As filed with the Securities and Exchange Commission on July 1, 1999
Registration Statement No. 333-76983
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ESG RE LIMITED
(Exact Name of Registrant as Specified in its Charter)
----------------------
Bermuda None
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
Skandia International House
16 Church Street
Hamilton, HM 11 Bermuda
(441) 295-2185
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
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CT Corporation System
1633 Broadway
New York, New York 10019
(212) 664-1666
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
----------------------
copy to:
Richard S. Borisoff, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
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Approximate date of commencement of proposed sale to public:
From time to time or at one time after the effective date
of this registration statement as determined by market conditions.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
================================================================================
<PAGE>
Subject to Completion, dated July 1, 1999
PRELIMINARY PROSPECTUS
ESG RE LIMITED
DIVIDEND REINVESTMENT AND
SHARE PURCHASE PLAN
2,000,000 Common Shares
We have established a distribution reinvestment and share purchase plan
to provide our shareholders with a simple and convenient method of investing
cash distributions in additional common shares of our company. These plan
participants and interested new investors, not currently our shareholders, may
also purchase our common shares on a monthly basis with optional cash payments.
A participant in the plan may purchase our common shares by any of the
following methods:
o reinvesting distributions relating to all or part of our
common shares held by the participant.
o making optional cash payments of not less than $50 and up
to $12,500 per month.
o making optional cash payments in excess of $12,500 per
month with our permission, at a discount on our share price
ranging from 0% to 5%.
The price of the common shares offered under the plan will be based
either on the average price of the shares on the Nasdaq National Market at the
time of your investment or on the average price that our plan administrator pays
for the relevant investment period to purchase the shares on the open market.
Our common shares are listed on the Nasdaq National Market under the
symbol "ESREF." On , 1999, our closing price was $ .
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See "Risk Factors" beginning on page 2 for factors relevant to an
investment in our common shares.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
The date of this prospectus is , 1999.
<PAGE>
For North Carolina Residents: The Commissioner of Insurance for the State
of North Carolina has not approved or disapproved this offering, nor has the
Commissioner passed upon the accuracy or adequacy of this prospectus. A buyer in
North Carolina must understand that neither ESG Re Limited nor its subsidiaries
is licensed in North Carolina pursuant to Chapter 58 of the North Carolina
General Statutes.
ENFORCEABILITY OF CIVIL LIABILITIES
We are organized under the laws of Bermuda, and substantially all of our
assets are located outside the United States. In addition, a majority of the
members of our board of directors and senior executive officers are
non-residents of the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon these
persons and to realize in the United States upon judgments of courts of the
United States predicated upon the civil liability of these persons under the
federal securities laws of the United States. Our Bermuda counsel, Appleby,
Spurling & Kempe, has advised us that there is doubt as to the enforceability,
in original actions in Bermuda courts, of judgments of United States courts
obtained in actions against our non-resident directors and senior executive
officers predicated upon the civil liability provisions of the federal
securities laws of the United States.
We have appointed CT Corporation System, New York, New York, as our agent
to receive service of process. This appointment cannot be revoked and applies to
litigation brought in any U.S. federal or state court relating to violations of
U.S. federal securities laws in connection with the transactions covered by this
prospectus.
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THE COMPANY
We were formed on August 21, 1997, under the laws of Bermuda. Through our
subsidiaries, European Specialty Reinsurance (Bermuda) Limited, European
Specialty Reinsurance (Ireland) Limited, European Specialty Ruckversicherung AG
and Accent Europe Insurance Company Limited, we are a specialty
reinsurer/insurer providing innovative risk solutions and capacity on a global
basis in the fields of accident, health, life and special risk reinsurance to
insurers and selected reinsurers.
In December 1997, we raised gross proceeds of $257 million in a combined
private placement and initial public offering. The proceeds from those offerings
provided the capitalization for us to assume for our own account risks that our
wholly owned reinsurance management subsidiary, ES Management, previously
underwrote on behalf of unaffiliated reinsurance companies. Subsequent to the
offerings, we assumed a 30% share of the business that ES Management underwrote
in 1997 on behalf of a group of those companies. In addition, since that time we
have separately negotiated additional reinsurance contracts with other
reinsurance companies.
We distinguish ourselves by actively assisting the primary insurance
companies that we reinsure by offering products and services for particular
underwriting problems, actuarial support, product design and, in the field of
medical expense reinsurance, loss prevention and disease management. We call our
approach "intelligent reinsurance."
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Our executive offices are located 16 Church Street, Hamilton HM11,
Bermuda, and our telephone number is (441) 295-2185.
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RISK FACTORS
You should carefully consider the following risk factors together with all
of the other information included or incorporated by reference in this
prospectus before you decide to purchase our common shares. This section
includes or refers to forward-looking statements. You should refer to the
explanation of the qualifications and limitations on such forward-looking
statements discussed on page 9 of this document.
The Cyclicality of the Reinsurance Industry as a Whole is Likely to Affect Our
Results
The insurance and reinsurance industries are cyclical. Historically,
reinsurers have experienced significant fluctuations in operating results due to
volatile and sometimes unpredictable developments, frequently beyond the direct
control of the reinsurer. These developments include:
o the unpredictability of the occurrence or severity of natural
disasters, other catastrophic events, trends in disease, their
treatment and health care expenditures and other inherently
unpredictable factors;
o the unpredictability of the overall insurance underwriting capacity
that is available in the market place; and
o general economic conditions.
In addition, the underwriting results of primary insurers significantly
influence the demand for reinsurance. Capacity to supply reinsurance is related
primarily to:
o prevailing prices;
o the levels of insured losses;
o levels of industry surplus; and
o utilization of underwriting capacity.
All of these factors may fluctuate in response to changes in rates of
return on investments being earned in the insurance and reinsurance industries.
As a result, the reinsurance business historically has been characterized
both by periods of intense price competition due to excessive underwriting
capacity and by periods when shortages of underwriting capacity permitted
favorable premium levels. Increases in the frequency and severity of losses
suffered by insurers, and changes in trends in mortality, the prognosis of
diseases and their treatment and overall health care trends and expenditures,
can significantly affect these cycles. Conversely, the absence of severe or
frequent catastrophes and other loss events could result in declining premium
rates in the global market. We expect to experience these kinds of cyclical
effects, which may be either advantageous or disadvantageous to us.
If an Unusual Number of the Speciality Risks that We Insure Against
Actually Occur, Our Results of Operations Could Suffer
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Our specialty risk lines of reinsurance are characterized by a relatively
small number of large risks, like the risk of cancellation of a World Cup Soccer
championship or the nonappearance of a performing artist. It is difficult to
predict if and when this kind of cancellation or non-appearance will occur. If
they do, they could have a material adverse effect on our results of operations,
even though we try to control the risk by purchasing further reinsurance for
ourselves.
Catastrophic Events May Cause Significant Underwriting Losses for Us
As with other reinsurers, our operating results and financial condition
could be adversely affected by catastrophes, particularly if they resulted in
significant claims under our various life and health reinsurance coverages.
Catastrophes can be caused by various events, including hurricanes, windstorms,
earthquakes, hail, explosions, severe winter weather and fires, and their
incidence and severity are inherently unpredictable. We seek to manage our
exposure to catastrophe losses through selective underwriting practices,
including monitoring of risk accumulations on a geographic basis, and through
the purchase of additional reinsurance to cover part of the claims against us.
However, these practices may not be adequate to protect us against material
catastrophe losses. In addition, in the future we may not be able to buy
reinsurance at commercially reasonable rates.
Our Loss Reserves May Turn Out to be Inadequate
We establish and maintain reserves to cover the ultimate payment of our
underwriting losses and expenses incurred in handling those losses. There is a
risk that those on reserves may turn out not to be high enough, which would
require us to increase the reserves and give rise to a corresponding decrease in
our net income during the period.
Reserves are estimates of how much we will ultimately have to pay out for
reported but not paid claims and as a result of events that have occurred that
will give rise to claims that have not yet been reported. These reserves are
calculated by making actuarial and statistical projections at a given time to
reflect our expectations of the costs of the ultimate settlement and
administration of claims. By their nature these reserves do not represent an
exact calculation of liability, but rather have as their basis, at a given time,
the facts and circumstances then known and estimates of trends in claims
severity and other variable factors, including new concepts of liability. In
addition, under U.S. generally accepted accounting principles, we are not
permitted to establish loss reserves with respect to personal and special risk
reinsurance until an event that may give rise to a claim occurs.
The inherent uncertainties of estimating reserves are increased for
reinsurers, as compared to primary insurers, because of the significant lapse of
time that can occur between the (1) occurrence of an insured loss, (2) reporting
of the loss to the primary insurer and, ultimately, to the reinsurer, (3) the
primary insurer's payment of that loss and (4) subsequent payment by the
reinsurer. These uncertainties are compounded by the necessity of relying on
reinsured companies for information on reported claims and by differing
reserving practices among the reinsured companies.
We periodically review and update our methods for establishing reserves.
Our management considers many factors when doing so, including:
o information from the companies we reinsure;
o historical trends, such as reserving patterns, loss payments and
pending levels of unpaid claims;
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o our product mix;
o statistical methods that analyze our experience with similar cases;
o current legal interpretations of coverage and liability; and
o economic conditions.
Based on these considerations, our management believes that our reserves of
$44,379,000 as of December 31, 1998 were adequate. Because our reinsurance
business began operating only last year, our estimation of reserves may be
inherently less reliable than the reserve estimations of a reinsurer with a
stable volume of business and an established long-term loss history. Actual
losses and loss adjustment expenses paid may deviate, perhaps substantially,
from estimates reflected in the loss reserves in our financial statements.
Furthermore, additional losses may emerge in the future of a type or magnitude
that we cannot foresee. Future losses of this kind also could have material
adverse effects on our future consolidated financial condition, results of
operations and cash flows.
Our Business Could Be Adversely Affected by the Departure of Key Personnel
We place substantial reliance on the reinsurance industry experience and
the continued services of our senior management, led by Wolfgang M. Wand, Steven
H. Debrovner, Joan H. Dillard and Renate M. Nellich. We pay competitive salaries
and have employment agreements with our senior management that impose
obligations on them not to compete with us for a reasonable period of time after
leaving their jobs with us. However, those agreements will not necessarily
prevent an employee from accepting an attractive position, especially if it is
not with one of our direct competitors. While we believe that, if necessary, we
could find replacements for our key personnel, the loss of their services could
have a material adverse effect on our operations.
Our Business Could Be Adversely Affected by the Loss of a Small Number of Key
Clients
We depend on a limited number of clients for a substantial portion of our
premium revenue. We have in excess of 400 centrally administered reinsurance
acceptances from clients. During 1998, our largest client, Caisse Centrale de
Reassurance, accounted for approximately 13.5% of our premium revenue. Our
second largest client, Best Meridian Insurance Company, accounted for
approximately 7.5% of our premium revenue in 1998. The non-renewal of even a
limited number of programs or policies could adversely affect our business. We
will solicit new clients, but cannot assure that we will be successful in doing
so.
Competition in the Insurance Industry is Intense, and Our Ability To Compete
Would Be Adversely Affected if Our Rating Was Downgraded
The reinsurance business is highly competitive. We compete for business in
the European, United States and other international reinsurance and insurance
markets with numerous international and domestic reinsurance and insurance
companies, some of which have higher ratings and far greater financial resources
than we do. Competition is based on many factors, including:
the perceived financial strength of a reinsurer;
premium charges;
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terms and conditions offered;
services provided;
ratings assigned by independent rating agencies;
speed of claims payment; and
reputation and experience in the line of reinsurance to be written.
Ultimately, this competition could affect our ability to attract business
on profitable terms.
Ratings by insurance rating agencies are used by the insurers and
reinsurance brokers who are our customers as important means of assessing our
financial strength and quality and that of other reinsurers and of
distinguishing reinsurers from one another. Ratings are based on quantitative
evaluations of performance with respect to profitability, leverage and liquidity
and qualitative evaluations of allocation of risk, reinsurance programs,
investments, reserves and management. We are currently rated A- (Strong) by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. We are not
rated by any other rating service. Standard & Poor's rating scale runs from AAA
(Extremely Strong) to CC (Extremely Weak), with ratings of BBB- (Good) or higher
described as indicating insurers having financial security characteristics that
outweigh any vulnerabilities, and highly likely to have the ability to meet
financial commitments. Our failure to maintain our current rating could have an
adverse effect on our business.
Our Business Would Be Adversely Affected if We Could Not Maintain
Letters of Credit To Secure Our Reinsurance Obligations in Jurisdictions
Where We Are Not Admitted As Reinsurers
We are licensed or admitted as reinsurers only in Bermuda, Ireland and
Germany, but we provide reinsurance to companies licensed in many other
jurisdictions. Because many jurisdictions do not permit insurance companies to
take credit for reinsurance obtained from unlicensed or non- admitted insurers
on their statutory financial statements unless security is posted, our
reinsurance contracts frequently require us to post a letter of credit or other
security when the reinsurance contract is first written or after a company that
we reinsure reports a claim. In order to be able to provide the necessary
security, we may either obtain a letter of credit at the time or draw on letter
of credit facilities that we have previously established for this purpose. If
our financial strength significantly deteriorated, however, we might not be able
to obtain new letters of credit or to maintain letter of credit facilities. A
failure of that kind would have a material adverse effect on our results of
operations.
Changes in Insurance Regulations or Their Interpretation Could Adversely Affect
Our Profitability
We are subject to the general corporate and insurance laws and regulations
of Bermuda, Ireland and Germany, our jurisdiction of incorporation and those of
each of our principal operating subsidiaries, and the laws and regulations of
the other jurisdictions in which those subsidiaries are licensed or authorized
to do business. Each state of the United States and many non-U.S. jurisdictions
regulate the sale of insurance and reinsurance within them by foreign insurers
that have not been "admitted" to do business. We do not maintain an office or
solicit, advertise, settle claims
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or conduct other insurance activities in any jurisdiction where the conduct of
those activities would be prohibited by our lack of a license. However, we
cannot guarantee that inquiries or challenges relating to our activities will
not be raised in the future or that our location and regulatory status or
restrictions on our activities will not adversely affect our ability to conduct
our business. Also, we cannot be sure that our operations would comply with a
given jurisdiction's regulations if we became subject to them in the future. Nor
can we predict what additional government regulations affecting our business as
it is currently conducted will be put in place in the future or how they might
be interpreted. As a result, we cannot guarantee that future regulations will
not have a serious adverse impact on us or the insurance industry generally.
Changes in Foreign Exchange Rates Can Adversely Affect Us
Our functional currency is the U.S. dollar. However, because we write a
portion of our business in currencies other than the U.S. dollar and maintain
investments denominated in currencies other than the U.S. dollar, changes in
exchange rates could cause significant dollar gains and losses, which could in
turn affect our results of operations. We try to maintain a partial "natural
hedge" by keeping the portion of our funds invested in a particular currency
proportionate to the losses that we anticipate incurring in that currency, but
this kind of hedge may prove to be inadequate if our loss estimates are
incorrect. As a result, exchange rate fluctuations may increase our losses (as
measured in U.S. dollars) as claim amounts are settled.
Also, the net premium income that we derive from our underwriting
activities in other currencies is rendered less valuable in U.S. dollar terms if
that currency falls against the dollar. We do not try to hedge against that kind
of currency loss.
Tax Matters
We operate our business in a manner that does not cause us to be viewed as
engaged in a trade or business in the United States and, thus, does not require
us or any of our subsidiaries, other than our U.S. subsidiary, to pay United
States corporate income taxes (other than withholding taxes). However, because
there is considerable uncertainty as to the activities that constitute being
engaged in a trade or business within the United States, there can be no
assurances that the United States Internal Revenue Service will not contend
successfully that we or one of our non-U.S. subsidiaries is engaged in a trade
or business in the United States. If we or any of our non-U.S. subsidiaries were
subject to U.S. income tax, our shareholders' equity and earnings could be
materially adversely affected. See "Certain Tax Considerations--Taxation of the
Company and its Subsidiaries."
We operate our business in a manner that does not cause us or our
subsidiaries to be taxable in jurisdictions other than the jurisdiction in which
they are organized. However, because the applicable tests are essentially
factual and there is considerable uncertainty as to the activities that will
cause a foreign corporation to be subject to tax in jurisdictions outside its
domicile, we cannot assume that relevant tax authorities will not successfully
contend that we and/or our other subsidiaries will not be subject to tax in a
jurisdiction outside its domicile. If a company were subject to tax outside its
country of domicile, our shareholders' equity and earnings could be materially
and adversely affected. See "Certain Tax Considerations--Taxation of the Company
and its Subsidiaries."
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Anti-Takeover Provisions in Our Bye-Laws May Keep Shareholders from Benefitting
from Someone's Attempting to Acquire Us at a Premium in a Hostile Offer
Our Bye-Laws provide for a staggered board of directors and voting
cut-backs, which are likely to have the effect of discouraging unsolicited
takeover bids from third parties or the removal of incumbent management. As a
result, it may be less likely that you will receive a premium price for your
shares in an unsolicited takeover of our company by another party. Our Bye-Laws
provide that shareholders' voting rights with respect to our common shares and
any other voting securities directly or indirectly beneficially or
constructively owned by any person, other than John C Head III and persons
deemed to own our common shares with him for purposes of the Internal Revenue
Code of 1986, will be limited in total to 9.9% of the voting power of our
company. Voting rights for all shares deemed held by a person in excess of the
9.9% limitation will be reallocated pro rata to the other holders of our common
shares, subject only to the further limitation that no shareholder to whom
additional voting rights are allocated, other than John C Head III and
individuals and entities affiliated with him, may exceed the 9.9% limitation as
a result of the reallocation. In addition, our Class B warrants, which normally
will vest over a period of five years ending in December 2002 based upon whether
the price of our stock outperforms the Wilshire 5000 Index, will completely vest
upon the occurrence of a change in control.
Conflicts of Interest Might Prevent Us From Pursuing Desirable Investment
and Business Opportunities
Head & Company, which is controlled by John C Head III, the Chairman of
our Board of Directors, makes investments through its affiliates in insurance
and reinsurance companies and companies providing services to the insurance
industry. As a result, conflicts of interest could arise with respect to
business opportunities that could be advantageous to Head & Company, on the one
hand, and our company, on the other hand. Transactions involving an actual or
potential conflict of interest must be approved by a majority vote of the
disinterested members of our board of directors, but this process cannot
guarantee that we will pursue all advantageous transactions that we would
otherwise pursue in the absence of a conflict.
We may compete with affiliates of Head & Company on personal and special
risk reinsurance programs for the same prospective clients, in which case we
will conduct our underwriting and pricing analyses independently. Because of
this independence, we believe that competition of this kind should not adversely
affect us. We also have an agreement with Head Asset Management L.L.C., an
affiliate of John C Head, relating to the provision of investment management
services, for which we pay fees to Head Asset Management.
If Shares Whose Sale is Restricted Are Sold Quickly After the Restrictions
Lapse, That May Drive Down the Trading Price of Our Shares
If holders of shares of our stock whose sale is currently restricted sell
shares rapidly after they become eligible to do so, the extra supply of shares
available on the market may drive down the market price of our shares.
On the date of this prospectus, our parent company has 13,915,799 common
shares outstanding. In addition, it has immediately exercisable Class A
warrants, which will expire in December 2007, outstanding to purchase 1,381,200
common shares at a price of $20 a share, all of which were issued in connection
with our public offering in December 1997. An additional 1,381,200 Class B
warrants, which will also expire in December 2007, are outstanding, of which
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276,240 are vested and exercisable. Each vested Class B warrant carries the
right to purchase a common share at a price of $20 a share until September 1,
2001 and of $18.50 after that until its expiration. The vesting of the remainder
of the Class B warrants depends on whether our stock outperforms the Wilshire
5,000 index for a defined period ending in December 2002
Except for shares and warrants held by Wolfgang Wand, our chief executive
officer, Steven Debrovner, our chief underwriter and marketing officer, and John
C Head III, our chairman, his wife, Madie Ivy, and an investment partnership
controlled by the two of them, all outstanding common shares, Class A warrants
and vested Class B warrants may be immediately sold by their holders, without
restrictions. Messrs. Wand, Debrovner, and Head and Ms. Ivy, as well as HMI
Partners, L.P., which Mr. Head and Ms. Ivy control, are not permitted to sell
the shares they acquired in connection with our public offering until December
1999, unless the underwriters in the public offering waive that restriction.
This can be illustrated as follows:
<TABLE>
<CAPTION>
Restricted outstanding
common shares and
restricted shares that may be Percentage of all outstanding
sold upon exercise of common shares plus Class A
Total of outstanding shares Class A and vested Class B and vested Class B Warrants
plus Class A Warrants and Warrants that become freely that become freely salable in
vested Class B Warrants salable in December 1999 December 1999
- ------------------------------------ ----------------------------------- -----------------------------------
<S> <C> <C>
15,581,239 2,285,293 14.7%
</TABLE>
Difficulties in Service of Process and Enforcement of Judgments Might Prevent
Shareholders From Being Able to Bring Lawsuits and Enforce Claims
It may be difficult for you, if you believe you have legal claims against
our company or our officers or directors, to (1) effect service of process
within the United States on directors and officers who reside outside the United
States or (2) recover in foreign courts against us or those directors and
officers on judgments of United States courts that are predicated upon civil
liabilities under U.S. federal securities laws. The majority of our officers and
directors are residents of jurisdictions outside the United States, and all or a
substantial portion of our assets and their assets are or may be located in
jurisdictions outside the United States. We have irrevocably agreed that we may
be served with process in New York, New York with respect to actions based on
the offer and sale of our common shares that we are making here, but that
submission does not extend to collection of judgments. See "Enforceability of
Civil Liabilities."
Our Holding Company Structure May Prevent Assets Held by Our Subsidiaries
From Being Used by Our Parent Company to Pay Expenses or Dividends
Because of our holding company structure, the assets shown as
shareholders' equity, as well as our income, that are reported on our
consolidated financial statements may not actually be available to pay the
expenses of our holding company or to fund payments to shareholders. Our holding
company has no operations and is not committed to holding significant assets
other than its ownership of the capital stock of its subsidiaries, although it
may do so from time to time. The subsidiaries will make money available to the
holding company primarily through the payment of dividends. Our insurance
subsidiaries, which hold most of our assets, are subject to insurance
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regulations that can restrict their ability to pay dividends in order to protect
the customers that they reinsure.
Year 2000 Compatibility of Our Systems and Insurance of Year 2000 Related Losses
The Year 2000 issue may affect us through the disruption of the processing
of business and general corporate transactions, both at our company and between
us and other businesses with which we interact, and through the assertion of
claims that costs related to the Year 2000 issue are covered under insurance in
respect of which we have a reinsurance obligation.
Background
A significant percentage of the software that runs most computers relies
on two-digit date codes to perform a number of computation and decision-making
functions. These programs may fail from an inability to interpret date codes
properly, misreading two-digit codes (e.g., "00" or "11") as dates in the 20th
century (e.g., 1900 or 1911) instead of the 21st century (in these examples,
2000 or 2011). Among many other possibilities, insurance policies with a January
1, 2000 or later expiration date could be affected by a Year 2000 malfunction.
Operational Risk
We believe that our Year 2000 program, anticipated to be completed no
later than June 30, 1999, will result in our proprietary operating systems,
application software programs and computer hardware being Year 2000 compliant in
all material respects, though there can be no complete assurance in that regard.
Although we do not rely on computer-dependent transactions to the same extent as
many other businesses, if our internal processing environment cannot be made
Year 2000- compliant, or if any of our significant business partners or service
providers or other business entities experience serious Year 2000 problems, we
might experience disruption in our business. That disruption, among other
things, could conceivably
o force us to compile information and process transactions manually;
o if compliance problems persisted, impair our ability to receive
premiums from and make claim payments to the companies that we
reinsure;
o impair our ability to obtain information about our investments; or
o impair the value of our fixed maturity and equity investments, if the
entities in which those investments were made have substantial Year
2000 costs, liabilities or disruptions.
Any or all of the types of possible disruptions resulting from this kind of
"worst case scenario" could materially increase the cost of doing business,
could impair our ability to make required regulatory filings and could
materially affect our results of operations, liquidity or financial condition.
However, based upon current information, we do not expect worst case scenarios
to occur and do not expect material disruptions to our business.
Insurance Risks
Although we have not received any claims made under policies for which we
have reinsurance obligations related to business losses caused by Year 2000
malfunctions or costs incurred in
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connection with prevention or correction of Year 2000 problems, it is
conceivable that claims of that kind could be made. Published estimates of Year
2000 business losses and costs are in the many billions of dollars. We are
working with the companies that we reinsure to attempt to determine whether any
prospective or existing underwritten business carries potential Year 2000
exposures. Nevertheless, we cannot be certain that Year 2000 related claims will
not have a material adverse effect on our results of operations.
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Neither the Registrar of Companies of Bermuda or the Bermuda Monetary
Authority have recommended the common shares being offered by this document.
Furthermore, these authorities have not confirmed that this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus may not be distributed to any person in the United Kingdom
unless that person is a qualifying institution or corporation or other person
within article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1986 of the United Kingdom. The person must
also be either a qualifying securities professional within regulation 7(2)(a) of
the Public Offers of Securities Regulations 1995 of the United Kingdom or
personally selected by or on behalf of ESG Re Limited.
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We have not undertaken any action to permit a public offering of the
common shares covered by this document outside the United States or to permit
the possession or distribution of this prospectus outside the United States.
Persons outside the United States who come into possession of this prospectus
must inform themselves about and observe any restrictions relating to the
offering of our common shares and the distribution of this prospectus outside of
the United States.
---------------------------
FORWARD-LOOKING INFORMATION
Information both included and incorporated by reference in this prospectus
may contain forward-looking statements within the meaning of Section 27A of the
U.S. Securities Act of 1933, and Section 21E of the U.S. Securities Exchange Act
of 1934. Such information may involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
our company to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. Forward-
looking statements, which are based on assumptions and describe our future
plans, strategies and expectations are generally identifiable by use of the
words "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative thereof or other variations thereon or
comparable terminology. Factors which could have a material adverse effect on
the operations and future prospects of our company include, but are not limited
to, changes in: (1) the frequency and severity of insured loss events, including
catastrophes, (2) mortality and morbidity levels, (3) persistency levels, (4)
prevailing levels of interest rates, (5) currency exchange rates and (6) changes
in laws. These and other factors are discussed in "Risk Factors" above, and
elsewhere in this prospectus. These risks and uncertainties should be considered
in evaluating any forward- looking statements contained or incorporated by
reference in this prospectus.
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<PAGE>
THE PLAN
The following summary and questions and answers explain and constitute the
plan. Shareholders who do not participate in the plan will continue to receive
cash distributions, as declared and paid in the usual manner.
Summary of Plan
General
Our plan provides our shareholders and interested new investors with a
convenient and attractive method of investing cash distributions and optional
cash payments in additional common shares without the payment of any brokerage
commission or service charge.
Depending on the availability of common shares registered for issuance
under the plan, there is no total maximum number of shares that can be issued
pursuant to the reinvestment of distributions There are, however, limitations on
the amount of optional cash payments that may be made, unless we waive those
limitations as described below. As of the date hereof, 2,000,000 of our common
shares have been registered and are available for sale under the plan.
Price of shares purchased under the plan
The price of our common shares to plan participants will be: (1) the
average price of our common shares on the Nasdaq National Market on the
corresponding investment date or (2) the average of the prices State Street Bank
and Trust Company, the plan administrator, pays for the shares it purchases with
(a) reinvested distributions for the related quarter and/or (b) optional cash
payments for the related month.
Cash investments
Generally
In general, in order to participate in the optional cash payment plan,
participants must invest at least $50 per month and no more than $12,500 per
month. Participants may invest in the plan periodically and are not required to
invest on a regular monthly basis.
Waivers and discounts
Participants may make optional cash payments in excess of the $12,500 per
month only upon our receipt and acceptance of a completed Request for Waiver
form as described in Question 20. Purchases in the waiver program may reflect a
discount between 0% and 5% from the price otherwise payable for our common
shares, which we will establish in our sole discretion. If we accept and approve
a participant's waiver request for a given month, that participant will receive
a discount, if available for that month, on the full amount of his or her
investment. Please note that any discount may be discontinued at our discretion
after a review of current market conditions, the level of plan participation and
our current and projected capital needs.
We expect to grant requests for waiver to financial intermediaries,
including brokers and dealers, and perhaps to other participants. Grants of
requests for waiver will be made in our sole discretion based on a variety of
factors, including those described in Question 20. To the extent that
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<PAGE>
we grant requests for waiver, a greater proportion of our common shares may be
issued under the optional cash payment feature of the plan as opposed to the
distribution reinvestment feature of the plan.
Minimum share price
We may also establish a minimum price for a given month that will apply to
shares purchased under the waiver program. Participants may contact our Investor
Relations Department at 353-1- 675-0264 to find out whether we have established
a minimum price. The minimum share price will be an amount that our average
share price on the Nasdaq National Market must exceed before plan participants
may invest optional cash payments in excess of $12,500 per month. There will be
no minimum share price applicable to optional cash payments that do not exceed
$12,500 per month or the reinvestment of distributions in additional common
shares.
Pricing period
For optional cash payments, we will establish on a monthly basis a ten-day
pricing period to determine (1) the date of investment of those payments and (2)
the price that plan participants will pay for our common shares. We expect the
pricing period to be the period beginning on the fifth trading day of each month
and ending at the close of the tenth consecutive trading day after that date.
For optional cash payments by an investor whose investments exceed $12,500 in a
month, and only for this type of an investor, for each business day on the
Nasdaq National Market of the related ten-day pricing period on which the
minimum share price discussed above is not satisfied, one-tenth of a
participant's optional cash payment will be returned without interest. In
addition, participants which are denied a request for waiver will be given the
option as to whether they wish to receive the full amount of their money back or
to invest up to the $12,500 monthly limit. If participants make optional cash
payments of less than $50 per month, we may return their investments to them
without interest.
No interest paid on cash held pending investment
No interest will be paid on cash distributions or optional cash payments
pending investment or reinvestment under the terms of the plan. As a result, it
normally will be in the best interest of a participant to defer optional cash
payments until shortly before commencement of a ten-day pricing period.
Payment of fees upon resale of shares
Although a participant will not pay brokerage fees to purchase shares
under the plan, he or she will have to pay a nominal fee per transaction to
State Street, a brokerage commission and any applicable share transfer taxes if
State Street resells common shares held in a participant's plan account at the
request of a participant.
Receipt of forms and instructions
As discussed below, we will establish a record date or deadline each month
for participating in the plan. All forms and appropriate instructions must be
received by State Street not later than the applicable record date or your cash
distributions and/or optional cash payments will not be reinvested or invested
until the following investment date.
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Automatic modification, suspension or termination
We reserve the right to modify, suspend or terminate participation in the
plan by otherwise eligible holders of our common shares or interested investors
in order to eliminate practices which are, in the our sole discretion, not
consistent with the purposes or operation of the plan or which adversely affect
the price of our common shares.
Purpose
1. What is the purpose of the plan?
The primary purpose of the plan is to provide eligible holders of our
common shares and interested new investors with a convenient and simple method
of increasing their investment in our company by (1) investing cash
distributions in additional common shares and (2) investing optional cash
payments in additional common shares, in either case without the payment of any
brokerage commission or service charge. See Question 7 for a description of the
holders who are eligible to participate in the plan. We may also use the plan to
raise additional capital through the sale each month of a portion of the common
shares available for issuance under the plan to current holders and interested
new investors, including brokers or dealers. Persons who make purchases under
the plan in connection with a distribution of our common shares may be deemed to
be underwriters under the federal securities laws.
2. Are there any restrictions on who will be permitted to participate in
the plan?
The plan is intended for the benefit of investors in our company and not
for individuals or investors who engage in transactions that may cause
aberrations in the price or trading volume of our common shares. From time to
time, financial intermediaries may engage in positioning transactions in order
to benefit from the discount from the market price of our common shares acquired
through optional cash payments under the plan. Transactions of that type may
cause fluctuations in the price or trading volume of our common shares. We
reserve the right to modify, suspend or terminate participation in the plan by
otherwise eligible holders of our common shares or interested new investors in
order to eliminate practices that are, in our sole discretion, not consistent
with the purposes or operation of the plan or that adversely affect the price of
our common shares.
Options Available to Participants
3. What options are available to enrolled participants?
Eligible holders of our common shares may elect to have the cash
distributions that are paid on all or a portion of their common shares
automatically reinvested in additional common shares. Cash distributions are
paid on our common shares when and as declared by our board of directors.
Depending on the availability of common shares registered for issuance under the
plan, there is no minimum limitation on the amount of distributions a
participant may reinvest under the distribution reinvestment feature of the
plan.
Each month plan participants may also elect to invest optional cash
payments in additional common shares, subject to a minimum per month purchase
limit of $50 and a maximum per month purchase limit of $12,500, which we may
waive. Participants may make optional cash payments each month even if
distributions on their common shares are not being reinvested and whether or not
a distribution has been declared.
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Advantages and Disadvantages
4. What are the advantages and disadvantages of the plan?
Advantages:
o The plan provides participants with the opportunity to reinvest cash
distributions paid on all or a portion of their common shares in additional
common shares without payment of any brokerage commission or service charge
on common shares purchased directly from our company or in the open market.
o The plan provides participants with the opportunity to make monthly
investments of optional cash payments, subject to minimum and maximum
amounts, for the purchase of additional common shares without the payment
of any brokerage commission or service charge on common shares purchased
directly from our company or in the open market. If we grant requests for
waiver for cash purchases in excess of the $12,500 per month limit,
purchases by investors participating in that program may be made at a
discount to the market price of our common shares at our discretion.
o All cash distributions paid on participants' common shares can be
fully invested in additional common shares because the plan permits
fractional shares to be credited to plan accounts. Subsequent distributions
on those fractional shares, as well as on whole shares, will also be
reinvested in additional shares, which will be credited to plan accounts.
o The administrator of the plan, State Street Bank and Trust Company,
at no charge to participants, provides for the safekeeping of shares
credited to each plan account.
o Periodic statements reflecting all current activity, including share
purchases and latest plan account balances, simplify participants' record
keeping. See Question 24 for information concerning reports to
participants.
Disadvantages:
o Neither State Street nor our company will pay any interest on
distributions or optional cash payments held pending reinvestment or
investment. See Question 15. In addition, optional cash payments made by
participants in the waiver program may be returned to participants in the
event that the average price of our common shares on the Nasdaq National
Market during a given ten-day pricing period does not exceed a minimum
share purchase price established by us for any trading day during the
ten-day pricing period. See Question 20.
o With respect to optional cash payments, the actual number of shares
to be issued to a participant's plan account will not be determined until
after the end of the relevant ten-day pricing period. Therefore, during the
pricing period participants will not know the actual number of shares they
have purchased or the price they have paid.
o With respect to optional cash payments, the price of our common
shares to plan participants may exceed the price at which our common shares
are trading after the investment date.
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<PAGE>
o Because State Street must receive optional cash payments at least
five business days before the related ten-day pricing period, the purchases
made with those payments will be exposed to changes in market conditions
for a longer period of time than in the case of typical secondary market
transactions. By the same token, once received, a payment will be used to
make purchases under the plan unless State Street receives a written
request prior to the record date for the investment date with respect to
which the participant has delivered optional cash payments. See Question
22.
o If State Street resells common shares held in a participant's plan
account at the request of a participant, the resale will involve a nominal
fee per transaction paid to State Street, a brokerage commission and any
applicable share transfer taxes on the resales. See Questions 23 and 30.
Administration
5. Who administers the plan?
We have retained State Street to administer the plan, keep records, send
statements of account activity to each participant and perform other duties
relating to the plan. Shares purchased under the plan and held by State Street
will be registered in State Street's name or the name of its nominee for the
benefit of the participants. In the event that State Street resigns or otherwise
ceases to act as plan administrator, we will appoint a new plan administrator.
State Street also acts as distribution disbursing agent, transfer agent and
registrar for our common shares.
6. How do you contact State Street with questions about the plan or if you
wish to enroll?
All correspondence regarding the plan should be directed to:
STATE STREET BANK AND TRUST COMPANY
c/o EquiServe, L.P.
P.O. Box 8200
Boston, Massachusetts 02266-8200
TELEPHONE: (XIX) XIX-XXXX
Please mention ESG RE LIMITED and this plan in all correspondence.
Participation
For purposes of this section, responses will generally be based upon the
method by which the holder holds his or her common shares. Generally, holders
are either record owners or beneficial owners. A record owner is a holder who
owns common shares in his or her own name. A beneficial owner is a holder who
beneficially owns common shares that are registered in a name other than his or
her own name. The shares of a beneficial owner will typically be registered in
the name of a broker, bank or other nominee.
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<PAGE>
7. Who is eligible to participate?
All record owners or beneficial owners of at least one of our common shares
are eligible to participate in the plan. A record owner may participate directly
in the plan. A beneficial owner must either become a record owner by having at
least one share transferred into his or her own name or arrange with the broker,
bank or other nominee who is the record holder to participate on his or her
behalf. In addition, interested new investors may participate in the optional
cash payment feature of the plan. If a beneficial owner who desires to become a
participant encounters any difficulties in arranging his or her participation in
the plan, he or she should call our Investor Relations Department in Ireland at
353-1-675-0264.
8. How does an eligible shareholder or interested new investor
participate?
Record owners and new investors may join the plan by completing and signing
an authorization form, which is included with the plan, and returning it to
State Street. A non-postage-paid return envelope is provided for this purpose.
Authorization forms may be obtained at any time by writing to or telephoning
State Street.
To facilitate participation by beneficial owners, we have made arrangements
with State Street to reinvest distributions, on a per distribution basis, and
accept optional cash payments under the plan by brokers, banks and other
nominees on behalf of beneficial owners. Beneficial owners who wish to join the
plan must instruct their broker, bank or other nominee to complete and sign (a)
an authorization form and/or (b) a broker and nominee form, which is required to
be used for optional cash payments when a nominee holds a beneficial owner's
shares in the name of a major securities depository. The nominee will forward
the completed authorization form to its securities depository, and the
securities depository will provide State Street with the information necessary
to allow the beneficial owner to participate in the plan. If a new investor
wishes to participate through a nominee, he or she will need to follow the
procedures outlined in this paragraph.
If a plan participant submits a properly executed authorization form
without electing an investment option, the authorization form will be deemed to
indicate the intention of the participant to apply all cash distributions and
optional cash payments, if applicable, toward the purchase of additional common
shares.
9. What does the authorization form provide?
The authorization form appoints State Street as agent for a plan
participant and directs us to pay to State Street each participant's cash
distributions on all or a part of our common shares owned by the participant, as
well as on all whole and fractional common shares already held in a
participant's plan account. The authorization form directs State Street to
purchase additional common shares with a participant's distributions and
optional cash payments, if any, made by the participant. The authorization form
also directs State Street to reinvest automatically all subsequent distributions
with respect to common shares held in a participant's plan account.
Distributions will continue to be reinvested on the number of common shares
specified by a plan participant and on all common shares held in a participant's
plan account until the participant specifies otherwise by contacting State
Street or the plan is terminated.
The authorization form provides for the purchase of additional common
shares through any of the following investment options:
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<PAGE>
o If "Full Distribution Reinvestment" is elected, State Street will apply
all cash distributions on all common shares then or subsequently registered in
the participant's name, and all cash distributions on all common shares held in
the participant's plan account, together with any optional cash payments, toward
the purchase of additional common shares.
o If "Partial Distribution Reinvestment" is elected, State Street will
apply all cash distributions on only the number of common shares registered in
the participant's name and specified on the authorization form and all cash
distributions on all common shares held in the participant's plan account,
together with any optional cash payments, toward the purchase of additional
common shares. Shares subsequently held in the participant's name will not be
included if this option is chosen.
o If "Optional Cash Payments Only" is elected, the participant will
continue to receive cash distributions on common shares registered in that
participant's name, if any, in the usual manner. However, State Street will
apply all cash distributions on all common shares held in the participant's plan
account, together with any optional cash payments received from the participant,
toward the purchase of additional common shares.
If State Street receives an authorization form prior to the record date for
a distribution payment, the election to reinvest distributions will begin with
that distribution payment. If State Street receives an authorization form on or
after the record date for a distribution payment, reinvestment of distributions
will begin on the distribution payment date following the next record date.
Record dates for payment of distributions normally precede payment dates by
approximately two weeks.
10. How does a participant change his or her investment option?
Participants may change their investment options at any time by requesting
a new authorization form and returning it to State Street.
If a participant desires to opt out of the distribution reinvestment
feature of the plan when the common shares relating to distribution
reinvestments will be purchased in the open market, a participant must notify
State Street no later than the record date for the related distribution payment
date.
11. What does the broker and nominee form provide?
The broker and nominee form provides the only means by which a broker, bank
or other nominee holding shares of a beneficial owner in the name of a major
securities depository may invest optional cash payments on behalf of the
beneficial owner. A broker and nominee form must be delivered to State Street
each time a nominee transmits optional cash payments on behalf of a beneficial
owner. Broker and nominee forms will be furnished at any time by contacting our
Investor Relations Department at 353-1-675-0264.
Prior to submitting a broker and nominee form, the nominee for a beneficial
owner must submit a completed authorization form on behalf of the beneficial
owner.
The broker and nominee form and appropriate instructions must be received
by State Street not later than the applicable record date or the optional cash
payment will not be invested until the following investment date.
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<PAGE>
12. Is partial participation possible under the plan?
Yes. A record owner or the nominee for a beneficial owner may designate on
the authorization form a number of shares for which distributions are to be
reinvested. Distributions will then be reinvested only on the number of shares
specified, and the record owner or beneficial owner, as the case may be, will
continue to receive cash distributions on the remainder of the shares.
13. When may an eligible shareholder or interested new investor join the
plan?
A record owner or beneficial owner or interested new investor may join the
plan at any time. Once in the plan, a participant remains in the plan until he
or she withdraws from the plan, we terminate his or her participation in the
plan or we terminate the plan.
14. When will distributions be reinvested and/or optional cash payments be
invested under the plan?
Purchases of common shares will be made on the applicable "investment date"
as follows:
<TABLE>
<CAPTION>
Method of Participation Investment Date Record Date
- ----------------------- --------------- -----------
<S> <C> <C>
Quarterly distribution reinvestment
Direct company issuance...................... Distribution payment date The record date our board
set by our board of directors sets for a distribution
Open market purchases........................ No later than ten business Same as above
days after the distribution
payment date
Monthly optional cash payments
Direct company issuance
$12,500 or less......................... Last day of the monthly ten- One business day before
day pricing period the related ten-day pricing
period
Greater than $12,500.................... Each day on which the Same as above
Nasdaq National Market is
open in a ten-day pricing
period*
Open market purchases........................ A date not more than 30 Same as above
days after the last business
day before the applicable
ten-day pricing period
</TABLE>
- ---------------------------
* On each day during the ten-day period, one-tenth of a participant's
optional cash payments will be invested.
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See Schedule A for a list of the expected pricing period commencement dates
and conclusion dates. We expect the ten-day pricing period to be the period
beginning on the fifth trading day of each month and ending at the close of the
tenth consecutive trading day thereafter.
State Street will allocate and credit shares to participants' accounts as
follows: (1) shares purchased from our company will be allocated and credited as
of the appropriate investment date; and (2) shares purchased in open market
transactions will be allocated and credited as of the date on which State Street
completes the purchases of the aggregate number of shares to be purchased on
behalf of all participants with distributions to be reinvested or optional cash
payments, as the case may be, during the month.
Purchases and Prices of Shares
15. What will be the price to participants of shares purchased under the
plan?
Distribution Reinvestment
o For common shares acquired directly from us, the price per share will
be the average of the high and low sales prices of our common shares on the
Nasdaq National Market on the corresponding investment date, or if no trading
occurs in our shares on the investment date, the average of the high and low
sales prices for the first trading day immediately before the investment date
for which trades are reported.
o For common shares acquired in open market purchases, the price per
share will be the weighted average of the actual prices State Street pays for
all of the common shares it purchases with all participants' reinvested
distributions for the related quarter.
Optional Cash Payments
o For common shares acquired directly from us, the price per share will
be the average of the daily high and low sale prices of our common shares as
reported on the Nasdaq National Market for the trading day relating to each
corresponding investment date or, if no trading occurs in our shares on this
trading day, for the trading day immediately preceding the investment date for
which trades are reported, less any applicable discount (in the case of
participants in the waiver program). A "trading day" means a day on which trades
in our shares are reported on the Nasdaq National Market.
o For common shares acquired through open market purchases, the price
per share will be the weighted average of the actual prices State Street pays
for all of the common shares it purchases with all participants' optional cash
payments for the related month.
Discount
Each month, at least three business days before the applicable record date,
we may establish a discount from the market price applicable during the
corresponding ten-day pricing period to optional cash payments made by
participants in the waiver program. We will notify State Street of any discount
we establish. The discount may be between 0% and 5% of the price plan
participants would otherwise pay for our common shares and may vary each month.
Once established, the discount will apply uniformly to all optional cash
payments made by participants during that month. We will establish any discount
in our sole discretion after a review of current market conditions, the
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level of participation in the plan and our current and projected capital needs.
The discount feature applies only to the issuance of common shares purchased
directly from us with optional cash payments under an accepted waiver. It does
not apply to open market purchases made with optional cash payments or the
reinvestment of distributions.
Neither our company nor State Street will be required to provide any
written notice to participants as to any discount, but current information
regarding the discount applicable to the next ten-day pricing period may be
obtained by contacting us at 353-1-675-0264. Setting a discount for an
investment date will not affect the setting of a discount for any subsequent
investment date.
16. Will interest be paid on cash held pending investment in the plan?
No interest will be paid on cash distributions or optional cash payments
pending investment or reinvestment under the terms of the plan. Since no
interest is paid on cash held by State Street, it normally will be in the best
interest of a participant to defer optional cash payments until shortly before
commencement of the pricing period.
17. How will State Street purchase shares on the open market?
When State Street makes open market purchases, those purchases may be made
on any securities exchange where the shares are traded, in the over-the-counter
market or by negotiated transactions. The purchases may also be made on terms
with respect to price, delivery and other matters as agreed to by State Street.
Neither our company nor any participant will have any authorization or
power to direct the time or price at which shares will be purchased or the
selection of the broker or dealer through or from whom State Street will make
purchases. However, when State Street makes open market purchases, it will use
its best efforts to purchase the shares at the lowest possible price.
18. How will the number of shares purchased for a participant be
determined?
A participant's plan account will be credited with the number of whole and
fractional shares equal to the total amount to be invested on behalf of the
participant divided by the purchase price per share as calculated pursuant to
the methods described above. Depending on to the availability of common shares
registered for issuance under the plan, there is no total maximum number of
shares available for issuance under the plan.
19. What is the source of common shares purchased under the plan?
Plan shares will be purchased either directly from us or on the open
market, or by a combination of these methods. We will determine the source of
shares to be purchased under the plan at least three business days before the
relevant record date, and will notify State Street of our determination. Neither
our company nor State Street will be required to provide any written notice to
participants as to the source of shares to be purchased under the plan. However,
participants may obtain current information regarding the source of shares by
contacting our Investor Relations Department at the number listed above.
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<PAGE>
20. What limitations apply to optional cash payments?
General
Each optional cash payment is subject to a minimum per month purchase limit
of $50 and a maximum per month purchase limit of $12,500. For purposes of these
limitations, we will aggregate all plan accounts under the common control or
management of a participant, which we will determine at our sole discretion.
Generally, optional cash payments of less than $50 and that portion of any
optional cash payment in excess of $12,500, unless we waive the limit, will be
returned to participants without interest at the end of the relevant ten-day
pricing period.*
Requests for Waiver
A participant may make optional cash payments in excess of $12,500 only
upon our acceptance of a completed request for waiver form from the participant
and receipt of the waiver form by State Street. We will notify participants of
our acceptance or denial of their requests. There is no preestablished maximum
limit applicable to optional cash payments that may be made following an
accepted request for waiver.
During any month in which we operate the plan, our company and State Street
must receive and elect to accept a request for waiver form no later than the
record date. Request for waiver forms will be furnished at any time by writing
to or telephoning State Street. Waivers will be accepted only with respect to
actual record participants that beneficially own their common shares and not for
the benefit of beneficial owners or multiple participants whose stock is held in
the name of other record holders. Participants interested in obtaining further
information about a request for waiver should contact our company at the number
listed above.
We will consider waivers on the basis of a variety of factors, which may
include:
o our current and projected capital needs and the alternatives
available to us to meet those needs,
o prevailing market prices for our common shares,
o general economic and market conditions,
o expected aberrations in the price or trading volume of our common
shares,
o the potential disruption of the price of our common shares by a
financial intermediary,
o the number of our common shares held by the participant
submitting the waiver request,
o the past actions of a participant under the plan,
o the aggregate amount of optional cash payments for which waivers
have been submitted, and the administrative constraints
associated with granting waivers.
Grants of waivers will be made in our absolute discretion.
- --------
* Same question.
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<PAGE>
Minimum Share Price
Unless we waive our right to do so, we may establish for any ten-day
pricing period a minimum share price applicable only to the investment of
optional cash payments by participants in the waiver program. We would establish
a minimum share price in order to provide us with the ability to set a minimum
price at which common shares will be purchased directly from us under the plan
by virtue of waiver requests. We will, at least three business days before each
record date, determine whether to establish a minimum share price and, if
established, its amount and so notify State Street. This determination will be
made at our discretion after a review of current market conditions, the level of
participation in the plan and our current and projected capital needs.
The minimum share price for optional cash payments made pursuant to
requests for waiver will be a stated dollar amount that the average of the high
and low sale prices of our common shares on the Nasdaq National Market for each
trading day of the relevant ten-day pricing period must equal or exceed. In the
event that a minimum share price is not satisfied for a trading day in the
ten-day pricing period, then that trading day will be excluded from that ten-day
pricing period and no investment will occur on the corresponding investment
date.
For each trading day on which the minimum share price is not satisfied,
1/10 of each participant's optional cash payment will be returned to the
participant by check, without interest, after the end of the applicable ten-day
pricing period. Thus, for example, if the minimum price is not satisfied for
three of the ten trading days in a ten-day pricing period, 3/10 of each
participant's optional cash payment will be returned to the participant. State
Street expects to mail checks within five to ten business days after the end of
the applicable ten-day pricing period. This return procedure will only apply
when shares are purchased directly from us for optional cash payments made by
virtue of requests for waiver and we have set a minimum price for the relevant
pricing period.
For any ten-day pricing period, we may waive our right to set a minimum
share price. Participants may ascertain whether the minimum price applicable to
a given pricing period has been set or waived, as applicable, by contacting our
company at the number listed above.
For a list of expected dates by which minimum share prices will be set in
1999 and 2000, see Schedule A.
The minimum share price concept and return procedure discussed above apply
only to optional cash payments made by virtue of requests for waiver when our
common shares are to be purchased from us on the applicable investment date. All
other optional cash payments will be made at the price otherwise payable by plan
participants for our common shares without regard to any minimum share price.
21. When must State Street receive optional cash payments?
Each month State Street will apply any optional cash payment for which good
funds are timely received to the purchase of our common shares for the account
of the participant during the next ten-day pricing period. In order for funds to
be invested during the next ten-day pricing period, State Street must have
received a check, money order or wire transfer by the end of the business day
immediately before the first trading day of the ensuing ten-day pricing period.
Any check, money order or wire transfer must have cleared on or before the first
investment date in the ten-day pricing period. Participants may use wire
transfers only if approved verbally in advance by State
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Street. State Street will accept checks and money orders subject to timely
collection as good funds and verification of compliance with the terms of the
plan. Checks or money orders should be made payable to State Street and
submitted together with, initially, the authorization form or, subsequently, the
form for additional investments attached to participant's statements. Checks
returned for any reason will not be resubmitted for collection.
In order for payments to be invested on the first investment date in a
ten-day pricing period, in addition to the receipt of good funds by the first
investment date in a ten-day pricing period, State Street must have received an
authorization form or a broker and nominee form, as appropriate, prior to or as
of the same date.
22. May optional cash payments be returned to participants?
If State Street receives a telephonic or written request at least five
business days before the next record date, those optional cash payments will be
returned to the participant as soon as practicable. If State Street receives
such requests less than five business days before the applicable record date, a
participant's optional cash payment will not be returned but instead will be
invested on the next related investment date.
23. Are there any expenses to participants in connection with their
participation under the plan?
Participants will incur no brokerage commissions or service charges in
connection with the reinvestment of distributions or optional cash payments made
to acquire our common shares. In addition, we will pay all other costs of
administration of the plan. However, participants that request that State Street
sell all or any portion of their shares must pay a nominal fee of $15 per
transaction to State Street, any related brokerage commissions, which are not
expected to exceed $.12 per share, and applicable share transfer taxes.
Reports to Participants
24. What kind of reports will be sent to participants in the plan?
Each participant in the plan will receive a statement of his or her account
following each purchase of additional shares. These statements are participants'
continuing record of the cost of their purchases and should be retained for
income tax purposes. In addition, participants will receive copies of other
communications sent to holders of our common shares, including our annual report
to shareholders, the notice of annual meeting and proxy statement in connection
with our annual meeting of shareholders and Internal Revenue Service information
for reporting distributions paid.
Distributions on Fractions
25. Will participants be credited with distributions on fractions of
shares?
Yes.
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Certificates for Common Shares
26. Will certificates be issued for shares purchased?
No. Common shares purchased for participants will be held in the name of
State Street or its nominee. No certificates will be issued to participants for
shares in the plan unless a participant submits a written request to State
Street or until participation in the plan is terminated. At any time, a
participant may submit a written request to State Street to send a certificate
for some or all of the whole shares credited to a participant's account. Any
remaining whole shares and any fractions of shares will remain credited to the
plan account. Certificates for fractional shares will not be issued under any
circumstances.
27. In whose name will certificates be registered when issued?
Each plan account is maintained in the name in which the related
participant's certificates were registered at the time of enrollment in the
plan. Share certificates for whole shares purchased under the plan will be
similarly registered when issued upon a participant's request. If a participant
is a beneficial owner, any request to receive certificates held in the plan
should be placed through such participant's banker, broker or other nominee.
28. May a participant pledge shares held in a plan account?
No. A participant who wishes to pledge shares credited to the participant's
plan account must first withdraw these shares from the account.
Withdrawals and Termination
29. When may participants withdraw from the plan?
A participant may withdraw from the plan with respect to all or a portion
of the shares held in his or her plan account at any time. If the request to
withdraw is received prior to a distribution record date, the request will be
processed on the day following receipt of the request by State Street.
If State Street receives the request to withdraw on or after a distribution
record date, but before a payment date, State Street, in its sole discretion,
may either pay the distribution in cash or reinvest it in shares for the
participant's account. The request for withdrawal will then be processed as
promptly as possible after the distribution payment date. All distributions
subsequent to the distribution payment date will be paid in cash unless a
shareholder re-enrolls in the plan, which may be done at any time.
Any optional cash payments that have been sent to State Street prior to a
request for withdrawal will also be invested on the next investment date unless
a participant expressly requests return of that payment in the request for
withdrawal and the request for withdrawal is received by State Street at least
two business days prior to the first day of the corresponding ten-day pricing
period.
30. How does a participant withdraw from the plan?
A participant who wishes to withdraw from the plan with respect to all or a
portion of the shares held in his or her plan account must notify State Street
in writing. Upon a participant's withdrawal from the plan or termination of the
plan by us, certificates will be issued for the appropriate number
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of whole shares credited to his or her account under the plan. A cash payment
will be made for any fraction of a share.
Upon withdrawal from the plan, a participant may also request in writing
that State Street sell all or part of the shares credited to his or her account
in the plan. State Street will sell the shares as requested within ten business
days after processing the request for withdrawal. The participant will receive
the proceeds of the sale, less a nominal fee per transaction paid to State
Street, any brokerage fees or commissions and any applicable share transfer
taxes, generally within five business days of the sale.
31. Are there any automatic termination provisions?
Participation in the plan will be terminated if State Street receives
written notice of the death or adjudicated incompetence of a participant,
together with satisfactory supporting documentation of the appointment of a
legal representative, at least five business days before the next record date
for plan participation. In the event State Street receives written notice of
death or adjudicated incompetence and any supporting documentation less than
five business days before the next record date, shares will be purchased for the
participant and participation in the plan will not terminate until after any
cash distribution or optional cash payment has been invested. Following this
investment, no additional purchase of shares will be made for the participant's
account and the participant's shares and any cash distributions paid on these
shares will be forwarded to the participant's legal representative.
We reserve the right to modify, suspend or terminate participation in the
plan by otherwise eligible holders of our common shares or interested investors
in order to eliminate practices that are, in the our sole discretion, not
consistent with the purposes or operation of the plan or which adversely affect
the price of our common shares.
Other Information
32. What happens if a participant sells or transfers all of the shares
registered in the participant's name?
If a participant disposes of all shares registered in his or her name, and
is not shown as a record owner on a distribution record date, the participant
may be terminated from the plan as of the record date and the termination
treated as though a withdrawal notice had been received prior to the record
date.
33. What happens if we declare a distribution payable in shares or declare
a share split?
Any distribution payable in shares and any additional shares we distribute
in connection with a share split in respect of shares credited to a
participant's plan account will be added to that account. Share distributions or
split shares that are attributable to shares registered in a participant's own
name and not in his or her plan account will be mailed directly to the
participant as in the case of shareholders of our company not participating in
the plan.
34. How will shares held by State Street be voted at meetings of
shareholders?
If the participant is a record owner, the participant will receive a proxy
card covering both directly held shares and shares held in the plan. If the
participant is a beneficial owner, the
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participant will receive a proxy covering shares held in the plan through his or
her broker, bank or other nominee.
If a proxy is returned properly signed and marked for voting, all the
shares covered by the proxy will be voted as marked. If a proxy is returned
properly signed but no voting instructions are given, all of the participant's
shares will be voted in accordance with the recommendations of our board of
directors, unless applicable laws require otherwise. If the proxy is not
returned, or if it is returned unexecuted or improperly executed, shares
registered in a participant's name may be voted only by the participant in
person.
35. What are the responsibilities of our company and State Street under the
plan?
Our company and State Street will not be liable in administering the plan
for any act done in good faith or required by applicable law or for any good
faith omission to act, including (1) any claim of liability arising out of the
failure to terminate a participant's account upon his or her death, (2) with
respect to the prices at which our common shares are purchased and/or the times
when these purchases are made or (3) with respect to any fluctuation in the
market value before or after the purchase or sale of our common shares.
Notwithstanding the foregoing, nothing contained in the plan limits our
liability with respect to alleged violations of federal securities laws.
Our company and State Street will be entitled to rely on completed forms
and the proof of due authority to participate in the plan, without further
responsibility of investigation or inquiry.
36. May the plan be changed or discontinued?
Yes. We may suspend, terminate or amend the plan at any time. Notice will
be sent to participants of any suspension or termination, or of any amendment
that alters the plan terms and conditions, as soon as practicable after any
action by us.
We may substitute another administrator or agent in place of State Street
at any time. Participants will be promptly informed of any substitution.
37. What are the federal income tax consequences of participation in the
plan?
The following summary describes United States Federal income tax
considerations of participation in the plan applicable to holders of our common
shares who are generally subject to United States Federal income tax. This
summary is for general information purposes only and is based on the United
States Internal Revenue Code of 1986, and Treasury regulations under and
judicial and administrative interpretations of, the Code, all as in effect on
the date of this prospectus and all of which are subject to change. The tax
treatment to a U.S. shareholder may vary depending upon his particular
situation. Holders such as persons that are not United States persons, as well
as banks, insurance companies, tax-exempt organizations, financial institutions,
persons subject to the alternative minimum tax and broker dealers, may be
subject to special rules not discussed below. The following summary is limited
to U.S. shareholders who will hold our common shares as "capital assets" within
the meaning of Section 1221 of the Internal Revenue Code. The discussion below
does not address the effect of any state, local or foreign tax law on a U.S.
shareholder.
As used here, the term "United States" or "U.S." person means (1) an
individual who is a citizen or resident of the United States, (2) a partnership,
corporation or other entity created or organized in or under the laws of the
United States or any state thereof, (3) an estate, the income of
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which is subject to U.S. Federal income tax, regardless of source or (4) a trust
if (a) a court within the United States is able to exercise primary supervision
over the administration of the trust and (b) one or more United States persons
have the authority to control all substantial decisions of the trust.
For United States Federal income tax purposes, a U.S. plan participant will
be treated as receiving a distribution equal to the number of our common shares
purchased with his or her reinvested dividends multiplied by the fair market
value of our common shares on the date they were purchased. For purposes of this
paragraph, the "fair market value" of our common shares will be the average of
the high and low sales prices for that date, as reported by the exchange on
which the common shares are principally traded; if our common shares do not
trade on that date, the fair market value will be the weighted average of the
mean of the high and low sales prices on the nearest trading dates before and
after the date of purchase. This amount may differ from the price used to
determine the number of shares a shareholder will acquire under the plan.
A U.S. shareholder who does not participate in the plan, and who continues
to receive cash dividends, will be treated as receiving a distribution equal to
the amount of cash received. In either case, subject to the discussion below
under "Certain Tax Considerations--Taxation of Shareholders--United States
Taxation of U.S. Shareholders and Non-U.S. Shareholders," the distribution will
be includible in the U.S. shareholder's income as a taxable dividend to the
extent of our company's then current and accumulated earnings and profits as
determined for United States Federal income tax purposes. Any cash dividend also
will not be eligible for the dividends received deduction available to
corporations.
The tax basis to a U.S. participant in each share or fraction of a share
acquired through the dividend reinvestment aspect of the plan will equal the
fair market value of that share or fraction of a share on the date it was
purchased. The holding period will begin on the day following the date of
purchase.
Subject to the discussion below under "Certain Tax Considerations--Taxation
of Shareholders--United States Taxation of U.S. Shareholders and Non-U.S.
Shareholders," the sale of our common shares will generally result in the
recognition of gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted basis in such common
shares. For individuals, gain from a sale or exchange will be taxed at varying
rates depending on whether the stock sold was held for one year or less, more
than one year but not more than eighteen months, or more than eighteen months.
For U.S. participants who are current shareholders of our company, it is
not entirely clear under current law how purchases of common shares from us
pursuant to the optional cash payment feature of the plan should be treated for
federal income tax purposes. We currently intend to take the position for tax
reporting purposes either that no distribution from us has occurred in
connection with optional cash purchases, or, alternatively, that any such
distribution is not taxable as a dividend. It is possible, however, that the
Internal Revenue Service might contend that U.S. participants who are our
shareholders should be treated for federal income tax purposes as having
received a distribution from us in an amount equal to the excess, if any, of the
fair market value (determined as the average of the high and low trading prices)
of our common shares on the investment date less the amount of the optional cash
payment, and that all or a portion of that distribution should be treated as a
taxable dividend. In the future, we may, in light of subsequent developments in
the tax laws or for other reasons, treat as a taxable dividend all, or a
portion, of the excess of the fair market value of our common shares credited to
a participant's plan account on
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the investment date less the amount of the optional cash payment. U.S.
participants are encouraged to consult with their own tax advisors with regard
to the tax treatment of optional cash purchases.
38. How are income tax withholding provisions applied to participants in
the plan?
If a participant fails to provide federal income tax certifications in the
manner required by law, distributions on common shares proceeds from the sale of
fractional shares and proceeds from the sale of common shares held for a
participant's account will be subject to federal income tax withholding at the
rate of 31%. If withholding is required for any reason, the appropriate amount
of tax will be withheld. Generally institutional shareholders, such as most
corporations, are, however, exempt from the above withholding requirements.
If a participant is a foreign shareholder whose distributions are subject
to federal income tax withholding at the 31% rate (or a lower treaty rate), the
appropriate amount will be withheld and the balance in common shares will be
credited to that participant's account.
39. Who bears the risk of market fluctuations in our common shares?
A participant's investment in shares held in the plan account is no
different from his or her investment in directly held shares. The participant
bears the risk of any loss and enjoys the benefits of any gain from market price
changes with respect to his or her plan shares.
40. Who has the right and the responsibility to interpret the plan?
We will determine any question of interpretation arising under the plan,
and any determination we make will be final. We may adopt any condition to
participation in the plan. Its operation will be governed by the laws of
Bermuda.
41. Is there any way I could lose my rights to shares held in the plan?
Common shares credited to a participant's plan are subject to escheat to
the state in which the participant resides in the event that the shares are
deemed, under that state's laws, to have been abandoned by the participant.
Participants, therefore, should notify State Street promptly in writing of any
change of address. Account statements and other communications to participants
will be addressed to them at the last address of record that they provide to
State Street.
42. Are there any other rights available under the plan?
Participants will have no right to draw checks or drafts against their plan
accounts or to instruct State Street with respect to any common shares or cash
held by State Street except as expressly provided in this prospectus.
CERTAIN TAX CONSIDERATIONS
The following summary of the taxation of our companies, ES Bermuda, ESG
Germany, ES Ireland, ES North America (our Canadian subsidiary), ESG UK and
Accent Europe and the taxation of our shareholders is based upon current law.
Legislative, judicial or administrative changes may be forthcoming that could
affect this summary. Statements made below as to Bermuda law set forth the
opinion of Appleby, Spurling & Kempe, our Bermuda counsel. Statements made below
as to
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law set forth the opinion of Paul, Weiss, Rifkind, Wharton and Garrison, our
United States counsel. Statements made below as to German taxation set forth the
opinion of Deloitte & Touche GmbH. Statements made below as to United Kingdom
taxation set forth the opinion of Deloitte & Touche, our United Kingdom
advisors. Statements made below as to Canadian taxation set forth the opinion of
Deloitte & Touche, our Canadian advisors. Statements made below as to Irish law
set forth the opinion of Matheson Ormsby Prentice, our Irish counsel.
Taxation of Our Company and its Subsidiaries
Bermuda
Our company and ES Bermuda have each received from the Minister of Finance
of Bermuda a written undertaking under the Exempted Undertakings Tax Protection
Act, 1966 (as amended) of Bermuda, to the effect that in the event of there
being enacted in Bermuda any legislation imposing tax computed on profits or
income, or computed on any capital asset, gain or appreciation, or any tax in
the nature of estate duty or inheritance tax, then the imposition of any such
tax shall not be applicable to our company and ES Bermuda or to any of our
operations or those of ES Bermuda's or the shares, debentures or other
obligations of our company and ES Bermuda until March 28, 2016. These assurances
are qualified by the proviso that they are not construed to prevent the
application of any tax or duty to those persons as are ordinarily resident in
Bermuda or to prevent the application of any tax payable in accordance with the
provisions of The Land Tax Act 1967 of Bermuda or otherwise payable in relation
to the land leased to us and ES Bermuda.
Each of our company and ES Bermuda is required to pay annual Bermuda
government fees and ES Bermuda, additionally, is required to pay insurance
registration fees as an insurer under the Insurance Act 1978. Under current
rates, we pay a fixed fee of BD$15,900 and ES Bermuda pays a total of BD$18,400
per year (which includes the annual Bermuda government fee and the annual
insurance registration fee). Currently there is no Bermuda withholding tax on
dividends that ES Bermuda may pay to us.
United States
A foreign corporation is subject to taxation in the United States on its
business profits (1) if it is engaged in a trade or business in the United
States or (2), if a treaty applies, if it is so engaged through a permanent
establishment in the United States. Our company and our non-U.S. subsidiaries
intend to operate our business in a manner that will not cause us to be required
to pay U.S. income tax (other than withholding tax as described below) under one
or both of these tests. However, because there is considerable uncertainty as to
their application, there can be no assurances that the Internal Revenue Service
will not contend successfully that we or a subsidiary of ours is subject to
taxation in the United States.
A foreign corporation that is engaged in trade or business in the United
States, and that does not qualify for benefits under a tax treaty so that it may
apply the permanent establishment test, would be subject to U.S. income tax, as
well as the branch profits tax, on income that is treated as "effectively
connected" with the conduct of that trade or business. "Effectively connected"
income generally includes U.S. source income and, in the case of an insurance
company, underwriting and investment income from all sources to the extent the
underwriting income is attributable to the conduct of a U.S. insurance business.
A foreign corporation that is entitled to benefits under a tax treaty, but
nevertheless has a U.S. permanent establishment, is subject to U.S. income tax
on the business profits attributable to its permanent establishment. If U.S.
income tax were imposed under
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either test, taxable income would be computed in a manner generally analogous to
that applied to the income of a domestic corporation, except that a foreign
corporation can claim an allowance for deductions and credits only if it files a
U.S. income tax return on a timely basis for the applicable tax year. Currently,
the maximum federal tax rate on a corporation's effectively connected income is
35%, and the branch profits tax rate is 30% (unless reduced by a treaty
provision). The branch profits tax is imposed each year on a corporation's
effectively connected earnings and profits (with certain adjustments) that are
deemed repatriated out of the United States.
There are limitations on the applicability of the tax treaty between
Bermuda and the United States, which applies the permanent establishment test to
a company, such as ES Bermuda, that is predominantly engaged in the insurance
business. The Bermuda treaty does not, however, apply a lower withholding tax
rate to dividends and interest income or reduce the branch profits tax rate. ES
Bermuda would not be entitled to the benefits of the Bermuda treaty if (1) 50%
or more of ES Bermuda's stock were beneficially owned, directly or indirectly,
by persons other than Bermuda residents or U.S. citizens or residents or (2) ES
Bermuda's income were used in substantial part to make disproportionate
distributions to, or to meet liabilities to, persons who are not Bermuda
residents or U.S. citizens or residents. Although we can give no assurance that
ES Bermuda satisfies, or will continue to satisfy, the 50% ownership test, we
believe that these limitations on the Bermuda treaty's benefits do not apply to
ES Bermuda. However, even if the Bermuda treaty did not apply, we believe that
ES Bermuda would not be subject to U.S. taxation (other than withholding tax as
described below) on the grounds that it is not engaged in a trade or business in
the United States.
Foreign corporations not engaged in a trade or business in the United
States are nonetheless subject to U.S. income tax on certain "fixed or
determinable annual or periodic gains, profits and income" derived from sources
within the United States as enumerated in Section 881(a) of the Internal Revenue
Code of 1986 (such as dividends and certain interest on investments).
The United States also imposes an excise tax on insurance and reinsurance
premiums paid to foreign insurers or reinsurers with respect to risks located in
the United States. The rate of tax applicable to reinsurance premiums paid to ES
Bermuda and ES Ireland is 1% of gross premiums.
Ireland
In general, Irish companies must pay corporation tax on their trading
income at the rate of 28%. However, ES Ireland has been granted a certificate
that qualifies it for special relief under Section 446 of the Taxes
Consolidation Act, 1997, provided that it engages only in "relevant trading
operations". Provided the conditions attaching to the certificate are met, the
effect of Section 446 is to reduce the rate of corporation tax on income arising
from relevant trading operations to 10%. Unless it is revoked, the certificate
remains in force until December 31, 2005. ES Ireland's relevant trading
operations comprise:
(1) the provision of reinsurance facilities consisting of its
underwriting reinsurance placements that are solely in respect of risks
arising outside Ireland; and
(2) reinsurance of its own non-Irish risks with insurance and
reinsurance companies.
If ES Ireland engages in other activities that are not relevant trading
operations, to that extent its profits will be liable to Irish taxation at the
rate of 28%.
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Foreign corporations that engage in business in Ireland are subject to
Irish taxation on profits at the rate of 28%. Each of ES Bermuda, ESG Germany
(or any other of our German subsidiaries), ESG UK (or any other of our U.K.
subsidiaries) and ES North America intends to operate its business activities in
a manner that will not result in its being considered to be engaged in a trade
or business or to have a permanent establishment in Ireland under any applicable
tax treaty. However, whether or not a company is engaged in a trade or business
or has a permanent establishment in Ireland are essentially factual tests, and
there is considerable uncertainty as to the activities that will cause a foreign
corporation to be subject to tax under them. Thus, there can be no assurance
that Irish tax authorities will not successfully contend that we or our
non-Irish subsidiaries are subject to Irish tax.
Withholding Taxes. There is no withholding tax on interest payments made by
a company qualifying under Section 446 in carrying out its relevant trading
operations.
There is a withholding tax on the payment of dividends and distributions by
Irish resident companies at the standard rate of income taxation (currently
24%), subject to some exceptions that we believe should apply to us. Those
exceptions are for dividends and distributions paid to:
o companies resident in a jurisdiction outside the European Union with
which Ireland does not have a double tax treaty, if the company is
ultimately controlled by shareholders resident in a European Union
member state or in a treaty country (which includes the United States);
and
o companies that are not resident in Ireland and the principal class of
the shares of
o the company, or
o another company of which the company is a 75% subsidiary,
is substantially and regularly traded on one or more than one
recognized stock exchange in a jurisdiction in which Ireland has a
double taxation treaty (including Nasdaq, where our shares are traded)
or a European Union Member State or on another stock exchange approved
of by the Minister for Finance for this purpose.
Stamp Duty. Irish capital duty will generally arise in respect of monies
subscribed for shares in Irish limited liability companies such as ES Ireland.
The rate of duty is 1%.
The transfer of the beneficial ownership of any shares in ES Ireland will
give rise to Irish stamp duty at a rate of 1%. Stamp duty becomes payable when
the share transfer is executed. No stamp duty is chargeable on a transfer of
nominal or legal title.
No stamp duty is payable on the issue of policies of insurance which relate
to risk located outside Ireland.
Germany
ESG Germany, our German holding company, and its subsidiaries will be
subject to tax in Germany on their income. If the requirements of a fiscal unity
between ESG Germany and its other German subsidiaries are met, the income of the
subordinated companies will be directly attributed to ESG Germany.
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ESG Germany is currently subject to trade tax on its income (including the
income of our other subsidiaries attributed to it) at an effective rate of about
19%. Its remaining profit after the deduction of the trade tax is subject to
corporate income tax at a rate of 40% for retained earnings, which is reduced to
30% to the extent that its profits are distributed to ESG UK, its immediate
parent corporation. Additionally, a solidarity surcharge of 5.5% is levied on
the corporate income tax. Accordingly, the overall effective tax rate in Germany
will be approximately 54% for retained earnings and 45% for distributed
earnings. Non-deductible expenses would increase the overall effective tax
burden.
Dividends ESG Germany pays to ESG UK, our U.K. holding company and ESG
Germany's immediate parent, will be exempt from German withholding tax and
solidarity surcharge, but only if there is sufficient business purpose for the
existence of ESG UK or ESG UK carries out business activities on its own under
German tax law. We expect that a sufficient business purpose will be found,
under German tax law, because ESG UK owns all of the shares of ES North America,
European Specialty Limited and European Specialty Insurance Management Services
Limited, in addition to all of the shares of ESG Germany, and provides
management functions for these companies. If sufficient business purpose were
lacking, ESG Germany would have to withhold 25% withholding tax and a solidarity
surcharge of 5.5% on the withholding tax on dividends paid to ESG UK. The total
withholding tax burden would then be 26.375%.
ES Ireland will not be subject to tax in Germany unless it operates through
a permanent establishment in Germany. Although it is not free from doubt, we
expect that ES Germany, our German insurance company, will qualify as an
independent agent acting in the ordinary course of its business for ES Ireland
and thus will not constitute a permanent establishment. In this regard, it is
assumed that the activities of ES Germany will be structured as follows:
ES Germany will be independently capitalized at a level comparable to that
of other German reinsurers with similar levels of business and will itself
assume a considerable part of the reinsurance business that it writes. ES
Germany will have its own employees with extensive experience, knowledge and
relationships in the reinsurance industry, and decisions regarding the
underwriting business will be made in Germany by employees of ES Germany. ES
Germany will write reinsurance policies on behalf of itself, ES Ireland and to a
considerable extent also on behalf of unrelated companies. ES Ireland will not
direct the manner in which ES Germany operates, nor will it exercise any other
form of control over ES Germany's operations or guarantee the profitability of
ES Germany.
With regard to Bermuda, although not free from doubt, we believe that
structuring the activities of ES Germany as described above should also support
the opinion that ES Bermuda should not be subject to tax in Germany. The tax
position of ES Bermuda is strengthened by the fact that it has no contractual
relationship with ES Germany.
If ES Ireland or ES Bermuda were taxed in Germany, the current overall
effective tax rate would be approximately 54%, although non-deductible expenses
would increase the overall effective tax burden.
United Kingdom
Prior to April 1, 1999, ESG UK and its U.K. subsidiaries were subject to
corporate income tax in the United Kingdom at the 31% rate. As of April 1, 1999,
the corporate income tax rate in the United Kingdom is 30%. ESG UK will be
entitled to a foreign tax credit for German taxes paid by
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ESG Germany, and for Canadian taxes paid by ES North America, with respect to
profits paid as dividends to ESG UK, so that the effective U.K. corporate tax
rate on dividends received from ESG Germany and ES North America should be zero,
on the assumption that foreign tax borne in each jurisdiction is at least
equivalent to the U.K. rate of taxation.
Canada
ES North America will be subject to Canadian federal and provincial income
tax on its income at a combined rate of approximately 44%. It will also be
subject to Canadian federal and provincial capital taxes at a combined rate of
up to 0.5%. Dividends that ES North America pays to ESG UK will be subject to
Canadian withholding tax at the rate of 10%.
Non-resident companies that carry on business in Canada may also be subject
to Canadian income and capital taxes on the profits of the business carried on
in Canada. Pursuant to the Canada-Ireland tax treaty, ES Ireland will be subject
to tax in Canada only if it carries on business through a permanent
establishment in Canada, and then only on income attributable to that permanent
establishment. We intend to operate so that none of our subsidiaries, other than
ES North America, is subject to tax in Canada.
Taxation of Shareholders
Bermuda Taxation
There is no Bermuda withholding tax on dividends paid by our company.
United States Taxation of U.S. and Non-U.S. Shareholders
Classification as a Controlled Foreign Corporation ("CFC"). Under Section
951(a) of the Internal Revenue Code, each "Major U.S. shareholder" of 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. Until recently, Subpart F income included, among other items,
"insurance income," defined as including income, including premium and
investment income, attributable to issuing or reinsuring any insurance or
annuity contract (1) in connection with risks located in, liabilities arising
out of activities in, or the lives or health of residents of a country other
than the country under the laws of which the corporation is organized and (2)
that would be taxed under the provisions of the Internal Revenue Code relating
to insurance companies if the income were the income of a domestic insurance
company. Pursuant to temporary legislation enacted at the end of 1998, however,
the definition of Subpart F "insurance income" has been modified. Under this
legislation, insurance income does not include income derived from exempt
contracts covering non-U.S. risks in the case of a qualifying insurance company
that derives at least 50% of its premiums from insuring unrelated persons in the
insurer's own country. Unless extended, the temporary legislation generally will
be in effect only in 1999. In all cases, however, Subpart F "insurance income"
does not include income that was subject to an effective rate of income tax
imposed by a foreign country greater than 90% of the maximum rate specified in
Section 11 of the Internal Revenue Code. As discussed above, that maximum tax
rate is currently 35%.
Under Section 951(b) of the Internal Revenue Code, any U.S. person who
owns, directly or indirectly through foreign persons, or is considered to own
(by application of the rules of constructive ownership set forth in Section
958(b) of the Internal Revenue Code), 10% or more of the voting power of all
classes of shares of a foreign corporation will be considered to be a "Major
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U.S. Shareholder." In general, a foreign corporation is treated as a CFC if
Major U.S. Shareholders collectively own more than 50% of the total combined
voting power or total value of the corporation's shares for an uninterrupted
period of 30 days or more during any tax year. Additionally, a 25% threshold
applies to insurance companies that primarily insure risks outside their own
country of organization. We believe that neither the 25% nor the 50% ownership
tests will apply to us or our subsidiaries because (1) our share ownership will
be widely dispersed and (2) under our articles of association, no U.S. Holder
except John C Head III and persons deemed to own our common shares with him
under Section 958 of the Internal Revenue Code are permitted to hold as much as
10% of our total combined voting power, and John C Head III is not permitted to
hold more than 25% of that voting power. See "Risk Factors--Anti-Takeover
Considerations."
Additionally, John C Head III has informed us that he has no intention of
acquiring any shares that would cause him to be treated as owning 25% or more of
the total value of our company. Therefore, we do not believe that either we or
any of our subsidiaries will be a CFC for U.S. Federal income tax purposes. In
the absence of any controlling authority, however, there can be no assurance
that the Internal Revenue Service would not successfully take a contrary
position regarding the effect of these limitations on voting power and therefore
assert that we are a CFC. Moreover, if John C Head III acquired sufficient
shares so that he would be treated as owning more than 25% of the value of our
company for an uninterrupted period of 30 days or more during any tax year, we
would be a CFC. If we or any subsidiary of ours were deemed to be a CFC, each
Major U.S. Shareholder would be required to include in its gross income for U.S.
Federal income tax purposes its pro rata share of our Subpart F income, even if
the Subpart F income were not distributed.
Related Person Insurance Income ("RPII"). RPII is defined in Section
953(c)(2) of the Internal Revenue Code as any "insurance income" attributable to
policies of insurance or reinsurance with respect to which the person directly
or indirectly insured is a U.S. shareholder or a "related person" to a U.S.
shareholder. For these purposes, a U.S. shareholder generally includes any U.S.
person who beneficially owns any amount of our shares. The term "related person"
for these purposes generally means someone who controls or is controlled by an
RPII shareholder, or someone who is controlled by the same person or persons
that control the RPII shareholder.
If the RPII rules applied to us, insurance income derived by our insurance
subsidiaries from insuring our U.S. shareholders and persons related to them
would be taxed to all U.S. shareholders if they held our shares at the end of
the applicable year. However, the RPII rules do not apply in cases in which,
among others, (1) less than 20% of the insurance income of each of our insurance
subsidiaries is derived during a year from the direct or indirect insurance of
our U.S. shareholders or their related persons or (2) less than 20% of the value
or voting power of our shares is held by U.S. shareholders who, together with
their related persons, are directly or indirectly insured by one of our
insurance subsidiaries. Because, for these reasons, we believe the RPII rules
are unlikely to apply to us, the effect of the rules is not further described
here.
Dispositions of Ordinary Shares. Section 1248 of the Internal Revenue Code
provides that any gain from the sale or exchange of stock of a CFC may be
treated as ordinary income in the hands of a Major U.S. Shareholder to the
extent of the CFC's earnings and profits during the period that the Major U.S.
Shareholder held the shares (with certain adjustments). As noted above, we do
not believe we will be a CFC.
Section 1248 also applies to the sale or exchange of shares in a foreign
insurance company if 25% or more of its shares are owned by U.S. persons, even
if those U.S. persons are not Major
34
<PAGE>
U.S. Shareholders. We believe that these rules (and related reporting
requirements) will not apply to the disposition of our common shares because we
are not directly engaged in the insurance business, and neither the statute nor
the proposed regulations issued by the U.S. Department of the Treasury on April
17, 1991 provide a look-through rule. Therefore, we believe that the disposition
of our shares should not be viewed as a disposition of the shares of our
subsidiaries. No assurance, however, can be given that the Internal Revenue
Service will agree with this interpretation. We would send appropriate notices
to our shareholders if we concluded that these rules applied to us.
Passive Foreign Investment Companies. Sections 1291 through 1298 of the
Internal Revenue Code contain special rules applicable to foreign corporations
that are "passive foreign investment companies" ("PFICs"). In general, a foreign
corporation will be a PFIC if 75% or more of its income constitutes "passive
income" or 50% or more of our assets produce passive income. If we were to be
characterized as a PFIC, our U.S. shareholders would be subject to a penalty tax
at the time of their sale of (or receipt of an "excess distribution" with
respect to) our common shares. 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 our common shares during the three preceding
taxable years (or shorter period during which the taxpayer held our common
shares). In general, the penalty tax is equivalent to the taxes that are deemed
due during the period the U.S. shareholder owned our common shares, computed by
assuming that the excess distribution or gain (in the case of a sale) with
respect to our common shares was taxed in equal portions throughout the holder's
period of ownership at the maximum tax rate for ordinary income applicable to
each applicable period, plus an interest charge. The interest charge is equal to
the applicable rate imposed on underpayment of U.S. federal income tax for the
applicable period.
The PFIC statutory provisions contain an express exception for income
"derived in the active conduct of an insurance business by a corporation which
is predominantly engaged in an insurance business." This exception is intended
to ensure that the income of a bona fide insurance company is not treated as
passive income except to the extent that it is attributable to financial
reserves in excess of the reasonable needs of the insurance business. We believe
that the income and assets of our insurance subsidiaries will be attributed to
us for purposes of applying these principles. It is our intention that we and
our subsidiaries taken together will be predominantly engaged in an insurance
business and that our insurance subsidiaries will not have financial reserves in
excess of the reasonable needs of their insurance business. Accordingly, we
believe that we will not be treated as a PFIC. However, no regulations
interpreting these specific PFIC provisions have yet been issued. Therefore,
substantial uncertainty exists with respect to their application or their
possible retroactivity. Each U.S. person who is considering an investment in our
common shares should consult its tax advisor as to the effects of these rules.
Other. Dividends paid by our company to U.S. corporate shareholders will
not be eligible for the dividends received deduction provided by section 243 of
the Internal Revenue Code.
Except as discussed below with respect to backup withholding, dividends
paid by our company will not be subject to U.S. withholding tax.
Non-resident alien individuals will not be subject to U.S. estate tax with
respect to our common shares.
Information reporting to the Internal Revenue Service by paying agents and
custodians located in the United States will be required with respect to
payments of dividends on our common shares to U.S. persons. Thus, a holder of
our common shares may be subject to backup withholding at the
35
<PAGE>
rate of 31% with respect to dividends paid by those persons, unless that holder
(1) is a corporation or comes within other exempt categories and, when required,
demonstrates that fact or (2) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. The
backup withholding tax is not an additional tax and may be credited against a
holder's regular federal income tax liability.
Germany Taxation
Our profits should not be taxed at the level of a German shareholder until
they are distributed. However, because Bermuda is considered as a low tax state
and our company's income should qualify as (normal) passive income and/or
passive income with investment character, German shareholders of our company may
be subject to German CFC rules.
Under those rules income qualifying as passive income with "investment
character" that is derived at the level of a foreign company that is subject to
low taxation is included in the taxable income of a German resident who owns at
least 10% of the shares or voting rights in the foreign company in proportion to
his participation in the foreign company.
If we have (normal) passive income, our income would be attributed to the
German residents in proportion to their participation, if German residents in
their totality held more than 50% of the shares or voting rights in our company,
even if the shareholding of each resident were lower than 10%.
The German CFC rules may also be applicable if one or several companies or
partnerships are interposed between the shareholders and our company.
The German CFC rules, under some circumstances, may also require German
residents to include in income their proportionate share of the income of our
subsidiaries. German residents are urged to consult their personal tax advisors
regarding the possible application of the German CFC rules to their particular
circumstances.
---------------------------
The opinions of Appleby, Spurling & Kempe, Paul, Weiss, Rifkind, Wharton
and Garrison, Matheson Ormsby Prentice, Deloitte & Touche, Canada, Deloitte &
Touche, United Kingdom and Deloitte & Touche GmbH upon which the foregoing
discussion is based do not include any factual or accounting matters,
determinations or conclusions such as RPII amounts and computations and amounts
of components thereof (e.g., amounts or computations of income or expense items
or reserves entering into RPII computations) or facts relating to our business
or activities. The summary is based upon current tax law. The tax treatment of a
holder of our common shares, or of a person treated as a holder of our common
shares for United States Federal income, state, local or non-U.S. tax purposes,
may vary depending on the holder's particular tax situation. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could be retroactive and could affect the tax consequences to our shareholders.
Prospective investors should consult their own tax advisors concerning the
United States Federal, state, local and non-U.S. tax consequences of owning our
common shares.
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USE OF PROCEEDS
We do not know either the number of our common shares that will be
ultimately sold pursuant to the plan or the prices at which such shares will be
sold. However, we propose to use the net proceeds from the sale of newly issued
common shares for working capital purposes.
PLAN OF DISTRIBUTION
Except to the extent State Street purchases common shares in open market
transactions, the common shares acquired under the plan will be sold directly by
our company through the plan. Shares acquired under the plan, including shares
purchased pursuant to waivers granted with respect to the optional cash payment
feature of the plan, may be sold in market transactions (including coverage of
short positions) on any national securities exchange on which our common shares
trade or in privately negotiated transactions. Our common shares are currently
traded on the Nasdaq National Market.
We expect that a portion of the common shares available for issuance under
the plan will be issued pursuant to waivers of the $12,500 monthly purchase
maximum. If participants submit requests for waiver of the monthly maximum for
any investment date for an aggregate amount in excess of the amount we are
willing to accept, we will grant these requests in our absolute discretion and
on the basis of the factors described in Question 17 above.
Persons who make purchases in connection with a "distribution" of our
common shares, as that term is used under the Securities Act of 1933, may be
deemed to be underwriters under the federal securities laws. If a person is
deemed to be an underwriter, the difference between the price that person pays
to our company for common shares acquired under the plan, after deduction of any
applicable discount from the market price, and the price at which the shares
purchased are resold may be deemed to constitute underwriting commissions
received by that person in connection with those transactions. We will not
extend to any person who may be deemed to be an underwriter any rights or
privileges other than those to which he or it would be entitled as a plan
participant, nor will we enter into any agreement with any person regarding that
person's purchase of any of our common shares or any resale or distribution of
them. If any purchaser believes himself or itself to be an underwriter, we will
make available to him or it copies of this prospectus to be delivered to
subsequent purchasers of our common shares from him or it.
Subject to the availability of our common shares registered for issuance
under the plan, there is no total maximum number of shares that can be issued
pursuant to the reinvestment of distributions.
We will pay any and all brokerage commissions and related expenses incurred
in connection with purchases of our common shares under the plan. Upon
withdrawal by a participant from the plan by the sale of common shares held
under the plan, the participant will receive the proceeds of the sale less a
nominal fee per transaction paid to State Street (if the resale is made by State
Street at the request of a participant), any related brokerage commissions and
any applicable transfer taxes.
Our common shares may not be available under the plan in all states. This
prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any of our common shares or other securities in any state or any other
jurisdiction to any person to whom it is unlawful to make the offer.
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LEGAL CONSIDERATIONS
We have been designated as a non-resident for exchange control purposes by
the Bermuda Monetary Authority.
The transfer of our common shares between persons regarded as non-resident
in Bermuda for exchange control purposes and the issue of shares to such persons
may be effected without specific consent under the Exchange Control Act of 1972
and regulations thereunder. Issues and transfers of shares to any person
regarded as resident in Bermuda for exchange control purposes require specific
prior approval under the Exchange Control Act of 1972.
There are no limitations on the rights of persons regarded as non-resident
of Bermuda for foreign exchange control purposes owning our common shares to
hold or vote their common shares. Because we have been designated as a
non-resident for Bermuda exchange control purposes, there are no restrictions on
our ability to transfer funds in and out of Bermuda or to pay dividends to U.S.
residents who are holders of our common shares, other than in respect of local
Bermuda currency.
In accordance with Bermuda law, share certificates are issued only in the
names of corporations or individuals. In the case of an applicant acting in a
special capacity (for example, as an executor or trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any special capacity, we are not bound
to investigate or incur any responsibility in respect of the proper
administration of any estate or trust that is so recorded.
We will take no notice of any trust applicable to any of our common shares
whether or not we had notice of it.
As an "exempted company," we are exempt from Bermuda laws restricting the
percentage of share capital that may be held by non-Bermudians, but as an
exempted company we may not participate in business transactions such as (1) the
acquisition or holding of land in Bermuda, except that required for our business
and held by way of lease or tenancy for terms of not more than 21 years, without
the express authorization of the Bermuda legislature; (2) the taking of
mortgages on land in Bermuda to secure an amount in excess of $50,000 without
the consent of the Minister of Finance of Bermuda; (3) the acquisition of
securities created or issued by, or any interest in, any local company or
business, other than select types of Bermuda government securities or securities
of another "exempted" company, partnership or other corporation resident in
Bermuda but incorporated abroad; or (4) the carrying on of business of any kind
in Bermuda, except in furtherance of our business carried on outside Bermuda or
under a license granted by the Minister of Finance of Bermuda.
The Bermuda government actively encourages foreign investment in "exempted"
entities like our company that are based in Bermuda but do not operate in
competition with local business. In addition to having no restrictions on the
degree of foreign ownership, we are subject neither to taxes on our income or
dividends nor to any foreign exchange controls in Bermuda. In addition, there is
no capital gains tax in Bermuda, and we can accumulate profits, as required,
without limitation.
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EXPERTS
The consolidated financial statements of ESG Re Limited and subsidiaries as
of December 31, 1998 and 1997 and for each of the years in the three-year period
ended December 31, 1998, included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 and incorporated by reference into this
prospectus, have been incorporated by reference in reliance on the reports of
Deloitte & Touche, Hamilton, Bermuda, independent accountants, and on the
authority of Deloitte & Touche as experts in accounting and auditing.
LEGAL MATTERS
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York, will issue an
opinion confirming its opinion in this prospectus about U.S. tax matters and
will rely, as to Bermuda law, upon the opinion of Appleby, Spurling & Kempe,
Hamilton, Bermuda. Appleby, Spurling & Kempe will issue an opinion about the
legality of the issuance of our common shares offered by this prospectus.
Appleby, Spurling & Kempe will also issue an opinion about the accuracy of
statements made in this prospectus regarding Bermuda tax matters. Deloitte &
Touche GmbH will issue an opinion confirming its opinion in this prospectus
about German tax matters. Deloitte & Touche, United Kingdom, will issue an
opinion on the accuracy and presentation of United Kingdom tax matters described
in this prospectus. Matheson Ormsby Prentice, Ireland, will issue an opinion
confirming its opinion in this prospectus about Irish tax matters. Deloitte &
Touche, Canada, will issue an opinion confirming its opinion in this prospectus
about Canadian tax matters.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 regarding the offering
with the Securities and Exchange Commission (the "SEC"). This prospectus, which
is a part of the registration statement, does not contain all of the information
included in the registration statement, and you should refer to the registration
statement and its exhibits to read that information. You may read and copy the
registration statement, the related exhibits and the other materials we file
with the SEC at the SEC's public reference room in Washington, D.C., and at the
SEC's regional offices in Chicago, Illinois and New York, New York. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. The SEC also maintains an Internet site that contains reports,
proxy and information statements and other information regarding issuers that
file with the SEC, including our company. The site's address is
http://www.sec.gov.
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any of these reports, statements
or other information at the SEC's Internet site or at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. You can
request copies of those documents, upon payment of a duplicating fee, by writing
to the SEC.
39
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INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" in this prospectus other
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the SEC will automatically update and
supersede the earlier filed or incorporated information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities covered by this prospectus:
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
o Our Definitive Proxy Statement on Schedule 14A filed with the SEC on
April 8, 1999; and
o The description of our common shares contained in our Registration
Statement on Form 8-A, filed with the SEC on December 9, 1997.
We have filed each of these documents with the SEC, and they are available
from the SEC's Internet site and public reference rooms described under "Where
You Can Find More Information" above. You may also request a copy of these
filings, at no cost, by writing or telephoning us at the following address:
Corporate Secretary
ESG Re Limited
16 Church Street
Hamilton HM11, Bermuda
(441) 295-2185
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information.
PREPARATION OF FINANCIAL STATEMENTS
Our financial statements have been prepared in accordance with U.S.
generally accepted accounting principles. Audited financial statements as of
December 31, 1998 are incorporated into this prospectus and the registration
statement by reference to our Annual Report on Form 10-K for the fiscal year
ended December 31, 1998. As used in this prospectus, "$" refers to U.S. dollars
and "BD$" refers to Bermuda dollars.
40
<PAGE>
SCHEDULE A
OPTIONAL CASH PAYMENTS
<TABLE>
<CAPTION>
Record Date and
Minimum Price and Optional Cash Pricing Period Pricing Period
Discount Set Date Payment Due Date Commencement Date Conclusion Date
- ----------------- ---------------- ----------------- ---------------
<S> <C> <C> <C>
June 1, 1999 June 6, 1999 June 7, 1999 June 18, 1999
June 30, 1999 July 6, 1999 July 7, 1999 July 20, 1999
August 2, 1999 August 6, 1999 August 6, 1999 August 19, 1999
September 1, 1999 September 7, 1999 September 8, 1999 September 21, 1999
October 1, 1999 October 6, 1999 October 7, 1999 October 20, 1999
November 1, 1999 November 4, 1999 November 5, 1999 November 18, 1999
December 1, 1999 December 6, 1999 December 7, 1999 December 20, 1999
January 3, 2000 January 6, 2000 January 7, 2000 January 20, 2000
February 1, 2000 February 6, 2000 February 7, 2000 February 18, 2000
March 1, 2000 March 6, 2000 March 7, 2000 March 20, 2000
April 3, 2000 April 6, 2000 April 7, 2000 April 20, 2000
May 1, 2000 May 4, 2000 May 5, 2000 May 18, 2000
June 1, 2000 June 6, 2000 June 7, 2000 June 20, 2000
July 3, 2000 July 9, 2000 July 10, 2000 July 21, 2000
August 1, 2000 August 6, 2000 August 7, 2000 August 18, 2000
September 1, 2000 September 7, 2000 September 8, 2000 September 21, 2000
October 2, 2000 October 5, 2000 October 6, 2000 October 19, 2000
November 1, 2000 November 6, 2000 November 7, 2000 November 20, 2000
</TABLE>
41
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=========================================== ====================================
We have not authorized any dealer,
salesperson or other person to give any
information or represent anything not 2,000,000
contained in this prospectus. You must not Common Shares
rely on any unauthorized information. This
prospectus does not offer to sell or buy
any shares in any jurisdiction where it is ESG Re Limited
unlawful. The information in this
prospectus is current as of , 1999.
-----------------
TABLE OF CONTENTS
-----------------
-----------------
PROSPECTUS
-----------------
Page
----
Enforceability of Civil Liabilities......ii
The Company...............................1
Risk Factors..............................2
Forward-Looking Information...............9
The Plan..................................9
Certain Tax Considerations ..............29
Use of Proceeds..........................40
Plan of Distribution.....................40
Legal Considerations.....................41
Experts..................................42
Legal Matters............................42 , 1999
Where You Can Find More Information......42
Incorporation by Reference...............43
Preparation of Financial Statements......43
=========================================== ====================================
42
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Set forth below is an estimate of the approximate amount of the fees
and expenses (other than underwriting commissions and discounts) payable by the
Registrant in connection with the issuance and distribution of the shares of
Common Stock.
Securities and Exchange Commission, registration fee..................$ 9,419
Printing and mailing expenses......................................... 5,000
Accounting fees and expenses.......................................... 30,000
Legal fees and expenses............................................... 50,000
Miscellaneous expenses................................................ 1,500
Total...................................................$95,919
Item 15. Indemnification of Directors and Officers
Section 98 of the Companies Act 1981 of Bermuda (the "Act") provides
generally that a Bermudian company may indemnify its directors, officers and
auditors against any liability which by virtue of Bermudian law otherwise would
be imposed on them, except in cases where such liability arises from fraud or
dishonesty of which such director, officer or auditor may be guilty in relation
to the company. Section 98 further provides that a Bermudian company may
indemnify its directors, officers and auditors against any liability incurred by
them in defending any proceedings, whether civil or criminal, in which judgment
is awarded in their favor or they are acquitted or in which they are acquitted
or granted relief by the Supreme Court of Bermuda in certain proceedings arising
under Section 281 of the Act. The Company has adopted provisions in its
Memorandum of Association and Bye-Laws that provide that the Company shall
indemnify its officers and directors to the maximum extent permitted under the
Act. The Company also entered into indemnification agreements with each of its
directors and officers to provide them with the maximum indemnification allowed
under its Memorandum of Association, Bye-Laws and the Act.
Item 16. Exhibits
A list of exhibits included as part of this registration statement is
set forth in the Exhibit Index which immediately precedes such exhibits and is
hereby incorporated by reference herein.
II-1
<PAGE>
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
a prospectus pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offering therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing
II-2
<PAGE>
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question as to
whether such indemnification by it is against public policy as expressed in the
Act, and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Post-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of New York,
New York, on the 1st day of July 1999.
ESG RE LIMITED
By: *
-------------------------
Joan H. Dillard
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Registration Statement has been signed by
the following persons in the capacities indicated on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
* Managing Director and Chief July 1, 1999
- ----------------------- Executive Officer and Director
Wolfgang M. Wand (Principal Executive Officer)
/s/ Steven H. Debrovner Chief Operating Officer and July 1, 1999
- ----------------------- Director
Steven H. Debrovner
* Chief Financial Officer July 1, 1999
- ----------------------- (Principal Financial and
Joan H. Dillard Accounting Officer)
* Chairman of the Board July 1, 1999
- -----------------------
John C Head III
* Director
- -----------------------
Kenneth P. Morse
II-4
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
Director
- -----------------------
David L. Newkirk
* Director July 1, 1999
- -----------------------
William J. Poutsiaka
* Director July 1, 1999
- -----------------------
Edward A. Tilly
* By: /s/ Steven H. Debrovner
----------------------
Steven H. Debrovner
Attorney-in-fact
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
3.1 Memorandum of Association of the Registrant (incorporated by reference
to Amendment No. 1 to the Registration Statement on Form F-1 of the
Registrant, as filed with the Securities and Exchange Commission on
December 9, 1997 (File No. 333-40341)).
3.2 Bye-laws of the Registrant (incorporated by reference to Amendment No.
1 to the Registration Statement on Form F-1 of the Registrant, as filed
with the Securities and Exchange Commission on December 9, 1997 (File
No. 333-40341)).
4.1 Form of Share Certificate (incorporated by reference to Amendment No. 1
to the Registration Statement on Form F-1 of the Registrant, as filed
with the Securities and Exchange Commission on December 9, 1997 (File
No. 333-40341)).
5.1 Draft of Opinion of Appleby, Spurling & Kempe.
8.1 Paul, Weiss, Rifkind, Wharton & Garrison as to certain tax matters.**
8.2 Draft of Opinion of Appleby, Spurling & Kempe as to certain tax
matters.*
8.3 Opinion of Deloitte & Touche GmbH as to certain tax matters.*
8.4 Opinion of Deloitte & Touche, United Kingdom as to certain tax
matters.*
8.5 Opinion of Deloitte & Touche, Canada as to certain tax matters.*
8.6 Opinion of Matheson Ormsby Prentice as to certain tax matters.*
23.1 Consent of Appleby, Spurling & Kempe (included in Exhibit 5.1).*
23.2 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in
Exhibit 8.1).**
23.3 Consent of Deloitte & Touche, Bermuda.*
23.4 Consent of Deloitte & Touche GmbH (included in Exhibit 8.3).*
23.5 Consent of Deloitte & Touche, United Kingdom (included in Exhibit
8.4).*
23.6 Consent of Deloitte & Touche, Canada (included in Exhibit 8.5).*
23.7 Consent of Matheson Ormsby & Prentice (included in Exhibit 8.6).*
- -------------------------
* Filed herewith.
** Previously filed.
II-6
Exhibit 5.1
[Letterhead of Appleby Sperling & Kempe]
July __, 1999
ESG Re Limited
Skandia International House
Church Street
Hamilton HM 11
Bermuda
Dear Sirs:
ESG Re Limited (the "Company")
We have acted as Bermuda counsel to the Company with respect to the Registration
Statement, as filed with the Securities and Exchange Commission on July 1, 1999,
on Form S-3, and all amendments thereto (collectively, the "Registration
Statement") under the Securities Act of 1933 of the United States of America, as
amended (the "Act"), and the Rules and Regulations promulgated thereunder (the
"Rules").
For the purposes of this opinion we have examined and relied upon the documents
listed (which in some cases, are also defined in the Schedule to this opinion
(the "Documents"). Unless otherwise defined herein, capitalized terms have the
meanings assigned to them in the Registration Statement.
Assumptions
In stating our opinion we have assumed:
(a) the authenticity, accuracy and completeness of all Documents, submitted
to us as originals and the conformity to authentic original Documents
of all Documents submitted to us as certified, conformed, notarized or
photostatic copies;
(b) the genuineness of all signatures on the Documents;
(c) that any factual statements made in the Registration Statement are
true, accurate and complete;
(d) that the search made on 30 June 1999 of the Register of Companies at
the office of the Registrar of Companies referred to in paragraph 2 of
the Schedule to this
II-7
<PAGE>
opinion, was complete and accurate at the time of such search and
disclosed all information which is material for the purposes of this
opinion and such information has not since such date been materially
altered;
(e) that the search made of 30 June 1999 in the Supreme Court Causes Book
at the Registry of the Supreme Court referred to in paragraph 3 of the
Schedule to this opinion was complete and accurate at the time of such
search and disclosed all information which is material for the purposes
of this opinion and such information has not since such date been
materially altered;
(f) that the Resolutions are in full force and effect and have not been
rescinded, either in whole or in part, accurately record the
resolutions passed by the Board of Directors of the Company in a
meeting which was duly convened and at which a duly constituted quorum
was present and voting throughout; and
(g) that each Director of the Company, when the Board of Directors of the
Company adopted the Resolutions, discharged his fiduciary duty owed to
the Company and acted honestly and in good faith with a view to the
best interests of the Company.
Opinion
Based upon and subject to the foregoing, and subject to the reservations et out
below and any matters not disclosed to us, we are of the opinion that the common
shares, when issued, delivered and paid for as contemplated in the Registration
Statement will have been duly authorized, validly issued, fully paid and
non-assessable.
Any reference in this opinion to shares being "non-assessable" shall mean, in
relation to fully-paid shares of a company and subject to any contrary provision
in any agreement in writing between such company and the holder of shares, that:
no shareholder shall be obliged to contribute further amounts to the capital of
the company, either in order to complete payment for their shares, to satisfy
claims of creditors of the company, or otherwise; and no shareholder shall be
bound by an alteration of the Memorandum of Association or Bye-laws of the
company after the date on which he became a shareholder, if and so far as the
alteration requires him to take, or subscribe for additional shares, or in any
way increases his liability to contribute to the share capital of, or otherwise
to pay money to, the company.
Reservations
We have the following reservations:
(a) We express no opinion as to any law other than Bermuda law and none of
the opinions expressed herein relates to compliance with or matters
governed by the laws of any jurisdiction except Bermuda. This opinion
is limited to Bermuda law as applied by the Courts of Bermuda at the
date hereof.
II-8
<PAGE>
(b) Where an obligation is to be performed in a jurisdiction other than
Bermuda, the courts of Bermuda may refuse to enforce it to the extent
that such performance would be illegal under the laws of , or contrary
to public policy of, such other jurisdiction.
(c) Searches of the Register of Companies at the office of the Registrar of
Companies and of the Supreme Court Causes Book at the Registry of the
supreme Court are not conclusive and it should be noted that the
Register of Companies and the Supreme Court Causes Book do not reveal:
(i) whether an application to the Supreme Court for a winding up
petition or for the appointment of a receiver or manager has
been prepared but not yet been presented or has been presented
but does not appear in the Causes Book at the date and time
the Search is concluded;
(ii) whether any arbitration or administrative proceedings are
pending or whether any proceedings are threatened, or whether
any arbitrator has been appointed;
(iii) details of matters which have been lodged for filing or
registration which as a matter of general practice of the
Registrar of Companies would have or should have been
disclosed on the public file but have not actually been
registered or to the extent that they have been registered
have not been disclosed or appear in the public records at the
date and time the search is concluded;
(iv) details of matters which should have been lodged for
registration but have not been lodged for registration at the
date the search is concluded; or
(v) whether a receiver or manager has been appointed privately
pursuant to the provisions of a debenture or other security,
unless notice of the fact has been entered in the register of
charges in accordance with the provisions of the Act.
Furthermore, in the absence of a statutorily defined system for the registration
of charges created by companies incorporated outside Bermuda ("overseas
companies") over their assets located in Bermuda, it is not possible to
determine definitively from searches of the register of charges maintained by
the Registrar of Companies in respect of such overseas companies what charges
have been registered over any of their assets located in Bermuda or whether any
one charge has priority over any other charge over such assets.
(d) In order to issue this opinion we have carried out the search referred
to in paragraph 2 of the Schedule to this opinion on 30 June 1999 and
have not enquired as to whether there has been any change since that
time and date.
II-9
<PAGE>
(e) In order to issue this opinion we have carried out the search referred
to in paragraph 3 of the Schedule to this opinion at on 30 June 1999
and have not enquired as to whether there has been any change since
that time and date.
Disclosure
This opinion is addressed to you solely for your benefit and is neither to be
transmitted to any other person, nor relied upon by any other person or for any
other purpose nor quoted or referred to in any public document nor filed with
any governmental agency or person, without our prior written consent, except as
may be required by law or regulatory authority. Further, this opinion speaks as
of its date and is strictly limited to the matters stated herein and we assume
no obligation to review or update this opinion if applicable law or the existing
facts or circumstances should change.
We hereby specifically consent to the use of this opinion as an Exhibit to the
Registration Statement and to the sue of our name under the heading "Legal
Matters" contained in the Prospectus included in the Registration Statement. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required by the Act or the Rules.
This opinion is governed by and is to be construed in accordance with Bermuda
law. It is given the basis that it will not give rise to any legal proceedings
with respect thereto in any jurisdiction other than Bermuda.
Yours faithfully
II-10
<PAGE>
SCHEDULE
--------
1. A draft copy of the Registration Statement dated 17 April 1999.
2. Certified copy of the Minutes of the Meeting of the Board of Directors
of the Company (the "Resolutions").
3. The entries and filings shown in respect of the Company on the file of
the Company maintained in the Register of Companies at office of the
Registrar of Companies in Hamilton, Bermuda, as revealed by a search on
30 June 1999.
4. The entries and filing shown in the Supreme Court Causes Book
maintained at the Registry of the Supreme Court in Hamilton, Bermuda,
as revealed by a search on 22 April 1999 in respect of the Company.
5. Certified copies of the Certificate of Incorporation, Memorandum of
Association and Bye-laws for the Company (collectively referred to as
the "Constitutional Documents").
6. A certified copy of the "Foreign Exchange Letter," dated 21 August
1997, issued by the Bermuda Monetary Authority, Hamilton, Bermuda in
relation to the Company.
7. A certified copy of the "Tax Assurance," dated 18 September 1997,
issued by the Registrar of Companies for the Minister of Finance in
relation to the Company.
8. A certified copy of the Register of Directors and Officers in respect
of the Company.
II-11
Exhibit 8.2
July , 1999
[Letterhead of Appleby Spurling & Kempe]
ESG Re Limited
Skandia International House
Church Street
Hamilton HM 11
Bermuda
Dear Sirs:
ESG Re Limited (the "Company")
We have acted as legal counsel in Bermuda to the Company and this opinion as to
Bermuda law is addressed to you in connection with the filing by the Company
with the Securities and Exchange Commission, Washington D.C. 20549 on July 1,
1999 of a Registration Statement on Form S-3 with respect to the Company (the
"Registration Statement"). The documents include a draft copy of the
Registration Statement referred to above dated 25 June 1999]; and
For the purposes of this opinion we have examined and relied upon the documents
listed in the Schedule to this opinion and the Registration Statement (the
"Documents"). Unless otherwise defined herein, capitalized terms have the
meanings assigned to them in the Registration Statement.
Assumptions
In stating our opinion we have assumed:
(a) the authenticity, accuracy and completeness of all Documents submitted to us
as originals and the conformity to authentic original Documents of all
Documents submitted to us as certified, conformed, notarized or photostatic
copies;
(b) the genuineness of all signatures on the Documents;
(c) the authority, capacity and power of each of the persons signing the
Documents;
(d) that any factual statements made in any of the Documents are true, accurate
and complete; and
II-12
<PAGE>
(e) that the draft of the Registration Statement which we have examined for the
purposes of this opinion does not differ in any material respect from the
draft approved by the board of directors of the Company and its shareholders
pursuant to the relevant board resolutions, and that when filed the
Registration Statement will not differ in any material respect from the
draft which we examined.
Opinion
Based upon and subject to the foregoing and subject to the reservations set out
below and to any matters not disclosed to us, we are of the opinion that the
statements in the Registration Statement under the headings "Certain Tax
Considerations -- Taxation of the Company and its Subsidiaries -- Bermuda" and
"Certain Tax Considerations -- Taxation of Shareholders -- Bermuda Taxation",
insofar as they purport to describe the provisions of the laws of Bermuda
referred to therein, are accurate and correct in all material respects.
Reservations
We have the following reservations:
(a) We express no opinion as to any law other than Bermuda law and none of the
opinions expressed herein relates to compliance with or matters governed by the
laws of any jurisdiction except Bermuda. This opinion is limited to Bermuda law
as applied by the Courts of Bermuda at the date hereof.
(b) Where an obligation is to be performed in a jurisdiction other than Bermuda,
the courts of Bermuda may refuse to enforce it to the extent that such
performance would be illegal under the laws of, or contrary to public policy of,
such other jurisdiction.
Disclosure
This opinion is addressed to you in connection with the registration of Shares
with the Securities and Exchange Commission and is not to be made available to,
or relied on by any other person or entity, or for any other purpose, without
our prior written consent. We consent to the filing of this opinion as an
exhibit to the Registration Statement of the Company.
We also consent to the reference to our Firm in the Registration Statement.
This opinion is addressed to you solely for your benefit and is neither to be
transmitted to any other person, nor relied upon by any other person or for any
other purpose nor quoted or referred to in any public document nor filed with
any governmental agency or person, without our prior written consent, except as
may be required by law or regulatory authority. Further, this opinion speaks as
of its date and is strictly limited to the matters stated herein and we assume
no obligation to review or update this opinion if applicable laws or the
existing facts or circumstances should change.
II-13
<PAGE>
This opinion is governed by and is to be construed in accordance with Bermuda
law. It is given on the basis that it will not give rise to any legal
proceedings with respect thereto in any jurisdiction other than Bermuda.
Yours faithfully,
II-14
<PAGE>
SCHEDULE
--------
1. Certified copies of the Certificate of Incorporation, Memorandum of
Association and Bye-laws of the Company.
2. Certified copy of the Minutes of the Meeting of the Board of Directors of the
Company (the "Resolutions").
3. A certified copy of the "Foreign Exchange Letter", dated 21 August 1997,
issued by the Bermuda Monetary Authority, Hamilton, Bermuda in relation to the
Company.
4. A certified copy of the "Tax Assurance", dated 18 September 1997, issued by
the Registrar of Companies for the Minister of Finance in relation to the
Company.
II-15
Exhibit 8.3
[Letterhead of Deloitte & Touche GmbH]
To the Board of
Directors and Shareholders of
ESG Re Limited
The discussion of tax matters set forth under the captions "Risk Factors--Tax
Matters" and "Certain Tax Considerations--Taxation of Our Company and its
Subsidiaries--Germany" and "Certain Tax Considerations--Taxation of
Shareholders--Germany Taxation" in the Registration Statement of ESG Re Limited
on Form S-3 (file no. 333-76983) (the "Registration Statement") constitutes our
opinion with respect to the matters set forth therein, however, subject to the
following:
- - we are not the ongoing tax advisors to ESG Germany or its subsidiaries,
nor have we audited the 1997 financial statements of ESG Germany or any
of its subsidiaries nor the 1998 financial statements of ESG Germany or
any of its subsidiaries, nor have we prepared the 1997 or any earlier
or later tax returns of ESG Germany or any of its subsidiaries, nor
have we advised the Company or any of its subsidiaries on the
implementation of the structures as described in the Registration
Statement on Form F-1 of December 12, 1997;
- - we have not undertaken any investigation or verification or other
review of any statements of fact contained in the Form S-3;
- - we have assumed (without assuming any responsibility for the
correctness of any assumptions) that, to the extent they relate to
Germany, the Company and its subsidiaries have implemented and adhered
to the structures and situations of fact as described in the
Registration Statement on Form F-1 of December 12, 1997 and/or in the
Registration Statement, and thereby have satisfied and met in full all
pertinent requirements of German tax, commercial, corporate and any
other law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our Firm under the heading
"Certain Tax Considerations" in the prospectus.
/s/ Deloitte & Touche
- ---------------------
Deloitte & Touche GmbH
Wirtschaftsprufungsgesellschaft
Dusseldorf, Germany
July 1, 1999
II-16
Exhibit 8.4
[Letterhead of Deloitte & Touche, United Kingdom]
ESG Re Ltd.
16 Church Street
Hamilton
Bermuda
July 1, 1999
Dear Sirs:
PROSPECTUS
DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN
The discussion of tax matters set forth under the caption "Certain Tax
Considerations -- Taxation of Our Company and its Subsidiaries -- United
Kingdom" in the Prospectus is accurate in all material respects and fairly
presents the information set our therein insofar as such statements constitute a
summary of United Kingdom taxation. We hereby consent to the filing of this
opinion as an exhibit in the Prospectus and to the references to our firm under
the heading "Certain Tax Considerations" in the Prospectus.
Yours faithfully,
/s/ Deloitte & Touche
- ---------------------
Deloitte & Touche
II-17
Exhibit 8.5
[Letterhead of Deloitte & Touche, Canada]
Opinion of Deloitte & Touche LLP
Special Tax Advisor for the Company
To the Board of Directors and Shareholders of ESG Re Ltd.
The discussion of tax matters set forth under the caption "Certain Tax
Considerations -- Taxation of the Company and its Subsidiaries -- Canada" in the
Registration Statement of ESG Re Ltd. on Form S-3 (the "Registration Statement")
constitutes our opinion with respect to the matters set forth therein. We hereby
consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our Firm under the heading "Certain Tax
Considerations" in the Prospectus.
/s/ Deloitte & Touche
- ---------------------
Toronto, Canada
July 1, 1999
II-18
Exhibit 8.6
[Letterhead of Matheson Ormsby Prentice]
ESG Re Limited
16 Church Street
Hamilton
Bermuda
July 1, 1999
Dear Sirs:
We have acted as Solicitors for ESG Re Limited (the "Company") in connection
with the Registration Statement on Form S-3 (the "Registered Statement") in
relation to the Dividend Reinvestment and Share Purchase Plan.
We have been requested to give our opinion in relation to the matter hereinafter
set forth.
1. Basis of Opinion
1.1 This opinion is written with respect to the laws of Ireland in
effect at the date of signing of this letter. We have made no investigation of
and express no opinion as to the laws of any other jurisdiction and have
assumed, without enquiry, that there is nothing in the laws of any other
jurisdiction which would or might affect our opinion as stated herein. We
express no opinion on European Union law as it affects any jurisdiction other
than Ireland.
1.2 This opinion is strictly limited to:
(i) the matters stated herein and does not extend to and is
not to be read as extending by implication or otherwise to any other matter; and
(ii) the document listed at 1.3 below.
1.3 For the purposes of giving this opinion we have examined a copy of
the Registration Statement.
We have not for the purposes of this opinion examined any other contracts,
opinions, instruments or other documents.
II-19
<PAGE>
1.4 We have not assisted in the investigation or verification of the
facts or reasonableness of any assumption or statements of opinion (except with
respect to the matters set forth in this opinion) contained in the Registration
Statement nor have we attempted to determine whether any material facts have
been omitted therefrom.
1.5 This letter speaks as of its date and we assume no obligation to
update the opinion set forth herein.
1.6 This opinion is to be construed in accordance with and governed by
the laws of Ireland as at the date hereof.
1.7 We express no opinion and make no representation or warranty, as to
any matter of fact.
1.8 All words and phrases defined in the Registration Statement and not
defined herein shall have the same meaning as are respectively assigned to them
in the Registration Statement.
2. Assumptions
For the purposes of expressing this opinion we have assumed (without any
responsibility on our part if any assumption proves to have been untrue as we
have not independently verified any assumption):-
2.1 the completeness and authenticity of all documents submitted to or
examined by us as originals;
2.2 the completeness and conformity to authentic originals of all
documents submitted to or examined by us as conformed, certified or photostatic
or facsimile copies and the completeness and authenticity of the originals of
such documents;
2.3 the authenticity of all signatures and seals on all documents
submitted to or examined by us;
2.4 that there is or are no factual information or documents possessed
or discoverable by persons other than ourselves of which are not aware but of
which we should be aware for the purposes of this opinion;
2.5 the absence of fraud and the presence of good faith on the part of
all parties referred to in the Registration Statement and their respective
officers, employees, agents and advisers;
2.6 the truth of all representations and information given to us in
reply to any queries we have made which we have considered necessary for the
purpose of giving this opinion;
2.7 there are no agreements or arrangements in existence which in any
way bear upon or are inconsistent with the opinions stated herein.
II-20
<PAGE>
3. Opinion
Based upon and subject to the foregoing and so far as the laws of Ireland as in
force at the date of this opinion and the current practices of the Irish Revenue
Commissioners are concerned, the paragraph under the heading "Ireland" in the
section entitled "Taxation of the Company and its Subsidiaries" in the section
entitled "CERTAIN TAX CONSIDERATIONS" of the Registration Statement constitutes
our opinion with respect to the matters set forth therein.
4. Consent
We hereby consent to the use of this opinion in this section entitled "CERTAIN
TAX CONSEQUENCES" of this Registration Statement and to the reference to our
name therein and the filing of this opinion as an exhibit to the Registration
Statement.
Yours faithfully,
/s/ Matheson Ormsby Prentice
- ----------------------------
MATHESON ORMSBY PRENTICE
II-21
Exhibit 23.3
[Letterhead of Deloitte & Touche, Bermuda]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
ESG Re Limited on Form S-3 of our report dated March 8, 1999, appearing in the
Annual Report on Form 10-K of ESG Re Limited for the year ended December 31,
1998 and to the reference to us under the heading "Experts" in the prospectus,
which is a part of this Registration Statement.
DELOITTE & TOUCHE
Hamilton, Bermuda
July 1, 1999
II-22
