public and Private Warrants as amended shall be in substantially
the form of Exhibit A hereto, the provisions of each
of which are incorporated herein, and shall be signed by, or
bear the facsimile signature of, the Chief Executive Officer or
President and Chief Financial Officer, Treasurer, Secretary or
Assistant Secretary of the Company and shall bear a facsimile of
the Company’s seal.
1.2. Warrant Price and Duration of
Warrants. The exercise price of the Warrants
and the period during which a Warrant may be exercised set forth
in Section 6(a) are hereby amended in its entirety so that
it now reads in full as follows:
The initial exercise price per share at which Warrant Shares
shall be purchasable upon the exercise of Warrants (the
“Exercise Price”) shall be $11.00 per share, and each
Warrant shall be initially exercisable to purchase one Ordinary
Share.
Subject to the terms of this Agreement (including without
limitation Section 6(d) below), each Warrant holder shall
have the right, which may be exercised commencing at the opening
of business on the first day of the applicable Warrant Exercise
Period set forth below and until 5:00 p.m., New York City
time, on the last day of such Warrant Exercise Period, to
receive from the Company the number of fully paid and
nonassessable Warrant Shares which the holder may at the time be
entitled to receive on exercise of such Warrants and payment of
the Exercise Price then in effect for such Warrant Shares or on
a cashless basis pursuant to Section 6(d), if applicable.
No adjustments as to dividends will be made upon exercise of the
Warrants.
The “Warrant Exercise Period” shall commence on the
date of consummation of the Transaction and shall end on the
earlier of January 30, 2015 and the Business Day preceding
the date on which such Warrants are redeemed pursuant to
Section 6(b) below; provided that the Sponsors’
Warrants may not be exercised prior to the Transfer Restriction
Termination Date.
The “Closing Price” of the Ordinary Shares on any date
of determination means;
(i) the closing sale price for the regular trading session
(without considering after hours or other trading outside
regular trading session hours) of the Ordinary Shares (regular
way) on the NYSE Amex on that date (or, if no closing price is
reported, the last reported sale price during that regular
trading session),
(ii) if the Ordinary Shares are not listed for trading on
the NYSE Amex (or other exchange on which the Ordinary Shares
trade) on that date, as reported in the composite transactions
for the principal United States securities exchange on which the
Ordinary Shares are so listed,
(iii) if the Ordinary Shares are not so reported, the last
quoted bid price for the Ordinary Shares in the over-the-counter
market as reported by the OTC Bulletin Board, the National
Quotation Bureau or similar organization, or
(iv) if the Ordinary Shares are not so quoted, the average
of the mid-point of the last bid and ask prices for the Ordinary
Shares from at least three nationally recognized investment
banking firms that the Company selects for this purpose.
Each Warrant not exercised or redeemed prior to 5:00 p.m.,
New York City time, on the last day of the Warrant Exercise
Period shall become void and all rights thereunder and all
rights in respect thereof under this Agreement shall cease as of
such time.”
1.3. Amendments to
Section 6(b). Section 6(b) is
hereby amended in its entirety so that it now reads in full as
follows:
“(b) Redemption of Warrants.
The Company may call the Warrants for redemption, in whole and
not in part, at a price of $.01 per Warrant, upon not less than
30 days’ prior written notice of redemption to each
Warrant holder, at any time after such Warrants have become
exercisable pursuant to Section 6(a), if, and only if,
(i) the Closing Price has equaled or exceeded $16.00 per
share for any 20 trading days within a 30-trading-day period
ending on the third Business Day prior to the notice of
redemption to Warrant holders and (ii) at all times between
the date of such notice of redemption and the redemption date a
registration statement is in effect covering the Warrant Shares
issuable upon exercise of the Warrants and a current prospectus
relating to those Warrant Shares is available.
Upon a call for redemption of Warrants by the Company, the
Company shall have the right to require all holders of Warrants
subject to redemption who exercise such Warrants after the
Company’s call for redemption to do so on a cashless basis
in accordance with the procedures set forth in Section 6(d).
Notwithstanding the foregoing, no Sponsors’ Warrants shall
be redeemable at the option of the Company so long as they are
held by the purchasers set forth in Schedule I hereto (the
“Sponsors”) or a Permitted Transferee;
provided that the fact that one or more Sponsors’ Warrants
are non-redeemable because they are held by a Sponsor or a
Permitted Transferee shall not affect the Company’s right
to redeem the Public Warrants and all Sponsors’ Warrants
that are not held by a Sponsor or a Permitted Transferee
pursuant to the preceding paragraph.”
2. Miscellaneous.
2.1 Governing Law. The validity,
interpretation, and performance of this Amendment and of the
Warrants shall be governed in all respects by the laws of the
State of New York, without giving effect to conflicts of law
principles. The parties agree that all actions and proceedings
arising out of this Amendment or any of the transactions
contemplated hereby shall be brought in the United States
District Court for the Southern District of New York or in a New
York State Court in the County of New York and that, in
connection with any such action or proceeding, submit to the
jurisdiction of, and venue in, such court. Each of the
parties hereto also irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim arising out of
this Amendment or the transactions contemplated hereby.
2.2 Binding Effect. This Amendment
shall be binding upon and inure to the benefit of the parties
hereto and to their respective heirs, legal representatives,
successors and assigns.
2.3 Entire Agreement. This
Amendment sets forth the entire agreement and understanding
between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and
understandings of any and every nature among them. Except as set
forth in this Amendment, provisions of the Warrant Agreement
which are not inconsistent with this Amendment shall remain in
full force and effect.
2.4 Severability. This Amendment
shall be deemed severable, and the invalidity or
unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Amendment or of
any other term or provision hereof. Furthermore, in lieu of any
such invalid or unenforceable term or provision, the parties
hereto intend that there shall be added as part of this
Amendment a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and
enforceable.
2.5 Counterparts. This Amendment
may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall constitute but one and the same
instrument.
2.6 Indemnity. Notwithstanding any
provision of this Amendment or the Warrant Agreement to the
contrary, the Company hereby agrees to indemnify the Warrant
Agent and save it harmless from and against any and all
expenses, including reasonable counsel fees and disbursements,
or losses incurred by the Warrant Agent in connection with any
action, suit or other proceeding brought against the Warrant
Agent involving any claim or potential claim, or in connection
with any claim or demand, which in any way arises out of or
relates to this Amendment or the Warrant Agent’s execution
thereof.
Business
Combination (the “Business Combination
Proposal”)
It is resolved THAT the Business Combination Proposal (as
defined in the Company’s proxy statement/prospectus dated
January 8, 2010 (the “Proxy Statement”)),
and the transactions contemplated by the Master Agreement (as
defined in the Proxy Statement) (the
“Transaction”), be approved.
2
Change of
Name (the “Name Change Proposal”)
It is resolved as a special resolution THAT the name of
the Company be changed from “Overture Acquisition
Corp.” to “Overture Capital Corp.”
effective upon consummation of the Transaction.
3
Amendments
to Amended and Restated Memorandum and Articles of Association
(the “Repurchase Amendment Proposal”)
It is resolved as a special resolution THAT the following
amendments to the Amended and Restated Memorandum and Articles
of Association of the Company be approved effective upon
consummation of the Transaction:
(a) Article 21 be deleted and replaced with the
following wording:
“21 Subject to the provisions of the Statute, and,
where applicable, the rules of the Designated Stock Exchange
and/or any
competent regulatory authority, the Company may purchase its own
Shares (including any redeemable Shares) provided that
(i) the Members shall have approved the manner of purchase
by Ordinary Resolution or (ii) the manner of purchase is in
accordance with the following Articles 21.1 to 21.3 (this
authorisation is in accordance with sections 37(2) and
37(3)(d) of the Statute or any modification or re-enactment
thereof for the time being in force).
21.1 The Company is authorised to purchase any Share listed
on a Designated Stock Exchange in accordance with the following
manner of purchase: (i) the maximum number of Shares that
may be repurchased shall be equal to the number of issued and
outstanding Shares less one Share, and (ii) at such time at
such price and on such other terms as determined and agreed by
the Board in their sole discretion; provided however, that
(x) such repurchase transaction shall be in accordance with
the relevant code, rules and regulations applicable to the
listing of the Shares on the Designated Stock Exchange; and
(y) that the Company be able to pay its debts as they fall
due in the ordinary course of business and be solvent
immediately before and after the date on which the payment in
respect of the repurchase transaction is proposed to be made.
21.2 The Company is authorised to purchase any Share not
listed in a Designated Stock Exchange in accordance with the
following manner of purchase: (i) the Company shall serve a
repurchase notice in a form approved by the Board on the Member
from whom the Shares are to be repurchased at least two
(2) days prior to the date specified in the notice as being
the repurchase date, (ii) the price for the Shares being
repurchased shall be such price agreed between the Board and the
applicable Member, (iii) the date of repurchase shall be
the date specified in the repurchase notice, (iv) the
repurchase shall be on such other terms as specified in the
repurchase notice as determined and agreed by the Board and the
applicable Member in their sole discretion, and (v) that
the Company be able to pay its debts as they fall due in the
ordinary course of business and be solvent immediately before
and after the date on which the payment in respect of the
repurchase transaction is proposed to be made.
21.3 The purchase of any Share shall not oblige the Company
to purchase any other Share other than as may be required
pursuant to applicable law and any other contractual obligations
of the Company.”
Amendments
to Amended and Restated Memorandum and Articles of Association
(the “Staggered Board Elimination Proposal”)
It is resolved as a special resolution THAT the following
amendments to the Amended and Restated Memorandum and Articles
of Association of the Company be approved effective upon
consummation of the Transaction:
(a) Article 96 be amended by removing the word
“three” and replacing same with the word
“seven”;
(b) Article 97 be amended by deleting the following
wording:
“The Directors shall be divided into three classes:
Class A, Class B and Class C. The number of Directors
in each class shall be as nearly equal as possible. The existing
Directors shall by resolution classify themselves as
Class A, Class B or Class C Directors. The
Class A Directors shall stand elected for a term expiring
at the Company’s first annual general meeting, the Class B
Directors shall stand elected for a term expiring at the
Company’s second annual general meeting and the
Class C Directors shall stand elected for a term expiring
at the Company’s third annual general meeting. Commencing
at the Company’s first annual general meeting, and at each
annual general meeting thereafter, Directors elected to succeed
those Directors whose terms expire shall be elected for a term
of office to expire at the fourth succeeding annual general
meeting after their election. Except as the Statute or other
applicable law may otherwise require, in the interim between
annual general meetings or extraordinary general meetings called
for the election of Directors
and/or the
removal of one or more Directors and the filling of any vacancy
in that connection, additional Directors and any vacancies in
the board of Directors, including unfilled vacancies resulting
from the removal of Directors for cause, may be filled by the
vote of a majority of the remaining Directors then in office,
although less than a quorum (as defined in these Articles), or
by the sole remaining Director. All Directors shall hold office
until the expiration of their respective terms of office and
until their successors shall have been elected and qualified. A
Director elected to fill a vacancy resulting from the death,
resignation or removal of a Director shall serve for the
remainder of the full term of the Director whose death,
resignation or removal shall have created such vacancy and until
his successor shall have been elected and qualified.”
(c) Article 102 be amended by inserting the following
wording at the end of the Article:
“The Directors may appoint any person to be a Director,
either to fill a vacancy or as an additional Director provided
that the appointment does not cause the number of Directors to
exceed any number fixed by or in accordance with the Articles as
the maximum number of Directors.”
5
Repurchase
of Ordinary Shares issued to Founders (the “Share
Repurchase Proposal”)
It is resolved:
(a) THAT pursuant to Article 21 of the Amended
and Restated Memorandum and Articles of Association of the
Company, subject to the Company having sufficient funds lawfully
available therefor, the Company hereby authorises and approves
the purchase by the Company of 3,750,000 ordinary shares of a
par value of US$0.0001 each from John F. W. Hunt, Marc J.
Blazer, Blazer Investments, LLC, Marc Blazer 2007 GRAT,
Mark Booth, Domenico De Sole, Lawton W. Fitt, Paul S. Pressler
and Andrew H. Lufkin (the “Founder
Shareholders”) at a repurchase price of US$25,000
(being US$0.006 per ordinary share) (the “Repurchase
Shares”);
(b) THAT the manner of purchase be that the
Repurchase Shares be purchased from the holder thereof at the
price specified in (a) above and that the proceeds be paid
to the Founder Shareholders on the date of closing of the
Transaction on or before January 30, 2010 out of the
capital
and/or
retained earnings of the Company; and
(c) THAT American Stock Transfer and
Trust Company be and hereby is instructed to update the
Company’s register of members in respect of the aforesaid.
6
Election
of Directors (the “Board of Directors
Proposal”)
It is resolved THAT David Smilow, Mitchell H. Caplan,
John W. Hunt, Marc J. Blazer, Antoine Schwartz, Andrew Lufkin
and Dean C. Kehler be elected as Directors of the Company in
accordance with the Articles such appointments to take effect
immediately upon consummation of the Transaction.
7
Incentive
Plan Proposal (the “Incentive Plan
Proposal”)
It is resolved THAT the 2009 Long Term Incentive Plan
(the “Plan”) be and is hereby approved and that
the Directors of the Company be and are hereby authorised to do
all such acts and things as they may consider appropriate to
implement the Plan.
8
Adjournment
of Meeting (the “Shareholder Adjournment
Proposal”)
It is resolved THAT the Extraordinary General Meeting be
adjourned to a later date or dates, if necessary, at such date
and time as shall be announced by the Chairman at the
Extraordinary General Meeting.
OVERTURE
ACQUISITION CORP.
2010 STOCK INCENTIVE PLAN
1. Purposes.
(a) Eligible Award Recipients.
The persons eligible to receive Awards are the Employees,
Directors and Consultants of the Company and its Affiliates.
(b) Available Awards. The purpose
of the 2010 Stock Incentive Plan (the “Plan”) is to
provide a means by which eligible Employees, Directors and
Consultants may be given an opportunity to benefit from
increases in value of the Ordinary Shares (“Shares”)
through the granting of the following awards: (i) stock
options, (ii) stock bonuses and (iii) restricted stock
(collectively, “Awards”).
(c) General Purpose. The Company,
by means of the Plan, seeks to retain the services of the group
of persons eligible to receive Awards, to secure and retain the
services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
2. Definitions.
(a) “Affiliate” means any subsidiary of
the Company or any entity selected by the Board to participate
in this Plan.
(b) “Agreement” means a written agreement
between the Company and a Participant evidencing the terms and
conditions of an individual Award. Each Award Agreement shall be
subject to the terms and conditions of the Plan (and in the
event of any inconsistency between the terms of an Agreement and
the Plan, the terms of the Plan will override).
(c) “Award” has the meaning set forth in
Section 1(b) of the Plan.
(d) “Board” means the board of directors
of the Company.
(e) “Cause” means, if the Participant is a
party to an employment agreement or other agreement for services
with the Company or its Affiliates and such agreement provides
for a definition of Cause, the definition therein contained, or,
if no such agreement or definition exists, it shall mean a
Participant’s (i) material breach of any of such
Participant’s covenants or obligations under any applicable
employment agreement or agreement for services or non-compete
agreement; (ii) continued failure after written notice from
the Company or any applicable Affiliate to satisfactorily
perform assigned job responsibilities or to follow the
reasonable instructions of such Participant’s superiors,
including, without limitation, the Board; (iii) commission
of a crime constituting a felony (or its equivalent) under the
laws of any jurisdiction in which the Company or any applicable
Affiliate conducts its business or other crime involving moral
turpitude; or (iv) material violation of any material law
or regulation (including, without limitation, the Foreign
Corrupt Practices Act or any similar
non-U.S. statute)
or any policy or code of conduct adopted by the Company or
engaging in any other form of misconduct which, if it were made
public, could reasonably be expected to adversely affect the
business reputation or affairs of the Company or of an
Affiliate. The Board or Committee, in good faith, shall
determine all matters and questions relating to whether a
Participant has been discharged for Cause.
(f) “Change in Control” means the
occurrence of one of the following events:
(i) any “person” or “group” becomes the
“beneficial owner” (as such terms are used in
Rule 13d-3
promulgated under Exchange Act, except that a person or group
shall be deemed to have “beneficial ownership” of all
securities that such person or group has the right to acquire,
whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of 51% or more of the
Shares (measured by voting power rather than number of shares);
provided, however, that an event described in
this paragraph (i) shall not be deemed to be a Change in
Control if any of following becomes such a beneficial owner:
(A) any tax-qualified, broad-based employee benefit plan
sponsored or
maintained by the Company or any majority-owned subsidiary,
(B) any Company underwriter temporarily holding securities
pursuant to an offering of such securities, or (C) any
person or group pursuant to a Non-Qualifying Transaction (as
defined in paragraph (ii)); or
(ii) the Company consolidates or merges with or into any
other person or group or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its
assets and the assets of the Company’s direct and indirect
subsidiaries (on a consolidated basis) to any other person or
group, in either one transaction or a series of related
transactions, other than a consolidation or merger or
disposition of assets: (A) of or by the Company into or to
a 100% owned subsidiary of the Company, or (B) pursuant to
a transaction in which the outstanding Shares are changed into
or exchanged for securities or other property with the effect
that the beneficial owners of the outstanding Shares immediately
prior to such transaction, beneficially own, directly or
indirectly, at least a majority of the Shares (measured by
voting power rather than number of shares) of the surviving
corporation or the person or group to whom the Company’s
assets are transferred immediately following such transaction
(any transaction which satisfies the criteria specified in
(A) or (B) above shall be deemed to be a
“Non-Qualifying Transaction”).
(g) “Code” means the U.S. Internal
Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.
(h) “Committee” means the Board, unless
and until a committee of two or more members of the Board is
appointed by the Board in accordance with Section 3(c) of
the Plan.
(i) “Company” means Overture Acquisition
Corp., its successors and assigns.
(j) “Consultant” means any person,
including an advisor, who is engaged by the Company or an
Affiliate to render consulting or advisory services and who is
not either an Employee or Director.
(k) “Continuous Service” means that the
Participant’s service with the Company or an Affiliate,
whether as an Employee, Director or Consultant, has not been
interrupted or terminated. The Participant’s Continuous
Service shall not be deemed to have terminated merely because of
a change in the capacity in which the Participant renders
service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the
Participant renders such service, provided that there is no
interruption or termination of the Participant’s Continuous
Service. For example, a change in status from an Employee of the
Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or
the Committee, in its sole discretion, may determine whether
Continuous Service shall be considered interrupted.
(l) “Covered Employee” has the meaning
ascribed under Section 162(m) of the Code.
(m) “Director” means a member of the Board
or any member of the board of directors of any Affiliate.
(n) “Disability” means, if the Participant
is a party to an employment agreement or other agreement for
services with the Company or its Affiliates and such agreement
provides for a definition of Disability, the definition therein
contained, or, if no such agreement or definition exists, it
shall mean the failure of any Participant to perform his or her
duties due to physical or mental incapacity as determined by the
Committee.
(o) “Effective Date” shall mean the date
of adoption of the Plan by the Board.
(p) “Employee” means any person employed
by the Company or an Affiliate.
(q) “Event” has the meaning set forth in
Section 11(a) of the Plan.
(r) “Exchange Act” means the
U.S. Securities Exchange Act of 1934, as amended.
(s) “Fair Market Value” per share as of a
particular date shall mean the last reported sale price (on the
day immediately preceding such date) of the Shares on any
national securities exchange or national market system upon
which price quotations for the Company’s Shares are
regularly available; provided, however, that at
any time that the Shares of the Company are not traded on a
public exchange, Fair Market Value per share shall mean, as of
any date, except as may otherwise be provided in an Award
Agreement, the fair market value on such date as determined in
good faith by the Board.
(t) “Foreign Corrupt Practices Act” means
the U.S. Foreign Corrupt Practices Act.
(u) “Initial Public Offering” means the
consummation of the first public offering of the Shares pursuant
to a registration statement filed with, and declared effective
by, the applicable regulatory
and/or
governing body.
(v) “Non-Employee Director” means a
Director who serves on the Board and who is a “non-employee
director” within the meaning of
Rule 16b-3
and who is also an “outside director” within the
meaning of Section 162(m) of the Code.
(w) “Officer” means a person who is an
officer of the Company within the meaning of Section 16 of
the Exchange Act.
(x) “Option” means a non-qualified stock
option to purchase Shares which is not intended to be an
“incentive stock option” within the meaning of
Section 422 of the Code.
(y) “Optionee” means a person holding an
Option granted pursuant to the Plan.
(z) “Participant” means a person holding
an Award granted pursuant to the Plan.
(aa) “Plan” means the Overture Acquisition
Corp., 2010 Stock Incentive Plan.
(bb) “Rule 16b-3”
means
Rule 16b-3
promulgated under the Exchange Act or any successor to
Rule 16b-3,
as in effect from time to time.
(cc) “Sarbanes-Oxley Act of 2002” means
that certain U.S. federal legislation adopted on
July 30, 2002, as amended or supplemented from time to
time, or any U.S. federal statute or regulation adopted by
the U.S. Securities and Exchange Commission in effect that
has replaced, amended or supplemented or will replace, amend or
supplement such statute, and any reference in this Plan to a
provision of the Sarbanes-Oxley Act of 2002 or a rule or
regulation promulgated thereunder or in connection therewith
means such provision, rule or regulation as amended or
supplemented from time to time or any provision of a federal
law, or any federal rule or regulation, from time to time in
effect that has replaced such provision, rule or regulation.
(dd) “SEC” means the U.S. Securities
and Exchange Commission.
(ee) “Securities Act” means the
U.S. Securities Act of 1933, as amended.
(ff) “Shares” means the Ordinary Shares of
the Company, $0.001 par value per share.
(gg) “US Member” is a member of the
Company and a US Person as defined in Section 7701(a)(30)
of the Code.
3. Administration.
(a) Administration. The Plan
shall be administered by the Board and, if and when appointed,
the Committee.
(b) Powers of Committee. The
Committee shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Awards; when and how
each Award shall be granted; what type or combination of types
of Awards shall be granted; the provisions of each Award granted
(which need not be identical), including the time or times when
a person shall be permitted to receive Shares pursuant to an
Award; and the number of Shares with respect to which an Award
shall be granted to each such person.
(ii) To construe and interpret the Plan and Awards granted
under it, and to establish, amend and revoke rules and
regulations for its administration. The Committee, in the
exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Award Agreement, in a manner
and to the extent it shall deem necessary or expedient to make
the Plan fully effective, but it may not do so to the extent
that such correction materially prejudices the recipients of any
Awards. The Committee shall expressly have the authority to
adopt any modifications, procedures and sub-plans as may be
necessary or
desirable to comply with provisions of the law of foreign
countries in which the Company or its Affiliates may operate to
assure the viability of the benefits from Awards granted to
Participants employed or providing services in such countries
and to meet the objectives of the Plan. If, in connection with
the adoption of a sub-plan of the Plan, approval is required
from any applicable agency of any other country or jurisdiction,
the Committee shall have the authority to seek such approval and
the adoption of the sub-plan shall be conditioned on such
approval being obtained.
(iii) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote
the best interests of the Company which are not in conflict with
the provisions of the Plan.
(c) Delegation to Committee. The
entire Board may comprise the Committee or the Board may
delegate administration of the Plan to a Committee which, if
required under applicable law, shall consist solely of two
(2) or more Non-Employee Directors. In such event, the term
“Committee” shall apply to any person or persons to
whom such authority has been delegated. Furthermore, unless a
Committee has been appointed by the Board, any reference to the
Committee in the Plan shall mean the Board. If administration is
delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers
theretofore possessed by the Board (and references in this Plan
to the Board shall thereafter be to the Committee) subject,
however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by
the Board. The Board may abolish the Committee at any time and
re-vest in the Board the administration of the Plan. The Board
may also (A) delegate to a committee of one or more members
of the Board who are not “outside directors” within
the meaning of Section 162(m) of the Code the authority to
grant Awards to eligible persons who are either (1) not
then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from
such Award or (2) not persons with respect to whom the
Company wishes to comply with Section 162(m) of the Code or
(B) delegate to a committee of one or more members of the
Board who are not “non-employee directors” within the
meaning of
Rule 16b-3
the authority to grant Awards to eligible persons who are not
then subject to Section 16 of the Exchange Act.
(d) Effect of Committee’s
Decision. All determinations,
interpretations and constructions made by the Committee in good
faith shall not be subject to review by any person and shall be
final, binding and conclusive on all persons. Members of the
Committee and any officer or employee of the Company or any
Affiliate acting at the direction of the Committee shall (as far
as permitted by applicable law) not be personally liable for any
action or determination taken or made in good faith with respect
to the Plan, and shall, to the extent permitted by law, be fully
indemnified by the Company with respect to any such action or
determination.
4. Shares Subject to the Plan.
Subject to the provisions of Section 11, the total number
of Shares that shall be available for the grant of Awards under
the Plan shall not exceed in the aggregate the lesser of
(i) 1.5 million Shares, or (ii) ten percent (10%)
of the outstanding Shares at the closing of the transactions
contemplated by that certain Master Agreement by and among the
Company, Overture Re Holdings Ltd., Jefferson National Financial
Corp. (“JNF”), Jefferson National Life Insurance Co.,
JNL Bermuda LLC, JNF Asset Management LLC and certain directors
and officers of the Company. If any Award shall for any reason
expire or otherwise terminate, in whole or in part, without
having been exercised or realized in full, the Shares not
acquired under such Award shall again become available to be
made subject to Awards under the Plan. The Shares subject to the
Plan may be authorized but unissued shares or shares reacquired
by the Company in any manner.
5. Eligibility.
(a) Eligibility for Options.
Options may be granted to Employees, Directors and Consultants.
(b) Section 162(m)
Limitation. Subject to the provisions of
Section 11, no Employee shall be eligible to be granted
Options to acquire more than 250,000 Shares during any
calendar year.
(c) US Member Limitation. No
Participant that is a US Member shall be able to exercise
Options if so doing would have the effect of giving such US
Member greater than 9.95% of the voting power of all classes of
stock entitled to vote of the Company.
(d) Consultants.
(i) At any time that the Shares are not publicly traded, a
Consultant shall not be eligible for the grant of an Award if,
at the time of grant, either the offer or the sale of the
Company’s securities to such Consultant is not exempt under
Rule 701 of the Securities Act
(“Rule 701”) because of the nature
of the services that the Consultant is providing to the Company,
or because the Consultant is not a natural person, or as
otherwise provided by Rule 701, unless the Committee
determines that such grant need not comply with the requirements
of Rule 701 and will satisfy another exemption under the
Securities Act as well as comply with the securities laws of all
other relevant jurisdictions.
(ii) At any time that Shares are publicly traded, a
Consultant shall not be eligible for the grant of an Award if,
at the time of grant, a
Form S-8
Registration Statement under the Securities Act
(“Form S-8”)
is not available to register either the offer or the sale of the
Company’s securities to such Consultant because of the
nature of the services that the Consultant is providing to the
Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of
Form S-8,
unless the Company determines both (A) that such grant
either (1) shall be registered in another manner under the
Securities Act (e.g., on a
Form S-3
Registration Statement) or (2) does not require
registration under the Securities Act in order to comply with
the requirements of the Securities Act, if applicable, and
(B) that such grant complies with the securities laws of
all other relevant jurisdictions.
(iii) Rule 701 and
Form S-8
generally are available to Consultants and advisors only if
(a) they are natural persons; (b) they provide bona
fide services to the issuer, its parent, its majority-owned
subsidiaries or majority-owned subsidiaries of the issuer’s
parent; and (c) the services are not in connection with the
offer or sale of securities in a capital-raising transaction,
and do not directly or indirectly promote or maintain a market
for the issuer’s securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms
and conditions as the Committee shall deem appropriate. The
provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof
by reference in the Option or otherwise) the substance of each
of the following provisions:
(a) Term. No Option shall be
exercisable after the expiration of ten (10) years from the
date it was granted, or such other period of time as indicated
on the Agreement.
(b) Exercise Price of an Option.
The exercise price of each Option shall be established by the
Committee but shall be not less than one hundred percent (100%)
of the Fair Market Value of the Shares subject to the Option on
the date the Option is granted (and not less than the par value
of the Shares).
(c) Consideration. The purchase
price of Shares acquired pursuant to an Option shall be paid, to
the extent permitted by applicable statutes and regulations,
either (i) in cash or cashiers’ check at the time the
Option is exercised or (ii) at the discretion of the
Committee at the time of the grant of the Option or subsequently
(A) by delivery to the Company of other Shares having an
aggregate Fair Market Value equal to the exercise price to be
satisfied by their delivery or (B) in any other form of
legal consideration that may be acceptable to the Committee,
including, without limitation, a “cashless” exercise
program established with a broker that does not violate the
Sarbanes-Oxley Act of 2002. Unless otherwise specifically
provided in the Option, the purchase price of Shares acquired
pursuant to an Option that is paid by delivery to the Company of
other Shares acquired, directly or indirectly from the Company,
shall be paid only by Shares that have been held by the Optionee
for more than six (6) months (or such longer or shorter
period of time required to avoid a charge to earnings for
financial accounting purposes).
(d) Transferability of Options.
The terms of the Options shall be as set forth in the Agreement.
(e) Vesting. The total number of
Shares subject to an Option may, but need not, vest and become
exercisable in periodic installments that may, but need not, be
equal. The Option may be subject to such other terms and
conditions on the time or times when it may be exercised (which
may be based on performance or other criteria) as the Committee
may deem appropriate. The vesting provisions of individual
Options may vary. The provisions of this Section 6(e) are
subject to any Option provisions governing the minimum number of
Shares as to which an Option may be exercised. No Option may be
exercised for a fraction of a Share.
(f) Termination of Continuous
Service. Unless otherwise provided in an
Agreement, in the event an Optionee’s Continuous Service
terminates (other than upon the Optionee’s death or
Disability), all unvested Options shall terminate and the
Optionee may exercise his or her vested Options, but only within
such period of time ending on the earlier of (i) the date
three (3) months following the termination of the
Optionee’s Continuous Service, or (ii) the expiration
of the term of the Option as set forth in the Agreement;
provided, that, if the termination of Continuous
Service is by the Company for Cause, all outstanding Options
(whether or not vested) shall immediately terminate and cease to
be exercisable. If, after termination, the Optionee does not
exercise his or her Option within the time specified in the
Agreement, the Option shall terminate.
(g) Disability of Optionee.
Unless otherwise provided in an Agreement, in the event that an
Optionee’s Continuous Service terminates as a result of the
Optionee’s Disability, all unvested Options shall terminate
and the Optionee (or a person designated to exercise the Option
upon the Optionee’s Disability pursuant to
Section 6(d)) may exercise his or her vested Options, but
only within such period of time ending on the earlier of
(i) the date twelve (12) months following such
termination or (ii) the expiration of the term of the
Option as set forth in the Agreement. If, after termination, the
Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate.
(h) Death of Optionee. Unless
otherwise provided in an Agreement, in the event an
Optionee’s Continuous Service terminates as a result of the
Optionee’s death, then all unvested Options shall terminate
and the vested Options may be exercised by the Optionee’s
estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to
exercise the Option upon the Optionee’s death pursuant to
Section 6(d), but only within the period ending on the
earlier of (i) the date twelve (12) months following
the date of death or (ii) the expiration of the term of
such Option as set forth in the Agreement. If, after death, the
Option is not exercised within the time specified herein, the
Option shall terminate.
(i) Change in Control. Unless
otherwise provided in an Agreement and except as otherwise
provided in the Plan, a Change in Control shall not effect any
Options granted under the Plan.
7. Provisions of Awards Other Than Options.
(a) Stock Bonus Awards. Each
Agreement evidencing a stock bonus shall be in such form and
shall contain such terms and conditions as the Committee shall
deem appropriate. The terms and conditions of such Agreements
may change from time to time, and the terms and conditions of
separate Agreements need not be identical, but each such
Agreement shall include (through incorporation of provisions
hereof by reference in the Agreement or otherwise) the substance
of each of the following provisions:
(i) Consideration. A stock bonus
may be awarded in consideration for past services actually
rendered to the Company or an Affiliate.
(ii) Vesting. Shares awarded
under the stock bonus Agreement may, but need not, be subject to
a share repurchase option in favor of the Company or forfeiture
in accordance with a vesting schedule to be determined by the
Committee.
(iii) Termination of Participant’s Continuous
Service. In the event a Participant’s
Continuous Service terminates, the Company may reacquire, for
par value (or such other cash consideration, if any, paid for
such Shares by the Participant), any or all of the Shares held
by the Participant which have not vested as of the date of
termination under the terms of the applicable Agreement.
(iv) Transferability. Shares under the
applicable Agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the
Agreement, as the Committee shall determine
in its discretion, so long as the Shares awarded under the
Agreement remains subject to the terms of the Agreement.
(b) Restricted Stock Awards. Each
such Agreement evidencing a grant of restricted Shares shall be
in such form and shall contain such terms and conditions as the
Committee shall deem appropriate (including, without limitation,
in the form of restricted Share units if deemed appropriate by
the Committee). The terms and conditions of such Agreements may
change from time to time, and the terms and conditions of
separate Agreements need not be identical, but each such
Agreement shall include (through incorporation of provisions
hereof by reference in the Agreement or otherwise) the substance
of each of the following provisions:
(i) Purchase Price. The purchase
price of Awards of restricted Shares shall be determined by the
Committee, which shall in no event be less than the par value
per share.
(ii) Consideration. The purchase
price of Shares acquired pursuant to the applicable Agreement
shall be paid either: (i) in cash at the time of purchase;
(ii) at the discretion of the Committee, according to a
deferred payment or other similar arrangement with the
Participant to the extent it does not violate the Sarbanes-Oxley
Act of 2002 or any other applicable law; or (iii) in any
other form of legal consideration that may be acceptable to the
Committee in its discretion.
(iii) Vesting. Restricted Shares
shall vest in accordance with a vesting schedule to be
determined by the Committee under the applicable Agreement and
may, but need not, be subject to a share repurchase option in
favor of the Company or forfeiture.
(iv) Termination of Participant’s Continuous
Service. In the event a Participant’s
Continuous Service terminates, the Company may repurchase or
otherwise reacquire, for par value (or such other cash
consideration, if any, paid for such Shares by the Participant),
any or all of the Shares held by the Participant which have not
vested as of the date of termination under the terms of the
applicable Agreement.
(v) Transferability. Restricted
Shares under the Agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth
in the Agreement, as the Committee shall determine in its
discretion, so long as Shares awarded under the Agreement remain
subject to the terms of the Agreement.
(a) Availability of Shares.
During the terms of the Awards, the Company shall keep available
at all times the number of Shares required to satisfy such
Awards.
(b) Securities Law Compliance.
The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as
may be required to grant Awards and to issue and sell Shares
upon exercise of the Awards; provided, however,
that this undertaking shall not require the Company to register
under the Securities Act or any other applicable law of the
United States or otherwise the Plan, any Awards or any Shares
issued or issuable pursuant to any such Awards. If, after
reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance and sale
of Shares under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Shares upon grant or
exercise of such Awards unless and until such authority is
obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of Shares pursuant to the grant or
exercise of Awards shall constitute general funds of the Company.
10. Miscellaneous.
(a) Acceleration of Exercisability and
Vesting. The Committee shall have the power
to accelerate the time at which an Award may first be exercised
or the time during which an Award or any part thereof will
vest in accordance with the Plan, notwithstanding the provisions
in the Award stating the time at which it may first be exercised
or the time during which it will vest.
(b) Shareholder Rights. No
Participant shall be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any Shares subject to
such Award unless and until such Participant has satisfied all
requirements for exercise of the Award pursuant to its terms and
has become the registered holder of such shares.
(c) No Employment or other Service
Rights. Nothing in the Plan or any
instrument executed or Award granted pursuant thereto shall
confer upon any Participant any right to continue to serve the
Company or an Affiliate in the capacity in effect at the time
the Award was granted or shall affect the right of the Company
or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without Cause,
(ii) the service of a Consultant with or without notice and
with or without Cause or (iii) the service of a Director
pursuant to the Memorandum and Articles of Association of the
Company or an Affiliate, and any applicable provisions of the
corporate law of the jurisdiction in which the Company or the
Affiliate is incorporated, as the case may be.
(d) Investment Assurances. The
Company may require a Participant, as a condition of exercising
or acquiring Shares under any Award, (i) to give written
assurances satisfactory to the Company as to the
Participant’s knowledge and experience in financial and
business matters
and/or to
employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and
business matters and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits
and risks of exercising the Award; (ii) to give written
assurances satisfactory to the Company stating that the
Participant is acquiring Shares subject to the Award for the
Participant’s own account and not with any present
intention of selling or otherwise distributing the Shares; and
(iii) to execute a Shareholders’ Agreement or such
other documentation as the Company may require. The foregoing
requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (1) the issuance of
the Shares upon the exercise or acquisition of Shares under the
Award has been registered under a then currently effective
registration statement under the Securities Act or (2) as
to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in
the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to,
legends restricting the transfer of the Shares.
(e) Withholding Obligations. The
Company shall have the right to deduct from any compensation
paid to the Participant pursuant to the Plan the amount of taxes
required by law to be withheld therefrom, or to require the
Participant to pay the Company in cash such amount required to
be withheld. To the extent provided by the terms of an Award
Agreement, the Participant may satisfy any foreign, federal,
state or local tax withholding obligation relating to the
exercise or acquisition of Shares under an Award by any of the
following means (in addition to the Company’s right to
withhold or to direct the withholding from any compensation paid
to the Participant by the Company or by an Affiliate) or by a
combination of such means: (i) tendering a cash payment;
(ii) authorizing the Company to withhold Shares from the
Shares otherwise issuable to the Participant as a result of the
exercise or acquisition of Shares under the Award;
provided, however, that no Shares are withheld
with a value exceeding the minimum amount of tax required to be
withheld by law; or (iii) delivering to the Company or to
an Affiliate, owned and unencumbered Shares not acquired from
the Company with a Fair Market Value equal to the amount of tax
liability to be satisfied by their delivery.
11. Adjustments Upon Changes in Stock.
(a) Capitalization Adjustments.
In the event of any dividend or other distribution (whether in
the form of cash, Shares, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock
split, reorganization, merger, consolidation,
split-up,
spin-off, combination, repurchase, liquidation, dissolution, or
sale, transfer, exchange or other disposition of all or
substantially all of the assets or stock of the Company, or
exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate
transaction or event, and in the
Committee’s opinion, such event affects the Shares such
that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available
under the Plan or with respect to an Award, then the Committee
shall, in such manner as it may deem equitable, without
limitation, adjust any or all of the following: (i) the
number and kind of Shares (or other securities or property) with
respect to which Awards may be granted or awarded; (ii) the
number and kind of Shares (or other securities or property)
subject to all or any outstanding Awards; and (iii) the
grant or exercise price with respect to all or any outstanding
Awards. The Committee’s determination under this
Section 11(a) shall be final, binding and conclusive.
(b) Termination of Awards. Unless
otherwise provided in an Award Agreement, upon the occurrence of
a Change in Control in which outstanding Awards are not to be
assumed by the surviving entity or otherwise continued following
such Change in Control, the Committee may, in its discretion,
terminate any outstanding Award without a Participant’s
consent and (i) provide for the purchase of any such Award
for an amount of cash equal to the amount that could have been
attained upon the exercise of such Award or realization of the
Participant’s rights had such Award been currently
exercisable or payable or fully vested (based on the Fair Market
Value of the shares on the date of such termination) or the
replacement of such Award with other rights or property selected
by the Committee in its sole discretion
and/or
(ii) provide that such Award shall be exercisable (whether
or not vested) as to all shares covered thereby for at least
thirty (30) days prior to such Event or other similar
corporate event or transaction but will terminate at the end of
that period.
(c) Future Transactions. The
existence of the Plan, the Award Agreements and the Award
granted hereunder shall not affect or restrict in any way the
right or power of the Company or the shareholders of the Company
to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company’s capital
structure or its business, any merger or consolidation of the
Company, any issue of stock or of options, warrants or rights to
purchase stock or of bonds, debentures, preferred or prior
preference stocks whose rights are superior to or affect the
Shares or the rights thereof or which are convertible into or
exchangeable for Shares, or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
12. Amendment of the Plan and Awards.
(a) Amendment of Plan. The Board
at any time, and from time to time, may amend the Plan. However,
except as provided in Section 11 relating to adjustments
upon changes in Shares, no amendment shall be effective unless
approved by the shareholders of the Company to the extent
shareholder approval is necessary to satisfy any applicable law
or any national securities exchange listing requirements.
(b) Shareholder Approval. The
Board may, in its sole discretion, submit any other amendment to
the Plan for shareholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements
of Section 162(m) of the Code and the regulations
thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) Contemplated Amendments. It
is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide
eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations
promulgated thereunder
and/or to
bring the Plan into compliance therewith.
(d) No Impairment of Rights.
Subject to Section 11, rights under any Award granted
before amendment of the Plan shall not be impaired by any
amendment of the Plan unless (i) the Company requests the
consent of the Participant and (ii) the Participant
consents in writing.
(e) Amendment of Awards. Subject
to Section 11, the Board at any time, and from time to
time, may amend the terms of any one or more Awards;
provided, however, that the rights under any Award
shall not be impaired by any such amendment unless (i) the
Company requests the consent of the Participant and
(ii) the Participant consents in writing.
(a) Plan Term. The Committee may
suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on the day before the tenth
anniversary of the date the Plan is adopted by the Board or
approved by the shareholders of the Company, whichever is
earlier. No Awards may be granted under the Plan while the Plan
is suspended or after it is terminated.
(b) No Impairment of Rights.
Subject to Section 11, suspension or termination of the
Plan shall not impair rights and obligations under any Award
granted while the Plan is in effect except with the written
consent of the Participant.
14. Repurchase Right.
(a) Options. Prior to an Initial
Public Offering, to the extent permitted by applicable law, if
any Participant (i) resigns or terminates his Continuous
Service for any reason or (ii) is discharged by the Company
for any reason, the Company shall have the right (but not the
obligation) within ninety (90) days following such
termination, or such shorter period if required by applicable
law, to elect to purchase some or all of the Participant’s
outstanding and vested Options held by the Participant upon such
termination for an amount in cash, equal to the number of Shares
subject to such Option multiplied by the difference between
(1) the Fair Market Value of one Share on the date the
Company elects to purchase such Option and (2) the exercise
price per Share of the Option.
(b) Shares. Prior to an Initial
Public Offering, to the extent permitted by applicable law, if
any Participant (i) resigns or terminates his Continuous
Service for any reason or (ii) is discharged by the Company
for any reason, the Company shall have the right (but not the
obligation) within ninety (90) days following such
termination, or such shorter period if required by applicable
law, to elect to purchase some or all of the Shares acquired by
the Participant pursuant to the Plan, at their then current Fair
Market Value.
(c) Closing. In the event the
Company elects to purchase Options
and/or
Shares pursuant to this Section 14, the selling Participant
shall sell and the Company shall purchase the Options
and/or
Shares as soon as administratively feasible following the
exercise of the Company’s rights under this
Section 14, but in any event no later than ninety
(90) days thereafter. Notwithstanding anything in this
Section 14 to the contrary, the date of closing of any such
sale and purchase may be delayed by the Company to the extent
necessary to avoid adverse accounting consequences to the
Company.
15. Section 409A of the Code.
To the extent that an Award, issuance
and/or
payment under the Plan is subject to Section 409A of the
Code, this Plan is intended to comply with Section 409A of
the Code and shall be administered, construed and interpreted in
accordance with such intent and it shall be awarded
and/or
issued or paid in a manner that will comply with
Section 409A of the Code. Any provision of this Plan that
would cause an Award, issuance
and/or
payment to fail to satisfy Section 409A of the Code shall
have no force and effect until amended by the Committee, with or
without the consent of any Participant, to comply with
Section 409A of the Code.
16. Effective Date of Plan.
The Plan shall become effective as of the Effective Date,
subject to the approval of the Company’s shareholders
within twelve (12) months of the Effective Date.
17. Choice of Law.
The laws of the Cayman Islands shall govern all questions
concerning the construction, validity and interpretation of this
Plan.
Re:
Fairness Opinion — Opinion to the Board of Directors
of Overture Acquisition Corp.
Dear Mr. Blazer:
Houlihan Smith and Company, Inc. (“Houlihan”) has been
advised that Overture Acquisition Corp. (“Overture” or
the “Company”), intends to enter into a transaction
with Jefferson National Financial Corp. (“JNF”) and
certain subsidiaries of JNF. Under the proposed transaction, the
Company will remain domiciled in the Cayman Islands and form two
new Bermuda entities, a holding company and a reinsurance
subsidiary of the holding company (“Newco”). Newco
will work towards obtaining the licenses it will require to
operate as an insurer in Bermuda.
JNF will create a wholly owned subsidiary (“Sub” or
“Target”) and JNF will cause Jefferson National Life
Insurance Co. (“JNL”), a subsidiary of JNF, and JNL
Bermuda, LLC (“JNL Bermuda”), a subsidiary of JNL, to
enter into a reinsurance option and contribution agreement (the
“Reinsurance Option and Contribution Agreement”) with
Sub. The reinsurance option will involve JNL contributing to JNL
Bermuda: (i) certain employees, (ii) certain other
assets, including a portfolio of securities worth approximately
$98.5 million, and (iii) an option to enter into a
quota share reinsurance agreement with JNL in which JNL Bermuda
or any permitted successor or assign of JNL Bermuda may reinsure
90% of the fixed annuity block of JNL and 50% of the variable
annuity block of JNL for a ceding commission of approximately
$21.5 million conditional upon JNL Bermuda or any successor
or assign obtaining all the necessary licenses required to
operate as a reinsurer in Bermuda.
Newco will merge with JNL Bermuda at the closing of the
transaction for a purchase price of approximately
$120 million (the “Merger Consideration”). Newco
would assume all properties, rights, privileges, powers and
obligations of JNL Bermuda, including the Reinsurance Option and
Contribution Agreement and the Investment Management Agreement
(as defined herein), as the survivor entity to JNL Bermuda (the
“Merger”). Separately, Newco will be granted the right
to reinsure future Monument Advisor policies of JNL.
Separate from the Merger, JNL will acquire 24.5% of the shares
of common stock of Overture either through (i) open market
purchases of the common stock prior to the date of the closing
of the Merger (the “Closing Date”), (ii) a
private placement of shares of common stock at a per share
purchase price of $10.04
per share (“Securities Purchase Agreement”),
and/or
(iii) a combination thereof. JNL will enter into the
Securities Purchase Agreement only if it has not been able to
acquire 24.5% of Overture’s common stock as of the Closing
Date by open market purchases.
Prior to the Closing Date, JNL Bermuda will have entered into an
investment management agreement (“Investment Management
Agreement”) with JNF Asset Management, LLC
(“JNFAM”).
As of the Closing Date, Overture will (i) be granted an
option to purchase all of the membership interest of JNFAM for a
purchase price of up to $3.5 million, and (ii) a right
of first refusal with respect to a third party’s bid to
purchase JNFAM. The option will have a one year expiration
period from the Closing Date, first exercisable as of the six
month anniversary from the Closing Date.
Houlihan was engaged to render an opinion (“Opinion”)
to the board of directors (the “Board”) as to whether,
as of the date of such Opinion, (i) the Merger
Consideration to be paid by the Company for the Target in
conjunction with the Merger is fair from a financial point of
view to the shareholders of the Company, and (ii) the fair
market value of the Target is at least equal to 80% of the
balance in the Company’s trust account (excluding deferred
underwriting discounts and commissions).
Our Opinion is being rendered in such form and substance
customary to transactions of a similar nature and on a basis
that is consistent with our professional responsibilities to the
Company, and shall be subject to the undertaking of certain
inquiries concerning the Merger and the business of the Target.
In connection therewith, Houlihan has relied upon public and
non-public reports of the Target and other information supplied
to it by or on behalf of the Company and JNF. Houlihan shall not
in any respect be responsible for the accuracy or completeness
of any such report or information, public or non-public,
supplied to it by or on behalf of the Target or for any
obligation to verify the same nor for any conclusions based upon
inaccurate or incomplete information.
We have not been requested to opine as to, and this Opinion does
not express an opinion as to, make any recommendations with
respect to, or otherwise address, among other things,
(i) the underlying business decision of the Company,
shareholders of the Company, or any other party to proceed with
or affect the Merger, (ii) the terms of any arrangements,
understandings, agreements or documents related to, or the form
or any other portion or aspect of, the Merger or otherwise
(other than to the extent expressly specified herein),
(iii) the relative merits of the Merger as compared to any
alternative business strategies that might exist for the Company
or the effect of any other transaction in which the Company or
any other party might engage, (iv) the solvency or
creditworthiness of the Company or any other participant in the
Merger under any applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance or similar matters,
(v) the fairness of the Merger Consideration to be paid by
the Company for the Target in conjunction with the Merger to any
investors of the Company, other than the shareholders of the
Company, or (vi) the prospects of the impact of the Company
entering into or consummating the Merger under any other
contract, agreement or arrangement to which the Company may be a
party.
Process
In arriving at its opinion, Houlihan reviewed and analyzed all
the information it deemed necessary and appropriate including:
•
a draft of the Master Agreement prepared by Overture, dated
December 5, 2009, including publicly available information
concerning JNF that Houlihan believes to be relevant to its
inquiry;
•
financial and operating information with respect to the business
operations and prospects of the Target furnished to Houlihan by
JNF’s management;
financial and operating information with respect to the business
operations and prospects of Overture furnished to Houlihan by
Overture’s management;
•
a comparison of the financial condition and valuations of other
companies that are similar to the Target that Houlihan deemed
relevant and comparable;
•
a comparison of the financial terms of the Merger contemplated
by the Master Agreement with the terms of certain other recent
transactions which Houlihan deemed relevant and
comparable; and
•
such other financial, strategic and market information that
Houlihan deemed relevant.
In addition, Houlihan held discussions with the management and
staff of Overture and JNF and their respective advisors
concerning the business and operations, assets, present
condition and future prospects of the Target and Overture, and
undertook such other studies, analyses and investigations as
Houlihan deemed relevant and appropriate.
We have relied upon and assumed, without independent
verification, the accuracy, completeness and reasonableness of
the financial, legal, tax, and other information discussed with
or reviewed by us and have assumed such accuracy and
completeness for purposes of rendering our Opinion. We have
further relied upon the assurances and representations from the
Company that they are unaware of any facts that would make the
information provided to us to be incomplete or misleading for
the purposes of our Opinion. Furthermore, no opinion, counsel or
interpretation is intended in matters that require legal,
regulatory, accounting, insurance, tax or other similar
professional advice. It is assumed that such opinions, counsel
or interpretations have been or will be obtained from the
appropriate professional sources. Furthermore, we have relied,
with your consent, upon the Company and their respective
advisers, as to all legal, regulatory, accounting, insurance and
tax matters with respect to the Company and the Merger.
The Opinion shall be used (i) by the Board in evaluating
the Merger Consideration to be paid by the Company for the
Target in conjunction with the Merger and that the fair market
value of the Target is at least equal to 80% of the balance in
the Company’s trust account (excluding deferred
underwriting discounts and commissions), and (ii) in
reports made by the Company to its shareholders and regulatory
agencies. This Opinion has been furnished for the use and
benefit of the Board in connection with their evaluation of the
Merger Consideration to be paid by the Company for the Target in
conjunction with the Merger and may not be used for any other
purpose without our prior written consent.
Our Opinion is necessarily based upon our evaluation of
information made available to us, as well as, the economic,
monetary, market, financial, regulatory and other conditions as
they exist and can be evaluated on the date hereof and we have
not undertaken, and we assume no responsibility, to update,
revise, reaffirm or withdraw this Opinion, or otherwise comment
on or consider events or circumstances occurring after the date
hereof. We disclaim any obligation to advise the Board or any
person of any change in any fact or matter affecting our
Opinion, which may come or be brought to our attention after the
date of this Opinion. We did not provide, and will not provide,
any advice with respect to any legal conclusions as to whether
the Merger may be prohibited by law.
In rendering our Opinion, we have assumed, with your consent,
that the Merger will be consummated on the terms described in
the Master Agreement, without any waiver or modification of any
material terms or conditions, and that in the course of
obtaining the necessary regulatory or third party approvals for
the Merger, no delay, limitation, restriction or condition will
be imposed that would have an adverse effect on the Company or
the Merger.
Each of the analyses conducted by Houlihan was carried out to
provide a particular perspective of the Merger. Houlihan did not
form a conclusion as to whether any individual analysis, when
considered in isolation, supported or failed to support our
Opinion as to (i) the fairness of the Merger Consideration
to be
paid by the Company for the Target in conjunction with the
Merger to the shareholders of the Company, and (ii) the
fair market value of the Target is at least equal to 80% of the
balance in the Company’s trust account (excluding deferred
underwriting discounts and commissions). Houlihan does not place
any specific reliance or weight on any individual analysis, but
instead, concludes that its analyses taken as a whole, supports
its conclusion and Opinion. Accordingly, Houlihan believes that
its analyses must be considered in their entirety and that
selecting portions of its analyses or the factors it considered,
without considering all analyses and factors collectively, could
create an incomplete view of the processes underlying the
analyses performed by Houlihan in connection with the
preparation of the Opinion.
This Opinion is not intended to be, and does not constitute, a
recommendation to the Board to proceed with the Merger. This
Opinion relates solely to the question of (i) the fairness
of the Merger Consideration to be paid by the Company for the
Target in conjunction with the Merger to the shareholders of the
Company, and (ii) the fair market value of the Target is at
least equal to 80% of the balance in the Company’s trust
account (excluding underwriting discounts and commissions). This
Opinion should not be construed as creating any fiduciary duty
on our part to any person.
Except as set forth in our engagement letter with the Company
signed October 27, 2009, this Opinion may not be disclosed,
reproduced, disseminated, quoted, summarized or referred to at
any time, in any manner or for any purpose, nor shall any
references to Houlihan or any of its affiliates be made, without
the prior written consent of Houlihan, in each case except as
set forth in the fifth preceding paragraph of this letter.
Houlihan, a Financial Industry Regulatory Authority (FINRA)
member, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, underwritings, private
placements, bankruptcy, capital restructuring, solvency
analyses, stock buybacks, and valuations for corporate and other
purposes. Houlihan has no prior investment banking relationships
with any of the parties involved in the transaction. Houlihan
has received a non-contingent fee from Overture relating to its
services in providing the Opinion.
Based on and subject to the foregoing, we are of the opinion
that, as of the date hereof, (i) the Merger Consideration
to be paid by the Company for the Target in conjunction with the
Merger is fair from a financial point of view to the
shareholders of the Company, and (ii) the fair market value
of the Target is at least equal to 80% of the balance in the
Company’s trust account (excluding underwriting discounts
and commissions).
Very truly yours,
Houlihan Smith & Company, Inc.
V-4
Dates Referenced Herein and Documents Incorporated by Reference