INDM United America Indemnity, Ltd. (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

 

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES

EXCHANGE ACT OF 1934 (Amendment No.  )

 

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Filed by a Party other than the Registrant  o

 

Check the appropriate box:

 

o   Preliminary Proxy Statement

o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ   Definitive Proxy Statement

o   Definitive Additional Materials

o   Soliciting Material Under § 240.14a-12

 

UNITED AMERICA INDEMNITY, LTD.

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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UNITED AMERICA INDEMNITY, LTD.

Walker House, 87 Mary Street
George Town, Grand Cayman KY1-9005
Cayman Islands

April 21, 2010

 

Dear Shareholders:

 

We are furnishing the accompanying proxy statement to shareholders of United America Indemnity, Ltd. (the “Company”) in connection with the solicitation of proxies by our management for use at the special court-ordered meeting of our common shareholders (the “Special Meeting”). The Special Meeting will be held on Thursday, May 27, 2010 at Purvis House, Victoria Place, 29 Victoria Street, Hamilton, Bermuda, at 9:00 am Bermuda time.

 

At the Special Meeting, we will submit to you for your approval a proposal that would result in you holding shares in an Irish company rather than a Cayman Islands company pursuant to a scheme of arrangement filed with the Grand Court of the Cayman Islands. The proposed scheme of arrangement under Cayman Islands law will effectively result in the exchange of shares of the newly formed Irish company, Global Indemnity plc, for your shares in the Company, a Cayman Islands company, on a one-for-two basis. The one-for-two exchange will uniformly reduce the number of common shares outstanding, but it will not affect any shareholder’s percentage ownership interest or relative voting power (subject to the treatment of fractional shares). If the scheme of arrangement is effected, the Company will become a wholly-owned subsidiary of Global Indemnity plc. At the Special Meeting, we will be asking you to vote in favor of the scheme of arrangement. If the scheme of arrangement is approved, we will also ask you to approve a proposal to create “distributable reserves” for Global Indemnity plc, which, under Irish law, are required to make distributions and pay dividends or, generally, repurchase shares in the future.

 

After extensive research and consultation with our advisors, we have decided to create a new parent holding company in Ireland for the Company and its subsidiaries, which will result in you owning shares of a company incorporated in Ireland, rather than the Cayman Islands, if the proposed scheme of arrangement proceeds. We believe that this is in the best interests of both the Company and its valued shareholders because it will establish our overall home in a sophisticated, well-developed corporate, legal and regulatory environment, which will provide better access to European multinational corporations, administrative efficiencies, a modern technological infrastructure, a highly educated and motivated professional work force and a long history of international investments as well as an extensive network of treaties. Our research and investigations concluded that the creation of a new holding company in Ireland will best accomplish our objectives. For you, our shareholders, much will remain unchanged following the incorporation in Ireland. Our Class A common shares will continue to trade as Class A ordinary shares of Global Indemnity plc on The NASDAQ Global Select Market, which we refer to as “NASDAQ.” We will, however, change the ticker symbol to “GBLI.” We will remain subject to U.S. Securities and Exchange Commission reporting requirements, the mandates of the U.S. Sarbanes-Oxley Act and the corporate governance rules of NASDAQ. We will continue to report our consolidated financial results in U.S. dollars and under U.S. generally accepted accounting principles.

 

Under U.S. federal income tax law, the holders of our common shares generally will not recognize gain or loss in the transaction (other than with respect to the receipt of cash in lieu of GI plc ordinary shares).

 

Please take the time to read the many details that follow in our proxy statement. Although there is legal and financial complexity associated with any move like this, and the change of domicile does present new risks and uncertainties, we are confident that the change of domicile enhances both our operating model and institutional credibility, while avoiding any materially negative financial effects. We encourage you to read the entire document carefully, including the “Risk Factors” section, before voting in person or by proxy at the Special Meeting.

For the reasons set forth in the proxy statement, our board of directors unanimously believes that the proposed scheme of arrangement is in the best interests of our shareholders, and we therefore strongly urge you to vote FOR the scheme of arrangement and FOR the other proposals described in the accompanying proxy statement.

 

To approve the Scheme of Arrangement, we must obtain the affirmative vote of a majority in number of the holders of Class A and Class B common shares, present and voting as a single class, representing 75% or more in value of all common shares present and voting on the proposal, whether in person or by proxy. If the requisite majorities are obtained, we will then seek the sanction of the scheme of arrangement by the Grand Court of the Cayman Islands. The affirmative vote of holders of common shares representing at least a majority of the common shares present and voting at the Special Meeting is required to approve the distributable reserves proposal.

 

If you have any questions about the Special Meeting or require assistance, please call Georgeson Inc. at (800) 501-4416 (toll-free from the US and Canada), +1 (866) 742-1973 (toll-free from the EU) or (212) 806-6859 (collect).

 

Very truly yours,

 

Larry A. Frakes

President and Chief Executive Officer

 

YOUR VOTE IS IMPORTANT

 

It is important that your shares be voted at the Special Meeting. Please MARK, SIGN,
DATE, and MAIL your proxy PROMPTLY in the return envelope provided or appoint a proxy to vote your shares by telephone as described in the proxy statement or proxy card.

 

The proxy statement is dated April 21, 2010 and is first being mailed to

shareholders on or about April 23, 2010.

 

UNITED AMERICA INDEMNITY, LTD.

Walker House, 87 Mary Street
George Town, Grand Cayman KY1-9005
Cayman Islands

 

NOTICE OF SPECIAL COURT ORDERED MEETING OF

COMMON SHAREHOLDERS

 

The accompanying proxy statement and proxy card are first being mailed to our shareholders on or about April 23, 2010.

 

The Special Meeting of our common shareholders is being held in accordance with an order of the Grand Court of the Cayman Islands (the “Grand Court”) dated April 20, 2010. If our Class A and Class B common shareholders, voting as a single class, approve the Scheme of Arrangement, we will seek the sanction of the Scheme of Arrangement at a hearing before the Grand Court, which must be obtained as a condition to the Scheme of Arrangement becoming effective as set forth in the proxy statement. Shareholder approval of the distributable reserves proposal is not a condition to the Scheme of Arrangement becoming effective. We expect the sanction hearing to be held on June 11, 2010 at the Grand Court, which is located in George Town, Grand Cayman, Cayman Islands. If you are a common shareholder who wishes to appear in person or by counsel at the sanction hearing and present evidence or arguments in support of or opposition to the Scheme of Arrangement, you may do so. In addition, the Grand Court has wide discretion to hear from interested parties. UAI Ltd. will not object to the participation in the sanction hearing by any UAI Ltd. Class A or Class B common shareholder who holds shares through a broker.

 

As a term of the Scheme of Arrangement, holders of UAI Ltd. Class A and Class B common shares who would otherwise receive fractional shares in GI plc as a result of the one-for-two exchange will receive cash in consideration of the fractional shares. We intend to treat UAI Ltd. common shares held beneficially through a bank, broker, custodian or other nominee, who in turn hold such shares through the Depository Trust Company, in the same manner as registered shareholders of UAI Ltd. whose shares are registered in their names in order to calculate the number of shares to be exchanged.

 

This notice incorporates the accompanying proxy statement.

 

IF YOU WISH TO ATTEND THE MEETING BY PROXY, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE FURNISHED FOR THAT PURPOSE, OR DIRECT THE VOTING OF YOUR COMMON SHARES BY TELEPHONE, AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.

 

By Order of the board of directors

 

Larry A. Frakes
President and Chief Executive Officer

 

April 21, 2010

 

The accompanying proxy statement incorporates documents by reference. Please see “Where You Can Find More Information” for a listing of documents incorporated by reference. These documents are available to any person, including any beneficial owner, upon request directed to our Chief Executive Officer c/o United America Indemnity, Ltd., Walker House, 87 Mary Street, George Town, Grand Cayman KY1-9005, Cayman Islands. To ensure timely delivery of these documents, any request should be made by May 20, 2010. The exhibits to these documents will generally not be made available unless they are specifically incorporated by reference in the accompanying proxy statement.

 

TABLE OF CONTENTS

 

 

UNITED AMERICA INDEMNITY, LTD.

 

Walker House, 87 Mary Street

George Town, Grand Cayman KY1-9005

Cayman Islands

www.uai.ky

 

 

 

 

PROXY STATEMENT

 

 

 

 

For the Special Court-Ordered Meeting of All Common Shareholders
to be held on May 27, 2010

 

 

 

 

We will hold a special court-ordered meeting of all common shareholders (the “Special Meeting”) of United America Indemnity, Ltd. (sometimes referred to herein as “UAI Ltd.,” “UAI” or the “Company”) at Purvis House, Victoria Place, 29 Victoria Street, Hamilton, Bermuda at 9:00 am, Bermuda time, on Thursday, May 27, 2010. We are mailing this proxy statement on or about April 23, 2010 to each holder of our issued and outstanding Class A and Class B common shares entitled to vote at the Special Meeting in order to furnish information relating to the business to be transacted at the Special Meeting. At the Special Meeting, we will be asking you to approve a proposal that would result in your holding shares in an Irish company rather than a Cayman Islands company, which we call the “Scheme of Arrangement.” The proposal will effectively result in the exchange of shares of Global Indemnity plc, a newly formed Irish company (“GI plc”) for your shares in UAI Ltd. on a one-for-two basis. The one-for-two exchange ratio will reduce the number of shares outstanding but it will not affect any shareholder’s percentage ownership interest or relative voting power (subject to the treatment of fractional shares). Holders of UAI Ltd. Class A and Class B common shares who would otherwise receive fractional shares in GI plc as a result of the one-for-two exchange will receive cash in consideration of the fractional shares. We intend to treat UAI Ltd. common shares held beneficially through a bank, broker, custodian or other nominee, who in turn hold such shares through the Depository Trust Company (“DTC”) in the same manner as registered shareholders of UAI Ltd. whose shares are registered in their names in order to calculate the number of shares to be exchanged. If the Scheme of Arrangement is approved, we will also ask you to approve a proposal to create “distributable reserves,” which may be used to pay dividends or repurchase shares in the future.

 

Our board of directors has fixed the close of business on April 20, 2010 as the record date for the Special Meeting. All shareholders of record at that time are entitled to notice of and are entitled to vote in person or by proxy at the Special Meeting and any adjournment or postponement thereof. On the record date, 36,508,907 Class A common shares and 24,122,744 Class B common shares were issued and outstanding.

 

VOTING AND REVOCABILITY OF PROXIES

 

It is important that your shares be voted at the Special Meeting. Please MARK, SIGN, DATE, and MAIL your proxy PROMPTLY in the return envelope provided or appoint a proxy to vote your shares by telephone in accordance with the instructions in the proxy card, even if you plan to attend the Special Meeting. If you later desire to revoke your proxy for any reason, you may do so in the manner described below. The envelope is addressed to our proxy solicitor and requires no postage. If you receive more than one proxy card — because you have multiple accounts — you should sign and return all proxies received to be sure all of your shares are voted.

 

Generally, each holder of record of Class A common shares is entitled to one vote per share and each holder of record of Class B common shares is entitled to ten votes per share. However, since the required vote for approval of the Scheme of Arrangement consists of the affirmative vote of a majority in number of the

holders of our common shares, present and voting as a single class, representing 75% or more in value of our common shares present and voting on the proposal, whether in person or by proxy, each Class B common share will effectively have the same voting power as each Class A common share for purposes of this proposal.

 

All common shareholders are invited to attend the Special Meeting. Proof of ownership of Class A or Class B common shares as of the record date, as well as a form of personal identification, must be presented in order to be admitted to the Special Meeting.

 

The Special Meeting has been convened and will be conducted in accordance with the directions of the Grand Court of the Cayman Islands (the “Grand Court”). There is no formal quorum requirement for a meeting of shareholders convened to consider the terms of a scheme of arrangement under Cayman Islands law. Nonetheless, we will not seek that the Scheme of Arrangement be sanctioned by the Grand Court unless one or more persons in person or by proxy representing a majority of all common shares outstanding and entitled to vote are present at the Special Meeting, which number of shareholders would constitute a quorum for the conduct of business at a general meeting of the Company. Abstentions and broker non-votes will be counted as present for purposes of determining whether there is a quorum in respect of the proposals. Assuming the presence of a quorum, the Scheme of Arrangement must be approved by the affirmative vote of a majority in number of the holders of Class A and Class B common shares, present and voting as a single class, representing 75% or more in value of all common shares present and voting on the proposal, whether in person or by proxy. If the requisite majorities are obtained, we will then seek the sanction of the Scheme of Arrangement by the Grand Court. The affirmative vote of a majority of the votes cast by the holders of our common shares, whether in person or by proxy, is required to approve the reduction of share premium of GI plc to allow the creation of distributable reserves proposal.

 

If you mark your proxy as “Withhold Authority” or “Abstain” on any matter, or if you give specific instructions that no vote be cast on any specific matter, the shares represented by your proxy will not be voted on that matter, but will count in determining whether a quorum is present. Proxies submitted by brokers that do not indicate a vote for some or all of the proposals because the brokers do not have discretionary voting authority and have not received instructions as to how to vote on those proposals (so called “broker non-votes”) are also considered in determining whether a quorum is present, but will not affect the outcome of any vote.

 

You may vote your shares at the Special Meeting in person or by proxy. All valid proxies received before the Special Meeting will be voted according to their terms (including telephone proxy). If you submit a properly executed proxy card, but do not provide instructions as to how to vote your shares, your proxy will be voted as follows:

 

 

If any other business is brought before the Special Meeting, proxies will be voted, to the extent permitted by the rules and regulations of the Securities and Exchange Commission, which we refer to as the “SEC,” in accordance with the judgment of the persons voting the proxies. After providing your proxy, you may revoke it at any time before it is voted at the Special Meeting by (1) filing with our Chief Executive Officer an instrument revoking it or a duly executed proxy bearing a later date, or (2) by attending the Special Meeting and giving notice of revocation. Attendance at the Special Meeting, by itself, will not constitute revocation of a proxy.

 

We will bear the cost of preparing and soliciting proxies, including the reasonable charges and expenses of brokerage firms or other nominees for forwarding proxy materials to shareholders. In addition to solicitation by mail, certain of our directors, officers, and employees may solicit proxies personally or by telephone or other electronic means without extra compensation, with the exception of reimbursement for actual expenses incurred in connection with the solicitation. The enclosed proxy is solicited by and on behalf of our board of directors.

 

 

Some of the statements included in this proxy statement and the documents incorporated by reference may include forward-looking statements that reflect our current views with respect to future events and financial performance that are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “plan,” “seek,” “intend” or “anticipate” or the negative thereof or comparable terminology, and include discussions of strategy, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives, expectations or consequences of identified transactions, and statements about the future performance, operations, products and services of the companies.

 

Our business and operations are and will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following:

 

 

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are set forth in this proxy statement and the documents that we file with the SEC from time to time. You may obtain copies of these documents as described under the heading “Where You Can Find More Information.”

 

Except as required under U.S. federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this proxy statement, whether as a result of new information, future events, changes in assumptions or otherwise.

 

We are seeking your approval at the Special Meeting of the Scheme of Arrangement that will result in you owning Class A or Class B ordinary shares, as applicable, of Global Indemnity plc, a company incorporated in Ireland (“GI plc”), instead of the Class A or Class B common shares of UAI Ltd. that you currently hold. We use the terms “we,” “our” and “us” in this proxy statement to refer to UAI Ltd. prior to the Transaction and to refer to GI plc and its subsidiaries after the Transaction.

 

As explained in more detail below, the Scheme of Arrangement on which we are asking you to vote will effect the “Transaction.” The Transaction involves several steps. UAI Ltd. incorporated a new Irish company, GI plc, as a direct subsidiary. On April 20, 2010, the Grand Court ordered the convening of the Special Meeting of UAI Ltd. Class A and Class B common shareholders to approve the Scheme of Arrangement. We will hold the Special Meeting during which we will seek your approval of the Scheme of Arrangement on May 27, 2010. If we obtain the necessary approval from UAI Ltd.’s common shareholders, the Grand Court will hold a second hearing scheduled to be held on or about June 11, 2010 during which we will seek that the Grand Court sanction the Scheme of Arrangement (the “Sanction Hearing”). Assuming we receive the necessary approvals from UAI Ltd.’s common shareholders and the sanction of the Grand Court and the conditions to the consummation of the Transaction are satisfied (and we do not abandon the Transaction), we will file the court order sanctioning the Scheme of Arrangement with the Registrar of Companies in the Cayman Islands, at which time the Scheme of Arrangement will become effective. Please see “Proposal Number One: The Transaction — Conditions to Consummation of the Transaction.”

 

Various steps of the Transaction will effectively occur simultaneously at the “Transaction Time,” which we anticipate will be after the close of trading on the Nasdaq Global Select Market (“NASDAQ”) on the day the Scheme of Arrangement becomes effective, and before the opening of trading on NASDAQ on the next business day. Please see Annex E to this proxy statement for an expected timetable. GI plc, which is currently wholly-owned by UAI Ltd., was incorporated on March 9, 2010. Since Irish law requires that all public limited companies have at least seven members, GI plc issued a share to each of six other shareholders, these shares being held on a beneficial basis for UAI Ltd. GI plc has only nominal assets and capitalization and has not and, prior to the Transaction Time, will not, engage in any business or other activities other than in connection with its formation and the Transaction. As a result of the Transaction, GI plc will become the parent holding company of UAI Ltd.

 

At the Transaction Time, the following steps will effectively occur simultaneously:

 

1. all previously outstanding Class A common shares of UAI Ltd. will be repurchased and cancelled;

 

2. GI plc will issue Class A ordinary shares on a one-for-two basis to the holders of UAI Ltd. Class A common shares that have been repurchased and cancelled;

 

3. holders of UAI Ltd. Class A common shares who would otherwise receive fractional shares in GI plc as a result of the one-for-two exchange will receive cash in consideration of the fractional shares that would otherwise be issued in an amount based on the average of the high and low trading prices of UAI Ltd. Class A common shares on NASDAQ on the business day immediately preceding the effective date of the Scheme of Arrangement;

 

4. all previously outstanding UAI Ltd. Class B common shares will be repurchased and cancelled;

 

5. GI plc will issue Class B ordinary shares on a one-for-two basis to the holders of UAI Ltd. Class B common shares that have been repurchased and cancelled;

 

6. holders of UAI Ltd. Class B common shares who would otherwise receive fractional shares in GI plc as a result of the one-for-two exchange will receive cash in consideration of the fractional shares that would otherwise be issued in an amount based on the average of the high and low trading prices of UAI Ltd. Class A common shares (into which UAI Ltd. Class B common shares are, save in limited circumstances, convertible upon sale) on NASDAQ on the business day immediately preceding the effective date of the Scheme of Arrangement;

7. UAI Ltd. will issue 100 UAI Ltd. Class A common shares to GI plc (which will constitute all of UAI Ltd.’s issued shares at such time);

 

8. all previously outstanding ordinary shares of GI plc, which prior to the Transaction Time will be held by UAI Ltd. and its nominees, shall be reclassified as deferred shares and shall cease to carry any right to a dividend or to receive notice of or to attend, vote or speak at any shareholder meeting and shall only confer the right on a return of capital to repayment of the nominal value paid on those shares and only after repayment of the Class A and Class B ordinary shares in full and may be acquired by GI plc for no consideration; and

 

9. UAI Ltd. will file an election to be treated as an entity disregarded from GI plc for U.S. federal income tax purposes. This election will be effective two days after the Transaction Time.

 

GI plc Class A and Class B ordinary shares issued pursuant to the Transaction will be fully paid and non-assessable.

 

As a result of the Transaction, the Class A and Class B common shareholders of UAI Ltd. will become Class A and Class B ordinary shareholders of GI plc, respectively, and UAI Ltd. will become a wholly owned subsidiary of GI plc. The number of Class A and Class B ordinary shares issued and outstanding will be reduced as a result of the one-for-two exchange pursuant to the Transaction. The number of authorized shares of GI plc will equal the sum of (i) the number of authorized shares of UAI Ltd. immediately prior to the Transaction and (ii) 40,000 ordinary shares, with par value of €1 per share (the “Euro Share Capital”). Please see “Description of Global Indemnity plc Share Capital — Capital Structure.” The one-for-two exchange will uniformly reduce the number of UAI Ltd.’s common shares outstanding (subject to the treatment of fractional shares). The exchange ratio will not affect any shareholder’s percentage ownership interest or relative voting power (subject to the treatment of fractional shares, see “Summary — Fractional Shares”).

 

The current board of directors of UAI Ltd. will become the board of directors of GI plc. It is intended that at all material times, GI plc will have its tax residence in Ireland and will be Irish incorporated. In addition to GI plc being incorporated in Ireland and being governed by Irish law, we will set up a subsidiary in Ireland, principally to carry on certain business activities for UAI Ltd. and its subsidiaries, including information technology, actuarial and accounting services and to establish a base in Europe.

 

In connection with the completion of the Transaction, GI plc will assume UAI Ltd.’s existing obligations in connection with awards granted under UAI Ltd.’s equity incentive plans and other similar employee awards and UAI Ltd.’s existing shareholder agreement. Based on the Transaction and the one-for-two exchange, proportionate adjustments will be made to the per share exercise price and/or the number of shares issuable upon the exercise or conversion of all outstanding options to reflect the exchange ratio pursuant to the terms of such instruments.

 

Our board of directors has fixed the close of business on April 20, 2010 as the record date for the Special Meeting. On the record date, 36,508,907 Class A and 24,122,744 Class B common shares were issued and outstanding, respectively.

The following diagram depicts our organizational structure before and after the Transaction. The diagram does not depict any of the legal entities owned by UAI Ltd. (with the initial exception of GI plc).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Our proxy solicitor:

 

Georgeson Inc.

199 Water Street, 26 ^th Floor

New York, NY 10038-3560

(800) 501-4416 (toll-free from the US and Canada)

+1 (866) 742-1973 (toll-free from the EU)

(212) 806-6859 (call collect)

 

SUMMARY

 

Parties to the Transaction

	•	Penn-America, which includes property and general liability products for small commercial businesses distributed through a select network of wholesale general agents with specific binding authority;
	•	United National, which includes property, general liability, and professional lines products distributed through program administrators with specific binding authority; and
	•	Diamond State, which includes property, general liability, and professional lines products distributed through wholesale brokers and program administrators with specific binding authority.

	•	Wind River Reinsurance Company, Ltd., a Bermuda based treaty and facultative reinsurer of excess and surplus lines and specialty property and casualty insurance.

 

The Transaction

 

Reasons for the Transaction

	•	Ireland has strong international relationships as a member of the European Union (“EU”) and the eurozone, a long history of international investment and a robust network of tax treaties with the other EU member states and many other countries, including the United States. As a result, we believe Ireland offers a stable long-term legal and regulatory environment for us. In addition, while Ireland has a well-developed and stable tax regime, the Cayman Islands has generally no system of direct corporate taxation. We therefore expect that this change of incorporation will improve our global tax position by lowering our exposure to possible changes in tax legislation directed towards companies incorporated in countries that do not have a substantial network of commercial, tax and other treaties and trade agreements.
	•	We believe we will benefit from relocating to a jurisdiction that offers a more sophisticated financial and commercial infrastructure. In addition, Ireland offers a modern technological infrastructure as well as access to European multinational corporations having U.S. operations.
	•	Ireland has a sophisticated well-developed corporate, legal and regulatory environment and a highly educated and motivated professional workforce.
	•	Ireland, like the Cayman Islands, is an English-speaking common law jurisdiction, which we believe makes its legal system less prescriptive and more flexible than those of civil law jurisdictions and also more familiar to UAI Ltd. and its shareholders.
	•	Ireland has a stable and well-developed legal system, which we believe encourages high standards of corporate governance and provides shareholders with substantial rights. We believe that, on the whole, the perception of an Irish company among regulatory authorities, investors, creditors and customers is generally more favorable than that of a Cayman Islands company.

 

Tax Considerations

 

Rights of Shareholders

 

Fractional Shares

 

NASDAQ Listing

 

Court Sanction of the Scheme of Arrangement

 

Creation of Distributable Reserves

 

Market Price

 

No Appraisal Rights

 

Accounting Treatment of the Transaction

 

The Special Meeting

 

Recommendation of the Board of Directors

	•	“FOR” the proposal to approve the Scheme of Arrangement.
	•	“FOR” the distributable reserves proposal.
	•	“FOR” the proposal to adjourn the Special Meeting to a later date if there are insufficient proxies to approve the Scheme of Arrangement at the time of the Special Meeting.

 

Required Vote

 

Proxies

		For the Years Ended December 31,
		2009				2008				2007				2006				2005
		(Dollars in thousands, except per share data)
Consolidated Statements of Operations Data:
Gross premium written		$	340,999			$	378,700			$	563,112			$	652,965			$	622,878
Net premiums written			290,995				309,080				490,535				560,535				519,733
Net premiums earned			301,674				382,508				536,323				546,469				475,430
Net realized investment gains (losses)			15,862				(50,259	)			968				(570	)			554
Total revenues			387,750				400,079				614,632				612,437				523,102
Impairments of goodwill and intangible assets			—				(96,449	)			—				—				—
Income (loss) from continuing operations(1)			75,437				(141,560	)			98,917				89,338				64,751
Net income (loss)			75,437				(141,560	)			98,917				99,418				65,593
Per share data:(2)
Income (loss) from continuing operations(1)		$	75,437			$	(141,560	)		$	98,917			$	89,338			$	64,751
Basic			1.46				(3.87	)			2.40				2.18				1.62
Diluted			1.46				(3.87	)			2.38				2.16				1.59
Net Income (loss) available to common shareholders		$	75,437			$	(141,560	)		$	98,917			$	99,418			$	65,593
Basic			1.46				(3.87	)			2.40				2.43				1.64
Diluted			1.46				(3.87	)			2.38				2.41				1.61
Weighted-average number of shares outstanding
Basic(3)			51,712,098				36,556,189				41,258,027				40,957,109				39,983,638
Diluted(3)			51,762,764				36,556,189				41,570,239				41,336,616				40,669,413

(1)		The results of our discontinued operations for 2009, 2008 and 2007 relating to our Agency operations that were sold in 2006 are included in income from continuing operations due to immateriality. The results of discontinued operations continue to be stated separately for 2006 and 2005.
(2)		In 2008, “Diluted” loss per share is the same as “Basic” loss per share since there was a net loss for that year.
(3)		In May 2009, UAI Ltd. issued 17.2 million Class A common shares and 11.4 million Class B common shares in conjunction with the rights offering. In computing the basic and diluted weighted share counts, the number of shares outstanding prior to May 5, 2009 (the date that the common shares were issued in conjunction with the rights offering) was adjusted by a factor of 1.114 to reflect the impact of a bonus element associated with the rights offering in accordance with appropriate accounting guidance. As a result, share counts for the prior year have been restated.

		For the Years Ended December 31,
		2009				2008				2007				2006				2005
		(Dollars in thousands)
Consolidated Insurance Operating Ratios based on our GAAP Results:(1)
Before purchase accounting adjustments:
Loss ratio(2)(3)			56.2				79.8				55.8				55.7				58.0
Expense Ratio			39.8				37.3				32.5				31.8				33.2
Combined ratio(2)(3)			96.0				117.1				88.3				87.5				91.2
Impact of purchase accounting adjustments:
Loss ratio			—				—				—				—				2.6
Expense ratio			—				—				—				—				(2.9	)
Combined ratio			—				—				—				—				(0.3	)
As reported, after purchase accounting adjustments:
Loss ratio(2)(3)			56.2				79.8				55.8				55.7				60.6
Expense Ratio			39.8				37.3				32.5				31.8				30.3
Combined ratio(2)(3)			96.0				117.1				88.3				87.5				90.9
Net/gross premiums written			85.3				81.6				87.1				85.8				83.4
Financial Position as of Last Day of Period:
Total investments and cash and cash equivalents		$	1,731,314			$	1,599,528			$	1,765,103			$	1,656,664			$	1,419,564
Reinsurance receivables, net of allowance			543,351				679,277				719,706				982,502				1,278,156
Total assets			2,445,780				2,477,059				2,775,172				2,984,616				3,102,002
Senior notes payable			90,000				90,000				90,000				90,000				90,000
Junior subordinated debentures			30,929				30,929				46,393				61,857				61,857
Unpaid losses and loss adjustment expenses			1,257,741				1,506,429				1,503,237				1,702,010				1,914,224
Total Shareholders’ equity			831,976				631,993				836,276				763,270				639,927

(1)		Our insurance operating ratios are non-U.S. GAAP financial measures that are generally viewed in the insurance industry as indicators of underwriting profitability. The loss ratio is the ratio of net losses and loss adjustment expenses to net premiums earned. The expense ratio is the ratio of acquisition costs and other underwriting expenses to net premiums earned. The combined ratio is the sum of the loss and expense ratios. The ratios presented here represent the consolidated results of both our Insurance Operations and Reinsurance Operations.
(2)		Our 2009 loss and combined ratios were impacted by a $9.1 million reduction of net losses and loss adjustment expenses for prior accident years. Our 2008 loss and combined ratios were impacted by a $34.9 million increase of net losses and loss adjustment expenses for prior accident years. Our 2007 loss and combined ratios were impacted by a $29.1 million reduction of net losses and loss adjustment expenses for prior accident years. Our 2006 loss and combined ratios were impacted by a $15.6 million reduction of net losses and loss adjustment expenses for prior accident years.
(3)		Our loss and combined ratios for 2009, 2008, 2007, 2006 and 2005 include $5.8 million, $21.5 million, $1.7 million, $4.6 million and $8.0 million respectively, of catastrophic losses.

 

Unaudited Summary Pro Forma Financial Information

 

You should carefully consider the following risk factors, the risk factors described in Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2009 and our subsequent reports on Form 10-Q as well as the other information included or incorporated by reference into this proxy statement, before voting. Additional risks not presently known to us or that we currently deem insignificant may also impair our business or results of operations as they become known facts or as facts and circumstances change. Any of the risks described below or in the documents incorporated by reference could result in a significant or material adverse effect on our results of operations or financial condition.

 

Your rights as a shareholder will change as a result of the Transaction.

 

Because of differences between Irish law and Cayman Islands law and differences between the governing documents of GI plc and UAI Ltd., your rights as a shareholder will change if the Transaction is completed. For a description of these differences, please see “Comparison of Rights of Shareholders and Powers of the Board of Directors.”

 

The Fox Paine Entities will continue to control a substantial interest in us and thus may exert significant influence on corporate affairs and actions, including those submitted to a shareholder vote.

 

Following the Transaction, the Fox Paine Entities will continue to beneficially own approximately 22.6% of GI plc Class A ordinary shares and 100% of our issued and outstanding Class B ordinary shares, together representing approximately 53.4% of our total voting power. As a result of their majority ownership, the Fox Paine Entities have and will continue to have control over the outcome of most matters requiring shareholder approval, including the power to, among other things:

 

 

Subject to certain exceptions, the Fox Paine Entities may also be able to prevent or cause a change of control. The Fox Paine Entities’ control over us, and Fox Paine & Company’s ability in certain circumstances to prevent or cause a change of control, may delay or prevent a change of control, or cause a change of control to occur at a time when it is not favored by other shareholders. As a result, the trading price of our GI plc Class A ordinary shares could be adversely affected.

 

Under the terms of an existing shareholders agreement between us and certain Fox Paine Entities, the applicable Fox Paine Entities have the contractual right to nominate a majority of the members of our board of directors. Our board of directors currently consists of seven directors, five of whom were nominated by such Fox Paine Entities: Messrs. Saul A. Fox, Seth J. Gersch, Michael J. Marchio, Stephen A. Cozen, and James R. Kroner. GI plc will assume the obligations of UAI Ltd. under the shareholders agreement. Following the Transaction, the right of Fox Paine Entities to appoint directors to the board will be included in GI plc’s memorandum and articles of association, which will permit certain Fox Paine affiliates to appoint by written notice to the board a certain number of directors, dependent on their percentage ownership of voting shares in GI plc for so long as Fox Paine and its affiliates hold an aggregate of 25% or more of the voting power in the company.

 

Our board of directors, in turn, and subject to its fiduciary duties under Cayman Islands law and Irish law, appoints or will appoint, as applicable, the members of our senior management, who also have fiduciary duties to the Company. As a result, the Fox Paine Entities have the ability to control the appointment of the

members of our senior management and to prevent any changes in senior management that other shareholders, or that other members of our board of directors, may deem advisable.

 

Legislative and regulatory action could materially and adversely affect us regardless of whether or not we complete the Transaction.

 

Legislative action may be taken by the U.S. Congress which, if ultimately enacted, could override tax treaties upon which we rely or could broaden the circumstances under which we would be considered a U.S. resident regardless of whether we complete the Transaction, each of which could materially and adversely affect our effective tax rate and cash tax position. We cannot predict the outcome of any specific legislative proposals. However, if proposals were enacted that had the effect of disregarding the Transaction or limiting our ability to take advantage of the tax treaties between Ireland and the U.S., we could be subjected to increased taxation. In addition, any future amendments to the current income tax treaty between Ireland and the U.S. could subject us to increased taxation.

 

As a company incorporated in the European Union, GI plc is subject to European Union law and this could impose regulatory burdens on GI plc in the future.

 

Our effective tax rate may increase after the Transaction.

 

While the Transaction is not anticipated to have any material impact on our effective tax rate, there is uncertainty regarding the tax policies of the jurisdictions where we operate (which include the potential legislative actions described above), and our effective tax rate may increase and any such increase may be material. Additionally, the tax laws of Ireland and other jurisdictions could change in the future, and such changes could cause a material change in our effective tax rate.

 

The Transaction will result in additional direct and indirect costs, even if it is not completed.

 

Although we do not expect these costs to be material, we will incur additional direct costs as a result of the Transaction. In addition to GI plc being incorporated in Ireland and being governed by Irish law, we will expand our presence in Ireland. In general, we will hold at least half of our board of directors meetings in Ireland. We also expect to incur costs and expenses, including professional fees, to comply with Irish corporate and tax laws and financial reporting requirements. In addition, we expect to incur attorneys’ fees, accountants’ fees, filing fees, mailing expenses and financial printing expenses in connection with the Transaction, even if the Scheme of Arrangement is not approved or completed. The Transaction also may negatively affect us by diverting attention of our management and employees from our operating business during the period of implementation and by increasing other administrative costs and expenses.

 

We may choose to abandon or delay the Transaction.

 

We may abandon or delay the Transaction at any time prior to the Scheme of Arrangement becoming effective by action of our board of directors, even after obtaining the necessary approval of UAI Ltd. common shareholders at the Special Meeting and sanction of the Grand Court. While we currently expect to complete the Transaction as soon as practicable after obtaining shareholder approval of the Scheme of Arrangement at the Special Meeting and sanction of the Grand Court, our board of directors may delay the Transaction for a significant time or may abandon the Transaction after the Special Meeting because, among other reasons, of an increase in our estimated cost of the Transaction or a determination by the board of directors that completing the Transaction is no longer in our best interest or the best interests of our shareholders or may not result in the benefits we expect. Additionally, we may not be able to obtain the requisite shareholder approval or court sanction.

 

Please see “Proposal Number One: The Transaction — Amendment, Termination or Delay.”

If the shareholders of UAI Ltd. do not approve the distributable reserves proposal, GI plc may not have sufficient distributable reserves to pay dividends (or to repurchase or redeem shares) following the Transaction. In addition, there is no guarantee that Irish High Court approval of the creation of distributable reserves will be forthcoming.

 

Under Irish law, dividends must be paid (and share repurchases and redemptions must generally be funded) out of “distributable reserves,” which GI plc will not have immediately following the Transaction Time. Please see “Description of Global Indemnity Plc Share Capital — Dividends” and “Description of Global Indemnity Plc Share Capital — Share Repurchases, Redemptions and Conversions.” If the Scheme of Arrangement is approved, shareholders of UAI Ltd. also will be asked at the Special Meeting to approve the reduction of share premium of GI plc to allow the creation of distributable reserves of GI plc (through the reduction of the share premium account of GI plc), so that we may pay dividends and repurchase or redeem shares. The approval of the distributable reserves proposal is not a condition to the consummation of the Transaction. Accordingly, if the common shareholders of UAI Ltd. approve the Scheme of Arrangement but do not approve the distributable reserves proposal, and the Transaction is consummated, GI plc may not have sufficient distributable reserves to make distributions or pay dividends (or to repurchase or redeem shares) following the Transaction.

 

In addition, the creation of distributable reserves requires the approval of the Irish High Court. Although we are not aware of any reason why the Irish High Court would not approve the creation of distributable reserves, the issuance of the required order is a matter for the discretion of the Irish High Court and there is no guarantee that such approval will be forthcoming. Even if the Irish High Court does approve the creation of distributable reserves, it may take substantially longer than we anticipate. Please see “Proposal Number Two: Creation of Distributable Reserves.”

 

As a result of different shareholder voting requirements in Ireland relative to the Cayman Islands, we will have less flexibility with respect to certain aspects of capital management than we now have.

 

Under Cayman Islands law, our directors may issue, without shareholder approval, any common shares authorized in our memorandum of association that are not already issued. Irish law allows shareholders to authorize share capital which then can be issued by a board of directors without shareholder approval. Additionally, subject to specified exceptions, Irish law grants statutory pre-emptive rights to existing shareholders to subscribe for new issuances of shares for cash, but allows shareholders to authorize the waiver of the statutory pre-emptive rights with respect to any particular allotment of shares. These authorizations must be renewed by the shareholders at least every five years and we cannot guarantee that these authorizations will always be approved, which could limit our ability to issue equity. While we do not believe that the differences between Cayman Islands law and Irish law relating to our capital management will have an adverse effect on us, situations may arise where the flexibility we now have in the Cayman Islands would have provided benefits to our shareholders. Please see “Comparison of Rights of Shareholders and Powers of the Board of Directors — Capitalization,” “Comparison of Rights of Shareholders and Powers of the Board of Directors — Pre-emption Rights” and “Comparison of Rights of Shareholders and Powers of the Board of Directors — Distributions and Dividends; Repurchases and Redemptions.”

 

After the Transaction, a future transfer of your GI plc ordinary shares may be subject to Irish stamp duty.

 

Transfers by shareholders who hold their GI plc ordinary shares beneficially through banks, brokers, trustees, custodians or other nominees, which in turn hold those shares through DTC, will not be subject to Irish stamp duty where such transfers are to holders who also hold through DTC. If you hold your GI plc ordinary shares directly rather than beneficially, any purchase of your shares will be subject to Irish stamp duty. Irish stamp duty is currently at the rate of 1% of the price paid or, if higher, the market value of the ordinary shares acquired. Any transfer of GI plc ordinary shares which is subject to Irish stamp duty will not be registered in the name of the buyer unless an instrument of transfer is executed by or on behalf of the seller, is duly stamped and is provided to our transfer agent. Only registered shareholders of GI plc will be entitled to receive dividends. Subject to certain exceptions, only registered shareholders of GI plc will be

entitled to vote in general meetings of GI plc. The Euro Share Capital will not, on consummation of the Transaction, carry voting rights. The potential for stamp duty could adversely affect the price of GI plc ordinary shares. Please see “Material Tax Considerations — Irish Tax Considerations — Stamp Duty.”

 

Dividends received by you may be subject to Irish dividend withholding tax.

 

In certain circumstances, as an Irish tax resident company, we are required to deduct Irish dividend withholding tax (currently at the rate of 20%) from dividends paid to our shareholders. In the majority of cases, shareholders resident in the U.S. will not be subject to Irish dividend withholding tax, and shareholders resident in a number of other countries will not be subject to Irish dividend withholding tax provided that they complete certain Irish dividend withholding tax forms. However, some shareholders may be subject to withholding tax, which could adversely affect the price of our shares. Please see “Material Tax Considerations — Irish Tax Considerations — Withholding Tax on Dividends.”

 

Dividends received by you could be subject to Irish income tax.

 

Dividends paid in respect of our shares will generally not be subject to Irish income tax where the beneficial owner of these dividends is exempt from dividend withholding tax, unless the beneficial owner of the dividend has some connection with Ireland other than his or her shareholding in GI plc.

 

GI plc shareholders who receive their dividends subject to Irish dividend withholding tax will generally have no further liability to Irish income tax on the dividend unless the beneficial owner of the dividend has some connection with Ireland other than his or her shareholding in GI plc. Please see “Material Tax Considerations — Irish Tax Considerations — Income Tax on Dividends Paid on GI plc Ordinary Shares.”

 

We strongly recommend that each shareholder consult his or her own tax advisor as to the tax consequences of holding shares in and receiving dividends from GI plc.

 

A change of control could accelerate certain of our indebtedness.

 

We have $90 million principal amount of Notes outstanding under the Note and Guarantee Agreement dated as of July 20, 2005. Pursuant to the terms of these Notes, if GI plc ceases to be an affiliate of the Fox Paine Entities, then unless certain ratings of UAI Ltd. or GI plc and its subsidiaries remain constant, we will be required to offer to repurchase such indebtedness pursuant to a change of control provision set forth therein.

 

The total market capitalization of GI plc ordinary shares after the Transaction may be lower than the total market capitalization of UAI Ltd. common shares before the Transaction

 

Reducing the number of outstanding shares through the one-for-two exchange pursuant to the Transaction is intended, absent other factors, to increase the per share market price of GI plc ordinary shares. However, other factors, such as financial results, market conditions and the market perception of our business and the one-for-two exchange may adversely affect the market price of GI plc ordinary shares. As a result, there can be no assurance that the one-for-two exchange pursuant to the Transaction, if completed, will result in the intended benefits, that the market price of GI plc will increase following the Transaction or that the market price of GI plc will not decrease in the future. Additionally, we cannot assure you that the market price per share of GI plc after the Transaction will increase in proportion to the reduction in the number of UAI Ltd. common shares outstanding before the Transaction. Accordingly, the total market capitalization of GI plc ordinary shares after the Transaction may be lower than the market capitalization of UAI Ltd. common shares before the Transaction.

 

The Transaction may result in some shareholders owning “odd lots” of less than 100 shares of GI plc ordinary shares

 

The Transaction may result in some shareholders owning “odd lots” of less than 100 shares of GI plc ordinary shares because of the one-for-two exchange of GI plc ordinary shares for UAI Ltd. common shares. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares.

 

The Transaction will effectively change the place of incorporation of the company whose shares you own from the Cayman Islands to Ireland.

 

As explained in more detail below, the Scheme of Arrangement on which we are asking you to vote will effect the Transaction. The Transaction involves several steps. UAI Ltd. has incorporated a new Irish Company, GI plc, as a direct subsidiary. On April 20, 2010, the Grand Court ordered the convening of the Special Meeting of UAI Ltd. Class A and Class B common shareholders to approve the Scheme of Arrangement. We will hold the Special Meeting during which we will seek your approval of the Scheme of Arrangement on May 27, 2010. If we obtain the necessary approval from UAI Ltd.’s common shareholders, the Grand Court will hold a second hearing scheduled to be held on or about June 11, 2010 during which we will seek that the Grand Court sanction the Scheme of Arrangement (the “Sanction Hearing”). Assuming we receive the necessary approvals from UAI Ltd.’s common shareholders and the sanction of the Grand Court and the conditions to consummate the Transaction are satisfied (and we do not abandon the Transaction), we will file the court order sanctioning the Scheme of Arrangement with the Registrar of Companies in the Cayman Islands, at which time the Scheme of Arrangement will become effective. Please see “Proposal Number One: The Transaction — Conditions to Consummation of the Transaction.”

 

Various steps of the Transaction will effectively occur simultaneously at the Transaction Time. Please see Annex E to this proxy statement for an expected timetable. GI plc, which is currently wholly-owned by UAI Ltd. was incorporated on March 9, 2010. Since Irish law requires that all public limited companies have at least seven members, GI plc issued a share to each of six other shareholders, these shares being held on a beneficial basis for UAI Ltd. GI plc has only nominal assets and capitalization and has not, prior to the Transaction Time, and will not engage in any business or other activities other than in connection with its formation and the Transaction. As a result of the Transaction, GI plc will become the parent holding company of UAI Ltd.

 

At the Transaction Time, the following steps will effectively occur simultaneously:

 

1. all previously outstanding Class A common shares of UAI Ltd. will be repurchased and cancelled;

 

2. GI plc will issue Class A ordinary shares on a one-for-two basis to the holders of UAI Ltd. Class A common shares that have been repurchased and cancelled;

 

3. holders of UAI Ltd. Class A common shares who would otherwise receive fractional shares in GI plc as a result of the one-for-two exchange will receive cash in consideration of the fractional shares that would otherwise be issued in an amount based on the average of the high and low trading prices of UAI Ltd. Class A common shares on NASDAQ on the business day immediately preceding the effective date of the Scheme of Arrangement;

 

4. all previously outstanding UAI Ltd. Class B common shares will be repurchased and cancelled;

 

5. GI plc will issue Class B ordinary shares on a one-for-two basis to the holders of UAI Ltd. Class B common shares that have been repurchased and cancelled;

 

6. holders of UAI Ltd. Class B common shares who would otherwise receive fractional shares in GI plc as a result of the one-for-two exchange will receive cash in consideration of the fractional shares that would otherwise be issued in an amount based on the average of the high and low trading prices of UAI Ltd. Class A common shares (into which UAI Ltd. Class B common shares are generally convertible upon sale) on NASDAQ on the business day immediately preceding the effective date of the Scheme of Arrangement;

 

7. UAI Ltd. will issue 100 UAI Ltd. Class A common shares to GI plc (which will constitute all of UAI Ltd.’s issued shares at such time);

 

8. all previously outstanding ordinary shares of GI plc, which prior to the Transaction Time will be held by UAI Ltd. and its nominees, shall be reclassified as deferred shares and shall cease to carry any right to a dividend or to receive notice of or to attend, vote or speak at any shareholder meeting and shall

only confer the right on a return of capital to repayment of the nominal value paid on those shares and only after repayment of the Class A and Class B ordinary shares in full and may be acquired by GI plc for no consideration; and

 

9. UAI Ltd. will file an election to be treated as an entity disregarded from GI plc for U.S. federal income tax purposes. This election will be effective two days after the Transaction Time.

 

GI plc Class A and Class B ordinary shares issued pursuant to the Transaction will be fully paid and non-assessable.

 

As a result of the Transaction, the Class A and Class B common shareholders of UAI Ltd. will become Class A ordinary shareholders and Class B ordinary shareholders of GI plc, respectively, and UAI Ltd. will become a wholly owned subsidiary of GI plc. The number of Class A and Class B ordinary shares issued and outstanding will be reduced in comparison to the number of Class A and Class B common shares in UAI Ltd. immediately prior to the Transaction as a result of the one-for-two exchange pursuant to the Transaction (and cancellation of those shares which would otherwise have been converted into fractional shares of GI plc). The number of authorized shares of GI plc will equal the sum of (i) the number of authorized shares of UAI Ltd. immediately prior to the Transaction and (ii) the Euro Share Capital. GI plc does not currently have plans to issue any of the additional unissued authorized Class A or Class B ordinary shares as a result of the approval of the one-for-two exchange. Please see “Description of Global Indemnity Plc Share Capital — Capital Structure.”

 

The current board of directors of UAI Ltd. will become the board of directors of GI plc. At all material times, GI plc will have its tax residence in Ireland and will be Irish incorporated. We also plan to set up a subsidiary in Ireland, principally to carry on certain business activities for UAI Ltd. and its subsidiaries, including information technology, actuarial and accounting services and to establish a base in Europe.

 

In connection with the completion of the Transaction, GI plc will assume UAI Ltd.’s existing obligations in connection with awards granted under UAI Ltd.’s equity incentive plans and other similar employee awards and UAI Ltd.’s existing shareholder agreement. Based on the Transaction and the one-for-two exchange, proportionate adjustments will be made to the per share exercise price and/or the number of shares issuable upon the exercise or conversion of all outstanding options to reflect the exchange ratio pursuant to the terms of such instruments.

 

At April 20, 2010, 36,508,907 Class A common shares and 24,122,744 Class B common shares were issued and outstanding and an additional 6,072,584 Class A common shares were held in treasury.

 

Our board of directors has determined that it is in the best interest of both UAI Ltd. and its valued shareholders to create a new parent holding company in Ireland. You will own the shares issued by this new parent holding company. We have chosen to create this new parent holding company in Ireland, through the Transaction, for many reasons, including but not limited to the following:

 

 

 

As a result of these factors, our board of directors determined that it was advisable to effect the Transaction. We cannot assure you that the anticipated benefits of the Transaction will be realized. In addition to the potential benefits described above, the Transaction will expose you and us to some risks. Please see the discussion under “Risk Factors.”

 

In the Transaction, the shares of GI plc will be exchanged for shares of UAI Ltd. on a one-for-two basis. The primary purpose of this exchange ratio is to increase the per share trading value of the Class A ordinary shares. The one-for-two exchange would allow a broader range of institutions to invest in the Class A ordinary shares (namely, funds that are prohibited from buying stocks with a price below a certain threshold), potentially increasing the trading volume and liquidity of the Class A ordinary shares. The one-for-two exchange would also help increase analyst and broker interest in the Class A ordinary shares, as their policies can discourage them from following or recommending companies with lower stock prices. Because of the trading volatility often associated with lower-priced stock, many brokerage houses and institutional investors have adopted internal policies and practices that either prohibit or discourage them from investing in such stocks or recommending them to their customers. Some of those policies and practices may also function to make the processing of trades in lower-priced stocks economically unattractive to brokers.

 

Further, the Class A common shares currently trade on NASDAQ. NASDAQ has several continued listing criteria that companies must satisfy in order to remain listed thereon. Currently, UAI meets all of NASDAQ’s continued listing criteria, including the minimum closing bid price requirement. The one-for-two exchange pursuant to the Transaction will further strengthen UAI’s ability to have a higher bid price for its shares and comply with the minimum closing bid requirement. On April 20, 2010, the closing price of the Class A common shares was $9.80 per share.

 

Our board of directors has considered both the potential advantages of the Transaction and these risks and has unanimously approved the Scheme of Arrangement and recommended that the shareholders vote for the Scheme of Arrangement.

 

Subject to U.S. securities law constraints, the Scheme of Arrangement may be amended, modified or supplemented at any time before or after its approval by the common shareholders of UAI Ltd. at the Special Meeting. However, after obtaining the requisite shareholder majorities at the Special Meeting, no amendment, modification or supplement may be made or effected that legally requires further approval by UAI Ltd.’s common shareholders without obtaining that approval.

 

At the Sanction Hearing, the Grand Court may impose such conditions as it deems appropriate in relation to the Scheme of Arrangement but may not impose any material changes without the joint consent of UAI Ltd. and GI plc. UAI Ltd. may, subject to U.S. securities law constraints, consent to any modification of the Scheme of Arrangement on behalf of its common shareholders which the Grand Court may think fit to approve or impose.

 

The board of directors of UAI Ltd. may terminate the Scheme of Arrangement and abandon the Transaction, or delay the Transaction, at any time prior to the effectiveness of the Scheme of Arrangement, without obtaining the approval of UAI Ltd.’s common shareholders, even though the Scheme of Arrangement may have been approved by such shareholders and sanctioned by the Grand Court and all other conditions to the Transaction may have been satisfied.

Unless the Scheme of Arrangement has become effective on or before 31 December, 2010 or such later date, if any, as UAI Ltd. may agree and the Grand Court may allow, the Scheme of Arrangement will lapse by its terms and not come into effect.

 

The Transaction will not be completed unless, among other things, the following conditions are satisfied or, if allowed by law, waived:

 

 

Pursuant to Section 86 of the Companies Law (2009 Revision) (the “Companies Law”), the Scheme of Arrangement must be sanctioned by the Grand Court. This requires UAI Ltd. to file a petition (the “Petition”) outlining the Scheme of Arrangement with the Grand Court. Prior to the mailing of this proxy statement, UAI Ltd. obtained orders and directions from the Grand Court providing for the convening of the Special Meeting of UAI Ltd.’s common shareholders and other procedural matters regarding the Special Meeting and the Grand Court proceeding, including a date upon which the Grand Court will hear the Petition. A copy of the orders and directions made by the Grand Court is attached as Annex D to this proxy statement. Following the common shareholders of UAI Ltd. approving the Scheme of Arrangement by the majorities required by the Companies Law, the Grand Court will hear the Petition, and, if it deems appropriate, sanction the Scheme of Arrangement. At the Sanction Hearing, the Grand Court may impose such conditions as it deems appropriate in relation to the Scheme of Arrangement but may not impose any material changes without the joint consent of UAI Ltd. and GI plc. UAI Ltd. may, subject to U.S. securities law constraints, consent to any modification of the Scheme of Arrangement on behalf of the common shareholders which the Grand Court may think fit to approve or impose. In determining whether to exercise its discretion and sanction the Scheme of Arrangement, the Grand Court will determine, among other things, whether the Scheme of Arrangement is fair to UAI Ltd.’s common shareholders. The Sanction Hearing is to be held on June 11, 2010 at the Grand Court in George Town, Grand Cayman, Cayman Islands. If you are a Class A or Class B common shareholder who wishes to appear in person or by counsel at the Sanction Hearing and present evidence or arguments in support of or opposition to the Scheme of Arrangement, you may do so. In addition, the Grand Court has wide discretion to hear from interested parties. UAI Ltd. will not object to the participation in the Sanction Hearing by any

Class A and Class B common shareholder who holds shares through a broker. In accordance with its terms, the Scheme of Arrangement will become effective as soon as a copy of the Order of the Grand Court sanctioning the Scheme of Arrangement has been delivered to the Registrar of Companies of the Cayman Islands for registration as required by Section 86(3) of the Companies Law. Please see “Proposal Number One: The Transaction — Conditions to Consummation of the Transaction” for more information on the conditions to the Transaction.

 

The Scheme of Arrangement is attached as Annex A to this proxy statement. At the Special Meeting, UAI Ltd.’s common shareholders will be asked to approve the Scheme of Arrangement. If the common shareholders approve the Scheme of Arrangement, then UAI Ltd. will apply for the sanction of the Scheme of Arrangement at the Sanction Hearing. We encourage you to read the Scheme of Arrangement in its entirety for a complete description of its terms and conditions.

 

Once the Scheme of Arrangement is effective, the Grand Court will have exclusive jurisdiction to hear and determine any suit, action or proceeding and to settle any dispute which arises out of or is connected with the terms of the Scheme of Arrangement or its implementation or out of any action taken or omitted to be taken under the Scheme of Arrangement or in connection with the administration of the Scheme of Arrangement. A Class A or Class B common shareholder who wishes to enforce any rights under the Scheme of Arrangement after such time must notify UAI Ltd. in writing of its intention at least five business days prior to commencing a new proceeding. After the effective date of the Scheme of Arrangement, no shareholder may commence a proceeding against GI plc or UAI Ltd. in respect of or arising from the Scheme of Arrangement except to enforce its rights under the Scheme of Arrangement where a party has failed to perform its obligations under the Scheme of Arrangement.

 

When under any provision of the Scheme of Arrangement a matter is to be determined by UAI Ltd., UAI Ltd. will have discretion to interpret those matters under the Scheme of Arrangement in a manner that it considers fair and reasonable, and its decisions will be binding on all concerned.

 

The issuance of GI plc ordinary shares to UAI Ltd.’s shareholders in connection with the Transaction will not be registered under the Securities Act of 1933 (the “Securities Act”). Section 3(a)(10) of the Securities Act exempts securities issued in exchange for one or more outstanding securities from the general requirement of registration where the terms and conditions of the issuance and exchange of such securities have been approved by any court of competent jurisdiction, after a hearing upon the fairness of the terms and conditions of the issuance and exchange at which all persons to whom such securities will be issued have a right to appear and to whom adequate notice of the hearing has been given. In determining whether it is appropriate to authorize the Scheme of Arrangement, the Grand Court will consider at the Sanction Hearing whether the terms and conditions of the Scheme of Arrangement are fair to UAI Ltd.’s common shareholders. The Grand Court has fixed the date and time for the Sanction Hearing, which will be held at the Grand Court in George Town, Grand Cayman, Cayman Islands, on June 11, 2010, at 10:00 am, Cayman Islands time. The GI plc ordinary shares issued to UAI Ltd. Class A and Class B common shareholders in connection with the Transaction will be freely transferable, except for the ability of the board of directors of GI plc to decline the registration of shares in limited circumstances and for restrictions applicable to certain “affiliates” of UAI Ltd. under the Securities Act, as follows:

 

 

 

Persons who may be deemed to be affiliates of UAI Ltd. and GI plc for these purposes generally include individuals or entities that control, are controlled by, or are under common control with, UAI Ltd. or GI plc, and would generally not be expected to include shareholders who are not executive officers, directors or significant shareholders of UAI Ltd. or UAI Ireland.

 

We have not filed a registration statement with the SEC covering any resales of the GI plc ordinary shares to be received by UAI Ltd.’s Class A and Class B common shareholders in connection with the Transaction. GI plc intends to file certain post-effective amendments to existing effective registration statements of UAI Ltd. concurrently with the completion of the Transaction.

 

Upon consummation of the Transaction, the ordinary shares of GI plc will be deemed to be registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), by virtue of Rule 12g-3 under the Exchange Act, without the filing of any Exchange Act registration statement.

 

If the Scheme of Arrangement is approved by the requisite shareholder majorities and sanctioned by the Grand Court and the other conditions to the consummation of the Transaction are satisfied (and we do not abandon the Transaction), the Scheme of Arrangement will become effective upon our filing of the court order sanctioning the Scheme of Arrangement with the Registrar of Companies in the Cayman Islands. Please see “Proposal Number One: The Transaction — Conditions to Consummation of the Transaction.” Various steps of the Transaction will occur effectively simultaneously at the Transaction Time. The expected timetable for the Transaction is set forth in Annex E to this proxy statement.

 

In the event the conditions to the Transaction are not satisfied, the Transaction may be abandoned or delayed, even after approval by UAI Ltd.’s common shareholders and the sanction of the Grand Court. In addition, the Transaction may be abandoned or delayed by our board of directors at any time prior to the Scheme of Arrangement becoming effective, without obtaining the approval of UAI Ltd.’s common shareholders, even though the Scheme of Arrangement may have been approved by UAI Ltd.’s Class A and Class B common shareholders and sanctioned by the Grand Court and all other conditions to the Transaction may have been satisfied. Please see “Proposal Number One: The Transaction — Amendment, Termination or Delay.”

 

When the Transaction is completed, the executives and directors of UAI Ltd. immediately prior to the completion of the Transaction are expected to be the executives and directors of GI plc. GI plc’s memorandum and articles of association, as they will be in effect after the Transaction, provide for a single class of directors, just as UAI Ltd. currently has, and all of GI plc’s directors will be subject to reelection at the 2010 annual general meeting of GI plc.

 

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for the indemnification of officers and directors, except to the extent that such provision may be held by the Cayman Islands courts to be contrary to public policy, for instance, for purporting to provide indemnification against the consequences of committing a crime. UAI — Cayman’s articles of association provide that it will indemnify its officers, directors, employees and agents against certain liabilities.

 

GI plc’s articles of association contain similar indemnification provisions, although the scope of the indemnification provided to GI plc’s directors and secretary is limited in accordance with Irish law. For information on the limitations on the ability of an Irish company to indemnify its directors or its secretary, please see “Comparison of Rights of Shareholders and Powers of the Board of Directors — Indemnification of Directors and Officers; Insurance.”

In addition, in connection with the Transaction, we expect that UAI Ltd. will enter into indemnification agreements with each of GI plc’s directors and secretary, as well as with individuals who serve as executives of GI plc or directors or officers of our subsidiaries, providing for the indemnification of, and advancement of expenses to, these persons by UAI Ltd. We expect that the indemnification and expense advancement provided under these indemnification agreements will be substantially similar to that currently afforded by UAI Ltd. under its articles of association to its directors and officers and those serving at its request in other capacities as described above, with the primary differences being such modifications as may be necessary to account for limitations on the ability of an Irish company to indemnify its directors or its secretary. We further expect that these indemnification agreements will be guaranteed by Wind River Reinsurance Company, Ltd. and one of our other subsidiaries.

 

Finally, in connection with the Transaction, UAI Ltd. will enter into an indemnification agreement with one of the Fox Paine Entities with respect to certain potential U.S. and Irish tax liabilities. In general, no gain should be recognized for U.S. federal income tax purposes by the indirect owners of the Fox Paine Entities solely as a result of the Transaction. Nevertheless, we may engage in certain internal restructuring transactions involving transfers of assets to subsidiaries of GI plc, which, under U.S. tax law, could require certain indirect owners of the Fox Paine Entities to enter into an agreement with the U.S. Internal Revenue Service in order not to recognize gain. Under the agreement with the U.S. Internal Revenue Service, the affected indirect owners of the Fox Paine Entities would agree to pay tax on their gain not taxed at the time of the Transaction, together with interest on such tax, if a “triggering event” occurs. A triggering event would be deemed to occur if, among other things, we dispose of shares of any such transferee subsidiaries or dispose of substantially all the transferred assets, including potentially in other internal reorganizations, to the extent such indirect owners have not previously disposed of our shares in a taxable transaction. In connection with our agreement with the Fox Paine Entities, subject to certain conditions we will have to indemnify the affected indirect owners of the Fox Paine Entities for any tax cost to them (including interest on tax and penalties, if any) of any triggering event and such affected indirect owners will pay us an amount equal to any tax benefits, if any, realized by them as a result of a triggering event for which they were indemnified, provided that the indirect owners will not be required to pay any amount of tax benefits in excess of the tax costs for which we have indemnified them. We will offer to enter into an indemnification agreement in respect of triggering events with those shareholders similarly situated to the Fox Paine Entities who notify us prior to December 31, 2010, on substantially the same terms and subject to the same conditions as our indemnification agreement with the Fox Paine Entities. A sale or other disposition by these indirect owners of our ordinary shares will not constitute a triggering event for this purpose. In addition, the indemnification agreement with the Fox Paine Entities will provide that, under certain circumstances, in the event the conversion of our Class B ordinary shares to Class A ordinary shares or a sale or other disposition of our Class B ordinary shares by any of the Fox Paine Entities is subject to Irish stamp duty, we (or a foreign subsidiary of GI plc) will indemnify the Fox Paine Entities and their transferees against such Irish stamp duty.

 

Except for the indemnification arrangements described above, no person who has been a director or executive officer of UAI Ltd. at any time since the beginning of the last fiscal year, or any associate of any such person, has any substantial interest in the Transaction, except for any interest arising from his or her ownership of shares of UAI Ltd. No such person is receiving any extra or special benefit not shared on a pro rata basis by all other holders of Class A and Class B common shares of UAI Ltd.

 

We are not aware of any other governmental approvals or actions that are required to complete the Transaction other than compliance with U.S. federal and state securities laws and Cayman Islands and Irish corporate law. We do not believe that any significant regulatory approvals will be required to effect the Transaction.

 

Under Cayman Islands law, none of the shareholders of UAI Ltd. has any right to an appraisal of the value of their shares or payment for them in connection with the Transaction.

 

Assuming the Transaction becomes effective, your UAI Ltd. Class A and Class B common shares will be repurchased and cancelled (and the register of shareholders of UAI Ltd. will be so updated) and GI plc Class A and Class B ordinary shares, respectively, will be issued without any action on your part, regardless of whether you currently hold UAI Ltd. Class A common shares in certificated form. All of GI plc’s shares will be issued in uncertificated book-entry form. Consequently, if you currently hold UAI Ltd. Class A common shares in certificated form, following the Transaction, your share certificates will cease to have effect as documents or evidence of title. The transfer agent will make an electronic book-entry in your name and will mail you a statement evidencing your ownership of GI plc ordinary shares.

 

If the Transaction is completed, GI plc will assume UAI Ltd.’s existing obligations in connection with awards granted under UAI Ltd.’s equity incentive plans and other similar employee awards and UAI Ltd.’s existing shareholder agreement. Those plans will be amended as necessary to give effect to the Transaction, including to provide (1) that Class A ordinary shares of GI plc will be issued, held, available or used to measure benefits as appropriate under the plans, in lieu of Class A common shares of UAI Ltd., including upon exercise of any options or upon vesting of restricted stock units issued under those plans; (2) for the appropriate substitution of GI plc for UAI Ltd. in those plans; and (3) that, upon the one-for-two exchange, proportionate adjustments will be made to the per share exercise price and/or the number of shares issuable upon the exercise or conversion of all outstanding options to reflect the exchange ratio pursuant to the terms of such instruments.

 

UAI Ltd.’s Class A common shares are currently listed on NASDAQ. There is currently no established public trading market for the Class A ordinary shares of GI plc. We intend to make application so that, immediately following the Transaction Time, the Class A ordinary shares of GI plc will be listed on NASDAQ under the new symbol “GBLI.” We do not plan to be listed on the Irish Stock Exchange at the present time.

 

Under U.S. GAAP, the Transaction represents a transaction between entities under common control. Assets and liabilities transferred between entities under common control are accounted for at cost. Accordingly, the assets and liabilities of GI plc will be reflected at their carrying amounts in the accounts of UAI Ltd. at the Transaction Time.

 

Under SEC rules, companies organized outside of the United States that qualify as “foreign private issuers” remain subject to SEC regulation, but are exempt from certain requirements that apply to U.S. reporting companies. UAI Ltd. is not a “foreign private issuer,” and we do not expect that GI plc will be a “foreign private issuer” following the Transaction.

Upon completion of the Transaction, we will remain subject to SEC reporting requirements, the mandates of the Sarbanes-Oxley Act and the corporate governance rules of NASDAQ, and we will continue to report our consolidated financial results in U.S. dollars and in accordance with U.S. GAAP.

 

The Scheme of Arrangement must be approved by the affirmative vote of a majority in number of the holders of our common shares, present and voting as a single class, representing 75% or more in value (which is par value) of all common shares present and voting on the proposal, whether in person or by proxy.

 

THE BOARD OF DIRECTORS RECOMMENDS
VOTING “FOR” THE SCHEME OF ARRANGEMENT

 

Under Irish law, GI plc requires “distributable reserves” in its unconsolidated balance sheet prepared in accordance with the Irish Companies Acts to enable it to make distributions (including the payment of cash dividends) to its shareholders, or, generally, to buy back or redeem shares. Please see “Description of Global Indemnity Plc Share Capital — Dividends” and “Description of Global Indemnity Plc Share Capital — Share Repurchases, Redemptions and Conversions.” Immediately following implementation of the Transaction, the unconsolidated balance sheet of GI plc will not contain any distributable reserves, and “shareholders’ equity” in such balance sheet will be comprised entirely of “share capital” (equal to the aggregate par value of the GI plc ordinary shares issued in the Transaction) and “share premium” (resulting from the issuance of GI plc ordinary shares in the Transaction and the Euro Share Capital). Share premium will be equal to the value of the shares issued, expected to be represented by (a) total shareholders’ equity in the consolidated balance sheet of UAI Ltd. as of the close of trading on NASDAQ on the day the Scheme of Arrangement becomes effective plus unpaid losses and loss adjustment expenses reduced by the discounted value of unpaid losses and loss adjustment expenses less (b) the nominal amount of share capital. Unpaid loss and loss adjustment expenses represent liabilities of UAI Ltd.’s insurance and reinsurance subsidiaries that will be paid in future periods. The discounted value of unpaid losses and loss adjustment expenses represents the present value of those liabilities. The current shareholders of GI plc (which are UAI Ltd. and its nominees) have passed a resolution that would create distributable reserves following the Transaction by converting to distributable reserves all of the share premium of GI plc less the total outstanding financial indebtedness of UAI Ltd. as immediately prior to the Transaction Time. If the Transaction Time were to have occurred on December 31, 2009, based upon the amount of total shareholders’ equity in the consolidated balance sheet of UAI Ltd., plus unpaid losses and loss adjustment expenses reduced by the discounted value of unpaid losses and loss adjustment expenses, less the nominal amount of share capital, distributable reserves of GI plc created in this manner would have been approximately $911.3 million. We have not paid any cash dividends on our common shares in the past and we currently intend to retain any earnings for use in our business.

 

If the Scheme of Arrangement is approved, the common shareholders of UAI Ltd. also will be asked at the Special Meeting to approve the reduction of the share premium of GI plc to allow the creation of distributable reserves of GI plc that was previously approved by UAI Ltd. and the other current shareholders of GI plc. If the common shareholders of UAI Ltd. approve the creation of distributable reserves and the Transaction is completed, we will seek to obtain the approval of the Irish High Court, which is required for the creation of distributable reserves to be effective, as soon as practicable following implementation of the Transaction. The approval of the Irish High Court is expected to be obtained within six weeks of the consummation of the Transaction.

 

The approval of the distributable reserves proposal is not a condition to the consummation of the Transaction. Accordingly, if the common shareholders of UAI Ltd. approve the Scheme of Arrangement but do not approve the distributable reserves proposal, and the Transaction is consummated, GI plc may not have sufficient distributable reserves to pay dividends (or to repurchase or redeem shares) following the Transaction. In addition, although we are not aware of any reason why the Irish High Court would not approve the creation of distributable reserves, there is no guarantee that such approval will be forthcoming. Even if the Irish High Court does approve the creation of distributable reserves, it may take substantially longer than we anticipate. Please see “Risk Factors.”

 

The affirmative vote of the holders of our common shares representing at least a majority of our common shares present and voting on the proposal, whether in person or by proxy.

 

THE BOARD OF DIRECTORS RECOMMENDS
VOTING “FOR” THE CREATION OF DISTRIBUTABLE RESERVES

 

The information presented under the caption “U.S. Federal Income Tax Considerations” below is a discussion of the material U.S. federal income tax consequences to U.S. Holders (as defined below) of the Transaction and of the ownership and disposition of the GI plc ordinary shares received in the Transaction. The information presented under the caption “Irish Tax Considerations” is a discussion of the material Irish tax consequences of the Transaction and of investing in the GI plc ordinary shares. The information presented under the caption “Cayman Islands Tax Considerations” is a discussion of the material Cayman Islands tax consequences of the Transaction.

 

You should consult your tax advisor regarding the applicable tax consequences to you of the Transaction and investing in the GI plc ordinary shares under the laws of the United States (federal, state and local), Ireland, the Cayman Islands and any other applicable foreign jurisdiction.

 

In General

 

The following discussion sets forth the material U.S. federal income tax consequences to U.S. Holders (as defined below) of the Transaction and of the ownership and disposition of GI plc ordinary shares as of the date hereof. This discussion does not address any tax consequences arising under the laws of any U.S. state or local or foreign jurisdiction, or under any U.S. federal laws other than those pertaining to income tax. This discussion is not a complete analysis or listing of all of the possible tax consequences and does not address all tax considerations that may be relevant to you. Special rules that are not discussed in the general descriptions below may also apply to you. In particular, the description of U.S. federal income tax consequences deals only with U.S. Holders that own shares as capital assets and, except as provided herein, do not own and have not at any time owned directly, indirectly through certain non-U.S. entities or constructively 10% or more of the voting power or value of our aggregate shares outstanding. In addition, the description of U.S. federal income tax consequences does not address the tax treatment of special classes of U.S. Holders, such as banks and other financial institutions, insurance companies, persons holding shares as part of a “straddle,” “hedge,” “appreciated financial position,” “conversion transaction” or other risk reduction strategy, U.S. expatriates, persons liable for alternative minimum tax, brokers or dealers in securities or currencies, holders whose “functional currency” is not the U.S. dollar, regulated investment companies, real estate investment trusts, partnerships (or any entity treated as a partnership for U.S. federal income tax purposes) and other pass-through entities, traders in securities who have elected the mark-to-market method of accounting for their securities, individual retirement accounts or other tax-deferred accounts, holders who acquired shares pursuant to the exercise of an employee stock option or right or otherwise as compensation, and, except as provided below, tax-exempt entities.

 

The discussion is based on the laws of the United States (including the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed Treasury regulations promulgated thereunder, judicial decisions, published rulings and administrative pronouncements of the U.S. Internal Revenue Service (“IRS”)) as in effect on the date of this proxy statement, as well as the Convention between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, which we refer to as the “U.S.-Ireland Treaty,” and the Convention between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland (on behalf of the Government of Bermuda) relating to the Taxation of Insurance Enterprises and Mutual Assistance in Tax Matters which we refer to as the “U.S.-Bermuda Treaty”, any of which may change, possibly with retroactive effect. There can be no assurance that the IRS will not disagree with or will not challenge any of the conclusions reached and described herein.

For purposes of this discussion, a “U.S. Holder” is any beneficial owner of shares that is:

 

 

If an entity treated as a partnership for U.S. federal income tax purposes holds our shares, the U.S. federal income tax treatment of such partnership and each partner will generally depend on the status and the activities of the partnership and the partner. Partnerships that hold our shares, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal, state and local and non-U.S. tax consequences applicable to them of the Transaction and the ownership and disposition of our shares.

 

This discussion does not address any aspects of United States taxation other than federal income taxation or any aspects of Irish taxation other than income and capital taxation, wealth tax, withholding tax and stamp duties upon issuance and transfer of securities.

 

This discussion does not address any aspects of the taxation of the transactions or of the acquisition, ownership or disposition of GI plc ordinary shares in any jurisdiction other than the United States, Ireland and the Cayman Islands.

 

You should consult your own tax advisor regarding the applicable tax consequences to you of the acquisition, ownership and disposition of GI plc ordinary shares under the laws of the United States (federal, state and local) or any other taxation jurisdiction that is relevant to you.

 

U.S. Taxation of the Transaction

 

The creation of a new holding company in Ireland results from a “Scheme of Arrangement” under the corporate law of the Cayman Islands that is subject to approval by the Grand Court. Pursuant to the Transaction, holders of Class A common shares of UAI Ltd. will be issued one Class A ordinary share of GI plc for every two Class A common shares of UAI Ltd. and holders of Class B common shares of UAI Ltd. will be issued one Class B ordinary shares of GI plc for every two Class B common shares of UAI Ltd., and their UAI Ltd. common shares will be repurchased and cancelled. GI plc will pay cash in lieu of any fractional GI plc ordinary shares that a U.S. Holder would otherwise be entitled to receive based on the one-for-two exchange ratio. UAI Ltd. will issue new common shares to GI plc. UAI Ltd. will then elect to be treated as an entity disregarded from GI plc for U.S. federal income tax purposes effective two days after the Transaction Time. These steps will constitute a “reorganization” under Section 368(a)(1)(F) of the Code, which we refer to as an “F Reorganization.” Pursuant to the Code, Treasury regulations and other guidance, UAI Ltd. will be treated as transferring all of its assets to GI plc in exchange for GI plc stock and the assumption by GI plc of all liabilities of UAI Ltd. followed by an exchange by our shareholders of their UAI Ltd. common shares for GI plc ordinary shares. We will not, as a result of the Transaction, recognize gain or loss for U.S. income tax purposes. In addition, the deemed exchange by a U.S. Holder of UAI Ltd. common shares for GI plc ordinary shares on a two-for-one basis, as described above, will qualify as an exchange under Section 1036 of the Code or as a “recapitalization” under Section 368(a)(1)(E) of the Code, which we refer to as an “E Reorganization.”

 

Except as described below with respect to cash received in lieu of fractional GI plc ordinary shares, and subject to the discussion below concerning “Section 1248 Shareholders” and “Passive Foreign Investment

Company Considerations,” U.S. Holders will generally recognize no gain or loss upon the deemed exchange of UAI Ltd. common shares for ordinary shares of GI plc in the Transaction.

 

A U.S. Holder who receives cash in lieu of a fractional GI plc ordinary share pursuant to the Transaction should recognize gain or loss in an amount equal to the difference between the amount of cash received and the U.S. Holder’s tax basis in the UAI Ltd. common shares surrendered that is allocated to such fractional GI plc ordinary share. If the receipt of cash in lieu of a fractional share is treated as a sale or exchange, any gain recognized will be capital gain that, in general, will be long-term capital gain if the U.S. Holder held its UAI Ltd. common shares for more than one year at the Transaction Time.

 

Section 302 of the Code provides guidance as to whether the receipt of cash in lieu of fractional shares is treated as a sale or exchange. Under Section 302, the receipt by a U.S. Holder of cash in lieu of fractional GI plc ordinary shares will be treated as a sale or exchange, and any gain recognized will be capital gain rather than a dividend, if the receipt of such cash is not “essentially equivalent to a dividend” or one of several other tests is satisfied. In applying each of the Section 302 tests, U.S. Holders must take into account not only shares that they actually own but also shares they are deemed to own under the constructive ownership rules of Section 318 of the Code. Under Section 318, a U.S. Holder is deemed to own constructively shares that are actually owned, and in some cases constructively owned, by certain related individuals and entities or that such U.S. Holder or related individuals or entities have an option or similar right to acquire.

 

The receipt by a U.S. Holder of cash in lieu of fractional GI plc ordinary shares will be treated as not “essentially equivalent to a dividend”, with resulting capital gain treatment if, under all facts and circumstances, the receipt of such cash results in a “meaningful reduction” of the holder’s proportionate stock interest in GI plc when compared with such U.S. Holder’s stock interest in UAI Ltd. before the Transaction. For example, in a published ruling, the IRS has indicated that any reduction in the percentage interest of a shareholder whose relative stock interest in a publicly held corporation is “minimal” and who exercises no control over corporate affairs should constitute a “meaningful reduction.”

 

If, alternatively, the receipt of cash in lieu of a fractional GI plc ordinary share has the effect of a dividend distribution to a U.S. Holder, the gain to such U.S. Holder will be treated as a dividend to the extent of such holder’s ratable share of the undistributed earnings and profits of UAI Ltd. The remainder of any gain will be treated as capital gain. U.S. Holders should consult their tax advisors regarding the character of any gain recognized as a result of the receipt of cash in lieu of fractional GI plc ordinary shares.

 

A U.S. Holder’s aggregate tax basis in the GI plc ordinary shares received should equal the aggregate tax basis in the UAI Ltd. common shares surrendered (excluding the portion of the tax basis that is allocable to any fractional share), and such U.S. Holder’s holding period for the GI plc ordinary shares received should include the holding period for the UAI Ltd. common shares surrendered. Treasury regulations promulgated under the Code provide detailed rules for allocating the tax basis and holding period of the surrendered UAI Ltd. common shares to the GI plc ordinary shares received in the Transaction. U.S. Holders of UAI Ltd. common shares that acquired blocks of UAI Ltd. common shares at different times or at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.

 

Consequences to Section 1248 Shareholders of UAI Ltd.   Pursuant to Treasury regulations promulgated under Section 367(b) of the Code, a U.S. Holder that is a “Section 1248 Shareholder” with respect to UAI Ltd. must include in its income as a deemed dividend the lesser of the “Section 1248 amount” attributable to its UAI Ltd. common shares and the gain, if any, realized by such U.S. Holder if, immediately after the Transaction, such U.S. Holder is not a Section 1248 Shareholder with respect to GI plc or GI plc is not a CFC (as defined below under U.S. Taxation of Shareholders — Classification of GI plc and any of its Non-U.S. Subsidiaries as Controlled Foreign Corporations). A U.S. Holder will be treated as a Section 1248 Shareholder if such holder owned, directly, indirectly through certain non-U.S. entities or constructively, 10% or more of the voting power of UAI Ltd. at any time during the five-year period ending on the date of the Transaction when UAI Ltd. was treated as a CFC. We believe that UAI Ltd. was a CFC until August 18, 2009 as a result of the attribution and constructive ownership rules applicable for this purpose, and ceased to be a CFC on that date, and, accordingly, that GI plc will not be a CFC after the Transaction. Generally, a U.S. Holder’s Section 1248 amount will equal its allocable share of the earnings and profits of UAI Ltd. and its non-U.S. subsidiaries

(determined under U.S. federal income tax principles) that are attributable to such U.S. Holder’s UAI Ltd. common shares and that were accumulated during the U.S. Holder’s holding period at a time when UAI Ltd. was a CFC. In addition there are special reporting requirements for Section 1248 Shareholders. If a U.S. Holder of UAI Ltd. common shares acquired blocks of UAI Ltd. common shares at different times or at different prices, the Section 1248 amount and the comparison of it with gain, if any, in such holder’s UAI Ltd. shares will be determined separately for each block of shares. U.S. Holders that are Section 1248 Shareholders of UAI Ltd. should consult with their own tax advisors regarding the application of these rules to the Transaction under their circumstances. Due to legal uncertainties regarding the application of the attribution and constructive ownership rules applicable to CFCs, there can be no assurance that UAI Ltd. is not currently a CFC and that GI plc will not be a CFC after the Transaction.

 

U.S. Holders Owning Five Percent or More of GI plc.   Pursuant to Section 367(a) of the Code and the Treasury regulations thereunder, U.S. persons who own or are treated as owning (applying ownership attribution rules) 5% or more of the voting power or value of the shares of GI plc immediately after the Transaction (“Five-Percent U.S. Holders”) should not be required, solely as a result of the F Reorganization and E Reorganization, to file and maintain with the IRS a “gain recognition agreement” and related materials, which we refer to as a GRA, in order to defer their gain realized in the F Reorganization and E Reorganization. Nevertheless, GI plc and its subsidiaries may engage in certain internal restructuring transactions after the Transaction which could require Five-Percent U.S. Holders to enter into a GRA in order to continue deferring gain realized but not recognized in the F Reorganization. In the event that GI plc proposes to engage in any such internal restructuring transactions after the Transaction, it intends to provide notice to shareholders. Five-Percent U.S. Holders should consult their own tax advisors to determine whether and when to enter into a GRA and the tax implications thereof.

 

Passive Foreign Investment Company Considerations.   In general, if a non-U.S. corporation is treated as a passive foreign investment company, which we refer to as a “PFIC,” with respect to a shareholder, such shareholder is potentially subject to tax liability on gain realized upon any disposition of his or her shares, including a transaction that would otherwise be tax free. As discussed below, we believe that UAI Ltd. was not a PFIC in prior taxable years and will not be treated as a PFIC in the current taxable year. We cannot be certain, however, that the IRS will not challenge this position and that a court would not sustain such challenge because the determination of PFIC status is fundamentally factual in nature, depends on the application of complex U.S. federal income tax rules that are subject to differing interpretations, and generally cannot be determined until the close of the taxable year in question. Furthermore, there are currently no Treasury regulations regarding the application of the PFIC provisions to an insurance company, and new Treasury regulations or pronouncements interpreting or clarifying these rules may not be forthcoming. Under proposed Treasury regulations, if UAI Ltd. was classified as a PFIC for prior taxable years during which a U.S. Holder held UAI Ltd. common shares and GI plc is not a PFIC after the Transaction, such U.S. Holder would be required to recognize gain realized, if any, in respect of the E Reorganization. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of the Transaction if GI plc were treated as a PFIC with respect to them.

 

U.S. Taxation of UAI and its Subsidiaries

 

A non-U.S. corporation that is engaged in the conduct of a U.S. trade or business will be subject to U.S. federal income tax as described below, unless entitled to the benefits of an applicable tax treaty. Whether business is being conducted in the United States is an inherently factual determination. Because the Code, Treasury regulations and court decisions fail to identify definitively activities that constitute being engaged in a trade or business in the United States, we cannot be certain that the IRS will not contend successfully that GI plc and/or its non-U.S. subsidiaries are or will be engaged in a trade or business in the United States. A non-U.S. corporation deemed to be so engaged will be subject to U.S. income tax at regular corporate rates, as well as the branch profits tax, on its income that is treated as effectively connected with the conduct of that trade or business unless the corporation is entitled to relief under the Business Profits provision of an applicable tax treaty, as discussed below. Such income tax, if imposed, would be based on effectively connected income computed in a manner generally analogous to that applied to the income of a

U.S. corporation, except that a non-U.S. corporation is generally entitled to deductions and credits only if it timely files a U.S. federal income tax return. GI plc and certain of its non-U.S. subsidiaries may file protective U.S. federal income tax returns on a timely basis in order to preserve the right to claim income tax deductions and credits if it is ever determined that any of them are subject to U.S. federal income tax. The highest marginal federal income tax rate for corporations currently is 35%. The “branch profits” tax is currently imposed on a non-U.S. corporation’s effectively connected earnings and profits (i.e., generally effectively connected income less federal income taxes) at a 30% rate, although this rate may be reduced by treaty. The U.S.-Ireland Treaty reduces this tax rate to 5%. The U.S.-Bermuda Treaty does not reduce this tax rate.

 

If GI plc is entitled to the benefits of the Business Profits provision of the U.S.-Ireland Treaty, it would not be subject to U.S. income tax on any of its business profits found to be effectively connected with a U.S. trade or business unless that trade or business was conducted through a permanent establishment in the United States. No Treasury regulations interpreting the U.S.-Ireland Treaty have been issued. GI plc intends to conduct its activities so that it does not have a permanent establishment in the United States, although we cannot be certain that we will achieve this result. An enterprise resident in Ireland generally will be entitled to the benefits of the U.S.-Ireland Treaty if it is a company whose principal class of shares is primarily and regularly traded on a recognized stock exchange. Because our Class B ordinary shares are not traded on a stock exchange, we do not expect to satisfy this test. Alternatively, a company resident in Ireland generally will be entitled to the benefits of the U.S.-Ireland Treaty if at least 50% of the aggregate vote and value of the company’s shares is directly or indirectly owned by persons who would themselves qualify for benefits under the U.S.-Ireland Treaty as individuals, qualified governmental entities, publicly-traded persons or companies, or tax-exempt organizations, and a base erosion test is satisfied. In general, the base erosion test is satisfied if amounts that are paid or accrued by GI plc to persons that are not themselves eligible for benefits under the U.S.-Ireland Treaty as individuals, qualified governmental entities, publicly-traded persons or companies, or tax-exempt organizations and that are deductible for Irish income tax purposes in the tax year do not exceed 50% of GI plc’s gross income for that year. We cannot be certain whether GI plc will be eligible for U.S.-Ireland Treaty benefits immediately after the Transaction or will be eligible in the future due to legal uncertainties regarding the application of the U.S.-Ireland Treaty to us as well as uncertainties regarding the residence and citizenship of our ultimate beneficial owners.

 

In addition, we conduct operations in Bermuda through our subsidiary Wind River Reinsurance Company, Ltd., which we refer to as “Wind River Reinsurance.” If Wind River Reinsurance is entitled to the benefits of the U.S.-Bermuda Treaty, Wind River Reinsurance would not be subject to U.S. income tax on any business profits of its insurance enterprise found to be effectively connected with a U.S. trade or business unless that trade or business were conducted through a permanent establishment in the United States. No Treasury regulations interpreting the U.S.-Bermuda Treaty have been issued. Wind River Reinsurance currently intends to limit its U.S. contacts so as not to be engaged in a trade or business in the United States and to reduce the risk that it will have a permanent establishment in the United States, although we cannot be certain that it will achieve this result.

 

An insurance enterprise resident in Bermuda generally will be entitled to the benefits of the U.S.-Bermuda Treaty if (1) more than 50% of its shares are owned beneficially, directly or indirectly, by individual residents of the United States or Bermuda or U.S. citizens and (2) its income is not used in substantial part, directly or indirectly, to make disproportionate distributions to, or to meet certain liabilities to, persons who are neither residents of either the United States or Bermuda nor U.S. citizens. We cannot be certain whether Wind River Reinsurance is currently eligible for U.S.-Bermuda Treaty benefits or will be eligible in the future due to legal uncertainties regarding the application of the U.S.-Bermuda Treaty to Wind River Reinsurance as well as to uncertainties regarding the residency and citizenship of Wind River’s indirect owners.

 

Non-U.S. insurance companies carrying on an insurance business within the United States have a certain minimum amount of effectively connected net investment income, determined in accordance with a formula that depends, in part, on the amount of U.S. risk insured or reinsured by such companies. If Wind River Reinsurance is considered to be engaged in the conduct of an insurance business in the United States and is not entitled to the benefits of the U.S.-Bermuda Treaty, a significant portion of its investment income may be

subject to U.S. income tax. In addition, while the U.S.-Bermuda Treaty clearly applies to premium income, it is uncertain whether the U.S.-Bermuda Treaty applies to other income such as investment income. If Wind River Reinsurance is considered engaged in the conduct of an insurance business in the United States and is entitled to the benefits of the U.S.-Bermuda Treaty in general, but the U.S.-Bermuda Treaty is interpreted not to apply to investment income, a significant portion of Wind River Reinsurance’s investment income could be subject to U.S. income tax.

 

Non-U.S. corporations not engaged in a trade or business in the United States are nonetheless subject to 30% U.S. income tax imposed by withholding on the gross amount of 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), subject to exemption under the Code or reduction by applicable treaties. The U.S.-Bermuda Treaty does not reduce the U.S. withholding rate on U.S. source investment income.

 

The United States also imposes an excise tax on insurance and reinsurance premiums paid to non-U.S. insurers or reinsurers with respect to risks located in the United States. Generally, the rate of tax is 4% for casualty insurance premiums and 1% for reinsurance premiums, although in certain cases these excise taxes are eliminated by application of relevant tax treaties. The U.S.-Bermuda Treaty does not reduce this tax rate.

 

The U.S. subsidiaries of GI plc will be subject to taxation in the United States at regular corporate rates.

 

U.S. Taxation of Shareholders

 

Taxation of Distributions.   Subject to the discussions below relating to the potential application of the controlled foreign corporation rules, which we refer to as “CFC” rules, the related person insurance income, which we refer to as “RPII” rules, and the passive foreign investment company, which we refer to as “PFIC” rules, the gross amount of a distribution paid with respect to GI plc ordinary shares, including the full amount of any Irish withholding tax thereon, will be a dividend for U.S. federal income tax purposes to the extent paid out of the current or accumulated earnings and profits of GI plc (as determined for U.S. federal income tax purposes). Under current law, certain dividends received by individuals and other non-corporate U.S. Holders in taxable years beginning before January 1, 2011 from a qualified foreign corporation may be subject to a maximum tax rate of 15%. We believe dividends paid in taxable years beginning before January 1, 2011 on GI plc Class A ordinary shares that are traded on NASDAQ Global Select Market to individuals and certain non-corporate holders will be eligible for such reduced rates of tax as “qualified dividend income,” provided that GI plc is not a PFIC during the relevant period and certain other requirements, including stock holding period requirements, are satisfied. Moreover, subject to the same conditions above, dividends paid on GI plc Class B ordinary shares before 2011 to individuals and certain non-corporate holders should also be treated as qualified dividend income so long as GI plc is eligible for the benefits of the U.S.-Ireland Treaty. This reduced tax rate will not be available in all situations, and U.S. Holders should consult their own tax advisors regarding the application of the relevant rules to their particular circumstances. Dividends paid by GI plc will not be eligible for the dividends received deduction allowed to corporate shareholders under the Code.

 

To the extent that a distribution exceeds GI plc’s current and accumulated earnings and profits (as determined for U.S. federal income tax purposes), it will be treated as a nontaxable return of capital to the extent of the U.S. Holder’s basis in the stock, and thereafter as a capital gain.

 

Classification of GI plc and any of its Non-U.S. Subsidiaries as Controlled Foreign Corporations .  Each “10% U.S. Shareholder” (as defined below) of a non-U.S. corporation that is a CFC for an uninterrupted period of 30 days or more during a taxable year, and who owns shares in the CFC, directly or indirectly through non-U.S. entities, on the last day in such year on which such corporation is a CFC, must include in its gross income for U.S. federal income tax purposes its pro rata share of the CFC’s “Subpart F income,” even if the Subpart F income is not distributed. A non-U.S. corporation is considered a CFC if 10% U.S. Shareholders own (directly, indirectly through non-U.S. entities or by attribution by application of the constructive ownership rules of Section 958(b) of the Code (i.e., “constructively”)) more than 50% of the total combined voting power of all classes of voting stock of such corporation, or more than 50% of the total value of all stock of such corporation, on any day during the taxable year of such corporation. For purposes of taking into

account insurance income, a CFC generally also includes a non-U.S. insurance company in which more than 25% of the total combined voting power of all classes of stock (or more than 25% of the total value of the stock) is owned (directly, indirectly through non-U.S. entities or constructively) by 10% U.S. Shareholders, on any day during the taxable year of such corporation. Subpart F income of a non-U.S. insurance corporation typically includes foreign personal holding company income (such as interest, dividends and other types of passive income), as well as insurance and reinsurance income (including underwriting and investment income). A “10% U.S. Shareholder” is a U.S. person who owns (directly, indirectly through non-U.S. entities or constructively) at least 10% of the total combined voting power of all classes of stock entitled to vote of the non-U.S. corporation. As a result of the constructive ownership rules of Section 958(b), a U.S. person who owns directly or indirectly 10% of the value of the ordinary shares of GI plc could be treated as a U.S. Shareholder of Wind River Reinsurance even if such U.S. person owns less than 10% of the voting power of such ordinary shares. We believe that UAI Ltd. and Wind River Reinsurance currently are not CFCs and that GI plc and Wind River Reinsurance will not be CFCs immediately after the Transaction; there can be no assurance, however, that this is or will be the case due to legal uncertainties regarding the application of the attribution and constructive ownership rules applicable for this purpose.

 

The RPII CFC Provisions.   The following discussion generally is applicable only if the RPII of Wind River Reinsurance, determined on a gross basis, is 20% or more of its gross insurance income for the taxable year and the 20% Ownership Exception (as defined below) is not met. The following discussion generally would not apply for any taxable year in which the gross RPII of Wind River Reinsurance falls below the 20% gross insurance income threshold or the 20% Ownership Exception is met. Although we cannot be certain, we believe that Wind River Reinsurance was in prior years of operation and will be for the foreseeable future either below the 20% gross insurance income threshold or within the 20% Ownership Exception for each taxable year.

 

RPII is any “insurance income” (as defined below) attributable to policies of insurance or reinsurance with respect to which the person (directly or indirectly) insured is a “RPII shareholder” (as defined below) or a “related person” (as defined below) to such RPII shareholder. In general, and subject to certain limitations, “insurance income” is income (including premium and investment income) attributable to the issuing of any insurance or reinsurance contract which would be taxed under the portions of the Code relating to insurance companies if the income were the income of a domestic insurance company. For purposes of inclusion of the RPII of Wind River Reinsurance in the income of RPII shareholders, unless an exception applies, the term “RPII shareholder” means any U.S. person who owns (directly or indirectly through non-U.S. entities) any amount of GI plc’s ordinary shares. Generally, the term “related person” for this purpose means any person who controls or is controlled by the RPII shareholder or any person who is controlled by the same person or persons who control the RPII shareholder. For these purposes, control is measured by either more than 50% in value or more than 50% in voting power of stock applying certain constructive ownership rules. Wind River Reinsurance will be treated as a CFC under the RPII CFC provisions if RPII shareholders are treated as owning (directly, indirectly through non-U.S. entities or constructively) 25% or more of the shares of GI plc by vote or value.

 

RPII Exceptions.   The special RPII rules would not apply with respect to Wind River Reinsurance if (i) at all times during the taxable year less than 20% of the voting power and less than 20% of the value of the stock of GI plc (the “20% Ownership Exception”) was owned (directly or indirectly) by persons who are (directly or indirectly) insured under any policy of insurance or reinsurance issued by Wind River Reinsurance or related persons to any such person, (ii) RPII, determined on a gross basis, is less than 20% of the gross insurance income of Wind River Reinsurance for the taxable year (the “20% Gross Income Exception”), (iii) Wind River Reinsurance elects to be taxed on its RPII as if the RPII were effectively connected with the conduct of a U.S. trade or business, and to waive all treaty benefits with respect to RPII and satisfy certain other requirements or (iv) Wind River Reinsurance elects to be treated as a U.S. corporation and to waive all treaty benefits and satisfy certain other requirements. Wind River Reinsurance does not intend to make either of the elections described in (iii) or (iv). Where none of these exceptions applies, each U.S. person owning or treated as owning any shares in GI plc (and therefore, indirectly, in Wind River Reinsurance) on the last day of GI plc’s taxable year will be required to include in its gross income for U.S. federal income tax purposes

its share of the RPII for the portion of the taxable year during which Wind River Reinsurance was a CFC under the RPII provisions, determined as if all such RPII were distributed proportionately only to such U.S. persons at that date, but limited by each such U.S. person’s share of Wind River Reinsurance’s current-year earnings and profits (as determined for U.S. federal income tax purposes) as reduced by the U.S. person’s share, if any, of certain prior-year deficits in earnings and profits (as determined for U.S. federal income tax purposes). Wind River Reinsurance intends to operate in a manner such that it qualifies for either the 20% Gross Income Exception or the 20% Ownership Exception, but there is no assurance that it will be successful in doing so.

 

Computation of RPII.   For any taxable year in which Wind River Reinsurance does not meet the 20% Gross Income Exception or the 20% Ownership Exception, GI plc may also seek information from its shareholders as to whether beneficial owners of ordinary shares at the end of the year are U.S. Persons so that the RPII may be determined and apportioned among such persons. To the extent GI plc is unable to determine whether a beneficial owner of ordinary shares is a U.S. Person, we may assume that such owner is not a U.S. Person, thereby increasing the per share RPII amount for all known RPII shareholders.

 

If Wind River Reinsurance meets either the 20% Gross Income Exception or the 20% Ownership Exception, RPII shareholders will not be required to include RPII in their taxable income. The amount of RPII includable in the income of a RPII shareholder is based upon the net RPII income for the year after deducting related expenses such as losses, loss reserves and operating expenses.

 

Uncertainty as to Application of RPII.   The RPII provisions are complex, have never been interpreted by the courts or the Treasury Department in final Treasury regulations, and Treasury regulations interpreting the RPII provisions of the Code exist only in proposed form. It is not certain whether these Treasury regulations will be adopted in their proposed form or what changes or clarifications might ultimately be made thereto or whether any such changes, as well as any interpretation or application of RPII by the IRS, the courts or otherwise, might have retroactive effect. Accordingly, the meaning of the RPII provisions and the application thereof to Wind River Reinsurance is uncertain. In addition, we cannot be certain that the amount of RPII or the amounts of the RPII inclusions for any particular RPII shareholder, if any, will not be subject to adjustment based upon subsequent IRS examination. Any U.S. Holder which does business with Wind River Reinsurance should consult its own tax advisor as to the effects of these uncertainties.

 

Tax-Exempt Shareholders.   Tax-exempt entities will be required to treat certain subpart F insurance income, including RPII, that is includible in income by the tax-exempt entity as unrelated business taxable income if Wind River Reinsurance is a CFC. Tax exempt entities are urged to consult their own tax advisors as to the potential impact of the unrelated business taxable income provisions of the Code. A tax-exempt organization that is treated as a 10% U.S. Shareholder or a RPII shareholder also must file IRS Form 5471 in certain circumstances.

 

Dispositions of Common Shares.   Subject to the discussions below relating to the potential application of Section 1248 of the Code and the PFIC rules, U.S. Holders of ordinary shares generally should recognize capital gain or loss for U.S. federal income tax purposes on the sale, exchange or other taxable disposition of ordinary shares in an amount equal to the difference between the amount realized on such sale, exchange or other taxable disposition and the U.S. Holder’s adjusted tax basis in the ordinary shares. Any such gain or loss generally will be long-term capital gain or loss if the U.S. Holder held the ordinary shares for more than one year at the time of the sale, exchange or other taxable disposition. Preferential tax rates may apply to long-term capital gains of individuals and other non-corporate U.S. Holders. The deductibility of capital losses is subject to significant limitations under the Code.

 

Section 1248 of the Code generally provides that a U.S. person that owned, directly, indirectly through certain non-U.S. entities or constructively, 10% or more of the voting power of a non-U.S. corporation at any time during the five-year period ending on the date of a sale or exchange of stock in such corporation at a time when the corporation was a CFC must treat any gain realized from such sale or exchange as a dividend to the extent of the CFC’s earnings and profits (determined under U.S. federal income tax principles) attributable to the period during which the person held the shares while the corporation was a CFC (with certain adjustments). As explained above, we believe that GI plc will not be a CFC immediately after the

Transaction; there can be no assurance, however, that this will be the case due to legal uncertainties regarding the application of such rules. A 10% U.S. Shareholder may in certain circumstances be required to report a disposition of shares of a CFC 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. In the event this is determined necessary, GI plc will provide a completed IRS Form 5471 or the relevant information necessary to complete the Form.

 

Section 1248 of the Code also applies to the sale or exchange of shares in a non-U.S. corporation if the non-U.S. corporation would be treated as a CFC for RPII purposes regardless of whether the shareholder is a 10% U.S. Shareholder or whether the 20% Gross Income Exception or the 20% Ownership Exception applies. Proposed Treasury regulations do not address whether Section 1248 of the Code would apply if a non-U.S. corporation is not a CFC but the non-U.S. corporation has a subsidiary that is a CFC that would be taxed as an insurance company if it were a domestic corporation. We believe, however, that this application of Section 1248 of the Code under the RPII rules should not apply to dispositions of ordinary shares because GI plc will not be directly engaged in the insurance business. We cannot be certain, however, that the IRS will not interpret the proposed Treasury regulations in a contrary manner or that the Treasury Department will not amend the proposed Treasury regulations to provide that these rules will apply to dispositions of ordinary shares. U.S. Holders should consult their own tax advisors regarding the effects of these rules on a disposition of ordinary shares.

 

Passive Foreign Investment Companies.   In general, a non-U.S. corporation will be a PFIC during a given year if (i) 75% or more of its gross income constitutes “passive income,” which we refer to as the “75% test,” or (ii) 50% or more of its assets produce or are held for the production of passive income, which we refer to as the “50% test.”

 

If GI plc were characterized as a PFIC during a given year during which a U.S. Holder held ordinary shares, such U.S. Holder would be subject to generally adverse rules upon the sale at a gain of, or receipt of an “excess distribution” with respect to, its ordinary shares, unless such person (i) was a 10% U.S. Shareholder and we were a CFC or (ii) made a “qualified electing fund election” or “mark-to-market” election. It is uncertain whether GI plc would be able to provide its shareholders with the information necessary for a U.S. Holder to make a qualified electing fund election and the holders of Class B ordinary shares would not be eligible for a mark-to-market election. In general, a shareholder receives an “excess distribution” if the amount of the distribution is more than 125% of the average distribution with respect to the ordinary shares during the three preceding taxable years (or shorter period during which the taxpayer held ordinary shares). Generally, a U.S. Holder would be required to allocate any excess distribution or any gain from the sale or other disposition of the ordinary shares ratably over its holding period for the ordinary shares. Such amounts would be taxed as ordinary income and amounts allocated to prior taxable years would be subject to an interest charge at a rate applicable to underpayments of tax. In addition, a distribution paid by GI plc to U.S. Holders that is characterized as a dividend and not as an excess distribution would not be eligible for reduced rates of tax as qualified dividend income with respect to dividends paid before 2011.

 

For the above purposes, passive income generally includes interest, dividends, annuities and other investment income. The PFIC rules provide that income “derived in the active conduct of an insurance business by a corporation which is predominantly engaged in an insurance business... is not treated as passive income” (the “Insurance Income Exception”). The PFIC provisions also contain a look-through rule under which a non-U.S. corporation generally shall be treated as if it “received directly its proportionate share of the income...” and as if it “held its proportionate share of the assets...” of any other corporation in which it owns at least 25% of the value of the stock.

 

The Insurance Income Exception is intended to ensure that income derived by a bona fide insurance company is not treated as passive income, except to the extent such income is attributable to financial reserves in excess of the reasonable needs of the insurance business. We expect, for purposes of the PFIC rules, that each of the insurance subsidiaries of GI plc will be predominantly engaged in the active conduct of an insurance business, and, additionally, we expect that in each year of operations the income and assets of GI plc and its subsidiaries treated as passive income and assets will not exceed the 75% test or 50% test amounts

with respect to the overall income and assets of GI plc and its subsidiaries for such year. Under the look-through rule, GI plc should be deemed to own its proportionate share of the assets and to have received its proportionate share of the income of its direct and indirect subsidiaries for purposes of the 75% test and the 50% test. As a result, we believe that GI plc should not be treated as a PFIC for the current year and for the foreseeable future. Furthermore, based on the application of these rules, we believe that UAI Ltd. was not a PFIC in prior taxable years, and will not be a PFIC in the current taxable year. We cannot be certain that the IRS will not successfully challenge this position or that a court would not sustain such challenge because the determination of PFIC status is fundamentally factual in nature, depends on the application of complex U.S. federal income tax rules that are subject to differing interpretations, and generally cannot be determined until the close of the taxable year in question. Furthermore, there are currently no Treasury regulations regarding the application of the PFIC provisions to an insurance company, and new Treasury regulations or pronouncements interpreting or clarifying these rules may be forthcoming. U.S. Holders should consult their own tax advisors as to the effects of the PFIC rules.

 

Information Reporting and Backup Withholding.   U.S. Holders who owned (i) at least 5% (by vote or value) of the total outstanding UAI Ltd. Class A common shares or at least 1% (by vote or value) of the total outstanding UAI Ltd. Class B common shares or (ii) whose tax basis in their UAI Ltd. shares surrendered pursuant to the Transaction equals or exceeds $1 million are subject to certain reporting requirements with respect to the Transaction.

 

In addition, U.S. Holders that are Section 1248 Shareholders will be required to file a notice with the IRS on or before the last day for filing the federal income tax return for the U.S. Holder’s taxable year in which the Transaction is consummated. The notice must contain certain information specifically enumerated in the Treasury regulations promulgated under Section 367(b) of the Code. U.S. Holders are advised to consult their own tax advisors for assistance in preparing such notice.

 

Information returns may be filed with the IRS in connection with distributions on our ordinary shares and the proceeds from a sale or other taxable disposition of our ordinary shares unless the U.S. Holder of our ordinary shares establishes an exemption from the information reporting rules. A U.S. Holder of ordinary shares that does not establish such an exemption may be subject to U.S. backup withholding tax on these payments if the holder is not a corporation or other exempt recipient or fails to provide its taxpayer identification number or otherwise comply with the backup withholding rules. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is furnished to the IRS in a timely manner. U.S. Holders are urged to consult with their tax advisors with respect to these and other reporting requirements applicable to the Transaction.

 

Treatment of Certain Irish Taxes

 

Any stamp duty or Irish capital acquisitions tax imposed on a U.S. Holder as described below under the heading “— Irish Tax Considerations” will not be creditable against U.S. federal income taxes, although a U.S. Holder may be entitled to deduct such taxes, subject to applicable limitations under the Code. U.S. Holders should consult their tax advisors regarding the tax treatment of these Irish taxes.

 

Scope of Discussion

 

The following is a general summary of the main Irish tax considerations applicable to certain investors who are the beneficial owners of GI plc ordinary shares. It is based on existing Irish law and practices in effect on the date of this proxy statement and on discussions and correspondence with the Irish Revenue Commissioners. Legislative, administrative or judicial changes may modify the tax consequences described below.

 

The statements do not constitute tax advice and are intended only as a general guide. Furthermore, this information applies only to GI plc ordinary shares held as capital assets and does not apply to all categories of

shareholders, such as dealers in securities, trustees, insurance companies, collective investment schemes and shareholders who have, or who are deemed to have, acquired their GI plc ordinary shares by virtue of an office or employment. This summary is not exhaustive and shareholders should consult their own tax advisors as to the tax consequences in Ireland, or other relevant jurisdictions of the Transaction, including the acquisition, ownership and disposition of the GI plc ordinary shares.

 

Irish Tax on Chargeable Gains

 

The receipt by UAI Ltd. shareholders of GI plc ordinary shares as consideration for the repurchase and cancellation of their UAI Ltd. shares in the Transaction will not give rise to a liability to Irish tax on chargeable gains for persons that are not resident or ordinarily resident in Ireland for Irish tax purposes and do not hold such shares in connection with a trade or business carried on by such holder in Ireland through a branch or agency.

 

The issuance, pursuant to the Transaction, of GI plc ordinary shares to holders of UAI Ltd. shares who are resident or ordinarily resident for tax purposes in Ireland, or who hold their shares in connection with a trade or business carried on by such holder in Ireland through a branch or agency, should be treated as falling within the relief for reconstructions for the purposes of taxation of chargeable gains (“Irish CGT”). Accordingly, the GI plc ordinary shares issued to holders of UAI Ltd. shares in accordance with their entitlements as holders of UAI Ltd. shares should be treated as the same asset and as acquired at the same time as the UAI Ltd. shares. The receipt of cash in lieu of fractional shares may trigger a liability to Irish tax on chargeable gains for such shareholders. Shareholders should consult their own tax advisor if they believe they may be subject to Irish tax.

 

Withholding Tax on Dividends

 

Distributions made by GI plc will generally be subject to dividend withholding tax (“DWT”) at the standard rate of income tax (currently 20%) unless one of the exemptions described below applies, which we believe will be the case for the majority of shareholders. DWT (if any) arises in respect of dividends paid by GI plc. For DWT purposes, a dividend includes any distribution made by GI plc to its shareholders, including cash dividends, non-cash dividends and additional stock or units taken in lieu of a cash dividend. GI plc is responsible for withholding DWT at source and forwarding the relevant payment to the Irish Revenue Commissioners.

 

Certain shareholders (both individual and corporate) are also entitled to an exemption from DWT. In particular, a non-Irish resident shareholder is not subject to DWT on dividends received from GI plc if the shareholder is:

 

 

and provided that, in all cases noted above but subject to the matters described below, the shareholder has provided the appropriate forms to his or her broker (and the relevant information is further transmitted to GI plc’s qualifying intermediary) before the record date for the dividend (in the case of shares held beneficially), or to GI plc’s transfer agent at least 14 business days before such record date (in the case of shares held directly).

 

GI plc will enter into an agreement with an institution which will be recognized by the Irish Revenue Commissioners as a “qualifying intermediary” prior to paying any dividends or making any distributions. This will satisfy one of the Irish requirements for dividends to be paid free of DWT to certain shareholders who hold their shares through DTC, as described below. The agreement will generally provide for certain arrangements relating to cash distributions in respect of those shares of GI plc (the “Deposited Securities”) that are held through DTC. The agreement will also provide that the qualifying intermediary shall distribute or otherwise make available to Cede & Co., as nominee for DTC, any cash dividend or other cash distribution to be made to holders of the Deposited Securities, after GI plc delivers or causes to be delivered to the qualifying intermediary the cash to be distributed.

 

GI plc will rely on information received directly or indirectly from brokers and its transfer agent in determining where shareholders reside, whether they have provided the required U.S. forms and whether they have provided the required Irish dividend withholding tax forms, as described below. Shareholders who are required to file Irish forms in order to receive their dividends free of DWT should note that such forms are valid for five years and new forms must be filed before the expiration of that period in order to continue to enable them to receive dividends without DWT. Links to the various Irish Revenue forms are available at http://www.revenue.ie/en/tax/dwt/forms/index.html. In most cases, individual shareholders resident in a relevant territory should complete a non-resident Form V2A and corporate shareholders resident in a relevant territory should complete a non-resident Form V2B. Where a shareholder is neither an individual nor a company but is resident in a relevant territory, it should complete a non-resident Form V2C. Please contact your broker or your tax advisor if you have any questions regarding Irish dividend withholding tax.

 

For a list of “relevant territories” as defined for the purposes of DWT, please see Annex C to this proxy statement.

 

Shares Held by U.S. Resident Shareholders

 

Dividends paid on GI plc ordinary shares that are owned by residents of the U.S. and held beneficially through DTC will not be subject to DWT provided that the address of the beneficial owner of the shares in the records of the broker is in the U.S. UAI strongly recommends that such shareholders ensure that their information has been properly recorded by their brokers (so that such brokers can further transmit the relevant information to UAI’s qualifying intermediary) by filing a Form W-9 with their broker.

 

Dividends paid on GI plc ordinary shares that are owned by residents of the U.S. and held directly will not be subject to DWT if the shareholder held shares on February 17, 2010 and has provided a valid Form W-9 showing a U.S. address or a valid U.S. taxpayer identification number to UAI’s transfer agent or if the shareholder became a shareholder after February 17, 2010 and has provided the appropriate Irish dividend withholding tax forms to GI plc’s transfer agent, in either case, at least 14 business days before the record date for the first dividend to which the shareholder is entitled. GI plc strongly recommends that such shareholders ensure that appropriate Form W-9 or taxpayer identification number or Irish dividend withholding tax form has been provided to GI plc’s transfer agent.

 

If any shareholder who is resident in the U.S. receives a dividend subject to DWT, he or she should generally be able to make an application for a refund from the Irish Revenue Commissioners on the prescribed form.

 

Shares Held by Residents of “Relevant Territories” Other Than the U.S.

 

Dividends paid to our shareholders who are residents of “relevant territories” other than the U.S. generally will not be subject to Irish dividend withholding tax, but those shareholders will need to provide the

appropriate tax forms in order to receive their dividends without any Irish dividend withholding tax as summarized below.

 

Shareholders who are residents of “relevant territories” other than the U.S. who acquired their shares on or before February 17, 2010 generally will receive dividends paid on or before September 30, 2010 without any DWT. For shares held beneficially through DTC, dividends will be paid on or before September 30, 2010 without any DWT if the address of the relevant shareholder in his or her broker’s records as evidenced by a Form W-8 is in a “relevant territory” other than the U.S. UAI strongly recommends that such shareholders ensure that their information has been properly recorded by their brokers (so that such brokers can further transmit the relevant information to UAI’s qualifying intermediary). For shares held directly, dividends will be paid on or before September 30, 2010 without any DWT if the shareholder has provided a valid U.S. Form W-8 showing an address in a “relevant territory” other than the U.S. to GI plc’s transfer agent at least 14 business days before the record date for the first dividend to which they are entitled. GI plc strongly recommends that such shareholders ensure that appropriate tax form has been provided to GI plc’s transfer agent.

 

Shareholders who are residents of “relevant territories” other than the U.S. who acquire all of their shares after February 17, 2010 must complete the appropriate Irish dividend withholding tax forms in order to receive their dividends without DWT. Such shareholders must provide the appropriate Irish dividend withholding tax forms to their brokers (so that such brokers can further transmit the relevant information to GI plc’s qualifying intermediary) before the record date for the first dividend payment to which they are entitled (in the case of shares held beneficially), or to UAI’s transfer agent at least 14 business days before such record date (in the case of shares held directly). UAI strongly recommends that such shareholders complete the appropriate Irish forms and provide them to their brokers or UAI’s transfer agent, as the case may be, as soon as possible after acquiring their shares.

 

In addition, all shareholders who are residents of “relevant territories” other than the U.S. (regardless of when such shareholders acquired their shares) must complete the appropriate Irish dividend withholding tax forms in order to receive their dividends after September 30, 2010 without DWT. Such shareholders must provide the appropriate Irish forms to their brokers (so that such brokers can further transmit the relevant information to UAI’s qualifying intermediary) before the record date for the first dividend paid after September 30, 2010 (in the case of shares held beneficially), or to UAI’s transfer agent at least 14 business days before such record date (in the case of shares held directly). UAI strongly recommends that such shareholders complete the appropriate Irish forms and provide them to their brokers or UAI’s transfer agent, as the case may be, as soon as possible.

 

Shares Held by Residents of Ireland

 

Most Irish tax resident or ordinarily resident shareholders will be subject to DWT in respect of dividend payments on their GI plc ordinary shares.

 

Shareholders that are residents of Ireland but are entitled to receive dividends without DWT must complete the appropriate Irish forms and provide them to their brokers (so that such brokers can further transmit the relevant information to GI plc ’s qualifying intermediary) before the record date for the first dividend to which they are entitled (in the case of shares held beneficially), or to GI plc ’s transfer agent at least 14 business days before such record date (in the case of shares held directly). Shareholders who are resident or ordinarily resident in Ireland or are otherwise subject to Irish tax should consult their own tax advisor.

 

Shares Held by Other Persons

 

GI plc shareholders who do not reside in “relevant territories” or in Ireland will be subject to DWT, but there are a number of other exemptions that could apply on a case-by-case basis. Dividends paid to such shareholders will be paid subject to DWT unless the relevant shareholder has provided the appropriate Irish dividend withholding tax form to his or her broker (so that such broker can further transmit the relevant information to GI plc’s qualifying intermediary) prior to the record date for the first dividend to which they

are entitled (in the case of shares held beneficially), or to GI plc’s transfer agent at least 14 business days before such record date (in the case of shares held directly). GI plc strongly recommends that such shareholders to whom an exemption applies complete the appropriate Irish forms and provide them to their brokers or GI plc’s transfer agent, as the case may be, as soon as possible.

 

If any shareholder who is not a resident of a “relevant territory” or Ireland but is exempt from withholding receives a dividend subject to DWT, he or she may make an application for a refund from the Irish Revenue Commissioners on the prescribed form.

 

Income Tax on Dividends Paid on GI plc Ordinary Shares

 

Irish income tax (if any) arises in respect of dividends paid by GI plc.

 

A shareholder who is neither resident nor ordinarily resident in Ireland and who is entitled to an exemption from DWT, generally has no liability for Irish income tax or the income and health levies on a dividend from GI plc unless he or she holds his or her GI plc ordinary shares through a branch or agency in Ireland through which a trade is carried on.

 

A shareholder who is neither resident nor ordinarily resident in Ireland and who is not entitled to an exemption from DWT generally has no additional liability to income tax or to the levies unless he or she holds his or her GI plc ordinary shares through a branch or agency in Ireland through which a trade is carried on. The DWT deducted by GI plc discharges such liability to Irish income tax provided that the shareholder furnishes the statement of DWT imposed to the Irish Revenue.

 

A shareholder who is resident of a “relevant territory” or otherwise exempt from Irish dividend withholding tax but who receives dividends subject to DWT should be able to make a reclaim of the DWT from the Irish Revenue Commissioners unless he or she holds his or her GI plc ordinary shares through a branch or agency in Ireland through which a trade is carried on.

 

Irish resident or ordinarily resident shareholders may be subject to Irish tax and/or levies on dividends received from GI plc. Such shareholders should consult their own tax advisor.

 

Capital Acquisitions Tax

 

Irish capital acquisitions tax (“CAT”) comprises principally of gift tax and inheritance tax. CAT could apply to a gift or inheritance of GI plc ordinary shares irrespective of the place of residence, ordinary residence or domicile of the parties. This is because GI plc ordinary shares are regarded as property situated in Ireland as the share register of GI plc must be held in Ireland. The person who receives the gift or inheritance has primary liability for CAT.

 

CAT is levied at a rate of 25% above certain tax-free thresholds. The appropriate tax-free threshold is dependent upon (1) the relationship between the donor and the donee and (2) the aggregation of the values of previous gifts and inheritances received by the donee from persons within the same group threshold. Gifts and inheritances passing between spouses are exempt from CAT.

 

Shareholders should consult their own tax advisor as to whether CAT is creditable or deductible in computing any domestic tax liabilities.

 

Stamp Duty

 

Irish stamp duty (if any) becomes payable in respect of share transfers occurring after completion of the Transaction.

 

Shares held through DTC

 

It is anticipated that the majority of GI plc Class A ordinary shares will be held in DTC. Accordingly, for the majority of transfers of GI plc Class A ordinary shares, there will not be any Irish stamp duty.

A transfer of GI plc Class A ordinary shares from a seller who holds shares through DTC to a buyer who holds the acquired shares through DTC will not be subject to Irish stamp duty.

 

Shares held outside of DTC or transferred into or out of DTC

 

A transfer of GI plc ordinary shares (i) by a seller who holds shares outside of DTC to any buyer, or (ii) by a seller who holds the shares through DTC to a buyer who holds the acquired shares outside of DTC, may be subject to Irish stamp duty (currently at the rate of 1% of the price paid or the market value of the shares acquired, if higher) payable by the buyer.

 

A shareholder who holds GI plc Class A ordinary shares outside of DTC may transfer those shares into DTC (or vice versa) without giving rise to Irish stamp duty provided there is no change in the ultimate beneficial ownership of the shares as a result of the transfer and at the time of the transfer into DTC (or out of DTC) there is no agreement for the sale of the shares by the beneficial owner to a third party. In order to benefit from this exemption from Irish stamp duty, the seller must confirm to GI plc that there is no change in the ultimate beneficial ownership of the shares as a result of the transfer and there is no agreement for the sale of the shares by the beneficial owner to a third party.

 

Because of the potential Irish stamp duty on transfers of GI plc ordinary shares, UAI strongly recommends that all directly registered shareholders open broker accounts so they can transfer their Class A ordinary shares into DTC as soon as possible. UAI also strongly recommends that any person who wishes to acquire GI plc Class A ordinary shares after completion of the Transaction acquires such shares through DTC.

 

Payment of Stamp Duty

 

GI plc’s official share register must be maintained in Ireland. Registration in this share register will be determinative of shareholding in GI plc. Only shareholders of GI plc will be entitled to receive dividends. Subject to certain exceptions, only members of GI plc will be entitled to vote in general meetings of GI plc.

 

A written instrument of transfer is required under Irish law in order for a transfer of the legal ownership of shares to be registered on GI plc’s official share register. Such instruments of transfer may be subject to Irish stamp duty, which must be paid prior to the official share register being updated.

 

As a holder of Class A ordinary shares in GI plc who holds shares through DTC will not be the legal owner of such shares (instead, the depository (for example, Cede & Co., as nominee for DTC) will be the holder of record of such shares), a transfer of shares from a person who holds such shares through DTC to a person who also holds such shares through DTC will not be registered in GI plc’s official share register, i.e., the depository will remain the record holder of such shares.

 

GI plc’s articles of association as they will be in effect after the Transaction delegate to GI plc’s secretary the authority to execute an instrument of transfer on behalf of a transferring party, which the secretary may do if for any reason such instrument is required and has not already been lodged with the Company.

 

To the extent that stamp duty is due but has not been paid, GI plc may, in its absolute discretion, pay (or cause one of its affiliates to pay) the outstanding stamp duty in respect of a transfer of shares. GI plc’s articles of association as they will be in effect after the Transaction provide that, in the event of any such payment, GI plc (i) may seek reimbursement from the transferor or transferee (at our discretion), (ii) may set-off the amount of the stamp duty against future dividends payable to the transferor or transferee (at our discretion), and (iii) will have a lien against the GI plc ordinary shares on which we have paid stamp duty.

 

The Transaction will not result in any income tax consequences under Cayman Islands law to UAI Ltd. or GI plc or their respective shareholders.

 

The following description of GI plc’s share capital is a summary. This summary is not complete and is subject to the complete text of GI plc’s forms of memorandum and articles of association attached as Annex B to this proxy statement and to the Irish Companies Acts. We encourage you to read those laws and documents carefully. There are differences between UAI Ltd.’s memorandum and articles of association and GI plc’s memorandum and articles of association as they will be in effect after the Transaction primarily due to differences between Cayman Islands law and Irish law. See “Comparison of Rights of Shareholders and Powers of the Board of Directors.” Except where otherwise indicated, the description below reflects GI plc’s memorandum and articles of association as those documents will be in effect upon completion of the Transaction.

 

Authorized Share Capital.   The authorized share capital of GI plc is €40,000 and US$100,000 divided into 40,000 ordinary shares (which will become 40,000 deferred shares on consummation of the Transaction) with a nominal value of €1 per share, 600,000,000 Class A ordinary shares with a nominal value of US$0.0001 per share, 300,000,000 Class B ordinary shares with a nominal value of US$0.0001 per share and 100,000,000 preferred shares with a nominal value of US$0.0001 per share.

 

GI plc may issue shares subject to the maximum prescribed by its authorized share capital contained in its articles of association. In connection with the Transaction, GI plc will also assume UAI Ltd.’s existing obligations to deliver shares under our equity incentive plans pursuant to the terms thereof. Based on the Transaction and the one-for-two exchange, proportionate adjustments will be made to the per share exercise price and/or the number of shares issuable upon the exercise or conversion of all outstanding options to reflect the exchange ratio pursuant to the terms of such instruments.

 

As a matter of Irish company law, the directors of a company may issue new ordinary or preferred shares without shareholder approval once authorized to do so by the articles of association of the company or by an ordinary resolution adopted by the shareholders at a general meeting. An “ordinary resolution” requires a majority of the total number of votes of the shares of GI plc present in person or by proxy and entitled to vote at the meeting convened to consider the matter. The authority conferred can be granted for a maximum period of five years, at which point it must be renewed by the shareholders of the company by an ordinary resolution. The articles of association of GI plc authorize the board of directors of GI plc to issue new ordinary or preferred shares without shareholder approval for a period of five years from the date of GI plc’s incorporation.

 

The authorized share capital may be increased or reduced as provided for in GI plc’s articles. The shares comprising the authorized share capital of GI plc may be divided into shares of such par value as the articles prescribes.

 

The rights and restrictions to which the ordinary shares will be subject will be prescribed in GI plc’s articles of association. GI plc’s articles of association entitle the board of directors, without shareholder approval, to determine the terms of the preferred shares issued by GI plc. The GI plc board of directors is authorized, without obtaining any vote or consent of the holders of any class or series of shares unless expressly provided by the terms of that class or series or shares, to provide from time to time for the issuance of other series of preferred shares and to establish the characteristics of each series, including the number of shares, designations, relative voting rights, dividend rights, liquidation and other rights, redemption, repurchase or exchange rights and any other preferences and relative, participating, optional or other rights and limitations not inconsistent with applicable law.

 

Irish law does not recognize fractional shares held of record; accordingly, the official Irish register of shareholders of GI plc will not reflect any fractional shares. Whenever as a result of an alteration or reorganization of the share capital of GI plc any shareholder would become entitled to fractions of a share the directors may, on behalf of these shareholders sell the shares representing the fractions for the best price reasonably obtainable to any person and distribute the proceeds of the sale in due proportion among those

shareholders (after deduction of brokerage commissions or other sale expenses). This ability of the directors of GI plc to dispose of fractional shares is required in order to comply with the Irish law prohibition on fractional shares held of record.

 

Issued Share Capital.   Immediately prior to the Transaction, the issued share capital of GI plc will be €40,000, comprised of 40,000 ordinary shares, with par value of €1 per share (the “Euro Share Capital”). In connection with the consummation of the Transaction, the Euro Share Capital shall be reclassified as deferred shares and shall cease to carry any right to a dividend or to receive notice of or to attend, vote or speak at any shareholder meeting and shall only confer the right on a return of capital, on a winding-up or otherwise, to repayment of the nominal value paid on those shares and only after repayment of the Class A and Class B ordinary shares in full and may be acquired by GI plc for no consideration. We expect that GI plc will simultaneously issue a number of Class A and Class B ordinary shares with a par value of $0.0001 each that will to take into account the one-for-two exchange of Class A and Class B ordinary shares for the UAI Ltd. Class A and Class B common shares that will be cancelled as part of the Transaction (including shares of GI plc issued to UAI Ltd. in respect of any shares of UAI Ltd. held as treasury shares immediately prior to the Transaction Time). All shares issued on completion of the Transaction will be issued as fully paid up.

 

Certain statutory pre-emption rights apply automatically in favor of GI plc’s shareholders where shares in GI plc are to be issued for cash. However, GI plc has opted out of these pre-emption rights in its articles of association as permitted under Irish company law. This opt-out must be renewed every five years by a special resolution of the shareholders. A special resolution requires not less than 75% of the votes of the shares of GI plc present in person or by proxy and entitled to vote at the meeting convened to consider the matter. If the opt-out is not renewed, shares issued for cash must be offered to pre-existing shareholders of GI plc pro rata to their existing shareholding before the shares can be issued to any new shareholders. The statutory pre-emption rights do not apply where shares are issued for non-cash consideration and do not apply to the issue of non-equity shares (that is, shares that have the right to participate only up to a specified amount in any income or capital distribution).

 

The articles of association of GI plc provide that, subject to any shareholder approval requirement under any laws, regulations or the rules of any stock exchange to which GI plc is subject, the board of directors is authorized, from time to time, in its discretion, to grant such persons, for such periods and upon such terms as the board of directors deems advisable, options to purchase such number of shares of any class or classes or of any series of any class as the board of directors may deem advisable, and to cause warrants or other appropriate instruments evidencing such options to be issued. The Irish Companies Acts provide that directors may issue share warrants or options without shareholder approval once authorized to do so by the articles of association or an ordinary resolution of shareholders. The board of directors may issue shares upon exercise of warrants or options without shareholder approval or authorization.

 

GI plc will be subject to the rules of NASDAQ that require shareholder approval of certain share issuances.

 

Under Irish law, dividends and distributions may only be made from distributable reserves. Distributable reserves, broadly, means the accumulated realized profits of GI plc less accumulated realized losses of GI plc. In addition, as a public limited company, no distribution or dividend may be made unless the net assets of GI plc are equal to, or in excess of, the aggregate of GI plc’s called up share capital plus undistributable reserves and the distribution does not reduce GI plc’s net assets below such aggregate amount. Undistributable reserves include the share premium account, the capital redemption reserve fund and the amount by which GI plc’s accumulated unrealized profits, so far as not previously utilized by any capitalization, exceed GI plc’s accumulated unrealized losses, so far as not previously written off in a reduction or reorganization of capital.

 

The determination as to whether or not GI plc has sufficient distributable reserves to fund a dividend must be made by reference to “relevant accounts” of GI plc. The “relevant accounts” will be the last set of

unconsolidated annual audited financial statements (except for any initial set of unconsolidated audited financial statements produced prior to the end of a company’s first fiscal year and which are not therefore annual audited financial statements) prepared in accordance with the Irish Companies Acts and any unaudited financial statements as are necessary to enable a reasonable judgment to be made as to the level of distributable reserves and which give a “true and fair view” of GI plc’s unconsolidated financial position and accord with accepted accounting practice. The relevant accounts must be filed in the Companies Registration Office (the official public registry for companies in Ireland).

 

Although GI plc will not have any distributable reserves immediately following the Transaction Time, we are taking steps to create such distributable reserves. Please see “Proposal Number Two: Creation of Distributable Reserves and “Risk Factors.”

 

The mechanism as to who declares a dividend and when a dividend shall become payable is governed by the articles of association of GI plc. GI plc’s articles of association authorize the directors to declare such dividends as appear justified from the profits of GI plc without the approval of the shareholders at a general meeting. The board of directors may also recommend a dividend to be approved and declared by the shareholders at a general meeting. Although a payment of dividends may be made by distribution of assets, shares or cash, no dividend issued may exceed the amount recommended by the directors. The dividends can be declared and paid in the form of cash or non-cash assets.

 

The directors of GI plc may deduct from any dividend payable to any member all sums of money (if any) immediately payable by such member to GI plc in relation to shares of GI plc.

 

The directors of GI plc are also entitled to issue shares with preferred rights to participate in dividends declared by GI plc. The holders of such preferred shares may, depending on their terms, be entitled to claim arrears of a declared dividend out of subsequently declared dividends in priority to ordinary shareholders.

 

For information about the Irish tax issues relating to dividend payments, please see “Material Tax Considerations — Irish Tax Considerations.”

 

Overview

 

Article 3(h) of GI plc’s articles of association provides that any ordinary share which GI plc has acquired or agreed to acquire shall be deemed to be a redeemable share. Accordingly, for Irish company law purposes, the repurchase of ordinary shares by GI plc will technically be effected as a redemption of those shares as described below under “— Repurchases and Redemptions by GI plc.” If the articles of association of GI plc did not contain Article 3(h), repurchases by GI plc would be subject to many of the same rules that apply to purchases of GI plc ordinary shares by subsidiaries described below under “— Purchases by Subsidiaries of GI plc,” including the shareholder approval requirements described below and the requirement that any on-market purchases be effected on a “recognized stock exchange.” Except where otherwise noted, when we refer elsewhere in this proxy statement to repurchasing or buying back ordinary shares of GI plc, we are referring to the redemption of ordinary shares by GI plc pursuant to Article 3(h) of the articles of association or the purchase of ordinary shares of GI plc by a subsidiary of GI plc, in each case in accordance with the GI plc articles of association and Irish company law as described below.

 

Repurchases and Redemptions by GI plc

 

Under Irish law, a company can issue redeemable shares and redeem them out of distributable reserves (which are described above under “— Dividends”) or the proceeds of a new issue of shares for that purpose. Although GI plc will not have any distributable reserves immediately following the Transaction Time, we are taking steps to create such distributable reserves. Please see “Proposal Number Two: Creation of Distributable Reserves” and “Risk Factors.” The issue of redeemable shares may only be made by GI plc where the nominal value of the issued share capital that is not redeemable is not less than 10% of the nominal value of the total issued share capital of GI plc. All redeemable shares must also be fully paid and the terms of redemption of

the shares must provide for payment on redemption. Redeemable shares may, upon redemption, be cancelled or held in treasury. Shareholder approval will not be required to redeem GI plc shares.

 

The board of directors of GI plc will also be entitled to issue shares which may be redeemed at the option of either GI plc or the shareholder, depending on the terms of such preferred shares. Please see “— Capital Structure — Authorized Share Capital” above for additional information on redeemable shares.

 

Repurchased and redeemed shares may be cancelled or held as treasury shares. The nominal value of treasury shares held by GI plc at any time must not exceed 10% of the nominal value of the issued share capital of GI plc. While GI plc holds shares as treasury shares, it cannot exercise any voting rights in respect of those shares. Treasury shares may be cancelled by GI plc or re-issued subject to certain conditions.

 

Purchases by Subsidiaries of GI plc

 

Under Irish law, it may be permissible for an Irish or non-Irish subsidiary to purchase shares of GI plc either on-market or off-market. A general authority of the shareholders of GI plc is required to allow a subsidiary of GI plc to make on-market purchases of GI plc ordinary shares; however, as long as this general authority has been granted, no specific shareholder authority for a particular on-market purchase by a subsidiary of GI plc ordinary shares is required. We expect that GI plc will seek such general authority, which must expire no later than 18 months after the date on which it was granted, at the first annual general meeting of GI plc in 2010 and at subsequent annual general meetings. In order for a subsidiary of GI plc to make an on-market purchase of GI plc’s shares, such shares must be purchased on a “recognized stock exchange.” NASDAQ, on which the shares of GI plc will be listed following the Transaction, has recently been recognized as a recognized stock exchange for this purpose by Irish company law. For an off-market purchase by a subsidiary of GI plc, the proposed purchase contract must be authorized by special resolution of the shareholders of GI plc before the contract is entered into. The person whose shares are to be bought back cannot vote in favor of the special resolution and, for at least 21 days prior to the special resolution, the purchase contract must be on display or must be available for inspection by shareholders at the registered office of GI plc.

 

The number of shares held by the subsidiaries of GI plc at any time will count as treasury shares and will be included in any calculation of the permitted treasury share threshold of 10% of the nominal value of the issued share capital of GI plc. While a subsidiary holds shares of GI plc, it cannot exercise any voting rights in respect of those shares. The acquisition of the shares of GI plc by a subsidiary must be funded out of distributable reserves of the subsidiary.

 

Under its articles of association, GI plc may by ordinary resolution consolidate and divide all or any of its share capital into shares of larger par value than its existing shares or subdivide its shares into smaller amounts than is fixed by its memorandum of association.

 

GI plc may, by ordinary resolution, cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and reduce the amount of its authorized share capital by the amount of shares so cancelled. GI plc also may by special resolution reduce its issued share capital, any capital redemption reserve fund or any share premium account in any manner and subject to any incident authorized and consent required, by law, including that of the Irish High Court. The distributable reserves proposal discussed above in “Proposal Number Two: Creation of Distributable Reserves” involves a reduction of share capital, namely the share premium account of GI plc, for purposes of Irish law.

 

GI plc will be required to hold an annual general meeting within eighteen months of incorporation and at intervals of no more than fifteen months thereafter, provided that an annual general meeting is held in each

calendar year following the first annual general meeting, no more than nine months after GI plc’s fiscal year-end. The first annual general meeting of GI plc may be held outside of Ireland. Thereafter, any annual general meeting may be held outside of Ireland if a resolution so authorizing has been passed at the preceding annual general meeting. Subject to applicable law, all general meetings of GI plc may be held outside Ireland.

 

Extraordinary general meetings of GI plc may be convened by the board of directors, or on requisition of the shareholders holding not less than 10% of the paid up share capital of GI plc carrying voting rights. In limited circumstances, GI plc’s auditors can require the board of directors to convene extraordinary general meetings of GI plc. Extraordinary general meetings are generally held for the purposes of approving shareholder resolutions of GI plc as may be required from time to time. Unless the consent of all the shareholders entitled to receive notice of that meeting is obtained at any extraordinary general meeting, only such business shall be conducted as is set forth in the notice thereof.

 

Notice of a general meeting must be given to all shareholders of GI plc (with the exception of the holder of the Euro Share Capital) and to the auditors of GI plc. The minimum notice periods are 21 days’ notice in writing for an annual general meeting or an extraordinary general meeting to approve a special resolution and 14 days’ notice in writing for any other extraordinary general meeting. Because of the 21-day and 14-day requirements described in this paragraph, GI plc’s articles of association include provisions reflecting these requirements of Irish law.

 

In the case of an extraordinary general meeting convened by shareholders of GI plc, the proposed purpose of the meeting must be set out in the requisition notice. The requisition notice can contain any resolution. Upon receipt of this requisition notice, the board of directors has 21 days to convene a meeting of GI plc’s shareholders to vote on the matters set out in the requisition notice. This meeting must be held within two months of the receipt of the requisition notice. If the board of directors does not convene the meeting within such 21-day period, the requisitioning shareholders, or any of them representing more than one half of the total voting rights of all of them, may themselves convene a meeting, which meeting must be held within three months of the receipt of the requisition notice.

 

The only matters which must, as a matter of Irish company law, be transacted at an annual general meeting are the presentation of the annual accounts, balance sheet and reports of the directors and auditors, the appointment of auditors and the fixing of the auditor’s remuneration (or delegation of same). If no resolution is made in respect of the reappointment of an auditor at an annual general meeting, the previous auditor will be deemed to have continued in office.

 

Directors are elected by the affirmative vote of a majority of the votes cast by shareholders at an annual general meeting and serve for one year terms. Any nominee for director who does not receive a majority of the votes cast is not elected to the board of directors. However, because Irish law requires a minimum of two directors at all times, in the event that an election results in no director being elected, each of the two nominees receiving the greatest number of votes in favor of his or her election shall hold office until such time as additional directors have been appointed to replace them. In the event that an election results in only one director being elected, that director shall be elected and shall serve for a one year term, and the nominee receiving the next greatest number of votes in favor of their election shall hold office until one or more additional directors have been appointed to replace that director.

 

Pursuant to Irish law, if the directors become aware that the net assets of GI plc are half or less of the amount of GI plc’s called-up share capital, the directors of GI plc must convene an extraordinary general meeting of GI plc’s shareholders not later than 28 days from the date that they learn of this fact. This meeting must be convened for the purposes of considering whether any, and if so what, measures should be taken to address the situation.

 

All votes at a meeting shall be determined by a poll and every shareholder shall have one vote for each Class A ordinary share and ten votes for each Class B ordinary share that he or she holds as of the record date for the meeting (unless statute provides otherwise such as is the case in a scheme of arrangement). Voting

rights on a poll may be exercised by shareholders registered in GI plc’s share register as of the record date for the meeting or by a duly appointed proxy of such a registered shareholder, which proxy need not be a shareholder. Where interests in shares are held by a nominee trust company this company may exercise the rights of the beneficial holders on their behalf as their proxy. All proxies must be appointed in the manner prescribed by GI plc’s articles of association. The articles of association of GI plc permit the appointment of proxies by the shareholders to be notified to GI plc electronically.

 

In accordance with the articles of association of GI plc, the directors of GI plc may from time to time cause GI plc to issue preferred shares. These preferred shares may have such voting rights as may be specified in the terms of such preferred shares (e.g., they may carry more votes per share than ordinary shares or may entitle their holders to a class vote on such matters as may be specified in the terms of the preferred shares).

 

Treasury shares will not be entitled to vote at general meeting of shareholders.

 

The Euro Share Capital shall carry no right to receive notice of or to attend, vote or speak at any shareholder meeting.

 

Irish company law requires “special resolutions” of the shareholders at a general meeting to approve certain matters. A special resolution requires not less than 75% of the votes of the shares of GI plc present in person or by proxy and entitled to vote at the meeting convened to consider the matter. This may be contrasted with “ordinary resolutions,” which require a simple majority of the votes of GI plc’s shareholders cast at a general meeting. Examples of matters requiring special resolutions include:

 

 

A scheme of arrangement with shareholders requires a court order from the Irish High Court and the approval of: (1) 75% or more in value of the shares of GI plc present and voting in person or by proxy; and (2) 50% in number of the voting shareholders, at the meeting convened to consider the scheme.

 

Variation of all or any special rights attached to any class or series of shares of GI plc is addressed in the articles of association of GI plc as well as the Irish Companies Acts. Any variation of class rights attaching to the issued shares of GI plc must be approved in writing by holders of three quarters (3/4) of the issued shares as that class or with the sanction of a special resolution of the shareholders of the class or series affected.

 

The presence, in person or by proxy, of one or more holders holding at least a majority of the votes eligible to be cast at a general meeting constitutes a quorum for the conduct of business. No business may take place at a general meeting of GI plc if a quorum is not present in person or by proxy. The board of directors has no authority to waive quorum requirements stipulated in the articles of association of GI plc. Abstentions and broker non-votes will be counted as present for purposes of determining whether there is a quorum in respect of the proposals.

 

Under Irish law, shareholders have the right to: (1) receive a copy of the memorandum and articles of association of GI plc and any act of the Irish Government which alters the memorandum of association of GI plc; (2) inspect and obtain copies of the minutes of general meeting and resolutions of GI plc; (3) inspect and receive a copy of the register of shareholders, register of directors and secretaries, register of directors’ interests and other statutory registers maintained by GI plc; (4) receive copies of balance sheets and directors’ and auditors’ reports which have previously been sent to shareholders prior to an annual general meeting; and (5) receive balance sheets of a subsidiary company of GI plc which have previously been sent to shareholders prior to an annual general meeting for the preceding ten years. The auditors of GI plc will also have the right to inspect all books, records and vouchers of GI plc. If required by law, the auditors’ report must be circulated to the shareholders with copies of the balance sheet and auditors’ report 21 days before the annual general meeting and must be read to the shareholders at GI plc’s annual general meeting.

 

There are a number of mechanisms for acquiring an Irish public limited company, including:

 

(a) a court-approved scheme of arrangement under the Irish Companies Acts. A scheme of arrangement with shareholders requires a court order from the Irish High Court and the approval of: (1) 75% or more in value of the shares of GI plc present in person or by proxy and entitled to vote; and (2) 50% in number of the voting shareholders, at the meeting convened to consider the scheme;

 

(b) through a tender offer by a third party for all of the shares of GI plc. Where the holders of 80% or more in value of GI plc’s ordinary shares have accepted an offer for their shares in GI plc, the remaining shareholders may be statutorily required to also transfer their shares. If the bidder does not exercise its “squeeze out” right, then the non-accepting shareholders also have a statutory right to require the bidder to acquire their shares on the same terms. If shares of GI plc were listed on the Irish Stock Exchange or another regulated stock exchange in the EU, this threshold would be increased to 90%; and

 

(c) it is also possible for GI plc to be acquired by way of a merger with an EU-incorporated public company under the EU Cross Border Merger Directive 2005/56. Such a merger must be approved by a special resolution. If GI plc is being merged with another EU public company under the EU Cross Border Merger Directive 2005/56 and the consideration payable to GI plc’s shareholders is not all in the form of cash, GI plc’s shareholders may be entitled to require their shares to be acquired at fair value.

 

Under Irish law, there is no general requirement for a company’s shareholders to approve a sale, lease or exchange of all or substantially all of a company’s assets to a third party.

 

Generally, under Irish law, shareholders of an Irish company do not have appraisal rights. Under the EC (Cross-Border Mergers) Regulations 2008 governing the merger of an Irish public limited company and a company incorporated in the European Economic Area, a shareholder (a) who voted against the special resolution approving the merger or (b) of a company in which 90% of the shares is held by the other company the party to the merger of the transferor company has the right to request that the company acquire its shares for cash.

 

Under the Irish Companies Acts, there is a notification requirement for shareholders who acquire or cease to be interested in at least 5% of the shares of an Irish public limited company. A shareholder of GI plc must therefore make such a notification to GI plc if as a result of a transaction the shareholder will be interested in 5% or more of the shares of GI plc; or if as a result of a transaction a shareholder who was interested in more than 5% will cease to be interested in at least 5% of the shares of GI plc. Where a shareholder is interested in more than 5% of the shares of GI plc, any alteration of his or her interest that brings his or her total holding to the nearest whole percentage number, whether an increase or a reduction, must be notified to GI plc. The relevant percentage figure is calculated by reference to the aggregate par value of the shares in which the shareholder is interested as a proportion of the entire par value of GI plc’s share capital. Where the percentage level of the shareholder’s interest does not amount to a whole percentage this figure may be rounded down to the next whole number. All such disclosures should be notified to GI plc within 5 business days of the transaction or alteration of the shareholder’s interests that gave rise to the requirement to notify. Where a person fails to comply with the notification requirements described above, no right or interest of any kind whatsoever in respect of any shares in GI plc concerned, held by such person, shall be enforceable by such person, whether directly or indirectly, by action or legal proceeding. However, such person may apply to the court to have the rights attaching to the shares concerned reinstated.

 

GI plc’s articles of association also give authority to the board of directors to request from any direct or indirect holder of shares, such information as is required to determine whether that shareholder may be a U.S. person and controls 9.5% or more of the voting power of UAI Ltd. GI plc has the power under it articles to adjust the voting power of all shares to the extent necessary so that there is no 9.5% U.S. shareholder, to avoid potential consequences for the U.S. shareholder under the United States Internal Revenue Code of 1986, except that, such adjustment shall not apply to the Fox Paine Entities or any group, as that term is used in Section 13(d) of the Exchange Act, referred to as a “13D Group,” which beneficially owns greater than 75% of the voting power or value of the issued shares of GI plc or any 13D Group in which a Fox Paine entity participates.

 

Further under GI plc’s articles of association any direct or indirect holder of shares that has actual knowledge that it is the owner of 9.5% or more of the voting power of all issued and outstanding shares of GI plc shall give notice to GI plc within ten days of acquiring that knowledge.

 

In addition to the above disclosure requirement, GI plc, under the Irish Companies Acts, may by notice in writing require a person whom GI plc knows or has reasonable cause to believe to be, or at any time during the three years immediately preceding the date on which such notice is issued, to have been interested in shares comprised in GI plc’s relevant share capital to: (a) indicate whether or not it is the case, and (b) where such person holds or has during that time held an interest in the shares of GI plc, to give such further information as may be required by GI plc including particulars of such person’s own past or present interests in shares of GI plc. Any information given in response to the notice is required to be given in writing within such reasonable time as may be specified in the notice.

 

Where such a notice is served by GI plc on a person who is or was interested in shares of GI plc and that person fails to give GI plc any information required within the reasonable time specified, GI plc may apply to court for an order directing that the affected shares be subject to certain restrictions.

 

Under the Irish Companies Acts, the restrictions that may be placed on the shares by the court are as follows:

 

(a) any transfer of those shares, or in the case of unissued shares any transfer of the right to be issued with shares and any issue of shares, shall be void;

 

(b) no voting rights shall be exercisable in respect of those shares;

 

(c) no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder of those shares; and

(d) no payment shall be made of any sums due from GI plc on those shares, whether in respect of capital or otherwise.

 

Where the shares in GI plc are subject to these restrictions, the court may order the shares to be sold and may also direct that the shares shall cease to be subject to these restrictions.

 

Irish Takeover Rules and Substantial Acquisition Rules

 

A transaction by virtue of which a third party is seeking to acquire 30% or more of the voting rights of GI plc will be governed by the Irish Takeover Panel Act 1997 and the Irish Takeover Rules made thereunder and will be regulated by the Irish Takeover Panel. The “General Principles” of the Irish Takeover Rules and certain important aspects of the Irish Takeover Rules are described below.

 

General Principles

 

The Irish Takeover Rules are built on the following General Principles which will apply to any transaction regulated by the Irish Takeover Panel:

 

 

Mandatory Bid

 

If an acquisition of shares were to increase the aggregate holding of an acquirer and its concert parties to shares carrying 30% or more of the voting rights in GI plc, the acquirer and, depending on the circumstances, its concert parties would be required (except with the consent of the Irish Takeover Panel) to make a cash offer for the outstanding shares at a price not less than the highest price paid for the shares by the acquirer or its concert parties during the previous 12 months. This requirement would also be triggered by an acquisition of shares by a person holding (together with its concert parties) shares carrying between 30% and 50% of the voting rights in GI plc if the effect of such acquisition were to increase the percentage of the voting rights held by that person (together with its concert parties) by 0.05% within a twelve-month period. A single holder (that is, a holder excluding any parties acting in concert with the holder) holding more than 50% of the voting rights of a company is not subject to this rule. Fox Paine and its affiliates will be considered by GI plc as a single holder with regard to their holdings in GI plc for these purposes.

Voluntary Bid; Requirements to Make a Cash Offer and Minimum Price Requirements

 

A voluntary offer is an offer that is not a mandatory offer. If a bidder or any of its concert parties acquire ordinary shares of GI plc within the period of three months prior to the commencement of the offer period, the offer price must be not less than the highest price paid for GI plc ordinary shares by the bidder or its concert parties during that period. The Irish Takeover Panel has the power to extend the “look back” period to 12 months if the Irish Takeover Panel, having regard to the General Principles, believes it is appropriate to do so.

 

If the bidder or any of its concert parties has acquired ordinary shares of GI plc (i) during the period of 12 months prior to the commencement of the offer period which represent more than 10% of the total ordinary shares of GI plc or (ii) at any time after the commencement of the offer period, the offer shall be in cash (or accompanied by a full cash alternative) and the price per GI plc ordinary share shall be not less than the highest price paid by the bidder or its concert parties during, in the case of (i), the period of 12 months prior to the commencement of the offer period and, in the case of (ii), the offer period. The Irish Takeover Panel may apply this rule to a bidder who, together with its concert parties, has acquired less than 10% of the total ordinary shares of GI plc in the 12 month period prior to the commencement of the offer period if the Panel, having regard to the General Principles, considers it just and proper to do so.

 

An offer period will generally commence from the date of the first announcement of the offer or proposed offer.

 

Substantial Acquisition Rules

 

The Irish Takeover Rules also contain rules governing substantial acquisitions of shares which restrict the speed at which a person may increase his or her holding of shares and rights over shares to an aggregate of between 15% and 30% of the voting rights of GI plc. Except in certain circumstances, an acquisition or series of acquisitions of shares or rights over shares representing 10% or more of the voting rights of GI plc is prohibited, if such acquisition(s), when aggregated with shares or rights already held, would result in the acquirer holding 15% or more but less than 30% of the voting rights of GI plc and such acquisitions are made within a period of seven days. These rules also require accelerated disclosure of acquisitions of shares or rights over shares relating to such holdings.

 

Frustrating Action

 

Under the Irish Takeover Rules, the board of directors of GI plc is not permitted to take any action which might frustrate an offer for the shares of GI plc once the board of directors has received an approach which may lead to an offer or has reason to believe an offer is imminent except as noted below. Potentially frustrating actions such as (i) the issue of shares, options or convertible securities, (ii) material disposals, (iii) entering into contracts other than in the ordinary course of business or (iv) any action, other than seeking alternative offers, which may result in frustration of an offer, are prohibited during the course of an offer or at any time during which the board of directors has reason to believe an offer is imminent. Exceptions to this prohibition are available where:

 

(a) the action is approved by GI plc’s shareholders at a general meeting; or

 

(b) with the consent of the Irish Takeover Panel where:

 

(i) the Irish Takeover Panel is satisfied the action would not constitute a frustrating action;

 

(ii) the holders of 50% of the voting rights state in writing that they approve the proposed action and would vote in favor of it at a general meeting;

 

(iii) in accordance with a contract entered into prior to the announcement of the offer; or

 

(iv) the decision to take such action was made before the announcement of the offer and either has been at least partially implemented or is in the ordinary course of business.

Subject to certain exceptions, the Fox Paine Entities will be able to prevent or cause a change of control because of their voting power with respect to GI plc ordinary shares upon completion of the Transaction. For other provisions that could be considered to have an anti-takeover effect, please see above at “— Pre-emption Rights, Share Warrants and Share Options” and “— Disclosure of Interests in Shares,” in addition to “— Corporate Governance,” “Comparison of Rights of Shareholders and Powers of the Board of Directors — Election of Directors,” “Comparison of Rights of Shareholders and Powers of the Board of Directors — Vacancies on Board of Directors,” “Comparison of Rights of Shareholders and Powers of the Board of Directors — Removal of Directors,” “Comparison of Rights of Shareholders and Powers of the Board of Directors — Shareholder Consent to Action Without Meeting,” “Comparison of Rights of Shareholders and Powers of the Board of Directors — Amendment of Governing Documents” and “Comparison of Rights of Shareholders and Powers of the Board of Directors — Director Nominations; Proposals of Shareholders” below.

 

GI plc’s articles of association provide that, if GI plc is required or entitled to vote at a general meeting of any direct subsidiary of GI plc that is organized under the laws of a jurisdiction outside the United States of America, the directors shall refer the subject matter of the vote to the shareholders of GI plc at a general meeting (subject to certain exceptions) and seek authority from the shareholders for the Company’s corporate representative or proxy to vote in favor of the resolution proposed by the subsidiary, unless the subsidiary is or has elected to be disregarded from its owner for United States federal income tax purposes and does not own, directly or indirectly, any subsidiary organized under the laws of a jurisdiction outside the United States of America that is treated as a corporation for United States federal income tax purposes (each such non-United States subsidiary that is not disregarded, or that is disregarded but owns, directly or indirectly, a non-United States subsidiary that is treated as a corporation for such purposes, a “Non-U.S. Regarded Subsidiary”). The Directors shall cause GI plc’s corporate representative or proxy to vote GI plc’s shares in the Non-U.S. Regarded Subsidiary pro rata to the votes received at the general meeting of GI plc, with votes for or against the directing resolution being taken, respectively, as an instruction for the Company’s corporate representative or proxy to vote the appropriate proportion of its shares for and the appropriate proportion of its shares against the resolution proposed by the Non-U S. Regarded Subsidiary, provided, however, that the foregoing shall not apply to any subject matter regarding a U.S. indirect subsidiary of GI plc that is required to be voted on by a Non-U.S. Regarded Subsidiary of the Company as the shareholder of such U.S. subsidiary, and shall apply to a vote of GI plc as shareholder of a disregarded subsidiary that directly or indirectly owns non-United States subsidiaries treated as corporations for United States federal income tax purposes only if the subject matter of such vote pertains to such non-United States subsidiaries treated corporations. Notwithstanding, the directors in their sole and absolute discretion will require that the bylaws or articles of association, or similar organizational documents, of each Non-U.S. Regarded Subsidiary, whether currently in existence or subsequently organized, will contain provisions substantially similar to the one in GI plc’s articles of association. GI plc will enter into agreements with each such Non-U.S. Regarded Subsidiary, as reasonably necessary, to effectuate or implement the provision.

 

The articles of association of GI plc allocate authority over the management of GI plc to the board of directors. The board of directors may then delegate management of GI plc to committees of the board, executives or to a management team, but regardless, the directors will remain responsible, as a matter of Irish law, for the proper management of the affairs of GI plc. It is the intention of GI plc to replicate the existing committees that are currently in place for UAI Ltd. which include an Audit Committee, a Compensation Committee, Executive Committee, Investment Committee, Nominating and Governance Committee and a Section 162(m) Committee. It also is the intention of GI plc to adopt UAI Ltd.’s current corporate governance policies which include the Code of Business Conduct and Ethics, Corporate Communications Policy, Insider Trading Policy, and other policies pertaining to the Audit Committee.

 

The legal and commercial name of the newly formed Irish company is Global Indemnity public limited company. GI plc was incorporated in Ireland, as a public limited company on March 9, 2010 with company registration number 481805. GI plc’s fiscal year ends on December 31 and GI plc’s registered address is Arthur Cox Building, Earlsfort Terrace, Dublin 2, Republic of Ireland.

 

GI plc’s duration will be unlimited. GI plc may be dissolved at any time by way of either a shareholders’ voluntary winding up or a creditors’ voluntary winding up. In the case of a shareholders’ voluntary winding up, the consent of not less than 75% of the votes of the shareholders of GI plc cast at a general meeting is required. GI plc may also be dissolved by way of court order on the application of a creditor, or by the Companies Registration Office as an enforcement measure where GI plc has failed to file certain returns.

 

The rights of the shareholders to a return of GI plc’s assets on dissolution or winding up, following the settlement of all claims of creditors, is prescribed in GI plc’s articles of association and may be prescribed in the terms of any preferred shares issued by the directors of GI plc from time to time. The holders of preferred shares in particular may have the right to priority in a dissolution or winding up of GI plc. If the articles of association contain no specific provisions in respect of a dissolution or winding up then, subject to the priorities or any creditors, the assets will be distributed to shareholders in proportion to the paid-up par value of the shares held. GI plc’s articles provide that the ordinary shareholders of GI plc are entitled to participate pro rata in a winding up, but their right to do so may be subject to the rights of any preferred shareholders to participate under the terms of any series or class of preferred shares, as the directors will fix at the time of issuance.

 

Holders of ordinary shares of GI plc will be entitled to a certificate for their shares. The transfer of ordinary shares in GI plc could be subject to Irish stamp duty. Please see “Material Tax Considerations — Irish Tax Considerations — Stamp Duty.”

 

We intend to file an application with NASDAQ to list the GI plc Class A ordinary shares that holders of UAI Ltd. Class A common shares will receive in the Transaction. We expect that, immediately following the Transaction Time, the GI plc Class A ordinary shares will be listed on NASDAQ under the new symbol “GBLI.” We do not plan to be listed on the Irish Stock Exchange at the present time.

 

The ordinary shares have no sinking fund provisions.

 

The shares to be issued in the Transaction will be duly and validly issued and fully paid.

 

GI plc’s share register will be maintained by its transfer agent. Registration in this share register will be determinative of membership in GI plc. A shareholder of GI plc who holds shares beneficially will not be the holder of record of such shares. Instead, the depository (for example, Cede & Co., as nominee for DTC) or other nominee will be the holder of record of such shares. Accordingly, a transfer of shares from a person who holds such shares beneficially to a person who also holds such shares beneficially will not be registered in GI plc’s official share register, as the depositary or other nominee will remain the record holder of such shares.

A written instrument of transfer is required under Irish law in order to register on GI plc’s official share register any transfer of shares from a person who holds such shares directly to any other person, or from a person who holds such shares beneficially to a person who holds such shares directly or from a person who holds such shares beneficially to another person who holds such shares beneficially where the transfer involves a change in the depository or other nominee that is the record owner of the transferred shares. An instrument of transfer also is required for a shareholder who directly holds shares to transfer those shares into his or her own broker account (or vice versa). Such instruments of transfer may give rise to Irish stamp duty, which must be paid prior to registration of the transfer on GI plc’s official Irish share register.

 

To the extent that stamp duty is due but has not been accounted for, GI plc may, in its absolute discretion, pay (or cause one of its affiliates to pay) the outstanding stamp duty in respect of a transfer of shares. GI plc’s articles of association as they will be in effect after the Transaction provide that, in the event of any such payment, GI plc (i) may seek reimbursement from the transferor or transferee (at our discretion), (ii) may set-off the amount of the stamp duty against future dividends payable to the transferor or transferee (at our discretion), and (iii) will have a lien against the GI plc ordinary shares on which we have paid stamp duty.

 

GI plc’s articles of association as they will be in effect after the Transaction delegate to GI plc’s secretary the authority to execute an instrument of transfer on behalf of a transferring party, which the secretary may do if for any reason such instrument is required and has not already been recorded with GI plc. In order to help ensure that the official share register is regularly updated to reflect trading of GI plc ordinary shares occurring through normal electronic systems, we intend to regularly produce any required instruments of transfer in connection with any transactions for which we pay stamp duty (subject to the reimbursement and set-off rights described above). In the event that we notify one or both of the parties to a share transfer that we believe stamp duty is required to be paid in connection with such transfer and that we will not pay such stamp duty, such parties may either themselves arrange for the execution of the required instrument of transfer (and may request a form of instrument of transfer from GI plc for this purpose) or request that GI plc execute an instrument of transfer on behalf of the transferring party in a form determined by GI plc. In either event, if the parties to the share transfer have the instrument of transfer duly stamped (to the extent required) and then provide it to GI plc’s transfer agent, the transferee will be registered as the legal owner of the relevant shares on GI plc’s official Irish share register (subject to the matters described below).

 

The directors of GI plc have general discretion to decline to register an instrument of transfer if:

 

(i) the transfer is not in respect of one class of share only, or

 

(ii) it appears to the directors, in their sole and absolute discretion, that any non-de minimis adverse tax, regulatory or legal consequences to GI plc or any of its subsidiaries, shareholder or affiliate would result from such transfer (including if such consequence arises as a result of any U.S. Person owning Controlled Shares constituting 9.5% or more of the value of the Company or the voting shares of the Company (subject to certain exceptions), or

 

(iii) such share has not been registered under the U.S. Securities Act of 1933, as amended from time to time, or is not exempt from registration under that Act, or a written opinion from counsel acceptable to the Company has not been obtained to the effect that registration of such transfer under the U.S. Securities Act of 1933, as amended from time to time, is not required.

 

The directors may request from any shareholder information to determine whether any transfer should be permitted. If such information is not forwarded, the board of directors may decline to approve or register such transfer. The board of directors shall decline to approve or to register any transfer of any share if the transferee shall not have been approved by applicable governmental authorities, if such approval is required.

 

The registration of transfers may be suspended by the directors at such times and for such period, not exceeding in the whole 30 days in each year, as the board of directors may from time to time determine.

 

Your rights as a Class A and Class B common shareholder of UAI Ltd. and the relative powers of UAI Ltd.’s board of directors are governed by Cayman Islands law and UAI Ltd.’s memorandum and articles of association. After the Transaction, you will become a shareholder of GI plc, and your rights and the relative powers of GI plc’s board of directors will be governed by Irish law and GI plc’s memorandum and articles of association as they will be in effect after the Transaction.

 

Many of the principal attributes of UAI Ltd.’s Class A and Class B common shares and GI plc’s Class A and Class B ordinary shares, respectively, will be similar. However, there are differences between what your rights are under Cayman Islands law and what they will be after the Transaction under Irish law. In addition, there are differences between UAI Ltd.’s memorandum and articles of association and GI plc’s memorandum and articles of association as they will be in effect after the Transaction, which are primarily attributable to differences between Cayman Islands law and Irish law. The following discussion is a summary of material changes in your rights resulting from the Transaction. This summary is not complete and does not cover all of the differences between Irish law and Cayman Islands law affecting companies and their shareholders or all the differences between UAI Ltd.’s memorandum and articles of association and GI plc’s memorandum and articles of association. We believe this summary is accurate. It is, however, subject to the complete text of the relevant provisions of the Irish Companies Acts, the Cayman Islands Companies Law (as amended), UAI Ltd.’s memorandum and articles of association and GI plc’s memorandum and articles of association as they will be in effect after the Transaction. We encourage you to read those laws and documents carefully. GI plc’s form of memorandum and articles of association as they will be in effect after the Transaction are attached to this proxy statement as Annex B. For information as to how you can obtain UAI Ltd.’s memorandum and articles of association, please see “Where You Can Find More Information.” Except where otherwise indicated, the discussion of GI plc below reflects GI plc’s memorandum and articles of association as those documents will be in effect upon completion of the Transaction.

 

Authorized Share Capital

 

UAI Ltd.   UAI Ltd.’s authorized share capital is US$100,000 divided into two classes of shares:

 

 

UAI Ltd.’s common shares currently issued and outstanding are fully paid and non-assessable, which means that the common shares are paid for in full at the time they are issued, and, once the common shares are paid for in full, there is no further liability for further assessment or taxation.

 

GI plc.   The authorized share capital of GI plc is €40,000 and US$100,000 divided into 40,000 shares (which will become 40,000 deferred shares on consummation of the Transaction) with a nominal value of €1 per share, and 600,000,000 Class A ordinary shares with a nominal value of US$0.0001 each, 300,000,000 Class B ordinary shares with a nominal value of US$0.0001 each and 100,000,000 preferred shares with a nominal value of US$0.0001 each, which preferred shares may be designated and created as shares of any other classes or series of shares with the respective rights and restrictions determined by action of the board of directors. The authorized share capital includes 40,000 shares (which will become 40,000 deferred shares on consummation of the Transaction) with a par value of €1 per share, even though there is no analogous authorization in the UAI Ltd.’s articles of association in order to satisfy statutory requirements for the incorporation and statutory authorized minimum nominal issued share capital requirements of all Irish public limited companies.

GI plc may issue shares subject to the maximum prescribed by its authorized share capital contained in its memorandum of association. In connection with the Transaction, GI plc will also assume UAI Ltd.’s existing obligations to deliver shares under our equity incentive plans and other similar employee awards pursuant to the terms thereof. Based on the Transaction and the one-for-two exchange, proportionate adjustments will be made to the per share exercise price and/or the number of shares issuable upon the exercise or conversion of all outstanding options to reflect the exchange ratio pursuant to the terms of such instruments.

 

As a matter of Irish company law, the directors of a company may issue new ordinary or preferred shares without shareholder approval once authorized to do so by the articles of association of the company or by an ordinary resolution adopted by the shareholders at a general meeting. An ordinary resolution requires a majority of the total number of votes of the shares of GI plc present in person or by proxy and entitled to vote at the meeting convened to consider the matter. The authority conferred can be granted for a maximum period of five years, at which point it must be renewed by the shareholders of the company by an ordinary resolution. Because of this requirement of Irish law, which does not have an analogous provision under Cayman Islands law, the articles of association of GI plc authorize the board of directors of GI plc to issue new ordinary or preferred shares without shareholder approval for a period of five years from the date of GI plc’s incorporation.

 

The authorized share capital may be increased or reduced by way of an ordinary resolution of GI plc’s shareholders. The shares comprising the authorized share capital of GI plc may be divided into shares of such par value as the resolution shall prescribe.

 

The rights and restrictions to which the ordinary shares will be subject will be prescribed in GI plc’s articles of association. GI plc’s articles of association entitle the board of directors, without shareholder approval, to determine the terms of the preferred shares issued by GI plc. The GI plc board of directors is authorized, without obtaining any vote or consent of the holders of any class or series of shares unless expressly provided by the terms of that class or series of shares, to provide from time to time for the issuance of other series of preferred shares and to establish the characteristics of each series, including the number of shares, designations, relative voting rights, dividend rights, liquidation and other rights, redemption, repurchase or exchange rights and any other preferences and relative, participating, optional or other rights and limitations not inconsistent with applicable law.

 

Unlike Cayman Islands law, Irish law does not recognize fractional shares held of record; accordingly, the official Irish register of GI plc will not reflect any fractional shares.

 

UAI Ltd.’s articles of association provide that the directors may, from time to time and without approval by UAI Ltd.’s shareholders, create and issue other series of preferred shares setting forth the rights and preferences of each class or series, including the following:

 

 

 

Issued Share Capital

 

UAI Ltd.   At April 20, 2010, 36,508,907 Class A common shares and 24,122,744 Class B common shares were issued and outstanding and an additional 6,072,584 Class A common shares were held in treasury. No preference shares are currently issued or outstanding.

 

GI plc.   Immediately prior to the Transaction, the issued share capital of GI plc will be €40,000, comprised of 40,000 ordinary shares of €1 each, comprising of the Euro Share Capital. In connection with the consummation of the Transaction, the Euro Share Capital shall be reclassified as deferred shares and shall cease to carry any right to a dividend or to receive notice of or to attend, vote or speak at any shareholder meeting and shall only confer the right on a return of capital, on a winding-up or otherwise, to repayment of the nominal value paid on those shares and only after repayment of the Class A and Class B ordinary shares in full and may be acquired by GI plc for no consideration. We expect that GI plc will simultaneously issue a number of Class A and Class B ordinary shares with a par value of $0.0001 and $0.0001, respectively, that will take into account the one-for-two exchange of Class A and Class B ordinary shares for the UAI Ltd. Class A and Class B common shares that will be cancelled as part of the Transaction (including shares of GI plc issued to UAI Ltd. in respect of any shares of UAI Ltd. held as treasury shares immediately prior to the Transaction Time). All shares issued on completion of the Transaction will be issued as fully paid up. Under its articles of association, GI plc may by ordinary resolution consolidate and divide all or any of its share capital into shares of larger par value than its existing shares or subdivide its shares into smaller amounts than is fixed by its memorandum of association.

 

UAI Ltd.   UAI Ltd. may, by special resolution, reduce or alter its share capital and any capital redemption reserve in any manner authorized by law.

 

GI plc.   GI plc may, by ordinary resolution, cancel any shares which, at the date of the passing of the resolution, are unissued or have not been taken or agreed to be taken by any person and reduce the amount of its authorized share capital by the amount of the shares so cancelled. GI plc also may, by special resolution and subject to confirmation by the Irish High Court, reduce or cancel its issued share capital in any way. The distributable reserves proposal discussed above in “Proposal Number Two: Creation of Distributable Reserves” involves a reduction of share capital, more specifically the share premium of GI plc, for purposes of Irish law.

 

UAI Ltd.   Shareholders do not have pre-emption rights under the Cayman Companies Law or in UAI Ltd.’s memorandum and articles of association over further issuances of shares in the capital of UAI Ltd.

 

GI plc.   Certain statutory pre-emption rights apply automatically in favor of GI plc’s shareholders where shares in GI plc are to be issued for cash. However, GI plc has opted out of these pre-emption rights in its articles of association as permitted under Irish company law. Because Irish law requires this opt-out to be renewed every five years by a special resolution of the shareholders, and there is no analogous provision under Cayman Islands law, GI plc’s articles of association provide that this opt-out must be so renewed even though UAI Ltd.’s articles of association do not include an analogous provision. A special resolution requires not less than 75% of the votes of the shares of GI plc present in person or by proxy and entitled to vote at the meeting convened for this purpose. If the opt-out is not renewed, shares issued for cash must be offered to pre-existing shareholders of GI plc pro rata to their existing shareholding before the shares can be issued to any new shareholders. The statutory pre-emption rights do not apply where shares are issued for non-cash consideration and do not apply to the issue of non-equity shares (that is, shares that have the right to participate only up to a specified amount in any income or capital distribution).

The articles of association of GI plc provide that, subject to any shareholder approval requirement under any laws, regulations or the rules of any stock exchange to which GI plc is subject, the board of directors is authorized, from time to time, in its discretion, to grant such persons, for such periods and upon such terms as the board of directors deems advisable, options to purchase such number of shares of any class or classes or of any series of any class as the board of directors may deem advisable, and to cause warrants or other appropriate instruments evidencing such options to be issued. The Irish Companies Acts provide that directors may issue share warrants or options without shareholder approval once authorized to do so by the articles of association or an ordinary resolution of shareholders. The board of directors may issue shares upon exercise of warrants or options without shareholder approval or authorization.

 

GI plc will be subject to the rules of NASDAQ that require shareholder approval of certain share issuances.

 

Distributions and Dividends

 

UAI Ltd.   Under Cayman Islands law, UAI Ltd.’s board of directors may pay such dividends as appear to the directors to be justified by UAI Ltd.’s profits or financial condition out of profits available for distribution or out of the “share premium account” (similar to the concept of additional paid-in capital) if UAI Ltd. has the ability to pay its debts as they become due immediately after payment of the dividend. UAI Ltd.’s articles of association of association permit the board of directors to declare dividends out of profits or out of monies otherwise available for dividends in accordance with Cayman Islands law.

 

GI plc.   Under Irish law, dividends and distributions may only be made from distributable reserves. Distributable reserves, broadly, means the accumulated realized profits of GI plc less accumulated realized losses of GI plc. In addition, as a public limited company, no distribution or dividend may be made unless the net assets of GI plc are equal to, or in excess of, the aggregate of GI plc’s called up share capital plus undistributable reserves and the distribution does not reduce GI plc’s net assets below such aggregate amount. Undistributable reserves include the share premium account, the capital redemption reserve fund and the amount by which GI plc’s accumulated unrealized profits, so far as not previously utilized by any capitalization, exceed GI plc’s accumulated unrealized losses, so far as not previously written off in a reduction or reorganization of capital.

 

The determination as to whether or not GI plc has sufficient distributable reserves to fund a dividend must be made by reference to “relevant accounts” of GI plc. The “relevant accounts” will be either the last set of unconsolidated annual audited financial statements (except for any initial set of unconsolidated audited financial statements produced prior to the end of the company’s first fiscal year and which are not therefore annual financial statements) prepared in accordance with the Companies Acts and any unaudited financial statements as are necessary to enable a reasonable judgment to be made as to the level of distributable reserves and which give a “true and fair view” of GI plc’s unconsolidated financial position and accord with accepted accounting practice. The relevant accounts must be filed in the Companies Registration Office (the official public registry for companies in Ireland).

 

Although GI plc will not have any distributable reserves immediately following the Transaction Time, we are taking steps to create such distributable reserves. Please see “Risk Factors” and “Proposal Number Two: Creation of Distributable Reserves.”

 

The mechanism as to who declares a dividend and when a dividend shall become payable is governed by the articles of association of GI plc. GI plc’s articles of association authorize the directors to declare such interim dividends as appear justified from the profits of GI plc without the approval of the shareholders at a general meeting. The board of directors may also recommend a dividend to be approved and declared by the shareholders at a general meeting. Although payment of dividends may be made by distribution of assets, shares or cash, no dividend issued may exceed the amount recommended by the directors. The dividends can be declared and paid in the form of cash or non-cash assets. Dividends, if any, are only payable to those holder’s shares who are noted as owning shares of the company in UAI’s register of members. Although the

provisions of GI plc articles of association described in this paragraph are different from the analogous provisions of UAI — Cayman’s articles of association, these differences are required due to differences between Irish law and Cayman Islands law with respect to distributions and dividends.

 

The directors of GI plc may deduct from any dividend payable to any member all sums of money (if any) payable by such member to GI plc in relation to the shares of GI plc.

 

The directors of GI plc are also entitled to issue shares with preferred rights to participate in dividends declared by GI plc. The holders of such preferred shares may, depending on their terms, be entitled to claim arrears of a declared dividend out of subsequently declared dividends in priority to ordinary shareholders.

 

The Euro Share Capital does not carry the right to receive a dividend.

 

For information about the Irish tax issues relating to dividend payments, please see “Material Tax Considerations — Irish Tax Considerations.”

 

Repurchases and Redemptions

 

UAI Ltd.   UAI Ltd.’s articles of association include provisions that allow UAI Ltd. to purchase or redeem shares under certain circumstances or if the Shareholders have approved the manner of purchase by Ordinary Resolution and such payment in respect of the redemption or purchase is not out of profits or proceeds of a fresh issue of Shares or through the establishment of a capital redemption reserve.

 

GI plc.   Article 3(h) of GI plc’s articles of association provides that any ordinary share which GI plc has acquired or agreed to acquire shall be deemed to be a redeemable share. Accordingly, for Irish company law purposes, the repurchase of ordinary shares by GI plc will technically be effected as a redemption of those shares as described below under “— Repurchases and Redemptions by GI plc.” If the articles of association of GI plc did not contain Article 3(h), repurchases by GI plc would be subject to many of the same rules that apply to purchases of GI plc ordinary shares by subsidiaries described below under “— Purchases by Subsidiaries of GI plc,” including the shareholder approval requirements described below and the requirement that any on-market purchases be effected on a “recognized stock exchange.” Because Cayman Islands law does not impose such requirements with respect to share repurchases by UAI Ltd. and we desired to preserve the status quo with respect to share repurchases to the greatest extent possible after the Transaction, Article 3(h) was included in the GI plc articles of association, even though there is no analogous provision in the UAI Ltd.’s articles of association. Except where otherwise noted, when we refer elsewhere in this proxy statement to repurchasing or buying back ordinary shares of GI plc, we are referring to the redemption of ordinary shares by GI plc pursuant to Article 3(h) of the articles of association or the purchase of ordinary shares of GI plc by a subsidiary of GI plc, in each case in accordance with GI plc’s articles of association and Irish company law as described below.

 

In addition, GI plc’s articles of association include a provision governing business combinations similar to the one included in UAI Ltd.’s articles of association. As provided in GI plc’s articles of association, GI plc may, subject to the relevant provisions of Irish company law, including that no shares may be converted into redeemable shares if as a result of the conversion the nominal value of the issued share capital which is not redeemable would be less than one-tenth of the nominal value of the total issued share capital of the company, redeem the ordinary shares upon approval by the board of directors of, and an ordinary resolution of the shareholders adopting, any agreement entered into by GI plc relating to a business combination transaction. GI plc’s articles of association provide that “business combination transaction” means any transaction following which any person (other than the Fox Paine Entities) would have a majority of the votes be represented by issued and outstanding shares and entitled to be cast at any annual general meeting of GI plc.

 

Repurchases and Redemptions by GI plc

 

Under Irish law, a company can issue redeemable shares and redeem them out of distributable reserves (which are described above under “— Distributions and Dividends”) or the proceeds of a new issue of shares for that purpose. Although GI plc will not have any distributable reserves immediately following the Transaction Time, we are taking steps to create such distributable reserves. Please see “Risk Factors” and

“Proposal Number Two: Creation of Distributable Reserves.” The issue of redeemable shares may only be made by GI plc where the nominal value of the issued share capital that is not redeemable is not less than 10% of the nominal value of the total issued share capital of GI plc. All redeemable shares must also be fully paid and the terms of redemption of the shares must provide for payment on redemption. Redeemable shares may, upon redemption, be cancelled or held in treasury. As is currently the case with UAI Ltd., shareholder approval will not be required to redeem GI plc ordinary shares.

 

The board of directors of GI plc will also be entitled to issue preferred shares which may be redeemed at the option of either GI plc or the shareholder, depending on the terms of such preferred shares. Please see “— Capitalization — Authorized Share Capital” above for additional information on redeemable shares.

 

Repurchased and redeemed shares may be cancelled or held as treasury shares. The nominal value of treasury shares held by GI plc at any time must not exceed 10% of the nominal value of the issued share capital of GI plc. While GI plc holds shares as treasury shares, it cannot exercise any voting rights in respect of those shares. Treasury shares may be cancelled by GI plc or re-issued subject to certain conditions.

 

Purchases by Subsidiaries of GI plc

 

Under Irish law, it may be permissible for an Irish or non-Irish subsidiary to purchase shares of GI plc either on-market or off-market. A general authority of the shareholders of GI plc is required to allow a subsidiary of GI plc to make on-market purchases of GI plc ordinary shares; however, as long as this general authority has been granted, no specific shareholder authority for a particular on-market purchase by a subsidiary of GI plc ordinary shares is required. We expect that GI plc will seek such general authority, which must expire no later than 18 months after the date on which it was granted, at the first annual general meeting of GI plc in 2010 and at subsequent annual general meetings. In order for a subsidiary of GI plc to make an on-market purchase of GI plc’s shares, such shares must be purchased on a “recognized stock exchange.” NASDAQ, on which the shares of GI plc will be listed following the Transaction, has recently been recognized as a recognized stock exchange for this purpose by Irish company law. We expect that the Irish authorities will take appropriate steps in the near future to add NASDAQ to the list of recognized stock exchanges. For an off-market purchase by a subsidiary of GI plc, the proposed purchase contract must be authorized by special resolution of the shareholders of GI plc before the contract is entered into. The person whose shares are to be bought back cannot vote in favor of the special resolution and, for at least 21 days prior to the special resolution, the purchase contract must be on display or must be available for inspection by shareholders at the registered office of GI plc.

 

The number of shares held by the subsidiaries of GI plc at any time will count as treasury shares and will be included in any calculation of the permitted treasury share threshold of 10% of the nominal value of the issued share capital of GI plc. While a subsidiary holds shares of GI plc, it cannot exercise any voting rights in respect of those shares. The acquisition of the shares of GI plc by a subsidiary must be funded out of distributable reserves of the subsidiary.

 

UAI Ltd.   There are a number of mechanisms of acquiring a Cayman Islands exempted limited company, including:

 

(a) a court approved scheme of arrangement under the Cayman Companies Law. A scheme of arrangement requires a court order from the Grand Court of the Cayman Islands and the approval of a majority in number representing 75% or more in value of those present and voting in each class of the company, whether in person or by proxy;

 

(b) a takeover offer for the entire issued share capital of the company which could become effective without the offeror acquiring 100% of such issued share capital. However, the Cayman Companies Law would permit the offeror to acquire 100% of the company if the offer is approved by holders of not less than 90% in value of the shares affected. If the target is listed, the takeover offer may be subject to the tender offer rules of the relevant exchange and the rules and regulations thereunder;

(c) it is also possible for UAI Ltd. to be acquired by way of a merger or consolidation. In each case, the property and liabilities of the constituent companies will be vested in the surviving or consolidated company. The plan of merger or consolidation must be authorized by each constituent company by a shareholder resolution by a majority in number representing 75% in value of the shareholders voting together as one class.

 

Under Cayman Islands law, there is no requirement for a company’s shareholders to approve a sale, lease or exchange of all or substantially all of a company’s property and assets.

 

GI plc.   There are a number of mechanisms for acquiring an Irish public limited company, including:

 

(a) a court-approved scheme of arrangement under the Irish Companies Acts. A scheme of arrangement with shareholders requires a court order from the Irish High Court and the approval of a majority in number representing 75% or more in value of the shareholders present and voting, whether in person or by proxy;

 

(b) through a tender offer by a third party for all of the shares of GI plc. Where the holders of 80% or more in value of GI plc’s ordinary shares have accepted an offer for their shares in GI plc, the remaining shareholders may be statutorily required to also transfer their shares. If the bidder does not exercise its “squeeze out” right, then the non-accepting shareholders also have a statutory right to require the bidder to acquire their shares on the same terms. If shares of GI plc were listed on the Irish Stock Exchange or another regulated stock exchange in the EU, this threshold would be increased to 90%; and

 

(c) it is also possible for GI plc to be acquired by way of a merger with an EU-incorporated public company under the EU Cross Border Merger Directive 2005/56. Such a merger must be approved by a special resolution. If GI plc is being merged with another EU public company under the EU Cross Border Merger Directive 2005/56 and the consideration payable to GI plc’s shareholders is not all in the form of cash, GI plc’s shareholders may be entitled to require their shares to be acquired at fair value.

 

Under Irish law, there is generally no requirement for a company’s shareholders to approve a sale, lease or exchange of all or substantially all of a company’s property and assets.

 

UAI Ltd.   Cayman Islands law does not provide for appraisal rights. However, in the case of a court sanctioned reorganization of a Cayman Islands company (which would be relevant in the context of a scheme of arrangement, and would require the approval of a majority in number of the shareholders holding shares representing at least 75% in value of each affected class of shares of the company present and voting at a class meeting), a dissenting shareholder has the right to express to the court such shareholder’s view that the transaction sought to be approved would not provide the shareholders with fair value for their shares. The Grand Court has the discretion to make such order as it may decide. However, UAI Ltd. has been advised that the Grand Court ordinarily would not disapprove the transaction on that ground absent other evidence that the arrangement or reorganization is such that any reasonable person could not approve it, and if the transaction were approved and consummated, the arrangement would be binding on all shareholders by operation of law and the dissenting shareholder would have no appraisal rights. In addition, Cayman Islands law provides that where an offer is made by a company for shares of a Cayman Islands company and, within four months of the offer, the holders of not less than 90% of the shares that are the subject of the offer accept, the offeror may by notice given within two months after the expiration of the four month period, require the dissenting shareholders to transfer their shares on the terms of the offer. Within one month of such notice, a dissenting shareholder may apply to the court objecting to the transfer. The burden is on the dissenting shareholders to shares that the court should exercise its discretion to prevent the transfer. The Grand Court has absolute discretion to make any order as it may decide. However, UAI Ltd. has been advised that the Grand Court is unlikely to prevent the requirement of such transfer unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority stockholders or where it is affirmatively established that notwithstanding the views of a very large majority of the shareholders the transaction is unfair.

GI plc.   Generally, under Irish law, shareholders of an Irish company do not have appraisal rights. Under the EC (Cross-Border Mergers) Regulations 2008 governing the merger of an Irish public limited company and a company incorporated in the European Economic Area, a shareholder (a) who voted against the special resolution approving the merger or (b) of a company in which 90% of the shares is held by the other company the party to the merger of the transferor company has the right to request that the company acquire its shares for cash.

 

UAI Ltd.   There is no continuing obligation imposed by the Cayman Islands Companies Law for shareholders to notify UAI Ltd. of their interest in shares.

 

UAI Ltd.’s articles of association also give authority to the board of directors to request from any direct or indirect holder of shares, except a shareholder who owns greater than 75% of the shares of UAI Ltd., such information as is required to determine whether that shareholder may be a U.S. person and control 9.5% or more of the voting power of UAI Ltd. UAI Ltd. has the power under the articles to adjust the voting power of all shares to the extent necessary so that there is no 9.5% U.S. shareholder, to avoid potential consequences for the U.S. shareholder under the United States Internal Revenue Code of 1986.

 

Further under UAI Ltd.’s articles of association any direct or indirect holder of shares that has actual knowledge that it is the owner 9.5% or more of the shares of UAI Ltd. shall give notice to UAI Ltd. within ten days of acquiring that knowledge.

 

GI plc.   Under the Irish Companies Acts, there is a notification requirement for shareholders who acquire or cease to be interested in 5% of the shares of an Irish public limited company. A shareholder of GI plc must therefore make such a notification to GI plc if as a result of a transaction the shareholder will be interested in 5% or more of the shares of GI plc; or if as a result of a transaction a shareholder who was interested in more than 5% of the shares of GI plc ceases to be so interested. Where a shareholder is interested in more than 5% of the shares of GI plc, any alteration of his or her interest that brings his or her total holding through the nearest whole percentage number, whether an increase or a reduction, must be notified to GI plc. The relevant percentage figure is calculated by reference to the aggregate par value of the shares in which the shareholder is interested as a proportion of the entire par value of GI plc’s share capital. Where the percentage level of the shareholder’s interest does not amount to a whole percentage this figure may be rounded down to the next whole number. All such disclosures should be notified to GI plc within 5 business days of the transaction or alteration of the shareholder’s interests that gave rise to the requirement to notify. Where a person fails to comply with the notification requirements described above no right or interest of any kind whatsoever in respect of any shares in GI plc concerned, held by such person, shall be enforceable by such person, whether directly or indirectly, by action or legal proceeding. However, such person may apply to the court to have the rights attaching to the shares concerned reinstated.

 

GI plc’s articles of association also give authority to the board of directors to request from any direct or indirect holder of shares, such information as is required to determine whether that shareholder may be a U.S. person and control 9.5% or more of the voting power of GI plc has the power under it articles to adjust the voting power of all shares to the extent necessary so that there is no 9.5% U.S. shareholder, to avoid potential consequences for the U.S. shareholder under the United States Internal Revenue Code of 1986, except that, such adjustment shall not apply to the Fox Paine Entities or any group, as that term is used in Section 13(d) of the Exchange Act, referred to as a “13D Group,” which beneficially owns greater than 75% of the voting power or value of the issues shares of GI plc or any 13D Group in which a Fox Paine entity participates.

 

Further under GI plc’s articles of association any direct or indirect holder of shares that has actual knowledge that it is the owner of 9.5% or more of the voting power of all issued and outstanding shares of GI plc shall give notice to GI plc within ten days of acquiring that knowledge.

 

In addition to the above disclosure requirement, GI plc, under the Irish Companies Acts, may by notice in writing require a person whom GI plc knows or has reasonable cause to believe to be, or at any time during

the three years immediately preceding the date on which such notice is issued, to have been interested in shares comprised in GI plc’s relevant share capital to: (a) indicate whether or not it is the case, and (b) where such person holds or has during that time held an interest in the shares of GI plc, to give such further information as may be required by GI plc including particulars of such person’s own past or present interests in shares of GI plc. Any information given in response to the notice is required to be given in writing within such reasonable time as may be specified in the notice. Where such a notice is served by GI plc on a person who is or was interested in shares of GI plc and that person fails to give GI plc any information required within the reasonable time specified, GI plc may apply to court for an order directing that the affected shares be subject to certain restrictions. Under the Irish Companies Acts, the restrictions that may be placed on the shares by the court are as follows:

 

(a) any transfer of those shares, or in the case of unissued shares any transfer of the right to be issued with shares and any issue of shares, shall be void;

 

(b) no voting rights shall be exercisable in respect of those shares;

 

(c) no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder of those shares; and

 

(d) no payment shall be made of any sums due from GI plc on those shares, whether in respect of capital or otherwise.

 

Where the shares in GI plc are subject to these restrictions, the court may order the shares to be sold and may also direct that the shares shall cease to be subject to these restrictions.

 

UAI Ltd.   Under Cayman Islands law, there is no prohibition of business combinations with interested shareholders.

 

GI plc.   Under Irish law, there is generally no prohibition of business combinations with interested shareholders. However, if the shareholder is a director or a connected person of that director under Irish law, shareholder approval may be required.

 

UAI Ltd.   Under Cayman Islands law, directors of a company have a duty to take only those actions which are in the best interests of the company. Directors also have a duty to exercise their powers for a proper purpose. The implementation of anti-takeover measures is not itself necessarily in the best interests of the company or a proper purpose for the exercise of director power.

 

Shareholder Rights Plans and Share Issuances.   Cayman Islands law does not expressly prohibit companies from adopting a shareholder rights plan. UAI Ltd. currently does not have a shareholder rights plan.

 

GI plc.   Under Irish law, directors of a company have a duty to take only those actions which are in the best interests of the company. Directors also have a duty to exercise their powers for a proper purpose. The implementation of anti-takeover measures is not itself necessarily in the best interests of the company or a proper purpose for the exercise of director power.

 

Shareholder Rights Plans and Share Issuances.   Irish law does not expressly prohibit companies from issuing share purchase rights or adopting a shareholder rights plan as an anti-takeover measure. However, there is no directly relevant case law on the validity of such plans under Irish law. In any event, such a plan would be subject to the Irish Takeover Rules described below.

 

Subject to the Irish Takeover Rules described below, the board also has power to issue any authorized and unissued shares of GI plc on such terms and conditions as it may determine and any such action should be taken in the best interests of GI plc. It is possible, however, that the terms and conditions of any issue of preferred shares could discourage a takeover or other transaction that holders of some or a majority of the

ordinary shares believe to be in their best interests or in which holders might receive a premium for their shares over the then market price of the shares.

 

Irish Takeover Rules and Substantial Acquisition Rules. A transaction by virtue of which a third party is seeking to acquire 30% or more of the voting rights of GI plc will be governed by the Irish Takeover Panel Act 1997 and the Irish Takeover Rules made thereunder and will be regulated by the Irish Takeover Panel. The “General Principles” of the Irish Takeover Rules and certain important aspects of the Irish Takeover Rules are described below.

 

General Principles

 

The Irish Takeover Rules are built on the following General Principles which will apply to any transaction regulated by the Irish Takeover Panel:

 

 

Mandatory Bid

 

If an acquisition of shares were to increase the aggregate holding of an acquirer and its concert parties to shares carrying 30% or more of the voting rights in GI plc, the acquirer and, depending on the circumstances, its concert parties would be required (except with the consent of the Irish Takeover Panel) to make a cash offer for the remaining outstanding shares at a price not less than the highest price paid for the shares by the acquirer or its concert parties during the previous 12 months. This requirement would also be triggered by an acquisition of shares by a person holding (together with its concert parties) shares carrying between 30% and 50% of the voting rights in GI plc if the effect of such acquisition were to increase the percentage of the voting rights held by that person (together with its concert parties) by 0.05% within a twelve-month period. A single holder (that is, a holder excluding any parties acting in concert with the holder) holding more than 50% of the voting rights of a company is not subject to this rule. Fox Paine and its affiliates will be considered by GI plc as a single holder with regard to their holdings in GI plc for these purposes.

 

Voluntary Bid; Requirements to Make a Cash Offer and Minimum Price Requirements

 

A voluntary offer is an offer that is not a mandatory offer. If a bidder or any of its concert parties acquire ordinary shares of GI plc within the period of three months prior to the commencement of the offer period, the

offer price must be not less than the highest price paid for GI plc ordinary shares by the bidder or its concert parties during that period. The Irish Takeover Panel has the power to extend the “look back” period to 12 months if the Irish Takeover Panel, having regard to the General Principles, believes it is appropriate to do so.

 

If the bidder or any of its concert parties has acquired ordinary shares of GI plc (i) during the period of 12 months prior to the commencement of the offer period which represent more than 10% of the total ordinary shares of GI plc or (ii) at any time after the commencement of the offer period, the offer shall be in cash (or accompanied by a full cash alternative) and the price per GI plc ordinary share shall be not less than the highest price paid by the bidder or its concert parties during, in the case of (i), the period of 12 months prior to the commencement of the offer period and, in the case of (ii), the offer period. The Irish Takeover Panel may apply this rule to a bidder who, together with its concert parties, has acquired less than 10% of the total ordinary shares of GI plc in the 12 month period prior to the commencement of the offer period if the Panel, having regard to the General Principles, considers it just and proper to do so.

 

An offer period will generally commence from the date of the first announcement of the offer or proposed offer.

 

Substantial Acquisition Rules

 

The Irish Takeover Rules also contain rules governing substantial acquisitions of shares which restrict the speed at which a person may increase his or her holding of shares and rights over shares to an aggregate of between 15% and 30% of the voting rights of GI plc. Except in certain circumstances, an acquisition or series of acquisitions of shares or rights over shares representing 10% or more of the voting rights of GI plc is prohibited, if such acquisition(s), when aggregated with shares or rights already held, would result in the acquirer holding 15% or more but less than 30% of the voting rights of GI plc and such acquisitions are made within a period of seven days. These rules also require accelerated disclosure of acquisitions of shares or rights over shares relating to such holdings.

 

Frustrating Action

 

Under the Irish Takeover Rules, the board of directors of GI plc is not permitted to take any action which might frustrate an offer for the shares of GI plc once the board of directors has received an approach which may lead to an offer or has reason to believe an offer is imminent except as noted below. Potentially frustrating actions such as (i) the issue of shares, options or convertible securities, (ii) material disposals, (iii) entering into contracts other than in the ordinary course of business or (iv) any action, other than seeking alternative offers, which may result in frustration of an offer, are prohibited during the course of an offer or at any time during which the board has reason to believe an offer is imminent. Exceptions to this prohibition are available where:

 

(a) the action is approved by GI plc’s shareholders at a general meeting; or

 

(b) with the consent of the Irish Takeover Panel where:

 

(i) the Irish Takeover Panel is satisfied the action would not constitute a frustrating action;

 

(ii) the holders of 50% of the voting rights state in writing that they approve the proposed action and would vote in favor of it at a general meeting;

 

(iii) in accordance with a contract entered into prior to the announcement of the offer; or

 

(iv) the decision to take such action was made before the announcement of the offer and either has been at least partially implemented or is in the ordinary course of business.

 

For other provisions that could be considered to have an anti-takeover effect, please see above at “Description of Global Indemnity Plc Share Capital — Disclosure of Interests in Shares” and “— Pre-emption Rights, Share Warrants and Share Options,” “— Business Combinations with Interested Shareholders,” in addition to “Comparison of Rights of Shareholders and Power of the Board of Directors — Election of

Directors,” “— Vacancies on Board of Directors,” “— Removal of Directors,” “— Board and Committee Composition; Management,” “— Shareholder Consent to Action Without Meeting,” “— Amendment of Governing Documents” and “— Director Nominations; Proposals of Shareholders” below.

 

UAI Ltd.   UAI Ltd.’s articles of association provide that, if UAI Ltd. is required or entitled to vote at a general meeting of any direct subsidiary of UAI Ltd. that is organized under the laws of a jurisdiction outside the United States of America, the board of directors will refer the subject matter of the vote to the shareholders of UAI Ltd. at a general meeting (subject to certain exceptions) and seek authority from the shareholders for UAI Ltd. to vote in favor of the resolution proposed by the subsidiary, unless the subsidiary is or has elected to be disregarded from its owner for United States federal income tax purposes and does not own, directly or indirectly, any subsidiary organized under the laws of a jurisdiction outside the United States of America that is treated as a corporation for United States federal income tax purposes (each such non-United States subsidiary that is not disregarded, or that is disregarded but owns, directly or indirectly, a non-United States subsidiary that is treated as a corporation for such purposes, a “Non-U.S. Regarded Subsidiary”). The board of directors will cause UAI Ltd.’s corporate representative or proxy to vote UAI Ltd.’s shares in the Non-U.S. Regarded Subsidiary pro rata to the votes received at the general meeting of UAI Ltd., with votes for or against the directing resolution being taken, respectively, as an instruction for UAI Ltd. to vote the appropriate proportion of its shares for and the appropriate proportion of its shares against the resolution proposed by the Non-U.S. Regarded Subsidiary, provided, however, that the foregoing shall not apply to any subject matter regarding a U.S. indirect subsidiary of UAI Ltd. that is required to be voted on by a Non-U.S. Regarded Subsidiary of the Company as the shareholder of such U.S. subsidiary, and shall apply to a vote of UAI Ltd. as shareholder of a disregarded subsidiary that directly or indirectly owns non-United States subsidiaries treated as corporations for United States federal income tax purposes only if the subject matter of such vote pertains to such non-United States subsidiaries treated corporations. Notwithstanding, the board of directors in their sole and absolute discretion will require that the bylaws or articles of association, or similar organizational documents, of each Non-U.S. Regarded Subsidiary, whether currently in existence or subsequently organized, will contain provisions substantially similar to the one in UAI Ltd.’s articles of association. UAI Ltd. will enter into agreements with each such Non-U.S. Regarded Subsidiary, as reasonably necessary, to effectuate or implement the provision.

 

GI plc.   GI plc’s articles of association also provide that, if GI plc is required or entitled to vote at a general meeting of any direct subsidiary of GI plc that is organized under the laws of a jurisdiction outside the United States of America, the directors will refer the subject matter of the vote to the shareholders of GI plc at a general meeting (subject to certain exceptions) and seek authority from the shareholders for GI plc to vote in favor of the resolution proposed by the subsidiary, unless the subsidiary is or has elected to be disregarded from its owner for United States federal income tax purposes and does not own, directly or indirectly, any subsidiary organized under the laws of a jurisdiction outside the United States of America that is treated as a corporation for United States federal income tax purposes. The board of directors shall cause GI plc’s corporate representative or proxy to vote GI plc’s shares in the Non-U.S. Regarded Subsidiary pro rata to the votes received at the general meeting of GI plc, with votes for or against the directing resolution being taken, respectively, as an instruction for GI plc to vote the appropriate proportion of its shares for and the appropriate proportion of its shares against the resolution proposed by the Non-U S. Regarded Subsidiary, provided, however, that the foregoing shall not apply to any subject matter regarding a U.S. indirect subsidiary of GI plc that is required to be voted on by a Non-U.S. Regarded Subsidiary of the Company as the shareholder of such U.S. subsidiary, and shall apply to a vote of GI plc as shareholder of a disregarded subsidiary that directly or indirectly owns non-United States subsidiaries treated as corporations for United States federal income tax purposes only if the subject matter of such vote pertains to such non-United States subsidiaries treated corporations. Notwithstanding, the board of directors in their sole and absolute discretion will require that the bylaws or articles of association, or similar organizational documents, of each Non-U.S. Regarded Subsidiary, whether currently in existence or subsequently organized, will contain provisions substantially similar to the one in GI plc’s articles of association. GI plc will enter into agreements with each such Non-U.S. Regarded Subsidiary, as reasonably necessary, to effectuate or implement the provision.

 

UAI Ltd.   UAI Ltd.’s articles of association provide that the number of directors to be appointed directors shall be fixed from time to time by the board of directors but unless such number is fixed the aforesaid number of directors shall be eleven. Each appointed director shall hold office until the next general meeting of the Company at which directors are to be appointed and such director’s successor is appointed or is removed pursuant to UAI Ltd.’s articles of association.

 

UAI Ltd.’s articles of association empower the board of directors to appoint persons to fill any vacancies on the board of directors or to appoint a person as an additional director; provided that such director shall be approved or terminated by a resolution of the Shareholders at the next general meeting.

 

GI plc.   The Irish Companies Acts provide for a minimum of two directors. GI plc’s articles of association provide that the board of directors may from time to time fix the maximum and minimum number of directors to be appointed, in the absence of which it will be seven.

 

Directors are elected by the affirmative vote of a majority of the votes cast by shareholders at an annual general meeting and serve for one year terms. Any nominee for director who does not receive a majority of the votes cast is not elected to the board of directors. However, because Irish law requires a minimum of two directors at all times, in the event that an election results in no director being elected, each of the two nominees receiving the greatest number of votes in favor of his or her election shall hold office until such time as additional directors have been appointed to replace them. In the event that an election results in only one director being elected, that director shall be elected and shall serve for a one year term, and the nominee receiving the next greatest number of votes in favor of their election shall hold office until one or more directors have been appointed to replace that director. Under GI plc’s articles of association, certain Fox Paine affiliates will be permitted to appoint by written notice to the board a certain number of directors, dependent on their percentage ownership of voting shares in GI plc for so long as Fox Paine and its affiliates hold an aggregate of 25 percent or more of the voting power in the company.

 

UAI Ltd.   UAI Ltd.’s articles of association empower the board of directors to appoint persons to fill any vacancies on the board of directors or to appoint a person as an additional director; provided that such director shall be approved or terminated by a resolution of the Shareholders at the next general meeting.

 

GI plc.   GI plc’s articles of association provide that the directors shall have the authority to appoint persons to fill any vacancies on GI plc’s board of directors, subject to the maximum in the articles of association. A director so appointed shall only hold office until its next annual general meeting where such directors will be subject to re-election.

 

UAI Ltd.   Directors may be removed if the Director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) is found to be or becomes of unsound mind; (iii) resigns his office by notice in writing to the Company; or (iv) is removed from office by Ordinary Resolution. A director shall also be removed if a written notice is delivered to the Company that has been signed by one or more Shareholders that, in the aggregate, own common shares representing a majority of the voting power of the then issued and outstanding common shares and direct that such Director be removed from the board of directors.

 

GI plc.   The Irish Companies Acts provide that notwithstanding anything contained in the articles of association of a company or in any agreement between that company and a director, the shareholders may by an ordinary resolution remove a director from office before the expiration of his or her term. The power of removal is without prejudice to any claim for damages for breach of contract (e.g. employment contract) which the director may have against GI plc in respect of his or her removal. Certain Fox Paine affiliates shall be able to remove by written notice any directors which they have appointed under GI plc’s articles of association.

 

UAI Ltd.   The board of directors may delegate preparation and/or implementation of its decisions and supervision of the business to committees or to individual members of the board of directors. The organizational regulations will be defined by the board of directors. While reserving its non-transferable powers, the board of directors may further delegate the management of the business or parts thereof and representation of the Company to one or more persons, members of the board of directors, members of the management or third parties. None of them needs to be a shareholder. The board of directors shall record all such arrangements in a set of regulations for the Company and set up the necessary contractual framework.

 

GI plc.   The articles of association of GI plc allocate authority over the management of GI plc to the board of directors. The board of directors may then delegate management of GI plc to committees of the board, executives or to a management team, but regardless, the directors will remain responsible, as a matter of Irish law, for the proper management of the affairs of GI plc. It is the intention of GI plc to replicate the existing committees that are currently in place for UAI Ltd. which include an Audit Committee, a Compensation Committee, Section 162(m) Committee, a Nominating and Governance Committee, an Executive Committee and an Investment Committee. It also is the intention of GI plc to adopt UAI Ltd.’s current Corporate Governance Guidelines.

 

UAI Ltd.   Directors of a company governed by Cayman Islands law have fiduciary duties to act in the best interest of the company.

 

GI plc.   The directors of GI plc have certain statutory and fiduciary duties. All of the directors have equal and overall responsibility for the management of GI plc (although directors who also serve as employees will have additional responsibilities and duties arising under their employment agreements and will be expected to exercise a greater degree of skill and diligence than non-executive directors). The principal directors’ duties include the common law fiduciary duties of good faith and exercising due care and skill. The statutory duties include ensuring the maintenance of proper books of account, having annual accounts prepared, having an annual audit performed, the duty to maintain certain registers and make certain filings as well as disclosure of personal interests. Particular duties also apply to directors of insolvent companies (for example, the directors could be liable to sanctions where they are deemed by the court to have carried on the business of GI plc while insolvent, without due regard to the interests of creditors). For public limited companies like GI plc, directors are under a specific duty to ensure that the secretary is a person with the requisite knowledge and experience to discharge the role.

 

UAI Ltd.   Cayman Islands law does not limit the extent to which a company’s articles of association may provide for the indemnification of officers and directors, except to the extent that such provision may be held by the Grand Court to be contrary to public policy, for instance, for purporting to provide indemnification against the consequences of committing a crime. UAI Ltd.’s articles of association provide that it will indemnify its officers, directors, employees and agents against certain liabilities.

 

GI plc.   GI plc’s articles of association confer the ability for an Irish company to give an indemnity to its directors and secretary in more limited circumstances than the analogous indemnity in UAI Ltd.’s articles of association of association. The Irish Companies Acts prescribe that this indemnity only permits a company to pay the costs or discharge the liability of a director or the secretary where judgment is given in any civil or criminal action in respect of such costs or liability, or where an Irish court grants relief because the director or secretary acted honestly and reasonably and ought fairly to be excused. This restriction does not apply to executives who are not directors or the secretary of GI plc. Any provision which seeks to indemnify a director or secretary of an Irish company over and above this shall be void under Irish law, whether contained in its articles of association or any contract between the director or secretary and the company.

GI plc’s articles of association also contain indemnification and expense advancement provisions for persons who are not directors or the secretary of GI plc that are substantially similar to those provided in UAI Ltd.’s articles of association of association.

 

Irish companies may take out directors’ and officers’ liability insurance, as well as other types of insurance, for their directors and officers.

 

In addition, in connection with the Transaction, we expect that UAI Ltd. will enter into indemnification agreements with each of GI plc’s directors and secretary, as well as with individuals who serve as executives of GI plc or directors or officers of our subsidiaries, providing for the indemnification of, and advancement of expenses to, these persons by UAI Ltd. We expect that the indemnification and expense advancement provided under these indemnification agreements will be substantially similar to that currently afforded by UAI Ltd. under its articles of association to its directors and officers and those serving at its request in other capacities as described above, with the primary differences being such modifications as may be necessary to account for limitations on the ability of an Irish company to indemnify its directors or its secretary.

 

UAI Ltd.   There is no provision under Cayman Islands law specifically authorizing a company to limit a director’s liability. However, UAI Ltd.’s articles of association include a provision exempting officers and directors of UAI Ltd. from liability to UAI Ltd. in respect of the execution of the duties of their respective offices.

 

GI plc.   Under Irish law, a company may not exempt its directors from liability for negligence or a breach of duty. However, where a breach of duty has been established, directors may be statutorily exempted by an Irish court from personal liability for negligence or breach of duty if, among other things, the court determines that they have acted honestly and reasonably, and that they may fairly be excused as a result.

 

UAI Ltd.   UAI Ltd.’s articles of association provide that no director will be disqualified from office or prevented by such office from contracting with UAI Ltd. In addition, a director interested in any contract with UAI Ltd. may vote in respect of that contract or transaction in which he is interested provided that he discloses the nature of his interest prior to the board of directors’ consideration of it.

 

GI plc.   As a matter of Irish law, a director is under a general fiduciary duty to avoid conflicts of interest. Under Irish law, directors who have a personal interest in a contract or a proposed contract or arrangement with GI plc are required to declare the nature of their interest, whether direct or indirect, at a meeting of the directors of GI plc, following which, under the GI plc’s articles of association, they may count with the quorum and participate in any vote in relation to such proposed transaction or arrangement. GI plc is required to maintain a register of such declared interests which must be available for inspection by the shareholders. The fiduciary duty of a director to avoid conflicts of interest also extends to not making personal profit from opportunities that result from directorship.

 

UAI Ltd.   The Grand Court has recognized derivative suits by shareholders; however, the consideration of such suits has been limited. In this regard, UAI Ltd. has been advised that the Grand Court ordinarily would be expected to follow English precedent, which may permit a minority shareholder to commence an action against or a derivative action in the name of the company to remedy a wrong done to the company where, for example:

 

 

 

A shareholder may also be able to bring a personal action against a company where the right alleged to have been infringed is a personal right vested in the individual shareholder.

 

GI plc.   In Ireland, the decision to institute proceedings is generally taken by a company’s board of directors who will usually be empowered to manage the company’s business. In certain limited circumstances, a shareholder may be entitled to bring a derivative action on behalf of GI plc. The central question at issue in deciding whether a minority shareholder may be permitted to bring a derivative action is whether, unless the action is brought, a wrong committed against GI plc would otherwise go un-redressed.

 

The principal case law in Ireland indicates that to bring a derivative action a person must first establish a prima facie case (1) that the company is entitled to the relief claimed and (2) that the action falls within one of the five exceptions derived from case law, as follows:

 

 

The shareholders of GI plc may also bring proceedings against GI plc where the affairs of GI plc are being conducted, or the powers of the directors are being exercised, in a manner oppressive to the shareholders or in disregard of their interests. Oppression connotes conduct which is burdensome, harsh or wrong. The conduct must relate to the internal management of GI plc. This is an Irish statutory remedy and the court can grant any order it sees fit, usually providing for the purchase or transfer of the shares of any shareholder.

 

UAI Ltd.   UAI Ltd.’s articles of association provide that a resolution in writing signed by all of the shareholders entitled to receive notice of, attend and vote at general meetings shall be as valid and effective as if the same had been passed at a general meeting of the company duly convened and held.

 

GI plc.   The Irish Companies Acts provide for the ability of shareholders to consent to action without a meeting by way of a unanimous written resolution. GI plc’s articles of association provide that a resolution in writing signed by all of the shareholders entitled to receive notice of, attend and vote at general meetings shall be as valid and effective as if the same had been passed at a general meeting of GI plc duly convened and held.

 

UAI Ltd.   UAI Ltd.’s articles of association provide that an annual general meeting of the shareholders of UAI Ltd. shall be convened each year at such time and place as the board of directors may appoint. The board of directors may whenever it thinks fit proceed to convene a general meeting of UAI Ltd. General meetings shall also be convened on the written request of any shareholder entitled to attend and vote at general meetings of UAI Ltd. holding at least 50% of the eligible votes (after taking account of the 9.5% voting limitations, see “— Voting Rights” below).

 

GI plc.   Pursuant to Irish law, GI plc will be required to hold an annual general meeting within eighteen months of incorporation and at intervals of no more than fifteen months thereafter, provided that an annual general meeting is held in each calendar year following the first annual general meeting, no more than nine months after GI plc’s fiscal year-end. The first annual meeting of GI plc may be held outside of Ireland. Thereafter, any annual general meeting may be held outside of Ireland if a resolution so authorizing has been

passed at the preceding annual general meeting. Subject to applicable law, all general meetings of GI plc may be held outside Ireland.

 

The only matters which must, as a matter of Irish company law, be transacted at an annual general meeting are the presentation of the annual accounts, balance sheet and reports of the directors and auditors, the appointment of auditors and the fixing of the auditor’s remuneration (or delegation of same). If no resolution is made in respect of the reappointment of an auditor at an annual general meeting, the previous auditor will be deemed to have continued in office.

 

Directors are generally elected by the affirmative vote of a majority of the votes cast by shareholders at an annual general meeting and serve for one year terms. Any nominee for director who does not receive a majority of the votes cast is not elected to the board of directors. However, because Irish law requires a minimum of two directors at all times, in the event that an election results in no director being elected, each of the two nominees receiving the greatest number of votes in favor of his or her election shall hold office until his or her successor shall be elected. In the event that an election results in only one director being elected, that director shall be elected and shall serve for a one year term, and the nominee receiving the next greatest number of votes in favor of their election shall hold office until his or her successor shall be elected.

 

UAI Ltd.   The board of directors may whenever it thinks fit proceed to convene a general meeting of UAI Ltd. General meetings can also be convened on the written request of any shareholder entitled to attend and vote at general meetings of UAI Ltd. holding at least 50% of the eligible votes of UAI Ltd. The requisition must specify the objects of the meeting and request that such meeting be held on a date no later than sixty (60) days from the date of deposit of the request at the registered office. If the board of directors does not convene the general meeting within such sixty (60) day period, the requisitionists may themselves convene the general meeting in the same manner, as nearly as possible, as that which general meetings may be convened by the board of directors, and all reasonable expenses incurred by the requisitionists in convening the general meeting shall be reimbursed to them by UAI Ltd.

 

A general meeting, other than an annual general meeting, shall, whether or not the provisions of the Articles regarding general meetings have been complied with, be deemed convened if so agreed by such number of the shareholders having a right to attend and vote at the meeting and holding not less than two-thirds of the votes entitled to be cast as such general meeting.

 

At least ten (10) days notice shall be given of any general meeting to all shareholders other than such as, under the provision of the Articles or the terms of issue of the shares they hold, are not entitled to receive such notice from UAI Ltd.

 

All business carried out at a general meeting shall be deemed special with the exception of the consideration of the accounts and balance sheets and any report of the board of directors or of UAI Ltd.’s auditors and the appointment of directors. No special business shall be transacted at any general meeting without the consent of all shareholders entitled to receive notice of that meeting unless notice of such special business has been given in the notice convening that meeting.

 

GI plc.   Extraordinary general meetings of GI plc may be convened by the board of directors, or on requisition of the shareholders holding not less than 10% of the paid up share capital of GI plc carrying voting rights. In limited circumstances, GI plc’s auditors can require the board of directors to convene extraordinary general meetings of GI plc. Extraordinary general meetings are generally held for the purposes of approving shareholder resolutions of GI plc as may be required from time to time. Unless the consent of all the shareholders entitled to receive notice of that meeting is obtained at any extraordinary general meeting, only such business shall be conducted as is set forth in the notice thereof.

 

Notice of a general meeting must be given to all shareholders of GI plc and to the auditors of GI plc. The minimum notice periods are 21 days’ notice in writing for an annual general meeting or an extraordinary general meeting to approve a special resolution and 14 days’ notice in writing for any other extraordinary

general meeting. Because of the 21-day and 14-day requirements described in this paragraph, GI plc’s articles of association include provisions reflecting these requirements of Irish law.

 

In the case of an extraordinary general meeting convened by shareholders of GI plc, the proposed purpose of the meeting must be set out in the requisition notice. The requisition notice can contain any resolution. Upon receipt of this requisition notice, the board of directors has 21 days to convene a meeting of GI plc’s shareholders to vote on the matters set out in the requisition notice. This meeting must be held within two months of the receipt of the requisition notice. If the board of directors does not convene the meeting within such 21-day period, the requisitioning shareholders, or any of them representing more than one half of the total voting rights of all of them, may themselves convene a meeting, which meeting must be held within three months of the receipt of the requisition notice.

 

If the directors become aware that the net assets of GI plc are half or less of the amount of GI plc’s called-up share capital, the directors of GI plc must convene an extraordinary general meeting of GI plc’s shareholders not later than 28 days from the date that they learn of this fact. This meeting must be convened for the purposes of considering whether any, and if so what, measures should be taken to address the situation.

 

UAI Ltd.   UAI Ltd.’s articles of association provide that the board may set the record date for any general shareholder meeting and the record date shall not exceed in any case 40 days prior to the general meeting.

 

GI plc.   GI plc’s articles of association provide that the board may set the record date for any general shareholder meeting and that, for the purpose of determining such date, the board may provide that the register be closed for transfers for a maximum of 30 days per year.

Director Nominations; Proposals of Shareholders

 

UAI Ltd.   UAI’s articles of association provide that if a shareholder holding not less than 50% of the eligible votes of UAI Ltd. desires to convene a general meeting and to nominate persons for election as director, a written requisition must be deposited at UAI Ltd.’s registered office requesting a meeting no later than 60 days from the date of deposit of the requisition. The notice must meet the requirements set forth in UAI Ltd.’s articles of association and, in the case of a proposal, SEC rules.

 

GI plc.   The Irish Companies Acts provide that shareholders holding not less than 10% of the total voting rights may requisition an extraordinary general meeting for the purpose of considering director nominations or other proposals, as described above under “— Annual Meetings of Shareholders.” In such requisitioned meeting, an ordinary resolution is required in order to approve the nomination of any director proposed by a shareholder.

 

UAI Ltd.   UAI Ltd.’s articles of association provide that the chairman of any shareholder meeting may adjourn a general meeting from time to time and place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. No business may be transacted at any meeting duly called at which a quorum is not present. The chairman may adjourn such meeting and if a meeting is adjourned for 14 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

 

GI plc.   GI plc’s articles provide that that the chairman of any shareholder meeting may, with the consent of a majority of votes cast by the shareholders present and entitled to vote at the meeting, adjourn the meeting from time to time and from place to place, but no business shall be transacted at the adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for 14 days or more, notice of the adjourned meeting shall be given in a like manner as in the case of an original meeting.

 

UAI Ltd.   All business carried out at a general meeting shall be deemed special with the exception of the consideration of the accounts and balance sheets and any report of the board of directors or of UAI Ltd. auditors and the appointment of directors. Such matters, excepting the election of directors, voted upon at any duly held shareholders’ meeting will be carried by a majority of the votes cast at the meeting by shareholders represented in person or by proxy. The appointment of directors will be carried by a plurality of the votes cast by shareholders present in person or by proxy at the annual general meeting. At least two-thirds of the votes cast by shareholders represented in person or by proxy at a duly convened meeting is required to approve a special resolution.

 

Each holder of UAI Ltd. Class A common shares is entitled to one vote per share and each holder of UAI Ltd. Class B common shares is entitled to ten votes per share on all matters submitted to a vote of shareholders at any meeting. UAI Ltd. common shares have non-cumulative voting rights, which means that the holders of a majority of UAI Ltd. common shares may elect all of our directors, and, in this event, the holders of the remaining shares will not be able to elect any directors. However, pursuant to a mechanism specified in UAI Ltd.’s articles of association, the voting rights exercisable by a shareholder may be limited. Pursuant to UAI Ltd.’s articles of association, in any situation in which the “controlled shares” (as defined below) of a U.S. Person would constitute 9.5% or more of the votes conferred by the issued shares, the voting rights exercisable by a shareholder with respect to such shares will be limited so that the Controlled Shares of such U.S. Person, other than a Fox Paine Entity or a member of a 13D Group of which a Fox Paine Entity is a member constitute less than 9.5% of the voting power conferred by our common shares (the “Voting Cutback Provision”). The votes that could be cast by a shareholder but for these restrictions will be allocated to the other shareholders pro rata based on the voting power held by such shareholders, provided that no allocation of any such voting rights may cause a U.S. Person to exceed the 9.5% limitation as a result of such allocation. “Controlled Shares” include shares that a U.S. Person owns directly, indirectly through a foreign entity or constructively (within the meaning of Section 958 of the Code). The foregoing voting limitations do not apply if any one or more shareholders or 13D Groups own greater than 75% of the voting power or value of our issued and outstanding common shares.

 

GI plc.   At a general meeting, GI plc’s articles of association provide that votes will be taken on a poll and every shareholder shall have one vote for each Class A ordinary share and ten votes for each Class B ordinary that he or she holds as of the record date for the meeting. Voting rights on a poll may be exercised by shareholders registered in GI plc’s share register as of the record date for the meeting or by a duly appointed proxy of such a registered shareholder, which proxy need not be a shareholder. Where interests in shares are held by a nominee trust company this company may exercise the rights of the beneficial holders on their behalf as their proxy. All proxies must be appointed in the manner prescribed by GI plc’s articles of association. The articles of association of GI plc permit the appointment of proxies by the shareholders to be notified to GI plc electronically.

 

In accordance with the articles of association of GI plc, the directors of GI plc may from time to time cause GI plc to issue preferred shares. These preferred shares may have such voting rights as may be specified in the terms of such preferred shares (e.g., they may carry more votes per share than ordinary shares or may entitle their holders to a class vote on such matters as may be specified in the terms of the preferred shares).

 

Treasury shares will not be entitled to vote at general meeting of shareholders.

 

The Euro Share Capital shall carry no right to receive notice of or to attend, vote or speak at any shareholder meeting.

 

Irish law requires “special resolutions” of the shareholders at a general meeting to approve certain matters. A special resolution requires not less than 75% of the votes of the shares of GI plc present in person or by proxy and entitled to vote at the meeting convened to consider the matter. This may be contrasted with “ordinary resolutions,” which require a simple majority of the votes of GI plc’s shareholders cast at a general meeting. Examples of matters requiring special resolutions include:

 

 

 

A scheme of arrangement with shareholders requires a court order from the Irish High Court and the approval of a majority in number representing 75% in value of the shareholders present and voting, whether in person or by proxy.

 

UAI Ltd.   At least two-thirds of the votes cast by shareholders represented in person or by proxy at a duly convened meeting is required to approve a special resolution.

 

GI plc.   At least three-quarters of the votes cast by shareholders represented in person or by proxy at a duly convened meeting is required to approve a special resolution.

 

UAI Ltd.   UAI Ltd.’s articles of association provide that, subject to applicable law and certain provisions of UAI Ltd.’s articles of association, the rights attaching to any class of shares, unless otherwise expressly provided in the rights attaching to or by the terms of issue of the shares of that class, may be materially adversely altered or abrogated with the consent in writing of the holders of not less than two-thirds of the shares then in issue of that class, or with the sanction of a resolution passed by holders of at least two-thirds of the voting power of the issued shares of the class present in person or by proxy at a separate general meeting of the holders of the shares of the class.

 

GI plc.   Variation of all or any special rights attached to any class of shares of GI plc is addressed in the articles of association of GI plc as well as the Irish Companies Acts. Any variation of class rights attaching to the issued shares of GI plc must be approved in writing by holders of three-quarters of the issued shares in that class or with the sanction of a special resolution of the shareholders of the class affected.

 

UAI Ltd.   UAI Ltd.’s articles of association may be amended or altered by a special resolution of UAI Ltd. shareholders. Under Cayman Islands law, a special resolution requires the approval of at least two-thirds of the votes cast by the shareholders represented in person or by proxy at a duly convened meeting at which a quorum is present.

 

GI plc.   Irish companies may alter their memorandum and articles of association by the passing of a special resolution of shareholders.

 

UAI Ltd.   One or more persons present in person and representing in person or by proxy a majority of the shares then in issue entitled to vote at any general meeting shall form a quorum for the conduct of business. No business may take place at a general meeting of UAI Ltd. if a quorum is not present in person or by proxy. Abstentions and broker non-votes will be counted as present for purposes of determining whether there is a quorum in respect of the proposals.

 

GI plc.   One or more persons present in person and representing in person or by proxy a majority of the shares then in issue entitled to vote at any general meeting shall form a quorum for the conduct of business. No business may take place at a general meeting of GI plc if a quorum is not present in person or by proxy. The board of directors has no authority to waive quorum requirements stipulated in the articles of association of GI plc. Abstentions and broker non-votes will be counted as present for purposes of determining whether there is a quorum in respect of the proposals.

 

UAI Ltd.   Shareholders of a Cayman Islands exempted company have no general rights to inspect or obtain copies of the list of shareholders or corporate records of a company, other than the memorandum of association, the articles of association and the register of mortgages and charges.

 

GI plc.   Under Irish law, shareholders have the right to: (1) receive a copy of the memorandum and articles of association of GI plc and any act of the Irish Government which alters the memorandum of association of GI plc; (2) inspect and obtain copies of the minutes of general meeting and resolutions of GI plc; (3) inspect and receive a copy of the register of shareholders, register of directors and secretaries, register of directors’ interests and other statutory registers maintained by GI plc; (4) receive copies of balance sheets and directors’ and auditors’ reports which have previously been sent to shareholders prior to an annual general meeting; and (5) receive balance sheets of a subsidiary company of GI plc which have previously been sent to shareholders prior to an annual general meeting for the preceding ten years. If required by law, the auditors of GI plc will also have the right to inspect all books, records and vouchers of GI plc. The auditors’ report must be circulated to the shareholders with copies of the balance sheet and directors report 21 days before the annual general meeting and must be read to the shareholders at GI plc’s annual general meeting.

 

UAI Ltd.   In accordance with UAI Ltd.’s articles of association an instrument of transfer of any share shall be in such form as the board of directors may approve and shall be executed by or on behalf of the transferor and, if so required by the board of directors, shall also be executed on behalf of the transferee. The instrument of transfer shall be accompanied by the certificate (if any) of the shares to which it relates and any other evidence as the board of directors may reasonably require.

 

The transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in UAI Ltd.’s register of members.

 

The board of directors may decline to approve or register any transfer of shares if it appears that any non-de minimis adverse tax, regulatory or legal consequences to UAI Ltd. would result from such transfer. If the board of directors refuses to register a transfer of any shares the secretary shall within ten (10) business days after the transfer was lodged with UAI Ltd., send to the transferor and transferee notice of the refusal.

 

GI plc.   GI plc’s share register will be maintained by its transfer agent. Registration in this share register will be determinative of membership in GI plc. A shareholder of GI plc who holds shares beneficially will not be the holder of record of such shares. Instead, the depository (for example, Cede & Co., as nominee for DTC) or other nominee will be the holder of record of such shares. Accordingly, a transfer of shares from a person who holds such shares beneficially to a person who also holds such shares beneficially will not be registered in GI plc’s official share register, as the depositary or other nominee will remain the record holder of such shares.

A written instrument of transfer is required under Irish law in order to register on GI plc’s official share register any transfer of shares from a person who holds such shares directly to any other person, or from a person who holds such shares beneficially to a person who holds such shares directly or from a person who holds shares beneficially to another person who holds shares beneficially where the transfer includes a change in depository or other nominee that is the record owner of the transferred shares. An instrument of transfer also is required for a shareholder who directly holds shares to transfer those shares into his or her own broker account (or vice versa). Such instruments of transfer may give rise to Irish stamp duty, which must be paid prior to registration of the transfer on GI plc’s official Irish share register.

 

GI plc currently intends to pay (or cause one of our affiliates to pay) stamp duty in connection with share transfers made in the ordinary course of trading by a seller who holds shares directly to a buyer who holds the acquired shares beneficially. In other cases GI plc may, in its absolute discretion, pay (or cause one of its affiliates to pay) any stamp duty. GI plc’s articles of association as they will be in effect after the Transaction provide that, in the event of any such payment, GI plc (i) may seek reimbursement from the transferor or transferee (at our discretion), (ii) may set-off the amount of the stamp duty against future dividends payable to the transferor or transferee (at our discretion), and (iii) will have a lien against the GI plc ordinary shares on which we have paid stamp duty. Parties to a share transfer may assume that any stamp duty arising in respect of a transaction in GI plc ordinary shares has been paid unless one or both of such parties is otherwise notified by us.

 

GI plc’s articles of association as they will be in effect after the Transaction delegate to GI plc’s secretary the authority to execute an instrument of transfer on behalf of a transferring party. In order to help ensure that the official share register is regularly updated to reflect trading of GI plc ordinary shares occurring through normal electronic systems, we intend to regularly produce any required instruments of transfer in connection with any transactions for which we pay stamp duty (subject to the reimbursement and set-off rights described above). In the event that we notify one or both of the parties to a share transfer that we believe stamp duty is required to be paid in connection with such transfer and that we will not pay such stamp duty, such parties may either themselves arrange for the execution of the required instrument of transfer (and may request a form of instrument of transfer from GI plc for this purpose) or request that GI plc execute an instrument of transfer on behalf of the transferring party in a form determined by GI plc. In either event, if the parties to the share transfer have the instrument of transfer duly stamped (to the extent required) and then provide it to GI plc’s transfer agent, the transferee will be registered as the legal owner of the relevant shares on GI plc’s official Irish share register (subject to the matters described below).

 

The directors of GI plc have general discretion to decline to register an instrument of transfer unless:

 

(i) the transfer is in respect of one class of share only, or

 

(ii) the instrument of transfer is in favor of not more than four transferees, or

 

(iii) such share has not been registered under the U.S. Securities Act of 1933, as amended from time to time, or is not exempt from registration under that Act, or a written opinion from counsel acceptable to the Company has not been obtained to the effect that registration of such transfer under the U.S. Securities Act of 1933, as amended from time to time, is not required.

 

The directors may request from any shareholder information to determine whether any transfer should be permitted. If such information is not forwarded, the Directors may decline to approve or register such transfer. The Directors shall decline to approve or to register any transfer of any share if the transferee shall not have been approved by applicable governmental authorities, if such approval is required.

 

The registration of transfers may be suspended by the directors at such times and for such period, not exceeding in the whole 30 days in each year, as the directors may from time to time determine.

 

UAI Ltd.   The rights of the shareholders to a return of UAI Ltd.’s assets on winding up, following the settlement of all claims of creditors, may be prescribed in UAI Ltd.’s articles of association or the terms of

any preferred shares issued by the directors of UAI Ltd. from time to time. UAI Ltd.’s articles of association provide that the holders of common shares are entitled to participate pro rata in a winding up, but their right to do so may be subject to the rights of any preferred shareholders to participate under the terms of any series or class of preferred shares.

 

GI plc.   The rights of the shareholders to a return of GI plc’s assets on dissolution or winding up, following the settlement of all claims of creditors, may be prescribed in GI plc’s articles of association or the terms of any preferred shares issued by the directors of GI plc from time to time. The holders of preferred shares in particular may have the right to priority in a dissolution or winding up of GI plc. If the articles of association contain no specific provisions in respect of a dissolution or winding up then, subject to the priorities or any creditors, the assets will be distributed to shareholders in proportion to the paid-up par value of the shares held. GI plc’s articles provide that the ordinary shareholders of GI plc are entitled to participate pro rata in a winding up, but their right to do so may be subject to the rights of any preferred shareholders to participate under the terms of any series or class of preferred shares as the directors will fix at time of issuance. GI plc may be dissolved at any time by way of either a shareholders’ voluntary winding up or a creditors’ voluntary winding up. In the case of a shareholders’ voluntary winding up, the consent of not less than 75% of the votes of the shareholders of GI plc cast at a general meeting is required. GI plc may also be dissolved by way of court order on the application of a creditor, or by the Companies Registration Office as an enforcement measure where GI plc has failed to file certain returns.

 

UAI Ltd.   UAI Ltd. has been advised by its Cayman Islands counsel that there is doubt as to whether the Grand Courts would enforce:

 

 

UAI Ltd. has also been advised by its Cayman Islands counsel that there is no treaty in effect between the United States and the Cayman Islands providing for this enforcement, and there are grounds upon which the Grand Courts may not enforce judgments of United States courts. Some remedies available under the laws of United States jurisdictions, including some remedies available under the U.S. Federal securities laws, would not be allowed in the Grand Court as contrary to the Cayman Islands’ public policy.

 

GI plc.   GI plc has been advised by its Irish counsel, Arthur Cox, that a judgment for the payment of money rendered by a court in the United States based on civil liability would not be automatically enforceable in Ireland. There is no treaty between Ireland and the United States providing for the reciprocal enforcement of foreign judgments. The following requirements must be met before the foreign judgment will be deemed to be enforceable in Ireland:

 

 

An Irish court will also exercise its right to refuse judgment if the foreign judgment was obtained by fraud, if the judgment violated Irish public policy, if the judgment is in breach of natural justice or if it is irreconcilable with an earlier foreign judgment.

 

We are furnishing this proxy statement to the holders of our common shares in connection with the solicitation of proxies by our board of directors for use at the Special Meeting of the holders of our Class A and Class B common shares to consider the Scheme of Arrangement and the other matters that may come before the Special Meeting, including to consider the creation of distributable reserves of GI plc (through the reduction of the share premiums), as described below, and at any adjournments or postponements of the Special Meeting.

 

The Special Meeting will be conducted in accordance with the directions of the Grand Court.

 

The Special Meeting is scheduled to be held on May 27, 2010 at 9:00 am, Bermuda time, at Purvis House, Victoria Place, 29 Victoria Street, Hamilton, Bermuda.

 

At the Special Meeting, our board of directors will ask all our Class A and Class B common shareholders, voting as a single class, to vote:

 

1. to approve the Scheme of Arrangement. If the Scheme of Arrangement is approved and becomes effective, it will effect the Transaction, pursuant to which each holder of UAI Ltd.’s Class A and Class B common shares immediately before the Transaction will receive GI plc Class A and Class B ordinary shares on a one-for-two basis in exchange for their UAI Ltd. Class A and Class B common shares, respectively; provided that, holders of UAI Ltd. common shares who would otherwise receive fractional shares in GI plc as a result of the one-for-two exchange will receive cash in consideration of the fractional shares, which would otherwise be issued;

 

2. if the Scheme of Arrangement is approved, to approve the reduction of share premium to establish distributable reserves of GI plc through the reduction of its share premium account; and

 

3. to approve a motion to adjourn the meeting to a later date to solicit additional proxies if there are insufficient proxies to approve the Scheme of Arrangement at the time of the meeting.

 

UAI Ltd.’s board of directors has approved the Scheme of Arrangement and unanimously recommends that you vote “FOR” all of the proposals.

 

If any other matters properly come before the Special Meeting or any adjournments or postponements of the Special Meeting, the persons named in the proxy card will vote the shares represented by all properly executed proxies in their discretion.

 

The board of directors has fixed the close of business on April 20, 2010 as the record date for the Special Meeting.

 

Only holders of record of UAI Ltd. Class A and Class B common shares on the record date are entitled to notice of and to vote at the Special Meeting or any adjournments or postponements of the Special Meeting. You will not be the holder of record of shares that you hold “beneficially.” Instead, the depository (for example, Cede & Co., as nominee for DTC) or other nominee will be the holder of record of such shares.

 

On the record date for the Special Meeting, approximately 36,508,907 and 24,122,744 UAI Ltd. Class A and Class B common shares, respectively, were issued and entitled to be voted at the Special Meeting. Generally, each holder of record of Class A common shares is entitled to one vote per share and each holder of record of Class B common shares is entitled to ten votes per share. However, since the required vote for approval of the Scheme of Arrangement consists of the affirmative vote of a majority in number of the holders of Class A and Class B common shares, present and voting as a single class, representing 75% or more in

value of Class A and Class B common shares present and voting on the proposal, whether in person or by proxy, the Class B common shares will effectively have the same voting power as the Class A common shares for purposes of this proposal.

 

There is no formal quorum requirement for a meeting of shareholders convened to consider the terms of a scheme of arrangement under Cayman Islands law. Nonetheless, we will not seek that the Scheme of Arrangement be sanctioned by the Grand Court unless one or more persons in person or by proxy representing a majority of all common shares outstanding and entitled to vote are present at the Special Meeting, which would constitute a quorum for the conduct of business at a general meeting of the Company. Abstentions and broker non-votes will be counted as present for purposes of determining whether there is a quorum in respect of the proposals.

 

Assuming the presence of a quorum, the Scheme of Arrangement must be approved by a majority in number of the holders of both the UAI Ltd. Class A and Class B common shares, present and voting as a single class, representing 75% or more in value of the UAI Ltd. Class A and Class B common shares, present and voting on the proposal, whether in person or by proxy. For the purpose of calculating the “majority in value,” any registered shareholder who holds shares for a beneficial shareholder will be able to vote the shares for or against the proposal, depending upon the beneficial shareholder’s instructions to the registered shareholder. For the purpose of calculating the “majority in number” requirement for the approval of the proposal, each registered shareholder, present and voting in person or by proxy, will be counted as a single shareholder, regardless of the number of shares voted by that shareholder. If a registered shareholder elects to vote a portion of such holder’s UAI Ltd. common shares in favor of the proposal (for example, in a scenario where the registered shareholder holds shares for two or more beneficial shareholders and the beneficial shareholders instruct the registered shareholder to vote their shares in a particular manner), and a portion against the proposal, then, subject to any reasonable objection that may be raised, that registered shareholder will be counted as one shareholder voting in favor of the proposal and as one shareholder voting against the proposal, thereby effectively cancelling out that registered shareholder’s vote for the purposes of the “majority in number” calculation.

 

Assuming the presence of a quorum, the distributable reserves proposal requires the affirmative vote of holders of UAI Ltd. Class A and Class B common shares representing at least a majority of the UAI Ltd. common shares present in person or by proxy at the meeting and voting on the proposal.

 

Assuming the presence of a quorum, the adjournment proposal requires the affirmative vote of holders of UAI Ltd. Class A and Class B common shares representing at least a majority of the UAI Ltd. common shares present in person or by proxy at the meeting and voting on the proposal.

 

Under Cayman Islands law, the Class A and Class B common shareholders of UAI Ltd. are not entitled to dissenters’ or appraisal rights with respect to the matters to be considered and voted on at the Special Meeting.

 

Our directors and executive officers have indicated that they intend to vote their shares in favor of all of the proposals. On the record date, our directors and executive officers and their affiliates beneficially owned 8,958,283, or 24.5%, of the outstanding UAI Ltd. Class A common shares and 24,122,744, or 100%, of the outstanding UAI Ltd. Class B common shares.

 

A proxy card is being sent to each UAI Ltd. common shareholder as of the record date. If you properly received a proxy card, you may grant a proxy to vote on the proposals presented in one of the two ways which are explained below under “— How You Can Vote.”

 

If you properly complete, sign and date the enclosed proxy card and send it to us in time to vote or direct the voting of your Class A and Class B Common Shares by telephone by the time required, your proxy holder (the individual named on the enclosed proxy card or designated as your proxy over the telephone) will vote your Class A and/or Class B common shares as you have directed.

If you do not specify on the enclosed proxy card that is submitted (or when giving your proxy by telephone) how you want to vote your common shares, the proxy holder will vote them “FOR” each of the proposals set forth in this proxy statement.

 

You may abstain on the proposal to approve the Scheme of Arrangement, the distributable reserves proposal or the adjournment proposal (or any of them) by marking “ABSTAIN” with respect to any or all of the proposals.

 

An abstention or broker non-vote on the proposal to approve the Scheme of Arrangement has the effect of a vote not being cast with respect to the relevant shares in relation to the proposal (although it will count for the purposes of determining whether or not a quorum is present). As a consequence, such shares will not be considered when determining whether the proposal to approve the Scheme of Arrangement has received the required approval by a majority in number of the holders of the UAI Ltd. common shares, present and voting as a single class, representing 75% or more in value of the UAI Ltd. common shares, present and voting on the proposal, whether in person or by proxy. Similarly, such shares will not be considered when determining whether the distributable reserves proposal has received the required approval by holders of UAI Ltd. common shares representing at least a majority of the UAI Ltd. common shares present in person or by proxy at the meeting and voting on the proposal.

 

In addition, such shares will not be considered when determining whether the adjournment proposal has received the required approval by holders of UAI Ltd. common shares representing at least a majority of the UAI Ltd. common shares present in person or by proxy at the meeting and voting on the proposal.

 

You may revoke your proxy at any time before it is exercised at the Special Meeting in any of the following ways: