<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
NOBEL INSURANCE LIMITED
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Capital Shares, $1.00 par value
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(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
Sale of substantially all assets for $54,106,000 cash
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$54,106,000
-----------------------------------------------------------------------
(5) Total fee paid:
$10,822
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
NOBEL INSURANCE LIMITED
FALCONER HOUSE, GROUND LEVEL
[LOGO]
108 PITTS BAY ROAD
HAMILTON, BERMUDA HM AX
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
, 1998
Dear Shareholder:
You are cordially invited to attend a special general meeting of
shareholders (the "Special Meeting") of Nobel Insurance Limited (the "Company")
to be held on , 1998, at the Marriott Castle Harbour Hotel in Tuckers
Town, Bermuda, commencing at 10:00 a.m., local time.
The Company and its wholly owned subsidiary, Nobel Holdings, Inc., have
entered into an agreement to sell the U.S. operating subsidiaries of Nobel
Holdings, including the stock of Nobel Insurance Company, for $54.1 million in
cash to a wholly owned subsidiary of RenaissanceRe Holdings Ltd. RenaissanceRe
also has agreed to lend the Company $8,894,000 on a limited recourse basis, in
exchange for a participating promissory note, in order to facilitate the
liquidation of the Company.
Assuming approval by the Company's shareholders of the sale and of a plan of
liquidation, the Company will (i) complete the sale of the U.S. operating
subsidiaries; (ii) cause Nobel Holdings to dissolve and distribute to the
Company the net cash remaining after the sale of the U.S. operating subsidiaries
and payment of its debts; (iii) subject to applicable restrictions and consents
required under Bermuda law, make an initial liquidating distribution to
shareholders of the Company of up to $13.00 in cash per outstanding share (the
"Initial Distribution"), and (iv) subject to further approval by shareholders,
wind up its affairs under Bermuda law. The winding up will include conversion by
the Company of any remaining assets to cash, the assignment to other insurers or
commutation of its reinsurance and insurance obligations and related claim
reserves, and the payment, settlement, or commutation of all other known debts.
The exact amount of the Initial Distribution will be determined by the Board
of Directors of the Company promptly after the adoption of the plan of
liquidation, completion of the sale of the U.S. operating subsidiaries,
dissolution of Nobel Holdings, and completion of a financial and statutory
review by the Board of Directors. The Board of Directors of the Company intends
to declare the maximum amount per share, up to $13.00, that at the time is
lawful and in compliance with Bermuda law. There can, however, be no assurance
that the Company will be able to declare and pay the Initial Distribution or, if
declared and paid, what the amount of the Initial Distribution will be.
Upon completion of the winding up of the Company's affairs, a final
liquidating distribution of all remaining cash will be made to shareholders with
respect to the outstanding shares. It is anticipated that this final liquidating
distribution will be in an amount of cash per share equal to $14.00 less the
Initial Distribution. This final liquidating distribution could be less if it is
determined during the winding up process that Nobel Holdings or the Company has
liabilities that are not currently known.
To implement this program, the Board of Directors of the Company has:
(a) called a special general meeting of shareholders to consider approval of
the sale of the U.S. operating subsidiaries, the plan of liquidation of
the Company, and other incidental matters; and
(b) subject to approval of the plan of liquidation and completion of the
sale of the U.S. operating subsidiaries, authorized the winding up of
Nobel Holdings; and
<PAGE>
(c) subject to approval of the plan of liquidation, completion of the sale
of the U.S. operating subsidiaries, and subject to applicable
restrictions and consents required under Bermuda law, authorized the
Company to make an Initial Distribution of up to $13.00 cash per
outstanding share of the Company; and
(d) subject to approval by the Company's shareholders, authorized the
winding up of the Company.
If shareholders approve the sale of the U.S. operating subsidiaries and the
plan of liquidation, the meeting will be temporarily adjourned to permit the
sale, the dissolution and liquidation of Nobel Holdings, and the payment of the
Initial Distribution. The shareholders' meeting will then be reconvened to vote
upon the winding up of the affairs of the Company under Bermuda law and other
matters incidental to the winding up.
Enclosed with this letter is a Notice of Special General Meeting of
Shareholders and a Proxy Statement, which together describe in detail the
proposals to be considered at the meeting. Also enclosed is a form of proxy by
which you can vote your shares if you cannot attend the shareholders' meeting.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MATTERS BEING SUBMITTED
TO SHAREHOLDERS FOR THEIR APPROVAL AND RECOMMENDS THAT YOU VOTE FOR EACH OF THE
PROPOSALS. Please sign and date the enclosed proxy relating to the proposals
being considered at the shareholders' meeting and return it in the enclosed
envelope at your earliest convenience.
Very truly yours,
Robert C. Duvall
CHAIRMAN OF THE BOARD
Jeffry K. Amsbaugh
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
NOBEL INSURANCE LIMITED
----------------
NOTICE OF SPECIAL GENERAL MEETING OF SHAREHOLDERS
---------------------
To the Shareholders of
NOBEL INSURANCE LIMITED:
Nobel Insurance Limited, a Bermuda exempted company (the "Company"), will
hold a special general meeting of shareholders (the "Special Meeting") at the
Marriott Castle Harbour Hotel in Tuckers Town, Bermuda, commencing at 10:00
a.m., local time, on , 1998, for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt the Stock Purchase
Agreement (the "Sale Agreement"), dated December 19, 1997, by and among the
Company, Nobel Holdings, Inc., a Delaware corporation and wholly owned
subsidiary of the Company ("Nobel Holdings"), RenaissanceRe Holdings Ltd.,
an Islands of Bermuda company ("RenaissanceRe"), and Renaissance U.S.
Holdings, Inc., a Delaware corporation and wholly owned subsidiary of
RenaissanceRe ("Renaissance Holdings"), and the transactions (other than the
liquidations of Nobel Holdings and the Company) contemplated thereby,
pursuant to which substantially all of the Company's U.S. operating
subsidiaries, including the stock of Nobel Insurance Company, will be sold
to Renaissance Holdings (the "Sale") for a cash purchase price of
$54,106,000 and RenaissanceRe will lend the Company $8,894,000 on a limited
recourse basis, in exchange for a participating promissory note, in order to
facilitate the liquidation of the Company (Proposal 1).
(2) If the Sale is approved by the Company's shareholders, to consider and vote
upon a proposal to approve and adopt a plan of liquidation (the "Plan of
Liquidation") pursuant to which the Company will (a) reduce its share
capital account by decreasing the par value of its capital shares (the
"Common Shares") from $1.00 per share to $0.05 per share and transfer the
amount of the reduction to its contributed surplus account, (b) reduce its
share premium account to zero and transfer the amount thereof to its
contributed surplus account, (c) temporarily adjourn the Special Meeting,
(d) consummate the Sale, (e) cause Nobel Holdings to dissolve, liquidate,
and distribute to the Company the net cash remaining after the Sale and
payment of its known debts, (f) subject to applicable restrictions and
consents required under Bermuda law, make an initial liquidating
distribution (the "Initial Distribution") to shareholders of the Company of
up to $13.00 in cash per Common Share, and (g) reconvene the Special Meeting
to present to the Company's shareholders a proposal (see Proposal 3 below)
for the voluntary winding up of the Company under Bermuda law (Proposal 2).
(3) Upon reconvening the Special Meeting, to consider and vote upon a proposal
to (a) voluntarily wind up the Company (the "Liquidation") in accordance
with the laws of Bermuda, including The Companies Act 1981 and The Companies
(Winding-Up) Rules 1982 (collectively the "Companies Act"), (b) appoint
Malcolm Butterfield of the Bermuda office of KPMG Peat Marwick to act as
liquidator of the Company (in such capacity, the "Liquidator") with full
power and authority to conduct the Liquidation under the Companies Act, (c)
compensate the Liquidator at the rate of not more than $325 per hour with a
minimum fee of $5,000, plus reimbursement of out-of-pocket expenses, and (d)
notwithstanding the appointment of the Liquidator, continue the authority of
the directors (Jeffry K. Amsbaugh, Robert C. Duvall, Gregory E. Leonard,
Thomas J. O'Shane, Roger T. Rankin, and Robert B. Sanborn) and officers
(Jeffry K. Amsbaugh, Thomas D. Nimmo, Douglas W. Caudill, and Bryan L.
Martin) of the Company to exercise such powers as directors and officers,
respectively, of the Company as may be necessary or appropriate to
facilitate the Liquidation, including without limitation compliance with
statutory, tax, and regulatory requirements to which the Company continues
to be or may become subject, but expressly excluding such powers and
functions falling within the scope of the Liquidator under the Companies Act
(Proposal 3).
(4) To transact such other business as may properly come before the Special
Meeting or any postponements or adjournments thereof.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED EACH OF
PROPOSALS 1, 2, AND 3 DESCRIBED ABOVE. THE BOARD OF DIRECTORS BELIEVES THAT THE
TERMS OF THE SALE, THE PLAN OF LIQUIDATION, AND THE ARRANGEMENTS
<PAGE>
WITH THE LIQUIDATOR ARE FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF
THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF EACH
PROPOSAL. Information concerning these proposals is set forth in the
accompanying Proxy Statement.
Approval of each proposal will require the affirmative vote of a majority of
the votes cast at the Special Meeting. Approval of Proposal 1 is not contingent
upon approval of any other proposal and, if Proposal 1 is approved but no other
proposal is approved, the Sale will nonetheless be consummated if all other
conditions to its closing have been satisfied. Proposals 2 and 3 are contingent
upon approval of Proposal 1, and if Proposal 1 is not approved or if the Sale is
for any reason not consummated neither the Plan of Liquidation (including the
Initial Distribution of up to $13.00 per Common Share) nor the Liquidation will
be completed.
If Proposal 1 is approved by the Company's shareholders, but Proposal 2 is
not approved by the Company's shareholders, the Company's share capital and
share premium accounts will not be reduced, the Special Meeting will not be
temporarily adjourned, the Initial Distribution will not be paid, and Proposal 3
(the Liquidation) will not be presented to the Company's shareholders for a
vote. The Sale will, nevertheless, be consummated and, except for the limited
role contemplated under the Sale Agreement, the Company's management will all
become employees of RenaissanceRe upon the closing of the transactions
contemplated by the Sale Agreement. The Company will have no operating assets,
no plans, and no prospects. Accordingly, in this event, the Company intends to
call a separate special general meeting of shareholders for the purpose of
presenting an alternative proposal equivalent to Proposal 3 for the voluntary
winding up of the Company and will incur additional fees and expenses in
connection therewith.
After completion of financial and statutory reviews and receipt of any
required regulatory consents, the Board of Directors of the Company intends to
declare the Initial Distribution in the maximum amount per share, up to $13.00,
that at the time is lawful and in compliance with Bermuda law. There can,
however, be no assurance that the Company will be able to declare and pay the
Initial Distribution or, if declared and paid, what the amount of the Initial
Distribution will be.
Only shareholders of record at the close of business on , 1998, are
entitled to notice of, and to vote at, the Special Meeting or any postponements
or adjournments thereof. A list of shareholders entitled to vote at the Special
Meeting will be available at the Special Meeting for examination by any
shareholder. Officers and directors of the Company who own an aggregate of
539,111 Common Shares, or % of the outstanding Common Shares, and Wampum
Hardware Company which owns 275,779 Common Shares, or % of the outstanding
Common Shares, have granted irrevocable proxies to RenaissanceRe in respect of
the Common Shares owned by them. RenaissanceRe intends to vote the irrevocable
proxies in favor of Proposals 1, 2, and 3 and against any transaction or matter
that conflicts with the Sale.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE MARK, DATE,
AND SIGN THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY, AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. The proxy must be signed
by all registered holders exactly as the stock is registered. No postage is
required if the proxy is mailed in the United States. Prompt response by our
shareholders will reduce the time and expense of solicitation. You may revoke
the proxy at any time before the proxy is exercised by delivering written notice
of revocation to the Secretary of the Company, by delivering a subsequently
dated proxy, or by attending the Special Meeting, withdrawing the proxy, and
voting your shares personally.
By Order of the Board of Directors,
Douglas W. Caudill
SECRETARY
Hamilton, Bermuda
, 1998
<PAGE>
NOBEL INSURANCE LIMITED
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL INFORMATION.................................................................. 1
SPECIAL GENERAL MEETING.............................................................. 1
General............................................................................ 1
Record Date; Outstanding Capital Stock............................................. 1
Quorum and Voting.................................................................. 2
Actions to be Taken at the Meeting; Recommendations of the Nobel Board............. 2
Proposal 1 (The Sale)............................................................ 2
Proposal 2 (The Plan of Liquidation)............................................. 3
Proposal 3 (The Liquidation)..................................................... 3
Persons Making the Solicitation.................................................... 4
Forward-Looking Statements......................................................... 4
THE COMPANY.......................................................................... 5
Selected Consolidated Financial Data............................................... 5
Market Prices and Dividends........................................................ 7
THE TRANSACTIONS..................................................................... 8
General............................................................................ 8
Background of the Transactions..................................................... 10
Reasons for the Transactions; Recommendations of the Nobel Board................... 12
Opinion of the Company's Financial Advisor......................................... 14
The Sale Agreement................................................................. 20
Plan of Liquidation................................................................ 28
The Liquidation.................................................................... 31
Appraisal Rights................................................................... 35
Accounting Treatment............................................................... 35
Insurance Regulations.............................................................. 35
Tax Consequences................................................................... 36
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT OF THE COMPANY........... 41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................................... 43
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON............................. 43
INDEPENDENT AUDITORS................................................................. 45
SHAREHOLDER PROPOSALS................................................................ 45
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.................................... 45
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS...................... F-1
Appendix A--STOCK PURCHASE AGREEMENT................................................. A-1
Appendix B--PLAN OF LIQUIDATION...................................................... B-1
Appendix C--FAIRNESS OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION........................................................................ C-1
Appendix D--FORM OF PARTICIPATING PROMISSORY NOTE.................................... D-1
</TABLE>
i
<PAGE>
NOBEL INSURANCE LIMITED
FALCONER HOUSE, GROUND LEVEL
108 PITTS BAY ROAD
HAMILTON, BERMUDA HM AX
------------------------
PROXY STATEMENT
FOR SPECIAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD , 1998
---------------------
GENERAL INFORMATION
The Board of Directors (the "Nobel Board") of Nobel Insurance Limited, a
Bermuda exempted company (the "Company"), has called a special general meeting
of shareholders (the "Special Meeting") to be held on , 1998, to consider
various proposals that, if approved, would authorize the sale of all of the U.S.
operating subsidiaries of the Company and the other transactions (other than the
winding up of Nobel Holdings, Inc., and the Company) contemplated thereby (the
"Sale"), a plan of liquidation (the "Plan of Liquidation"), and the voluntary
winding up of the remaining affairs of the Company (the "Liquidation").
This Proxy Statement is being furnished to shareholders of the Company in
connection with the solicitation, on behalf of the Nobel Board, of proxies to be
voted at the Special Meeting, and at any postponements or adjournments thereof,
on each of the proposals set forth in the Notice of the Special Meeting
concurrently being furnished to shareholders of the Company and more fully
described herein.
As used in this Proxy Statement, the "Company" refers, as the context may
require, to Nobel Insurance Limited and its direct and indirect subsidiaries on
a consolidated basis.
SPECIAL GENERAL MEETING
GENERAL
The Special Meeting will be held at the Marriott Castle Harbour Hotel in
Tuckers Town, Bermuda, commencing at 10:00 a.m., local time, on , 1998.
Proxies in the form enclosed will be voted at the Special Meeting if
properly executed, returned to the Company before the Special Meeting, and not
revoked. You may revoke your proxy with respect to any or all of the matters to
be acted upon at the Special Meeting, including any postponements or
adjournments thereof, at any time before it is voted by (i) delivering written
notice of revocation to the Secretary of the Company, (ii) delivering a
subsequently dated proxy, or (iii) attending the Special Meeting, including any
postponement or adjournments thereof, withdrawing your proxy, and voting your
shares personally. The approximate date on which this Proxy Statement and the
enclosed proxy card will first be sent to shareholders is , 1998.
RECORD DATE; OUTSTANDING CAPITAL STOCK
Holders of record of the capital shares, $1.00 par value per share, of the
Company (the "Common Shares") at the close of business on , 1998 (the
"Record Date"), are entitled to notice of and to vote at the Special Meeting. At
the close of business on the Record Date, the Company had Common Shares
outstanding and entitled to vote at the Special Meeting. The Common Shares are
the Company's only class of securities outstanding and entitled to vote.
1
<PAGE>
QUORUM AND VOTING
The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the Common Shares issued and outstanding and entitled to vote
at the Special Meeting is necessary to constitute a quorum to transact business.
Each share represented at the Special Meeting in person or by proxy will be
counted for purposes of determining whether a quorum is present.
With respect to each proposal presented, each shareholder of record present
at the meeting, in person or by proxy, may cast one vote for each Common Share
held by such shareholder that is entitled to be voted at the Special Meeting.
The holders of Common Shares will vote as a single class with regard to all
matters to be acted upon at the Special Meeting. An affirmative vote of a
majority of the votes cast is required for approval of each of the proposals
listed in the Notice of Special General Meeting of Shareholders. All shares
voted "for," "against," or "abstain" on a proposal will be counted as votes cast
with respect to that proposal. In addition, shares present but not voting on a
proposal will be counted as votes cast. Accordingly, abstentions and non-votes
with respect to a proposal will have the same effect as voting against the
proposal.
As described below under "The Transactions--The Sale Agreement--Irrevocable
Proxies" and "Interests of Certain Persons in Matters to Be Acted Upon,"
directors and officers of the Company who own 539,111 Common Shares, or % of
the outstanding Common Shares, and Wampum Hardware Company which owns 275,779
Common Shares, or % of the outstanding Common Shares, have each granted
irrevocable proxies to RenaissanceRe Holdings, Ltd., an Islands of Bermuda
company ("RenaissanceRe"), pursuant to agreements dated December 19, 1997, for
so long as such shares are owned by such persons or their affiliates to vote
those shares in favor of the Sale Agreement (as defined below) and related
transactions and against any transaction or matter that conflicts with the Sale.
RenaissanceRe intends to vote the irrevocable proxies in favor of the Sale
Agreement and any related transactions or matters at the Special Meeting and
against any transaction or matter that conflicts with the Sale.
ACTIONS TO BE TAKEN AT THE MEETING; RECOMMENDATIONS OF THE NOBEL BOARD
For a detailed description of the Sale, the Plan of Liquidation, and the
Liquidation, see "The Transactions--The Sale Agreement," "--The Plan of
Liquidation," and "--The Liquidation," respectively. The Sale, the Plan of
Liquidation, and the Liquidation are sometimes collectively referred to as the
"Transactions."
PROPOSAL 1 (THE SALE). The Company has entered into a Stock Purchase
Agreement (the "Sale Agreement"), dated December 19, 1997, by and among the
Company, Nobel Holdings, Inc., a Delaware corporation and wholly owned
subsidiary of the Company ("Nobel Holdings"), RenaissanceRe, and Renaissance
U.S. Holdings, Inc., a Delaware corporation and wholly owned subsidiary of
RenaissanceRe ("Renaissance Holdings"), providing for the Sale. Pursuant to the
Sale Agreement, and the transactions contemplated thereby, the stock of the
subsidiaries of Nobel Holdings (including Nobel Insurance Company) will be sold
to Renaissance Holdings for $54,106,000 in cash. In addition, the Sale Agreement
provides for RenaissanceRe to lend $8,894,000 to the Company on a limited
recourse basis, in exchange for a participating promissory note, to facilitate
the ability of the Company to pay a total of not more than $14.00 per Common
Share (other than as described herein) to shareholders of the Company by means
of purchases of shares and/or liquidating distributions. The Company currently
contemplates only making the liquidating distributions described herein and does
not currently contemplate tendering for or purchasing any Common Shares.
Although neither Bermuda law nor the Company's Bye-laws require that the
Sale Agreement be approved by the Company's shareholders, the Nobel Board
believes that such approval is warranted given the extraordinary nature of the
Sale. In that regard, at the Special Meeting, the shareholders of the Company
will be asked to consider and vote upon a proposal to approve and adopt the Sale
Agreement.
2
<PAGE>
THE NOBEL BOARD HAS UNANIMOUSLY APPROVED THE SALE AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 1.
PROPOSAL 2 (THE PLAN OF LIQUIDATION). Subject to approval by the
shareholders of Proposal 2, pursuant to the Plan of Liquidation, the Company
will (a) reduce its share capital account by decreasing the par value of the
Common Shares from $1.00 per share to $0.05 per share and transfer the amount of
the reduction to its contributed surplus account, (b) reduce its share premium
account to zero and transfer the amount thereof to its contributed surplus
account, (c) temporarily adjourn the Special Meeting, (d) consummate the Sale,
(e) cause Nobel Holdings to dissolve, liquidate, and distribute to the Company
the net cash remaining after the Sale and payment of its known debts, (f)
subject to applicable restrictions and consents required under Bermuda law, make
an initial liquidating distribution to shareholders of the Company of up to
$13.00 in cash per Common Share (the "Initial Distribution"), and (g) reconvene
the Special Meeting to present to the Company's shareholders a proposal for the
voluntary winding up of the Company under Bermuda law. In addition to
shareholder approval, the Plan of Liquidation is conditioned upon approval by
shareholders of the Sale (I.E., Proposal 1). If the Plan of Liquidation is
approved, then pursuant to its terms the Special Meeting will be temporarily
adjourned until the later of , 1998, or the date which is five business
days after the last to occur of (i) the closing of the Sale, (ii) the
dissolution and liquidation of Nobel Holdings, (iii) payment of the Initial
Distribution (or the determination by the Nobel Board that the Company cannot
pay the Initial Distribution), and (iv) the 60-day anniversary of the Special
Meeting, in order to permit those transactions to be completed prior to
consideration of Proposal 3 regarding the winding up and dissolution of the
Company.
If Proposal 1 is approved by the Company's shareholders, but Proposal 2 is
not approved by the Company's shareholders, the Company's share premium and
share capital accounts will not be reduced, the Special Meeting will not be
temporarily adjourned, the Initial Distribution will not be paid, and Proposal 3
(the Liquidation) will not be presented to the Company's shareholders for a
vote. The Sale will, nevertheless, be consummated and, except for the limited
role contemplated under the Sale Agreement, the Company's management will all
become employees of RenaissanceRe upon the closing of the transactions
contemplated by the Sale Agreement (the "Closing"). The Company will have no
operating assets, no plans or prospects. Accordingly, in this event, the Company
intends to call a separate special general meeting of shareholders for the
purpose of presenting an alternative proposal equivalent to Proposal 3 for the
voluntary winding up of the Company and will incur additional fees and expenses
in connection therewith.
After completion of financial and statutory reviews and receipt of any
required regulatory consents, the Nobel Board of Directors intends to declare
the Initial Distribution in the maximum amount per share, up to $13.00, that at
the time is lawful and in compliance with Bermuda law. There can, however, be no
assurance that the Company will be able to declare and pay the Initial
Distribution or, if declared and paid, what the amount of the Initial
Distribution will be.
At the Special Meeting, the shareholders of the Company will be asked to
consider and vote upon a proposal to approve and adopt the Plan of Liquidation.
THE NOBEL BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE PLAN OF LIQUIDATION AND
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 2.
PROPOSAL 3 (THE LIQUIDATION). Conditioned upon consummation of the Sale, the
Board has unanimously approved the Liquidation. When the Special Meeting is
reconvened in accordance with the Plan of Liquidation, the shareholders of the
Company will be asked to consider and vote upon a proposal to (a) approve the
Liquidation in accordance with the laws of Bermuda, including The Companies Act
1981 and The Companies (Winding-Up) Rules 1982 (collectively, the "Companies
Act"), (b) appoint Malcolm Butterfield of the Bermuda office of KPMG Peat
Marwick, chartered accountants ("KPMG Bermuda"), to act as liquidator of the
Company (in such capacity, the "Liquidator") with full power and authority to
conduct the Liquidation under the Companies Act, (c) compensate the Liquidator
at a rate of not more than $325 per hour with a minimum fee of $5,000, plus
reimbursement of out-of-pocket expenses, and (d) notwithstanding the appointment
of the Liquidator, continue the authority of the directors (Jeffry K. Amsbaugh,
Robert C. Duvall, Gregory E. Leonard, Thomas J. O'Shane, Roger T. Rankin, and
Robert B.
3
<PAGE>
Sanborn) and officers (Jeffry K. Amsbaugh, Thomas D. Nimmo, Douglas W. Caudill,
and Bryan L. Martin) of the Company to exercise such powers as directors and
officers, respectively, of the Company as may be necessary or appropriate to
facilitate the Liquidation, including without limitation compliance with
statutory, tax, and regulatory requirements to which the Company continues to be
or may become subject, but expressly excluding such powers and functions falling
within the scope of the Liquidator under the Companies Act. THE NOBEL BOARD HAS
UNANIMOUSLY APPROVED THE LIQUIDATION AND THE OTHER MATTERS INCIDENT THERETO AS
DESCRIBED IN CLAUSES (B), (C), AND (D) ABOVE, AND UNANIMOUSLY RECOMMENDS THAT
THE SHAREHOLDERS VOTE FOR PROPOSAL 3.
Properly executed proxies received by the Company prior to the Special
Meeting will be voted as specified on such proxy by the shareholder and at the
discretion of the proxy holders on any other matter that may properly come
before the Special Meeting or any postponements or adjournments thereof. The
Nobel Board knows of no such other matter as of the date of this Proxy
Statement.
PERSONS MAKING THE SOLICITATION
The accompanying proxy is being solicited on behalf of the Nobel Board. The
Company will bear the expense of preparing, printing, and mailing the proxy
solicitation material and the form of proxy. No other person or persons will
bear such costs either directly or indirectly. In addition to the use of the
mail, proxies may be solicited by personal interview, telephone, telegram,
facsimile, or other means of communication by directors, officers, and employees
of the Company. In addition, the Company has requested brokerage firms and other
custodians, nominees, and fiduciaries to forward copies of the proxy
solicitation material and form of proxy to the beneficial owners of Common
Shares held of record by such persons and to request authority for execution of
the proxies. The Company will reimburse such record holders for their reasonable
out-of-pocket expenses in doing so. The Company has retained Corporate Investor
Communications, Inc., to assist in the solicitation of proxies. The fee of such
firm is estimated not to exceed $5,000 plus reimbursement of reasonable
out-of-pocket expenses.
FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements other than historical or current facts,
including, without limitation, statements about the business, financial
condition, business strategy, plans and objectives of management, and prospects
of the Company, are forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from these
expectations. Such risks and uncertainties include, without limitation, the
satisfaction of conditions to the consummation of the Sale, the Liquidation
process, the amounts and timing of the anticipated distributions to shareholders
pursuant to the liquidating distributions, exposure to losses, changes in
competition, economic conditions, decrease in demand for insurance services, new
technological developments, changes in tax and other governmental rules and
regulations applicable to the Company, and other risks indicated in the
Company's filings with the Securities and Exchange Commission (the
"Commission"). These risks and uncertainties are beyond the ability of the
Company to control and, in many cases, the Company cannot predict the risks and
uncertainties that could cause actual results to differ materially from those
indicated by the forward-looking statements. When used in this Proxy Statement,
the words "believes," "plans," "estimates," "expects," "anticipates," "intends,"
and similar expressions as they relate to the Company or its management are
intended to identify forward-looking statements. The Company undertakes no
obligation to release publicly the results of any future revisions it may make
to forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
4
<PAGE>
THE COMPANY
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, are enclosed with this Proxy Statement. See "Incorporation
of Certain Information by Reference."
SELECTED CONSOLIDATED FINANCIAL DATA
The selected historical consolidated income, per share, and balance sheet
data presented below for, and as of the end of, the years ended December 31,
1992 through 1996, are derived from the consolidated financial statements of the
Company which have been audited by KPMG Bermuda. The consolidated financial
statements of the Company as of December 31, 1995 and 1996, and for each of the
years in the three-year period ended December 31, 1996, and KPMG Bermuda's
report thereon are incorporated by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1996. The selected historical
consolidated income, per share, and balance sheet data as of and for the nine
month periods ended September 30, 1996 and 1997, are derived from the unaudited
consolidated financial statements of the Company, which, in the opinion of the
Company's management, include all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the results of
operations and financial condition of the Company for the unaudited periods. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for the full year. The selected consolidated income, per
share, and balance sheet data should be read in conjunction with the
consolidated financial statements, related notes, and other financial
information appearing in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, and the Company's Quarterly Report on Form 10-Q for the
nine months ended September 30, 1997, copies of which are enclosed with this
Proxy Statement. See "Incorporation of Certain Information by Reference." The
selected pro forma consolidated data presented below are derived from the
Unaudited Pro Forma Condensed Consolidated Financial Statements of the Company
included elsewhere in this Proxy Statement.
5
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------- -------------------------------
HISTORICAL PRO HISTORICAL PRO
------------------------------------------------ FORMA --------------------- FORMA
1992 1993 1994 1995 1996 1996(1) 1996 1997 1997(1)
-------- -------- -------- -------- -------- ------- -------- ----------- -------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME DATA:
Gross premiums written................ $ 34,467 $ 44,073 $ 59,527 $ 70,515 $ 83,703 $ -- $ 63,329 $ 58,872 $ --
Ceded premiums written................ (14,355) (15,605) (19,025) (22,921) (40,508) -- (14,465) (25,475) --
-------- -------- -------- -------- -------- ------- -------- ----------- -------
Net premiums written.................. 20,112 28,468 40,502 47,594 43,195 -- 49,864 33,397 --
Change in unearned premiums........... (1,629) (2,172) (5,681) (4,396) 12,206 -- (4,536) (6,164) --
-------- -------- -------- -------- -------- ------- -------- ----------- -------
Net premiums earned................... 18,483 26,296 34,821 43,198 55,401 -- 45,328 27,233 --
Net investment income................. 6,313 5,956 5,543 7,302 6,272 -- 4,709 4,414 --
Net realized gains.................... 418 253 489 1,412 762 -- 501 1,882 --
Claim adjuster fees................... 1,110 5,159 9,400 9,357 10,423 -- 8,726 4,555 --
Other income.......................... 266 529 -- -- -- -- -- -- --
Gain on sale of U.S. Subsidiaries..... -- -- -- -- -- 8,264 -- -- 8,264
-------- -------- -------- -------- -------- ------- -------- ----------- -------
Total revenues...................... 26,590 38,193 50,253 61,269 72,858 8,264 59,264 38,084 8,264
-------- -------- -------- -------- -------- ------- -------- ----------- -------
Claims and claim adjustment
expenses............................ (2,578) 9,505 13,628 31,702 42,197 -- 30,162 16,578 --
Service fees and commissions.......... 1,850 5,841 6,881 6,992 13,383 -- 11,481 4,702 --
Underwriting and operating expenses... 8,246 12,919 14,369 18,843 15,060 120 13,466 12,235 120
-------- -------- -------- -------- -------- ------- -------- ----------- -------
Total expenses...................... 7,518 28,265 34,878 57,537 70,640 120 55,109 33,515 120
-------- -------- -------- -------- -------- ------- -------- ----------- -------
Income before income taxes............ 19,072 9,928 15,375 3,732 2,218 8,144 4,155 4,569 8,144
Income tax expense (benefit).......... -- -- -- (2,500) (2,069) 2,906 138 1,388 2,906
-------- -------- -------- -------- -------- ------- -------- ----------- -------
Net income.......................... $ 19,072 $ 9,928 $ 15,375 $ 6,232 $ 4,287 $5,238 $ 4,017 $ 3,181 $5,238
-------- -------- -------- -------- -------- ------- -------- ----------- -------
-------- -------- -------- -------- -------- ------- -------- ----------- -------
PER SHARE DATA:
Net income............................ $ 2.89 $ 1.43 $ 2.37 $ 1.06 $ 0.92 $ 1.13 $ 0.86 $ 0.69 $ 1.13
Average number capital shares......... 6,599 6,949 6,478 5,901 4,659 4,629 4,690 4,614 4,629
GAAP OPERATING RATIOS:
Claims ratio.......................... (13.9) 36.1 39.1 73.3 76.2 N/A 69.5 60.9 N/A
Expense ratio......................... 42.0 42.0 28.0 27.2 29.2 N/A 30.4 38.5 N/A
-------- -------- -------- -------- -------- -------- -----------
Combined ratio........................ 28.1 78.1 67.3 100.5 105.4 N/A 99.9 99.4 N/A
BALANCE SHEET DATA (2):
Cash & investments.................... $105,365 $108,148 $107,643 $128,866 $123,442 $ -- $122,515 $120,702 $ --
Total assets.......................... $143,873 $153,310 $168,173 $203,388 $222,778 $ -- $205,508 $215,202 $ --
Total shareholders' equity............ $ 46,114 $ 54,479 $ 56,548 $ 64,908 $ 53,187 $ -- $ 52,025 $ 56,493 $ --
</TABLE>
- - - ------------------------------
NOTES:
(1) The unaudited pro forma income statement information for the year ended
December 31, 1996, and for the nine months ended September 30, 1997, give
effect to the sale of the U.S. assets and the liquidations of both Nobel
Holdings and the Company as if the Sale and liquidations had occurred on
January 1, 1996 and 1997, respectively. The gain on sale of the U.S.
Subsidiaries has been evaluated based on the balances for the U.S.
Subsidiaries included in the Historical Company Balance Sheet as of
September 30, 1997. The unaudited pro forma balance sheet information has
been prepared as if the Sale had occurred on September 30, 1997. As a result
of the Transactions, the GAAP Operating Ratios and Balance Sheet Data are
not applicable and zero, respectively. The Interim Pro Forma Balance Sheet
Data as of September 30, 1997, after giving effect to the Sale, but prior to
the liquidations of Nobel Holdings and the Company, is as follows: cash and
investments--$73,318; total assets--$81,371; and total shareholders'
equity--$62,998. See "Unaudited Pro Forma Condensed Consolidated Financial
Statements."
(2) At end of period.
6
<PAGE>
MARKET PRICES AND DIVIDENDS
The Common Shares are traded on the Nasdaq National Market of The Nasdaq
Stock Market ("Nasdaq") under the symbol "NOBLF." At , 1998, the Company
had approximately shareholders of record. The following table sets forth
for the calendar periods indicated the high and low sales price per share of the
Common Shares as reported on Nasdaq.
<TABLE>
<CAPTION>
1996 1997 1998
-------------------- -------------------- --------------------
HIGH LOW HIGH LOW HIGH LOW
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter(1).............. $ 12.500 $ 11.250 $ 13.875 $ 11.875 $ 13.313 $ 13.063
2nd Quarter................. 11.750 10.875 15.250 12.125
3rd Quarter................. 12.750 11.000 15.125 14.125
4th Quarter................. 12.625 11.250 14.875 12.125
</TABLE>
- - - ------------------------
(1) Information for the first quarter 1998 is given through February 10, 1998.
The closing sale price for a Common Share on February 10, 1998, was $13.313.
The closing sale price for a Common Share on December 18, 1997, the last trading
day preceding the announcement of the proposed Sale, was $13.750. The closing
sale price for a Common Share on June 6, 1997, the last trading day preceding
the announcement that the Company was exploring strategic alternatives, was
$12.688. The Company paid quarterly cash dividends on its Common Shares at the
annual rate of $0.20 per share during 1996 and 1997. The Company has suspended
the payment of ordinary cash dividends pending approval and completion of the
Sale, the Plan of Liquidation, and the Liquidation. If the Transactions are
approved, the Company does not intend to pay any further cash dividends other
than the liquidating distributions totaling no more than $14.00 per Common Share
(other than as described herein).
Following payment of the Initial Distribution to shareholders, there can be
no assurance that the Common Shares will continue to satisfy the continued
listing requirements of Nasdaq, whether the Nasdaq National Market or Nasdaq
SmallCap Market, and the Company believes it is likely that the Common Shares
will be delisted from Nasdaq. In the event the Company does not maintain the
following continued listing criteria, the Common Shares are subject to being
delisted from Nasdaq: (i) a minimum bid price of $1.00 per Common Share; (ii)
market value of public float of $5 million (National Market) or $1 million
(SmallCap Market); and (iii) at least two market markers, or at least 400
(National Market) or 300 (SmallCap Market) holders of 100 Common Shares or more.
Following payment of the Initial Distribution, there can be no assurance that an
active public market for the Common Shares will be sustained or, if sustained,
will provide sufficient liquidity for a shareholder to sell Common Shares on
acceptable terms. In addition, the market price of Common Shares could be
subject to significant fluctuations in response to various factors and events.
7
<PAGE>
THE TRANSACTIONS
GENERAL
The Sale Agreement provides for the purchase by Renaissance Holdings from
Nobel Holdings of the following for cash consideration of $54,106,000: (i) all
the issued and outstanding shares of capital stock (the "Shares") of the U.S.
Subsidiaries (as defined below) other than Nobel Insurance Agency, Inc. ("NIA"),
and (ii) all of the assets and rights beneficially owned by Nobel Holdings in or
to NIA (the "NIA Assets"). The term "U.S. Subsidiaries" as used herein means
Nobel Insurance Company ("Nobel Insurance"), Nobel Service Corporation, IAS
Claims Services, Inc., and NIA. Since it is a wholly owned subsidiary of Nobel
Insurance, Nobel Managing Agents, Inc. will also be sold to RenaissanceRe as
part of the Sale. The Sale Agreement also provides for RenaissanceRe to lend
$8,894,000 to the Company on a limited recourse basis (the "Limited Recourse
Loan"), in exchange for a participating promissory note of the Company, to
facilitate the ability of the Company to pay a total of not more than $14.00 in
cash per Common Share (other than as described herein) by means of repurchases
of shares, dividends, and/or liquidating distributions. The Company currently
contemplates only making the liquidating distributions described herein and does
not contemplate tendering for or purchasing common shares. See "--The Sale
Agreement," "--The Plan of Liquidation," and "--The Liquidation."
Upon consummation of the Sale (the "Closing"), Nobel Holdings will transfer
the Shares and assign the NIA Assets to Renaissance Holdings. The U.S.
Subsidiaries will then be direct, wholly owned or, in the case of NIA,
beneficially owned subsidiaries of Renaissance Holdings. Following the Closing,
Nobel Holdings will have no material assets other than the cash consideration
received in the Sale. Upon consummation of the Sale and pursuant to the Plan of
Liquidation, the Company intends to cause Nobel Holdings to dissolve under
Delaware law, pay off its debts, and make a liquidating distribution to the
Company of the remaining net cash proceeds of the Sale. Pursuant to the Plan of
Liquidation, the Company then intends to pay the Initial Distribution to
shareholders in an amount up to $13.00 in cash per Common Share. See "--Plan of
Liquidation."
The Nobel Board will not be able to determine the amount of the Initial
Distribution until it completes a financial and statutory review of the Company
at the time of the proposed declaration of the Initial Distribution. In
addition, the Company must be in compliance with the statutory requirements at
the time of the proposed payment of the Initial Distribution. If the Sale had
been consummated and the reduction of capital pursuant to the Plan of
Liquidation had been completed as of the date of this Proxy Statement, the
Company believes it would have been able to meet all statutory requirements and
to declare and pay an Initial Distribution equal to $13.00 per Common Share.
There can, however, be no assurance that the Company will be able to declare and
pay the Initial Distribution or, if declared and paid, what the amount of the
Initial Distribution will be. The Nobel Board intends to declare the maximum
amount per share, up to $13.00, that at the time is lawful and in compliance
with Bermuda law. See "-- Plan of Liquidation."
Following payment of the Initial Distribution, if any, and the reconvening
of the Special Meeting, and assuming shareholder approval is obtained, the
Company will voluntarily wind up its affairs in accordance with Bermuda law,
including the Companies Act. The Liquidator appointed by the shareholders will
conduct the Liquidation, as required by Bermuda law, although it is proposed
that the authority of the current directors and officers of the Company will be
continued as necessary and appropriate to facilitate the winding up and
liquidation process. Prior to or as a part of the winding up of its affairs, in
addition to converting other assets to cash and paying off or settling other
liabilities and debts, the Company intends to assign to one or more reinsurers
the Company's remaining obligations under reinsurance and insurance contracts
together with associated claim reserves or enter into commutation agreements
with ceding insurers terminating its reinsurance obligations and assigning the
associated claim reserves. The Company is negotiating with Insurance Company of
North America, the primary ceding insurer under its reinsurance agreements, and
other insurers or potential parties to such contemplated commutation agreements,
but, as
8
<PAGE>
of the date of this Proxy Statement, had not reached assignment or commutation
agreements with any of those companies. There can be no assurance that any such
agreement will be reached or can be reached in a timely manner or on terms
favorable to the Company.
Under the terms of the Sale Agreement and the Limited Recourse Loan from
RenaissanceRe, the maximum amount per share that the Company can pay
shareholders after the date of the Sale Agreement and prior to completion of the
Liquidation, whether by repurchase of shares, or by means of one or more
dividends (including ordinary cash dividends) or distributions, is an amount
equal to the sum of (i) $14.00 per outstanding Common Share, less (ii) the
prorated expenses of making and completing a tender offer for Common Shares, if
any, plus (iii) an additional amount (if the Liquidation is completed after June
30, 1998, but prior to December 31, 1999, and the principal of the Limited
Recourse Loan has been paid) accruing from June 30, 1998, to the date of the
final liquidating distribution at the rate of 6% per annum on the difference
between $14.00 and any amounts previously distributed, to be paid, to the extent
of available funds, on a PARI PASSU basis with accrued interest on the Limited
Recourse Loan. If the Company is unable to generate sufficient funds from the
net proceeds of the Sale and the conversion to cash of its other assets to pay
all of its debts and liabilities and the expenses of the Liquidation, the
Company is permitted to use the proceeds of the Limited Recourse Loan to pay any
of such liabilities and expenses, other than U.S. federal tax liabilities, and
to make the permitted distributions and payments to its shareholders. The
distributions to shareholders may be less than the aggregate amount described
above if it is determined during the process of Liquidation that the Company or
Nobel Holdings has liabilities that are not currently known and that such
liabilities, together with the currently known liabilities of the Company or
Nobel Holdings, exceed the amounts available from the winding up of the
Company's assets and the Limited Recourse Loan.
After the Initial Distribution by the Company, to be effected prior to the
appointment of the Liquidator, it is not anticipated that any partial
liquidating distributions will be made by the Liquidator until the winding up of
the Company's affairs has been completed and all of its debts and obligations
other than those pursuant to the Limited Recourse Loan have been paid or
settled. At that time, in accordance with the terms of the Sale Agreement, the
Limited Recourse Loan, the Companies Act, and subject to the maximum amounts
described in the preceding paragraph, the Company expects that the Liquidator
will pay out the Company's remaining cash in accordance with the following
priorities:
(1) First, payment of a final liquidating distribution to shareholders equal
to not more than $14.00 in cash per Common Share outstanding on the date of the
Sale Agreement (or issued in exchange for any employee options outstanding on
such date) less the amount per share paid in the Initial Distribution;
(2) Second, to the extent of available funds, payment of the $8,894,000
principal amount of the Limited Recourse Loan then remaining outstanding;
(3) Third, to the extent of available funds, payment of (i) accrued but
unpaid interest on the Limited Recourse Loan at the rate of 6% per annum from
the date of Closing until the payment date, and (ii) to the extent of available
funds, if the payment date is after June 30, 1998, but prior to December 31,
1999, on a PARI PASSU basis with the accrued but unpaid interest on the Limited
Recourse Loan, an additional amount to the Company's shareholders accrued each
day from July 1, 1998, to the date of the final liquidating distribution at the
rate of 6% per annum on any portion of the amount described in clause (1) above
that remains unpaid after June 30, 1998; and
(4) Fourth, to the extent of available funds, payment of all remaining cash
to RenaissanceRe (or other holder of the promissory note relating to the Limited
Recourse Loan) as additional interest.
After the payments described above, the Liquidator will take steps to
dissolve the Company and terminate its legal existence. See "--The Liquidation."
9
<PAGE>
BACKGROUND OF THE TRANSACTIONS
The Nobel Board historically has monitored and reviewed insurance industry
and general economic conditions, as well as the Company's performance within
those environments, and has consulted with management as it deemed necessary to
adjust the Company's plans and strategies to respond or take advantage of those
environments or opportunities. Beginning in late 1996 and continuing into 1997,
the Nobel Board and management of the Company reviewed whether the best
interests of the Company and its shareholders would be better served by a
combination of the Company with other insurers, either by sale of the Company,
purchase of other insurers, or a strategic alliance with other insurers. Several
inquiries had been received regarding the desire of the Company to develop
strategic alliances and/or the desire of the Nobel Board and management to
discuss the sale of the Company. The Company was also being contacted
periodically by certain companies indicating a willingness on their part to be
acquired. Considerable management time was being spent to evaluate these
possible strategic directions.
Recognizing the need to have a comprehensive and thorough review of the
strategic alternatives available for the Company, a number of investment bankers
were contacted and invited to make presentations to the Nobel Board, including
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"). The Nobel Board
heard and reviewed presentations from the investment banking firms at its March
14, 1997, meeting in Toronto, Canada. At the conclusion of this meeting, a
Special Committee of the Nobel Board consisting of Jeffry K. Amsbaugh, Robert B.
Sanborn, and Roger T. Rankin was appointed and charged with the responsibility
of continuing to interview additional investment bankers and to make a
recommendation to the full Nobel Board regarding selection of an investment
banker.
A special meeting of the Nobel Board was held on April 21, 1997, to discuss
the recommendations of the Special Committee in the selection of an investment
banker. At that meeting, Mr. Amsbaugh reviewed with the full Nobel Board the
various investment banking candidates, the rankings assigned thereto by the
Special Committee, and the conclusion that DLJ was the firm best positioned with
respect to the insurance industry to assist the Company in maximizing
shareholder value. Based on the recommendation of the Special Committee, the
Nobel Board authorized management of the Company to engage the services of DLJ.
See "--Opinion of the Company's Financial Advisor."
Pursuant to an engagement letter dated May 5, 1997, the Company retained DLJ
to identify potential acquirers, negotiate the financial aspects of any proposed
transactions, and render an opinion regarding the fairness from a financial
point of view of the consideration to be received by the shareholders of the
Company in any proposed sale, merger, consolidation, or any other business
combination, in one or a series of transactions, involving all or a substantial
amount of the business, securities, or assets of the Company. The Nobel Board
selected DLJ as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in similar transactions
and is familiar with the Company, its business, and the property and casualty
insurance industry. Pursuant to the terms of the engagement letter between the
Company and DLJ, the Company paid DLJ a $50,000 retainer fee and agreed to pay
an additional $350,000 fee upon rendering of DLJ's opinion (the "DLJ Opinion").
In addition, the Company agreed to pay DLJ, on the date of the Sale, cash
consideration of approximately $1.2 million pursuant to the terms of the
engagement letter, less the retainer fee and the opinion fee paid prior to that
date. The Company also agreed to reimburse DLJ for all reasonable out-of-pocket
expenses. The terms of the fee arrangement with DLJ, which DLJ and the Company
believe are customary in transactions of this nature, were negotiated at arms'
length between the Company and DLJ and the Nobel Board was aware of such
arrangement, including the fact that a significant portion of the aggregate fee
payable to DLJ is contingent upon consummation of the Sale. See "Opinion of the
Company's Financial Advisor--Engagement of DLJ."
During the summer and fall of 1997, DLJ conducted an extensive process to
identify and solicit potential buyers and/or strategic partners. In total, DLJ
contacted 58 potential buyers, including U.S. and Bermuda property and casualty
insurance companies and financial buyers. In addition, the public
10
<PAGE>
announcement by the Company on June 9, 1997, that it was exploring its strategic
alternatives, including a sale, and that it had retained DLJ, provided
substantial time for all other interested potential buyers to approach the
Company. A total of 33 potential buyers signed confidentiality agreements and
received confidential information memoranda, 11 submitted preliminary proposals,
and seven conducted due diligence investigations of the Company. This process
resulted in one final proposal, from RenaissanceRe. One other proposal, other
than that from RenaissanceRe, was withdrawn due to that potential buyer's
inability to consummate the proposed transaction.
RenaissanceRe was among the initial potential buyers contacted by DLJ at the
commencement of the sale process. RenaissanceRe executed a confidentiality
agreement on June 7, 1997, and received a copy of the Company's confidential
information memorandum. On July 3, 1997, RenaissanceRe submitted a preliminary
proposal to purchase the Common Shares for between $13.00 to $15.00 per share in
cash.
Members of management of RenaissanceRe were invited to visit the Company's
offices for management presentations and due diligence on July 30 and 31, 1997.
A number of other interested parties visited the Company for due diligence in
late July and early August 1997. After completion of its preliminary due
diligence investigation, RenaissanceRe communicated to DLJ in early September
1997 that it would not be submitting a final proposal for the Company. Following
that communication, DLJ continued to work with other potential buyers, but
nonetheless maintained its contacts with RenaissanceRe.
In late September, 1997, DLJ contacted RenaissanceRe to inquire whether
RenaissanceRe desired to renew its consideration of the Company. In September
1997 and early October 1997, RenaissanceRe conducted additional due diligence at
the Company's offices. After completion of the additional due diligence and
further consideration of the acquisition, RenaissanceRe advised DLJ that it was
interested in considering an acquisition of all of the Company's assets. During
late October and early November 1997, RenaissanceRe, the Company, and DLJ
conducted discussions regarding the purchase price and structure of the proposed
transaction. During the same period, the field of potential acquirers narrowed
to RenaissanceRe and one other candidate.
RenaissanceRe submitted a proposal on October 31, 1997, which was reviewed
by the Nobel Board on November 1, 1997. The Nobel Board authorized the
management of the Company and DLJ to continue to negotiate with RenaissanceRe to
arrive at a definitive agreement. RenaissanceRe's proposal of October 31, 1997,
indicated a potential value of $13.50 to $14.00 per share and requested
additional due diligence. During the subsequent due diligence process,
RenaissanceRe proposed a transaction structure whereby only the Company's U.S.
operations would be purchased.
Management of the Company then consulted with DLJ, the Company's U.S.
counsel, Gardere & Wynne, L.L.P., the Company's Bermuda counsel, Appleby,
Spurling & Kempe, and the Company's tax advisors, KMPG Peat Marwick LLP, to
identify a process by which the affairs of Nobel Holdings and the Company could
be wound up and their liquidation be implemented, as well as the feasibility of
and timing of any such process, if RenaissanceRe's proposed transaction was
accepted. The Company, DLJ, and Gardere & Wynne received an initial draft of the
proposed Sale Agreement from RenaissanceRe's U.S. counsel, Willkie Farr &
Gallagher, on November 26, 1997. On December 10, 1997, the Company informed
RenaissanceRe that a sale of the Company's U.S. operations contemplating an
ultimate winding up of the Company would be considered. Continued negotiations
ultimately led to the proposed transactions set forth in the Sale Agreement.
Mr. Amsbaugh (the President and Chief Executive Officer of the Company),
Bryan L. Martin (a Vice President of the Company), and Douglas W. Caudill (the
Company's Secretary and General Counsel of the Nobel U.S. Group), and
representatives of DLJ and Gardere & Wynne participated on behalf of the Company
and Nobel Holdings in the negotiation and preparation of the Sale Agreement from
receipt of the initial draft until negotiations were completed. The Company's
management, DLJ, and Gardere & Wynne also consulted with KPMG Peat Marwick LLP
and Appleby, Spurling & Kempe with respect to the tax aspects and the Bermuda
law aspects, respectively, of the Sale Agreement.
11
<PAGE>
At a meeting in Pembroke, Bermuda, on December 4, 1997, the Board of
Directors of RenaissanceRe unanimously approved the Sale Agreement and
authorized the executive officers of RenaissanceRe to negotiate and execute the
final Sale Agreement. At a meeting held by unanimous written consent on December
12, 1997, the Board of Directors of Renaissance Holdings approved the Sale and
authorized the officers of Renaissance Holdings to execute the final Sale
Agreement.
The Nobel Board met in Toronto, Canada, on December 18, 1997. The meeting
was attended by all directors, Messrs. Caudill and Martin, and representatives
of DLJ and Gardere & Wynne. The Nobel Board unanimously approved the Sale
Agreement, authorized its execution by the Company, approved the Liquidation,
and recommended approval of both the Sale Agreement and the Liquidation by the
shareholders of the Company. The Nobel Board delegated authority to the
Company's Chief Executive Officer (or any two directors) to set the Record Date
and the date, time, and location of the Special Meeting.
By written consents as of December 18, 1997, the Board of Directors of Nobel
Holdings unanimously approved, and the sole stockholder of Nobel Holdings
approved and adopted, the Sale Agreement, authorized its execution by Nobel
Holdings, and approved the dissolution and liquidation of Nobel Holdings. Mr.
Amsbaugh, as the President and Chief Executive Officer of both the Company and
Nobel Holdings executed the Sale Agreement, subject to the completion of final
negotiations as authorized by the respective boards of directors, on December
18, 1997, in Toronto.
Following the meeting of the Nobel Board, Messrs. Amsbaugh, Caudill, and
Martin, along with representatives of Gardere & Wynne and DLJ, completed final
negotiations with respect to the Sale Agreement with senior officers of
RenaissanceRe and representatives of Willkie Farr & Gallagher. The Sale
Agreement was dated December 19, 1997, and each of the Company and RenaissanceRe
issued a public announcement.
After execution of the Sale Agreement, management of the Company commenced a
process of identifying and interviewing prospective persons to serve as
Liquidator of the Company to assess their capabilities and qualifications to so
serve and, in particular, to determine with those prospects their anticipated
timetable for completing the Liquidation. Messrs. Amsbaugh, Caudill, and Martin
identified and interviewed four candidates in Bermuda who would qualify to serve
as liquidators of Bermuda-based insurers. After considering the qualifications,
compensation, staffing, anticipated timing, and other relevant issues of the
potential liquidators, management recommended to the Nobel Board that Malcolm
Butterfield of KPMG Bermuda be submitted to shareholders of the Company for
appointment as the Liquidator.
At a meeting of the Nobel Board held on January 30, 1998, in Toronto,
Canada, the Nobel Board unanimously adopted, subject to shareholder approval,
the Plan of Liquidation, and recommended to the shareholders of the Company the
appointment of Mr. Butterfield as the Liquidator and approval of the proposed
compensation arrangements with the Liquidator. The Nobel Board delegated
authority to the Company's Chief Executive Officer to finalize the proposed
compensation of the Liquidator. By written consents as of January 30, 1998, the
Board of Directors of Nobel Holdings authorized and approved, and the Company as
the sole stockholder of Nobel Holdings adopted, a plan of distribution with
respect to the liquidation of Nobel Holdings.
REASONS FOR THE TRANSACTIONS; RECOMMENDATIONS OF THE NOBEL BOARD
As described above under "Background of the Transactions," the decision of
the Nobel Board to approve the Sale Agreement and related documentation and the
Transactions followed extensive negotiations over a period of over six months
between the Company and various other parties, including RenaissanceRe and its
representatives. During the period between the determination by the Nobel Board
in April, 1997, to pursue a strategic transaction and the signing of the Sale
Agreement and related
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documentation in December 1997, the Nobel Board met five times to consider and
review information concerning various aspects of the proposed transactions.
The Nobel Board has unanimously determined that the Transactions are fair
to, and in the best interests of, the Company and its shareholders. The Nobel
Board considered the following material factors in approving the terms of the
Sale Agreement, the terms of the Plan of Liquidation, and the Liquidation:
(1) The Nobel Board's primary goal was the maximization of shareholder
value.
(2) The Nobel Board recognized that the Company faced increasing
competition in the insurance business, which could adversely affect revenues
and earnings and thus limit shareholder value if strategic steps were not
taken.
(3) The Nobel Board reviewed the historical and current financial
condition, results of operations, prospects, and business of the Company as
well as the future prospects of the Company absent a transaction such as the
Sale. The Company's management and the Nobel Board recognized that the
Company was not meeting its established after-tax annual return on equity
objective of 15%. The Company believed that its lower than desired return on
equity was due in part to the over-capitalization of the Company in relation
to the amount of business being written. In addition, the Company's
operating results were under increasing pressure as reflected by an increase
in the combined ratio of 100.5% in 1995 to 105.4% in 1996 as determined
under U.S. generally accepted accounting principles ("GAAP").
(4) The Nobel Board considered the Company's potential for development
of new opportunities, the risk that such opportunities might not
materialize, the fact that the Company could be required to increase
substantially its borrowings and to seek new infusions of capital in order
to benefit from such opportunities, and the increased risk associated with
financing and developing any such opportunity.
(5) The Nobel Board considered current market conditions, historical
market prices, and trading information for the Common Shares. The Nobel
Board believed that the Company lacked sufficient research coverage,
investor interest, and liquidity in its Common Shares, and, therefore, the
Common Shares, which had consistently been trading at approximately book
value for several years, were not being fully valued in the market.
(6) There was a general perception in the market, which the Company's
management and the Nobel Board confirmed in discussions with various
investment bankers, that the environment for insurance company mergers and
acquisitions was particularly strong in early 1997.
(7) Based on the analysis of the Company, the insurance industry, and
the market generally by the Company's management and the Nobel Board, the
Company announced in June 1997 that it was exploring strategic alternatives,
including a sale, and contacted, through DLJ, 58 potential buyers directly
and received multiple initial proposals, which resulted in one final
proposal--from RenaissanceRe.
(8) The Sale Agreement is the result of arm's-length negotiations with
RenaissanceRe and includes RenaissanceRe's agreement to pay approximately
$54.1 million dollars in cash to Nobel Holdings as consideration for the
Sale and to loan approximately $8.9 million to the Company in order to
facilitate the Liquidation.
(9) It is expected that the Transactions will afford the Company's
shareholders the opportunity to receive cash of approximately $14.00 per
Common Share.
(10) The Sale will benefit the Company's other constituencies, including
its employees and customers, since all of the Company's operating businesses
will be purchased intact by RenaissanceRe, which is a larger company with
greater financial resources.
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(11) The various matters described under "Interests of Certain Persons in
Matters to Be Acted Upon," which the Nobel Board concluded do not outweigh
or materially detract from the benefits of the Sale to the Company.
(12) Representatives of DLJ made a presentation to the Nobel Board at its
December 18, 1997, meeting and delivered the DLJ Opinion that, as of
December 18, 1997, and based upon and subject to the assumptions,
limitations, and qualifications set forth in such opinion, the amount of
proceeds to be received by the holders of Common Shares from the anticipated
distribution of $14.00 per share pursuant to the Transactions is fair to
such shareholders from a financial point of view. See "Opinion of the
Company's Financial Advisor."
The Nobel Board also took into account the following negative aspects of the
Transactions:
(1) The Sale Agreement limits the Company's ability to consider other
proposals, which could be more attractive, and requires the Company in
certain circumstances to pay RenaissanceRe a termination fee of $3,000,000,
plus an amount equal to the reasonably documented out-of-pocket expenses
incurred by RenaissanceRe and Renaissance Holdings in connection with the
Sale Agreement and the Sale (including attorneys' fees and expenses), but
which expenses may not exceed $400,000. See "--The Sale
Agreement--Termination; Termination Fee."
(2) The Transactions are subject to regulatory approvals, including the
approval of the Texas Department of Insurance. Although the Company believes
that such approvals will be obtained, delays could prevent the timely
consummation of the Transactions and result in additional expenditures by
the Company.
(3) The conduct of the Liquidation, including the time period for its
completion, will, subject to certain statutory limitations, be controlled by
the Liquidator, who, under the Companies Act, will have broad powers with
respect to the Liquidation.
After taking into consideration the factors described above, the Nobel Board
on December 18, 1997, unanimously approved the Sale Agreement and the
Liquidation and on January 30, 1998, unanimously ratified and confirmed its
approval of the Sale Agreement and the Liquidation and adopted the Plan of
Liquidation. In view of the variety of factors considered in connection with its
evaluation of the Sale, the Plan of Liquidation, and the Liquidation, the Nobel
Board did not find it practicable to, and did not, quantify or otherwise assign
relative strengths to the specific factors considered in reaching its
determination.
THE NOBEL BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE
"FOR":
(1) PROPOSAL 1 TO APPROVE AND ADOPT THE SALE AGREEMENT;
(2) PROPOSAL 2 TO APPROVE AND ADOPT THE PLAN OF LIQUIDATION; AND
(3) PROPOSAL 3 TO WIND UP THE COMPANY.
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
In its role as financial advisor to the Company, DLJ was asked by the
Company to render its opinion to the Nobel Board as to the fairness, from a
financial point of view, to the holders of the Common Shares of the proceeds to
be received by such shareholders from the anticipated distribution of $14.00 per
Common Share (the "Distribution") pursuant to the Liquidation. On December 18,
1997, DLJ delivered its written opinion to the Nobel Board that, as of the date
of such opinion and based upon and subject to the assumptions, limitations, and
qualifications set forth in such opinion, the amount of the proceeds to be
received by the holders of Common Shares from the Distribution is fair to such
shareholders from a financial point of view.
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A COPY OF THE DLJ OPINION IS ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT.
THE COMPANY'S SHAREHOLDERS ARE URGED TO READ THE DLJ OPINION IN ITS ENTIRETY FOR
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED, AND LIMITS OF
THE REVIEW BY DLJ. THE SUMMARY OF THE DLJ OPINION SET FORTH IN THIS PROXY
STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE DLJ
OPINION.
The DLJ Opinion was prepared for the Nobel Board and is directed only to the
fairness, as of December 18, 1997, to the holders of Common Shares, from a
financial point of view, of the anticipated amount of proceeds to be received by
such shareholders from the Distribution. The DLJ Opinion does not address any
other aspect of the Transactions, nor does it constitute a recommendation as to
how the Company's shareholders should vote at the Special Meeting. No
restrictions or limitations were imposed by the Nobel Board upon DLJ with
respect to the investigations made or the procedures followed by DLJ in
rendering its opinion.
In arriving at the DLJ Opinion, DLJ reviewed the December 16, 1997, draft of
the Sale Agreement, including exhibits thereto, and the form of irrevocable
proxy of certain holders of Common Shares relating to approval of the
Transactions. No draft resolutions or other documentation with respect to the
Liquidation were available at the date of the DLJ Opinion, and as a result DLJ
did not review any such resolutions or documentation. DLJ also reviewed
financial and other information that was publicly available or furnished to it
by the Company, including information provided during discussions with the
Company's management. Included in the information provided during discussions
with the Company's management were certain financial projections of the Company
for the period beginning January 1, 1997, and ending December 31, 1998, prepared
by the management of the Company. In addition, DLJ compared certain financial
and securities data of the Company with various other companies whose securities
are traded in public markets, reviewed the historical stock prices and trading
volumes of the Common Shares, reviewed prices and premiums paid in certain
business combinations, and conducted such other financial studies, analyses, and
investigations as DLJ deemed appropriate for purposes of the DLJ Opinion.
In rendering the DLJ Opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
it from public sources, that was provided to it by the Company or its
representatives, or that was otherwise reviewed by it. DLJ assumed that the
financial projections of the Company supplied to it were reasonably prepared on
a basis reflecting the best currently available estimates and judgments of the
management of the Company as to the future operating and financial performance
of the Company. DLJ did not assume any responsibility for making an independent
evaluation of the Company's assets or liabilities or for making any independent
verification of any of the information reviewed by it. DLJ relied as to certain
legal matters on advice of counsel to the Company.
The DLJ Opinion is necessarily based on economic, market, financial, and
other conditions as they existed on, and on the information made available to it
as of, the date of the DLJ Opinion. It should be understood that, although
subsequent developments may affect the DLJ Opinion, DLJ does not have any
obligation to update, revise, or reaffirm its opinion. The DLJ Opinion does not
address the relative merits of the Liquidation or related transactions or any
other business strategies considered by the Nobel Board, nor does it address the
Nobel Board's decision to proceed with the Liquidation or related transactions.
The DLJ Opinion also does not address the anticipated satisfaction of those
liabilities of the Company that will remain following consummation of the Sale.
DLJ assumed that the full distribution of $14.00 per share will be made to
holders of the Common Shares in the Liquidation and that the Liquidation would
be completed promptly after shareholder approval of the proposed Transactions.
The DLJ Opinion does not constitute a recommendation to any shareholder as to
how such holder should vote on the proposed Transactions.
The following is a summary of the presentation of DLJ to the Nobel Board at
its December 18, 1997, meeting in connection with the preparation of the DLJ
Opinion.
For purposes of its analyses, DLJ assumed that the amount of the
Distribution to holders of Common Shares will be $14.00 per share, or
approximately $63 million in the aggregate.
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BROAD SOLICITATION OF POTENTIAL BUYERS. DLJ conducted an extensive sale
process, including a broad solicitation of potential buyers. In total, DLJ
contacted 58 potential buyers, including U.S. and Bermuda property and casualty
insurance companies and financial buyers. In addition, the public announcement
by the Company on June 9, 1997, that it was exploring its strategic
alternatives, including a sale, and that it had retained DLJ, provided
substantial time for all interested potential buyers to approach the Company. A
total of 33 potential buyers signed confidentiality agreements and received
confidential information memoranda, 11 submitted preliminary proposals, and
seven conducted due diligence investigations of the Company. This process
resulted in one final proposal, from RenaissanceRe. One other proposal, other
than that from RenaissanceRe, was withdrawn due to that potential buyer's
inability to consummate the proposed transaction.
TRANSACTION ANALYSIS. DLJ reviewed publicly available information for
selected transactions involving the merger and acquisition of property and
casualty insurance companies since January 1, 1995 (the "Selected
Transactions"). In reviewing these transactions, several factors were
considered, including: (i) the lack of publicly available information for
subsidiary and private company transactions that represent a significant portion
of the relevant merger and acquisition activity; and (ii) the lack of directly
comparable transactions. The Selected Transactions were not intended to
represent the complete list of property and casualty insurance company
transactions that have occurred. Rather, such transactions included only
selected recent transactions involving property and casualty insurance
companies. The Selected Transactions were used in this analysis because the
companies involved were deemed by DLJ to operate in similar businesses or have
similar financial characteristics to the Company.
DLJ reviewed the consideration paid in the Selected Transactions in terms of
the price paid for the common stock in the Selected Transactions as a multiple
of GAAP operating earnings for the latest reported twelve-month period ("LTM")
ended prior to the announcement of such transactions and as a multiple of
shareholders' equity as of the end of the last fiscal quarter ("LFQ") ended
prior to the announcement of such transactions. In acquisitions of property and
casualty insurance companies, the purchase price paid may be expressed as
multiples of the price paid for common stock to GAAP operating earnings and to
shareholders' equity. Variances in multiples for different transactions may
reflect such considerations as the consistency, quality, and growth of earnings
and the company's capitalization, asset quality, and return on capital. Since
GAAP operating earnings and shareholders' equity already reflect the cost of a
company's debt or preferred stock financing, multiples of GAAP operating
earnings or shareholders' equity are appropriately based on the price paid for
the company's common stock, which excludes the cost of assuming, repaying, or
redeeming such debt or preferred stock financing. Comparing the multiples of the
expected amount of the Distribution to the GAAP operating earnings and
shareholders' equity of the Company with multiples paid by acquirers in other
transactions indicates whether the valuation being placed on the Company is
within the range of values paid for other property and casualty insurance
companies.
The low, average, and high multiples of price paid for common stock to LTM
GAAP operating earnings for the Selected Transactions were 5.0x, 11.9x, and
21.9x, respectively. Based upon the expected amount of the Distribution of
$14.00 per share, the implied multiple of the Distribution to the Company's GAAP
operating earnings for the LTM ended September 30, 1997, was 31.1x. This
multiple is higher than the high end of the range of multiples of the Selected
Transactions. The low, average, and high multiples of price paid for common
stock to shareholders' equity as of the end of the LFQ ended prior to the
announcement of the Selected Transactions were 0.83x, 1.72x, and 3.92x,
respectively. Based on the expected amount of the Distribution of $14.00 per
share, the implied multiple of the Distribution to the Company's shareholders'
equity as of September 30, 1997, was 1.12x. This multiple is between the low and
average multiples of the Selected Transactions.
Additionally, DLJ reviewed the consideration paid in the Selected
Transactions in terms of the price paid for the common stock plus the amount of
debt and preferred stock assumed, repaid, or redeemed in such transactions (the
"Transaction Value") as a multiple of statutory net income for the LTM or last
fiscal
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year ("LFY") ended prior to the announcement of such transactions and as a
multiple of statutory capital and surplus as of the end of the LFQ or LFY ended
prior to the announcement of such transactions. In acquisitions of property and
casualty insurance companies, the purchase price paid may be expressed as
multiples of the Transaction Value to statutory net income and statutory capital
and surplus. Variances in multiples for different transactions may reflect such
considerations as the consistency, quality, and growth of earnings and the
company's capitalization, asset quality, and return on surplus. Since statutory
net income and statutory capital and surplus do not reflect the cost of a
company's debt or preferred stock financing, which are usually at the holding
company level rather than the insurance company level, multiples of statutory
net income and statutory capital and surplus are appropriately based on a
Transaction Value that includes the cost of assuming, repaying, or redeeming
such debt or preferred stock financing. Comparing the multiples of the expected
amount of the Distribution to the statutory net income and capital and surplus
of the Company with the multiples paid in other transactions indicates whether
the valuation being placed on the Company is within the range of values paid for
other property and casualty insurance companies.
The low, average, and high multiples of Transaction Value to statutory net
income for the LTM or LFY prior to the announcement of the Selected Transactions
were 7.8x, 12.5x, and 19.6x, respectively. Based on the expected amount of the
Distribution of $14.00 per share, the implied multiple of the Distribution to
the Company's statutory net income for the LFY ended December 31, 1996, was
10.5x. This multiple is between the low and average multiples of the Selected
Transactions. The low, average, and high multiples of Transaction Value to
statutory capital and surplus as of the end of the LFQ or LFY ended prior to the
announcement of the Selected Transactions were 0.90x, 1.77x, and 3.71x,
respectively. Based on the expected amount of the Distribution of $14.00 per
share, the implied multiple of the Distribution to the Company's statutory
capital and surplus as of December 31, 1996, was 1.36x. This multiple is between
the low and average multiples of the Selected Transactions.
DLJ also determined the percentage premium of the offer prices (represented
by the purchase price per share in cash transactions and the price of the
constituent securities times the exchange ratio in the case of stock-for-stock
mergers) over the public market trading prices one day, one week, and one month
prior to the announcement date of selected recent property and casualty
insurance company transactions where the acquired company's common stock was
publicly traded (the "Selected Public Transactions"). The low premiums of offer
prices to public market trading prices one day, one week, and one month prior to
the announcement date for the Selected Public Transactions were 1.4%, (1.8%),
and (2.7%), respectively. The average premiums of offer prices to public market
trading prices one day, one week, and one month prior to the announcement date
for the Selected Public Transactions were 31.3%, 31.1%, and 44.6%, respectively.
The high premiums of offer prices to public market trading prices one day, one
week, and one month prior to the announcement date for the Selected Public
Transactions were 67.7%, 73.3%, and 121.3%, respectively. The expected amount of
the Distribution of $14.00 per share represents premiums to the trading prices
of the Common Shares one day, one week, and one month prior to December 16,
1997, of 4.7%, 6.7%, and 0.0%, respectively. These premiums are between the
corresponding low and average premiums of the Selected Public Transactions. The
expected amount of the Distribution of $14.00 per share represents premiums to
the trading prices of the Common Shares one day, one week, and one month prior
to the June 9, 1997, announcement that the Company was exploring strategic
alternatives, including a sale, of 10.1%, 12.0%, and 8.7%, respectively. These
premiums are between the corresponding low and average premiums of the Selected
Public Transactions.
PUBLIC COMPANY ANALYSIS. To provide comparative market information, DLJ
compared selected historical and projected operating and financial ratios of the
Company to the corresponding data and ratios of selected property and casualty
insurance companies whose securities are publicly traded. Such companies
included ACMAT Corp., Amwest Insurance Group, Inc., Baldwin & Lyons, Inc.,
Gainsco, Inc., Gryphon Holdings, Inc., Intercargo Corp., Meadowbrook Insurance
Group, Inc., Penn-America Group, Inc., and Walshire Assurance Co. (the "Selected
Companies").
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Such analysis included, among other things, the ratios of stock price to
GAAP operating earnings per share ("EPS") for the LTM ended September 30, 1997,
estimated GAAP operating EPS for 1997 and 1998 (as estimated by research
analysts and compiled by Institutional Brokers Estimating Service for the
Selected Companies and by management's projections for the Company), and
shareholders' equity per share as of September 30, 1997, as well as the ratios
of the aggregate equity market capitalization plus the amount of debt and
preferred stock outstanding ("Enterprise Value") to statutory net income for the
LTM or LFY and statutory capital and surplus as of the end of the LFQ or LFY.
Closing stock prices as of December 16, 1997, were used in this analysis. The
ratios described in this paragraph have been designed to reflect the value
attributable in the public equity markets to various valuation measures of
property and casualty insurance companies. Measures utilized in the public
marketplace to value the stock of publicly traded companies in the property and
casualty insurance industry are based on, among other things, a company's
historical and projected GAAP operating earnings, historical statutory net
income, shareholders' equity, and statutory capital and surplus. The multiples
of stock price to GAAP operating EPS and Enterprise Value to statutory net
income reflect the value attributed to a company by public equity market
investors based on the company's historical and projected earnings. The
multiples of stock price to shareholders' equity per share and Enterprise Value
to statutory capital and surplus reflect the values attributed to a company by
public equity market investors based on the company's net worth. Variances in
multiples for different companies may reflect such considerations as the
consistency, quality, and growth of earnings and the company's capitalization,
asset quality, and return on capital. Since GAAP operating earnings and
shareholders' equity already reflect the cost of a company's debt or preferred
stock financing, multiples of GAAP operating earnings or shareholders' equity
are appropriately based on the price paid for the company's common stock, which
excludes debt or preferred stock financing. Since statutory net income and
statutory capital and surplus do not reflect the cost of a company's debt or
preferred stock financing, which are usually at the holding company level rather
than the insurance company level, multiples of statutory net income and
statutory capital and surplus are appropriately based on Enterprise Value, which
includes debt or preferred stock financing. Comparing the multiples of the
expected amount of the Distribution to the GAAP operating EPS, shareholders'
equity, statutory net income, and statutory capital and surplus of the Company
with the multiples at which the Selected Companies trade indicates whether the
valuation being placed on the Company is within the range of values at which the
Selected Companies trade.
The low, average, and high multiples of public stock price to GAAP operating
EPS for the LTM ended September 30, 1997, were 13.8x, 18.5x, and 26.0x,
respectively, for the Selected Companies. Based on the expected amount of the
Distribution of $14.00 per share, the implied multiple of the Distribution to
the Company's GAAP operating EPS for the LTM ended September 30, 1997, was
31.1x. This multiple is above the high multiple of the Selected Companies. The
low, average, and high multiples of public stock price to estimated 1997 GAAP
operating EPS were 10.9x, 15.1x, and 26.8x, respectively, for the Selected
Companies. Based on the expected amount of the Distribution of $14.00 per share,
the implied multiple of the Distribution to the Company's estimated 1997 GAAP
operating EPS was 20.9x. This multiple is between the average and high multiples
of the Selected Companies. The low, average, and high multiples of public stock
price to estimated 1998 GAAP operating EPS were 9.0x, 12.9x, and 24.8x,
respectively, for the Selected Companies. Based on the expected amount of the
Distribution of $14.00 per share, the implied multiple of the Distribution to
the Company's estimated 1998 GAAP operating EPS was 9.7x. This multiple is
between the low and average multiples of the Selected Companies. The low,
average, and high multiples of public stock price to shareholders' equity as of
September 30, 1997, were 0.85x, 1.36x, and 1.87x, respectively, for the Selected
Companies. Based on the expected amount of the Distribution of $14.00 per share,
the implied multiple of the Distribution to the Company's shareholders' equity
as of September 30, 1997, was 1.12x. This multiple is between the low and
average multiples of the Selected Companies. The low, average, and high
multiples of Enterprise Value to statutory net income for the LTM or LFY were
10.8x, 21.1x, and 39.7x, respectively, for the Selected Companies. Based on the
expected amount of the Distribution of $14.00 per share, the implied multiple of
the Distribution to the Company's
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statutory net income for the LFY ended December 31, 1996, was 10.5x. This
multiple is below the low multiple of the Selected Companies. The low, average,
and high multiples of Enterprise Value to statutory capital and surplus as of
the end of the LFQ or LFY were 1.01x, 2.28x, and 4.24x, respectively, for the
Selected Companies. Based on the expected amount of the Distribution, the
implied multiple of the Distribution to the Company's statutory capital and
surplus as of December 31, 1996, was 1.36x. This multiple is between the low and
average multiples for the Selected Companies.
No company or transaction used in the Transaction Analysis or the Public
Company Analysis described above was directly comparable to the Company or the
proposed Transactions. Accordingly, an analysis of the results of the foregoing
was not simply mathematical nor necessarily precise; rather, it involved complex
considerations and judgments concerning differences in financial and operating
characteristics of companies and other factors that could affect the transaction
values and trading prices. For example, many qualitative factors are involved in
valuing a company or analyzing a transaction in the property and casualty
insurance industry, including assessments of the quality of management, the
attractiveness of the company's target market, the economics of the products
being sold, and the company's market position relative to its competitors. Other
factors that could affect the transaction values or trading prices include
differences in distribution, products, geographic or demographic customer
concentration, size, accounting practices, asset portfolio quality, interest
rate sensitivity, and other factors. These factors may affect the transaction
values or trading prices in each case by affecting in varying degrees investors'
expectations of such factors as the company's risk and future operating
profitability.
STOCK TRADING HISTORY. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices and their relative
relationships for the Common Shares for various periods ending prior to the
announcement of the Transactions. DLJ reviewed the daily closing prices of the
Common Shares over various periods. For the period from December 31, 1996, to
December 16, 1997, the high closing price of the Common Shares was $15.25, and
the low closing price of the Common Shares was $11.88. For the period from
October 30, 1981, to December 16, 1997, the high closing price of the Common
Shares was $18.25, and the low closing price of the Common Shares was $1.63. In
addition, DLJ reviewed the trading history of the Common Shares relative to an
index of the Selected Companies in order to assess the relative stock price
performance of the Company and such index. DLJ also reviewed the historical
price/LTM earnings multiples and the historical price/book value multiples of
the Company.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ, but describes, in summary form, the principal
elements of the presentation of DLJ to the Nobel Board on December 18, 1997, in
connection with preparation of the DLJ Opinion. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. The preparation of a fairness opinion does
not involve a mathematical evaluation or weighing of the results of the
individual analyses performed, but requires DLJ to exercise its professional
judgment--based on its experience and expertise--in considering a wide variety
of analyses taken as a whole. Each of the analyses conducted by DLJ was carried
out in order to provide a different perspective on the Transactions and add to
the total mix of information available. DLJ did not form a conclusion as to
whether any individual analysis, considered in isolation, supported or failed to
support an opinion as to fairness. Rather, in reaching its conclusion, DLJ
considered the results of the analyses in light of each other and did not place
particular reliance or weight on any individual analysis and ultimately reached
its opinion based on the results of all analyses taken as a whole. Accordingly,
notwithstanding the separate factors summarized above, DLJ believes that its
analyses must be considered as a whole and that selected portions of its
analyses and the factors considered by it, without considering all analyses and
factors, may create an incomplete view of the evaluation process underlying the
DLJ Opinion. In performing its analyses, DLJ made numerous assumptions with
respect to industry performance, business and economic conditions, and other
matters. These assumptions include, but are not limited to, assumptions
regarding: (i) macro-economic business conditions; (ii) competitive dynamics
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and general trends in the property and casualty insurance industry; (iii)
competition from other industries; (iv) current and projected interest rates;
and (v) the industry regulatory environment. The analyses performed by DLJ are
not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
ENGAGEMENT OF DLJ. The Nobel Board selected DLJ as its financial advisor
because it is a nationally recognized investment banking firm that has
substantial experience in transactions similar to the Sale and is familiar with
the Company, its business, and the property and casualty insurance industry.
Pursuant to the terms of the engagement letter dated May 5, 1997, between the
Company and DLJ, the Company paid DLJ a $50,000 retainer fee and agreed to pay
an additional $350,000 fee upon rendering of the DLJ Opinion. Pursuant to the
terms of the engagement letter and based on the assumed transaction value of
approximately $68.4 million (including the value of shares issuable upon
exercise of options), the Company will pay DLJ, on the date of the Sale, cash
consideration of approximately $1.2 million, less the retainer fee and the
opinion fee paid prior to that date. The Company also agreed to reimburse DLJ
for all reasonable out-of-pocket expenses (including the reasonable fees and
expenses of outside counsel) incurred by DLJ in connection with its engagement
and to indemnify DLJ and its affiliates and their respective directors,
officers, agents, and employees against certain liabilities and expenses in
connection with DLJ's engagement, including liabilities under the federal
securities laws. The terms of the fee arrangement with DLJ, which DLJ and the
Company believe are customary in transactions of this nature, were negotiated at
arms' length between the Company and DLJ and the Nobel Board was aware of such
arrangement, including the fact that a significant portion of the aggregate fee
payable to DLJ is contingent upon consummation of the Sale.
In the ordinary course of business, DLJ may actively trade the securities of
the Company or RenaissanceRe for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. DLJ, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with stock
purchases, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate,
and other purposes. Prior to the retention by the Company for the exclusive
management of the sale or merger of the Company, DLJ had not performed
investment banking or other services for the Company or RenaissanceRe.
THE SALE AGREEMENT
THE FOLLOWING SUMMARY OF THE TERMS AND CONDITIONS OF THE SALE AS SET FORTH
IN THE SALE AGREEMENT IS NOT INTENDED TO BE A COMPLETE DESCRIPTION OF ALL
MATERIAL INFORMATION RELATING TO THE SALE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TERMS OF THE SALE AGREEMENT, WHICH IS ATTACHED AS APPENDIX
A TO THIS PROXY STATEMENT.
GENERAL. The Sale Agreement provides for the purchase by Renaissance
Holdings from Nobel Holdings of (i) the Shares of the U.S. Subsidiaries other
than NIA and (ii) the NIA Assets for cash consideration of $54,106,000.
RenaissanceRe has agreed to make the Limited Recourse Loan to the Company in the
principal amount of $8,894,000, in exchange for a participating promissory note,
in order to facilitate the liquidation of the Company.
At the Closing, Nobel Holdings will transfer the Shares and assign the NIA
Assets to Renaissance Holdings. The U.S. Subsidiaries will then be direct wholly
owned or, in the case of NIA, beneficially owned subsidiaries of Renaissance
Holdings. Following the Closing, Nobel Holdings will have no material assets
other than the cash consideration received in the Sale. See "--General."
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND NOBEL HOLDINGS. The Sale
Agreement contains various joint and several representations and warranties of
the Company and Nobel Holdings, which must be true and correct in all material
respects at the Closing, except as otherwise provided in the Sale Agreement.
These representations and warranties include customary representations and
warranties with respect to corporate organization, power, good standing, and
authority, subsidiaries, capital structure, and non-contravention of
organizational documents, any material contract, loan or credit agreement, or
other agreement, contract, document, or instrument, or any applicable judgment,
order, decree, statute, law ordinance rule, or regulation. The Sale Agreement
also contains representations and warranties of the Company and Nobel Holdings
regarding (i) consents, required filings, or approvals needed for the Sale, (ii)
the proxy statement for the Special Meeting, (iii) documents filed by the
Company with the Commission, (iv) statutory statements of Nobel Insurance, (v)
GAAP financial statements of the U.S. Subsidiaries, as included in this Proxy
Statement, if any, (vi) insurance reserves, (vii) absence of certain changes or
events since September 30, 1997, (viii) litigation, (ix) employee matters, (x)
taxes, (xi) liens for taxes, (xii) examination or investigation with respect to
tax matters, (xiii) withholding, (xiv) compliance with applicable laws, (xv) the
insurance business and compliance with insurance laws, (xvi) broker's and
finder's fees, (xvii) the DLJ Opinion, (xviii) title to assets, (xix) contracts,
(xx) the absence of other agreements to sell their capital stock or assets or
the capital stock or assets of any of the U.S. Subsidiaries or to effect any
merger, amalgamation, or consolidation, (xxi) proprietary rights, (xxii) year
2000 software compliance, (xxiii) transactions with certain persons, (xxiv)
reinsurance and retrocessions, and (xxv) intercompany accounts.
REPRESENTATIONS AND WARRANTIES OF RENAISSANCERE AND RENAISSANCE
HOLDINGS. The Sale Agreement also contains joint and several representations
and warranties of RenaissanceRe and Renaissance Holdings. In addition to
customary representations and warranties with respect to corporate organization,
power, and authority and non-contravention of organizational documents or any
applicable judgment, order, decree, statute, law ordinance rule, or regulation,
the Sale Agreement contains representations and warranties by RenaissanceRe and
Renaissance Holdings with respect to (i) consents, required filings, or
approvals needed for the Sale, (ii) information supplied in writing for
inclusion in the proxy statement for the Special Meeting, (iii) the availability
of financing to consummate the Sale, (iv) the interim operations of Renaissance
Holdings prior to the Closing, (v) ownership of the Shares, and (vi) investment
intent.
CONDUCT OF BUSINESS. During the period prior to the Closing, the Company
and Nobel Holdings have agreed to certain affirmative and negative covenants
relating to the business of the U.S. Subsidiaries. The Company and Nobel
Holdings will cause the U.S. Subsidiaries to carry on their respective
businesses in the ordinary course of business consistent with past practices.
The Company and Nobel Holdings will also use their commercially reasonable best
efforts, consistent with good business judgment, to preserve intact the U.S.
Subsidiaries' current business organizations, keep available the services of
their current officers and key employees, and preserve the U.S. Subsidiaries'
relationships consistent with past practice with producers, brokers, insureds,
suppliers, distributors, customers, and others having business dealings with
them. The negative covenants require the Company and Nobel Holdings prior to the
Closing, except as expressly contemplated in the Sale Agreement or previously
consented to in writing by RenaissanceRe, not to, or permit any of the U.S.
Subsidiaries to: (i) amend the organizational documents of any of the U.S.
Subsidiaries; (ii) declare or pay any dividend or other distribution; (iii)
acquire any of the capital stock of any of the U.S. Subsidiaries; (iv) issue,
sell, deliver, or authorize the issuance of any shares of capital stock, or
rights to acquire shares of capital stock, of any of the U.S. Subsidiaries; (v)
change the capitalization of any of the U.S. Subsidiaries; (vi) incur or assume
any long-term debt or any short-term debt for borrowed money, except pursuant to
existing credit agreements in the ordinary course of business; (vii) become
liable or responsible for the obligations of any person except in the ordinary
course of business, consistent with past practice; (vii) make any loans,
advances, or capital contributions to any person; (viii) except as required by
the Sale Agreement, authorize, recommend, propose, or enter into any plan of
liquidation or dissolution, any acquisition of a material amount of assets or
securities, or any disposition of assets or securities; (ix) except for
insurance and reinsurance agreements entered into in the ordinary course of
business, enter into any other material agreements, modification of material
agreements, or release of
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material rights under material agreements; (x) enter into any employment or
severance agreement or, except in accordance with normal practices, grant any
severance or termination pay to any officer, director, or key employee of the
U.S. Subsidiaries; (xi) hire or agree to hire any additional key employees or
officers at an annual salary in excess of $100,000; (xii) terminate an executive
officer of any of the U.S. Subsidiaries other than for good or just cause or
diminish the duties or responsibilities of any such executive officer; (xiii)
adopt, terminate, or amend any employee benefit plan, except as provided in the
Sale Agreement; (xiv) increase the compensation or fringe benefits of any
director, officer, or other senior management personnel; (xv) increase the
compensation or fringe benefits of any employee, except for normal increases or
bonuses in the ordinary course of business consistent with past practices and
that, in the aggregate, do not result in a significant increase in benefits or
compensation expense to any of the U.S. Subsidiaries; (xvi) pay any benefit not
provided for under any employee benefit plan; (xvii) grant any awards bonus,
incentive, performance, or other compensation plan; (xviii) change any
accounting unless required by a concurrent change in GAAP; (xix) change the
method of determining GAAP reserves, (xx) fail to pay any tax when due, make any
material tax election, or settle or compromise any material tax liability; (xxi)
take any action which causes any representation or warranty of the Company and
Nobel Holdings in the Sale Agreement to become untrue or that would result in
the a material breach of any covenant in the Sale Agreement; (xxii) enter into
any intercompany arrangements other than the existing intercompany accounts;
(xxiii) make any investment other than in accordance with guidelines provided to
RenaissanceRe or invest in derivative securities; or (xxiv) enter into any
agreement, commitment, or arrangement to do any of these matters or have an
intention to do so.
OTHER COVENANTS. The Sale Agreement includes various other affirmative and
negative covenants by one or more of the parties. The parties to the Sale
Agreement have agreed to customary covenants regarding RenaissanceRe's access to
information of the U.S. Subsidiaries for purposes of due diligence, the
confidentiality of information obtained by RenaissanceRe, the use of reasonable
best efforts to take all necessary actions to consummate the Sale in the most
expeditious manner possible, notice by the Company and Nobel Holdings to
RenaissanceRe if any representation or warranty of the Company and Nobel
Holdings becomes untrue or inaccurate or if they fail to comply in any material
respect any covenant in the Sale Agreement, and publicity. The parties have also
agreed that all intercompany accounts between the Company and Nobel Holdings and
the U.S. Subsidiaries (other than the intercompany account owed by Nobel Service
Corporation to the Company) will be settled at fair value as of the last
month-end prior to the Closing. The net amount of these intercompany accounts
balances will be paid in cash at the Closing to the appropriate party. In
addition, the intercompany account owed by Nobel Service Corporation to the
Company, which will not exceed $5.1 million, will be paid by Nobel Service
Corporation within ten business days after the Closing.
RenaissanceRe, the Company, and Nobel Holdings have agreed that all
indemnification rights existing in favor of the present or former directors,
officers, employees, fiduciaries, and agents of the Company, Nobel Holdings, and
the U.S. Subsidiaries as provided in their respective organizational documents
as of the Closing shall survive the Closing. With respect to the Company and
Nobel Holdings, the rights will survive until the completion of the Liquidation.
For the U.S. Subsidiaries, the rights will continue in full force and effect for
six years after the Closing. The parties have excluded from the continuing
indemnification protection any liabilities arising with respect to any U.S.
federal taxes incurred by the Company, Nobel Holdings, or the U.S. Subsidiaries
prior to the Closing. RenaissanceRe will also cause the U.S. Subsidiaries to
maintain in effect for not less than six years from the Closing the same or
equivalent directors' and officers' liability coverage as maintained on the date
of the Sale Agreement, provided that neither Renaissance Holdings nor the U.S.
Subsidiaries are required to expend in excess of $100,000 in the aggregate for
related premiums or to purchase coverage for any U.S. federal tax liability.
The Company and Nobel Holdings have agreed to (i) give RenaissanceRe
reasonable notice of any meetings prior to the Closing with A.M. Best Company,
Inc., and to use reasonable best efforts to permit representatives of
RenaissanceRe to attend such meetings, (ii) terminate any tax sharing
agreements, (iii) cause Nobel Holdings, at Renaissance Holdings' option, to join
with Renaissance Holdings in making
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an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as
amended (the "Code"), with respect to the Sale and pay any tax attributable to
the making of the election, (iv) assist RenaissanceRe with making necessary
filings under the Exchange Act or as required by the New York Stock Exchange,
and (v) use their reasonable best efforts fully and completely to commute and
novate all of their obligations or obligations of the U.S. Subsidiaries to
Insurance Company of North America on terms reasonably acceptable to
RenaissanceRe and the Company. The Sale Agreement also includes a covenant not
to compete by the Company and Nobel Holdings for a period of six years after the
Closing. The covenant prohibits the Company and Nobel Holdings from engaging or
participating, directly or indirectly, in a specified restricted area in the
business or businesses engaged in by the U.S. Subsidiaries as of the Closing.
The restricted area includes any state of the United States in which the U.S.
Subsidiaries had annual sales during 1997 in excess of $500,000.
RenaissanceRe has agreed to the following: (i) for a period of one year
following the Closing RenaissanceRe will cause the U.S. Subsidiaries to provide
their respective employees with employee benefit plans, programs, policies, or
arrangements substantially equivalent to those maintained by the Company, Nobel
Holdings, or the U.S. Subsidiaries; (ii) from and after the Closing,
RenaissanceRe will assume and perform the severance agreements dated as of May
9, 1997, among the Company, Nobel Service Corporation, and certain of the
Company's officers; and (iii) from and after the Closing, RenaissanceRe will
perform indemnification obligations of the Company arising under certain
specified agreements and cause the U.S. Subsidiaries to perform their respective
indemnification obligations arising under certain specified agreements. See
"Interests of Certain Persons to Be Acted Upon--Employment." RenaissanceRe and
Renaissance Holdings have also agreed that certain of the officers and directors
of the Company and Nobel Holdings, who will be identified in writing to
RenaissanceRe and must be reasonably acceptable to RenaissanceRe and the
Company, and who will be employees of RenaissanceRe or any of the U.S.
Subsidiaries after the Closing, will be permitted to continue functioning in
their respective capacities as officers and/or directors of the Company and
Nobel Holdings solely for the purpose of facilitating the liquidation of Nobel
Holdings and the Liquidation.
The Company and RenaissanceRe have agreed that, to the extent each is
willing to serve, each of Jeffry K. Amsbaugh, Thomas D. Nimmo, Douglas W.
Caudill, and Bryan L. Martin, directors and officers of the Company and Nobel
Holdings who are expected to become employees of RenaissanceRe or its U.S.
subsidiaries, will continue to serve in their respective capacities with the
Company and Nobel Holdings for such limited purpose, which includes without
limitation, compliance with statutory, tax, and regulatory requirements to which
the Company or Nobel Holdings continues to be or may become subject.
RenaissanceRe has notified the Company that such limited continued service by
these persons is acceptable.
NO SOLICITATION. The Company and Nobel Holdings have agreed that they will
not, will not permit any of the U.S. Subsidiaries, and will not authorize or
permit any of the U.S. Subsidiaries to authorize any officer, director, or
employee, or other advisor or representative thereof to knowingly encourage the
submission of any Takeover Proposal (as defined herein). For purposes of the
Sale, a "Takeover Proposal" means (i) any proposal or offer relating to any
direct or indirect acquisition or purchase of all or a substantial part of the
assets of the U.S. Subsidiaries or of any class of equity securities of the
Company or Nobel Holdings, or any of the U.S. Subsidiaries, any tender offer or
exchange that if consummated would result in any person beneficially owning
shares of any class of equity securities of the Company or Nobel Holdings, or
any of the U.S. Subsidiaries, or any merger, consolidation, business
combination, sale of substantially all of the assets, recapitalization,
liquidation, dissolution, or similar transaction involving the Company, Nobel
Holdings, or any of the U.S. Subsidiaries other than the Sale, Plan of
Liquidation, and Liquidation, or (ii) any other transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent, or
materially delay the consummation of the Sale and the Liquidation. The Company
and Nobel Holdings are required to advise RenaissanceRe of any Takeover
Proposal, or any proposal with respect to any Takeover Proposal, and the
material terms and conditions of the Takeover Proposal. Subject to the Nobel
Board's compliance with its fiduciary duties, neither the Nobel Board nor any
committee of the Nobel Board shall withdraw or modify its approval or
recommendation with respect
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to the Sale and the Liquidation, approve or recommend any Takeover Proposal, or
enter into any definitive agreement to consummate any Takeover Proposal. If
prior to the Closing the Nobel Board, after consultation with and based upon
advice received from experienced outside legal counsel, determines that a
failure to act with respect to any Takeover Proposal would be inconsistent with
its fiduciary duties to the Company's shareholders, the Company may furnish
information to any person in response to an unsolicited request pursuant to a
confidentiality agreement and participate in discussions and negotiations
regarding any potential Takeover Proposal. Based upon this determination, the
Nobel Board may withdraw or modify its approval or recommendation, and the
Company may enter into an agreement to consummate a Takeover Proposal, at any
time after the end of the next business day following RenaissanceRe's receipt of
written notice, which will include a copy of any documentation delivered in
connection with the Takeover Proposal. If the Company enters into a definitive
agreement, it will be required to pay a termination fee to RenaissanceRe. See
"--Termination; Termination Fee."
STOCK OPTIONS. Pursuant to the Sale Agreement, the Company and Nobel
Holdings have delivered to RenaissanceRe copies of waiver letters executed by
certain executive officers of the U.S. Subsidiaries. Each such executive officer
has waived the right to receive cash consideration upon completion of the
Liquidation with respect to the executive officer's options to purchase Common
Shares. In exchange, effective upon the Closing, each such executive officer
will have his or her options converted into options to purchase common shares,
par value $1.00 per share, of RenaissanceRe (the "RenaissanceRe Shares"). The
number of RenaissanceRe Shares to be received shall equal the number of Common
Shares subject to each option being converted divided by the ratio of the fair
market value per share of the RenaissanceRe Shares to the fair market value per
share of the Common Shares, in each case calculated immediately prior to the
Closing. The exercise price of each RenaissanceRe Shares to be received will
generally be equal to the exercise price of each option being converted
multiplied by the same ratio. All other terms and conditions of such options
will remain unchanged, and such conversion shall be effected in a manner
consistent with the requirements of Section 424(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations thereunder. See "Interests
of Certain Persons in Matters to Be Acted Upon--Stock Options" for a discussion
of arrangements made with respect to other employee stock options.
IRREVOCABLE PROXIES. Pursuant to the Sale Agreement, the Company and Nobel
Holdings have also delivered irrevocable proxies in favor of RenaissanceRe in
respect of all the Common Shares owned by each of Jeffry K. Amsbaugh, Douglas W.
Caudill, Robert C. Duvall, Bryan L. Martin, Robert B. Sanborn, and Thomas J.
O'Shane. The irrevocable proxies grant RenaissanceRe a proxy to vote the shares
subject to the irrevocable proxies in favor of the Sale or any similar
transaction, in favor of the Sale Agreement or any agreement evidencing the
Sale, in favor of any related transactions, and against any transaction or
matter that conflicts with the Sale. The Company and Nobel Holdings also agreed
to use their reasonable best efforts to cause another shareholder, Wampum
Hardware Company, to execute and deliver an irrevocable proxy in favor of the
Sale prior to the Special Meeting, which proxy has been obtained as of the date
of this Proxy Statement. Additionally, the irrevocable proxies provide that,
until the termination of the Sale Agreement, the parties thereto and their
affiliates shall not, directly or indirectly, solicit any proposal or offer from
any third party relating to any acquisition proposal in respect of the Company
or any of its subsidiaries, or participate in any discussions or negotiations
regarding any such proposals, or acquire, sell, assign, transfer, or otherwise
dispose of any shares of capital stock of the Company. See "Interest of Certain
Persons In Matters to Be Acted Upon--Irrevocable Proxies."
LIQUIDATION. Pursuant to the Sale Agreement, the Company and Nobel Holdings
are required to take all reasonable measures and actions in furtherance of the
liquidation of Nobel Holdings and the Liquidation. Immediately following
approval by the Company's shareholders of the Liquidation at the Special
Meeting, or at a subsequent special general meeting of the Company's
shareholders called for that purpose, the Company and Nobel Holdings (to the
extent not already commenced by Nobel Holdings) must commence liquidation
proceedings and use their reasonable best efforts to complete the Liquidation as
promptly as possible and to effectuate a distribution or distributions to the
Company's shareholders that
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shall aggregate, including the Final Distribution (as defined herein), not more
than $14.00 (other than as described herein) in respect of each Common Share
outstanding as of the date of the Sale Agreement (or issued in exchange for the
exercise of employee stock options outstanding on the date of the Sale
Agreement), which is referred to herein as the "Total Distribution." The "Final
Distribution" is the final liquidating distribution to the Company's
shareholders as part of the Liquidation in respect of each then outstanding
Common Share. If the Company purchases Common Shares, whether pursuant to a
tender offer or otherwise, prior to completion of the Liquidation, the price per
share may generally not exceed $14.00 and the aggregate costs of any such
repurchases will be deducted from the aggregate amount of the Final
Distribution. See "--The Liquidation."
LIMITED RECOURSE LOAN. At the Closing, RenaissanceRe has agreed to make the
Limited Recourse Loan to the Company, to be evidenced by a participating
promissory note of the Company substantially in the form of Appendix D attached
to this Proxy Statement and incorporated herein by reference, which shall bear
interest at the rate of 6.0% per annum and shall mature on the date of, and
immediately after, the payment of the Final Distribution or, in any event, not
later than December 31, 1999. The proceeds of the Limited Recourse Loan shall be
available to the Company, together with its other assets, to pay the actual
expenses incurred by the Company in connection with the Sale, the Plan of
Liquidation, and the Liquidation as well as to pay generally other liabilities
of the Company, except for any U.S. federal taxes or any costs associated with
any tender offer by the Company for the Common Shares. The Limited Recourse Loan
is expressly subordinate, first, to the policy claims of insurance or
reinsurance policyholders of the Company, second, to all other obligations and
indebtedness of the Company (except for obligations and indebtedness of the
Company in respect of any U.S. federal taxes), and, third, to the payment of the
Final Distribution and other distributions to shareholders or repurchases of
Common Shares at a price not in excess of an aggregate amount of $14.00 in cash
per Common Share. The holder of the Limited Recourse Loan will make no claim to
the assets comprising the Final Distribution.
If the Limited Recourse Loan matures on the date of payment of the Final
Distribution, the total amount due and payable under the Limited Recourse Loan
will be equal to all remaining assets of the Company after payment of all
permitted expenses and liabilities of the Company and the Final Distribution
(the "Remaining Amount"). The Remaining Amount will be applied: first, to the
payment of the principal amount of the Limited Recourse Loan; second, to accrued
interest on the Limited Recourse Loan; and third, as additional interest. If,
however, the maturity date of the Limited Recourse Loan is after June 30, 1998,
but before December 31, 1999, the Remaining Amount will be applied: first, to
the payment of the principal amount; second, to the extent of available funds,
on a PARI PASSU basis, to accrued interest on the Limited Recourse Loan and an
additional distribution to the Company's shareholders, which will be in addition
to the Total Distribution; and third, as additional interest. The additional
distribution will be calculated as interest accruing each day during the period
beginning July 1, 1998, through the maturity date at a rate equal to 6.0% per
annum on the difference between $14.00 and the portion of the Total Distribution
previously paid or distributed to shareholders of the Company prior to the Final
Distribution, multiplied by the number of outstanding Common Shares on the day
the calculation is made. If the balance of the Remaining Amount is insufficient
to satisfy both accrued interest and the additional distribution, the remaining
balance will be paid on a pro rata basis with respect to such amounts.
If the Limited Recourse Loan matures on December 31, 1999, prior to payment
of the Final Distribution, the total amount due and payable under the Limited
Recourse Loan will be equal to all of the assets of the Company in excess of (i)
necessary reserves determined by the Liquidator for the payment of all remaining
liabilities of the Company, other than the Limited Recourse Loan and any U.S.
federal taxes, and expenses of the Company to be incurred to complete the
Liquidation plus (ii) the aggregate amount of the Total Distribution then
remaining unpaid with respect to all then outstanding Common Shares. The Company
will apply payment: first, to payment of the principal amount of the Limited
Recourse Loan; second, to accrued interest on the Limited Recourse Loan; and
third, as additional interest.
CONDITIONS TO CONSUMMATION OF THE SALE. The respective obligations of the
parties to the Sale Agreement to consummate the Sale are subject to the
satisfaction of certain joint conditions, any one or
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more of which may be waived by mutual consent of the parties. First, the Sale
Agreement and the Sale must have been approved by the requisite vote of the
Company's shareholders. Second, no statute, rule, order, decree, or regulation
shall have been enacted or promulgated that prohibits consummation of the Sale.
Third, there shall be no order or injunction of a governmental entity
precluding, restraining, enjoining, or prohibiting consummation of the Sale
Agreement and the Sale. Finally, all required filings and approvals, including
all filings with the Commission and under state securities or blue sky laws, and
under Bermuda law, shall have been made and/or obtained.
The obligations of the Company and Nobel Holdings to consummate the Sale are
subject to the following conditions, any of which may be waived by them: (i)
each representation and warranty of Renaissance and RenaissanceRe Holdings
contained in the Sale Agreement, considered individually, which is not qualified
by its terms as to materiality, shall have been true and correct in all material
respects on the date of the Sale Agreement and shall be true and correct in all
material respects as of the Closing; (ii) all representations and warranties of
RenaissanceRe and Renaissance Holdings, considered collectively, and each
representation and warranty of RenaissanceRe and Renaissance Holdings,
considered individually, which is qualified by its terms as to materiality,
shall have been true and correct in all respects on the date of the Sale
Agreement and shall be true and correct in all respects at the Closing; and
(iii) RenaissanceRe and Renaissance Holdings shall have performed in all
material respects their respective obligations under the Sale Agreement.
The obligations of RenaissanceRe and Renaissance Holdings to consummate the
Sale are subject to the following conditions, any of which may be waived by
RenaissanceRe: (i) all representations and warranties of the Company and Nobel
Holdings contained in the Sale Agreement, considered collectively and each
representation and warranty of the Company and Nobel Holdings, considered
individually, which is not qualified by its terms as to materiality, shall have
been true and correct in all material respects on the date of the Sale Agreement
and shall be true and correct in all material respects as of the Closing; (ii)
each representation and warranty of the Company and Nobel Holdings, considered
individually, which is qualified by its terms as to materiality, shall have been
true and correct in all respects on the date of the Sale Agreement and shall be
true and correct in all respects at the Closing; (iii) the Company and Nobel
Holdings shall have performed in all material respects their respective
obligations under the Sale Agreement; (iv) other than as expressly disclosed to
RenaissanceRe and Renaissance Holdings in a schedule to the Sale Agreement,
there shall have been no event, change, or occurrence (other than actions taken
in compliance with the Sale Agreement and general economic conditions generally
affecting the industries in which the U.S. Subsidiaries conduct their respective
businesses), that has had or is reasonably likely to have, individually or in
the aggregate, a material adverse effect on the business, properties, assets,
financial condition, or results of operations of the U.S. Subsidiaries or the
ability of the Company or Nobel Holdings to perform their respective obligations
under the Sale Agreement; (v) the Company and Nobel Holdings shall have caused
all appropriate stock transfer tax stamps to be affixed to the certificates
representing the Shares; (vi) the President and Chief Executive Officer of Nobel
Insurance, Jeffry K. Amsbaugh, shall have entered into employment arrangements
satisfactory to RenaissanceRe; (vii) RenaissanceRe shall have received
satisfactory evidence that all consents and approvals required for the
consummation of the Sale or the ownership and operation by RenaissanceRe of the
U.S. Subsidiaries and their businesses have been obtained and all required
filings have been made; (viii) unaudited financial statements for the U.S.
Subsidiaries as of and for the latest three-month period for which statements
are available and as of and for the latest monthly period ended prior to the
Closing for which statements are available, true, correct, and complete copies
of which shall have been delivered to Renaissance, shall (except as expressly
disclosed to RenaissanceRe and Renaissance Holdings in a schedule to the Sale
Agreement) each reflect no material change from the September 30, 1997,
financial statements previously delivered to RenaissanceRe; (ix) Nobel Holdings
and Mr. Amsbaugh shall have each executed and delivered instruments satisfactory
to RenaissanceRe assigning to Renaissance Holdings all of the rights, title, and
interest of Nobel Holdings in NIA; (x) all reinsurance arrangements of any kind
whatsoever between Nobel Insurance and the Company shall have been commuted at
the face value of the related
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reserves as of the Closing on terms satisfactory to RenaissanceRe; and (xi) the
Company and Nobel Holdings will furnish RenaissanceRe and Renaissance Holdings
certificates and other documents as may be reasonably requested to evidence
fulfillment of these conditions.
AMENDMENT. Subject to applicable law, the Sale Agreement may be amended,
modified, and supplemented in any and all respects, whether before or after any
vote of the Company's shareholders with respect to the Sale or the Sale
Agreement, by written agreement of all the parties at any time prior to the
Closing.
TERMINATION; TERMINATION FEE. The Sale Agreement may be terminated at any
time before the Closing by the mutual written consent of RenaissanceRe, the
Company, and Nobel Holdings. The Sale Agreement may be terminated by either of
RenaissanceRe or the Company and Nobel Holdings if (i) any governmental entity
having competent jurisdiction shall have enacted a law or regulation or issued
an order, decree, or ruling, or taken any other action permanently restraining,
enjoining, or otherwise prohibiting the Sale, and such action has become final
and non-appealable, or (ii) the joint conditions to closing are not satisfied by
June 30, 1998, unless the failure to satisfy the conditions or the failure to
close is due to the action or inaction of the terminating party with respect to
covenants in the Sale Agreement to be performed on or before the Closing. With
respect to any termination pursuant to clause (i) above, the terminating party
must have used reasonable efforts to remove or lift any such action.
The Sale Agreement may be terminated at any time before the Closing by the
Company and Nobel Holdings based on the following: (i) subject to payment to
RenaissanceRe of a termination fee (as described below) and the requirements set
forth in the Sale Agreement, the Company and Nobel Holdings enter into a
definitive agreement with respect to a Takeover Proposal; (ii) there is a breach
of any representation or warranty (without giving effect to any materiality or
similar qualifications) on the part of RenaissanceRe or Renaissance Holdings
having a material adverse effect on the ability of RenaissanceRe or Renaissance
Holdings to perform their respective obligations under the Sale Agreement; or
(iii) there is a breach of any covenant on the part of RenaissanceRe or
Renaissance Holdings resulting in the same type of material adverse effect,
which breach is not cured within 10 days following written notice. With respect
to any termination pursuant to clauses (ii) or (iii) above, the Company and
Nobel Holdings must have complied with all provisions of the Sale Agreement. In
addition, if the Sale Agreement is terminated pursuant to clauses (ii) or (iii)
above and within 12 months thereafter either the Company, Nobel Holdings, or any
of the U.S. Subsidiaries enter into a definitive agreement with respect to a
Takeover Proposal or a Takeover Proposal with respect to any of them is
consummated, the Company and Nobel Holdings must pay RenaissanceRe a termination
fee.
The Sale Agreement may be terminated at any time before the Closing by
RenaissanceRe based on the following: (i) if the Nobel Board or the Board of
Directors of Nobel Holdings shall have withdrawn, or modified or changed in a
manner unacceptable to RenaissanceRe or Renaissance Holdings, such Board's
approval or recommendation of the Sale or the Sale Agreement; (ii) if the
Company enters into a definitive agreement for the consummation of a Takeover
Proposal in accordance with the restrictions set forth in the Sale Agreement;
(iii) the Nobel Board recommends any proposal other than by RenaissanceRe or
Renaissance Holdings in respect of a Takeover Proposal; (iv) the Company and
Nobel Holdings continue discussions with any third party concerning a Takeover
Proposal for more than 20 days after the date of receipt; (v) a Takeover
Proposal, which has been publicly disclosed and publicly proposed or
communicated to the Company, Nobel Holdings, or any of the U.S. Subsidiaries,
contains a proposal as to price and the Company and Nobel Holdings do not reject
the Takeover Proposal within 20 days of the earlier of its receipt or first
public disclosure; or (vi) any person or group (as defined in the Exchange Act)
other than RenaissanceRe or Renaissance Holdings or any of their respective
affiliates becomes the beneficial owner of more than 15% of the outstanding
Common Shares. If the Sale Agreement is terminated pursuant to clauses (i),
(ii), or (iii) above, the Company and Nobel Holdings must pay RenaissanceRe the
termination fee. In addition, if the Sale Agreement is terminated pursuant to
clauses (iv), (v), or (vi) above and within 12 months thereafter either the
Company, Nobel Holdings, or any of the U.S. Subsidiaries enter into a definitive
agreement with respect to a Takeover Proposal or a Takeover
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Proposal with respect to any of them is consummated, the Company and Nobel
Holdings must pay RenaissanceRe a termination fee.
RenaissanceRe may also terminate the Sale Agreement if (i) there is a breach
of any representation or warranty (without giving effect to any materiality or
similar qualifications) on the part of the Company or Nobel Holdings having a
material adverse effect on the business, properties, assets, financial
condition, or results of operations of the U.S. Subsidiaries or the ability of
the Company or Nobel Holdings to perform their respective obligations under the
Sale Agreement (other than actions taken in compliance with the Sale Agreement
and general economic conditions generally affecting the industries in which the
U.S. Subsidiaries conduct their respective businesses) or (ii) there is a breach
of any covenant on the part of the Company or Nobel Holdings resulting in the
same type of material adverse effect, which breach is not cured within 10 days
following written notice; provided that RenaissanceRe must have complied with
all provisions of the Sale Agreement.
If the Company and Nobel Holdings are required to pay RenaissanceRe a
termination fee in connection with a termination of the Sale Agreement, the
termination fee will equal $3,000,000 plus an amount equal to the reasonably
documented out-of-pocket expenses incurred by RenaissanceRe and Renaissance
Holdings in connection with the Sale Agreement and the Sale (including
attorneys' fees and expenses), but which expenses may not exceed $400,000. The
termination fee is payable by wire transfer of immediately available funds to
the account designated by RenaissanceRe. The Company and Nobel Holdings must pay
the termination fee simultaneous with any termination by them in connection with
entering into a definitive agreement with respect to a Takeover Proposal and
promptly, but not later than two business days, after the date of any other
termination or event requiring payment of the termination fee. Except when the
termination fee is required to be paid, the parties to the Sale Agreement are
otherwise responsible for their own fees and expenses incurred in connection
with the Sale Agreement and the Sale, whether or not the Sale is consummated.
GOVERNING LAW. The Sale Agreement is governed by Delaware law.
COMPARISON OF RIGHTS OF HOLDERS OF STOCK. There will be no change in the
rights and preferences of holders of the Common Shares as a result of the Sale.
PLAN OF LIQUIDATION
Pursuant to the Plan of Liquidation, the Company will (i) reduce its share
capital account by decreasing the par value of the Common Shares from $1.00 to
$0.05 per share and transfer the amount of the reduction to its contributed
surplus account, (ii) reduce its share premium account to zero and transfer the
amount thereof to its contributed surplus account, (iii) temporarily adjourn the
Special Meeting, (iv) consummate the Sale, (v) cause Nobel Holdings to dissolve,
liquidate, and distribute to the Company the net cash remaining after the Sale
and payment of its known debts, (vi) subject to applicable restrictions and
required consents under Bermuda law, make the Initial Distribution, and (vii)
reconvene the Special Meeting to present the proposal for the Liquidation to the
Company's shareholders. A copy of the Plan of Liquidation is attached as
Appendix B to this Proxy Statement.
REDUCTION OF CAPITAL. Effective immediately upon shareholder approval of
the Plan of Liquidation and the Company's compliance with the applicable
provisions of the Companies Act and the Bermuda Insurance Act 1978, as amended
(the "Insurance Act"), including the consent of the Minister of Finance under
the Insurance Act, (i) the Company's share capital account will be reduced by
decreasing the par value of the Common Shares from $1.00 per share to $0.05 per
share and transferring the amount of the reduction to its contributed surplus
account (as defined in the Companies Act) and (ii) the Company's share premium
account, which represents the premium paid for Common Shares in excess of the
$1.00 par value, will be reduced to zero and the amount thereof will be
transferred to its contributed surplus account.
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This reduction in capital will facilitate the Company's ability to implement the
Plan of Liquidation, including payment of the Initial Distribution. A reduction
of capital, whether in share capital or share premium accounts, is authorized
under the Companies Act and the Company's Bye-laws upon approval by the
Company's shareholders at a general meeting.
As of September 30, 1997, the date of the most recently published
consolidated balance sheet of the Company, the Company's share capital, based on
$1.00 par value per Common Share, was approximately $4,471,000, its share
premium account was approximately $18,169,000, and it had no contributed surplus
account. The amounts of both the Company's share premium and share capital
accounts have been adjusted to reflect the cancellation of the treasury shares
reflected on such balance sheet since they are no longer considered issued under
Bermuda law. After giving effect to the reduction of capital pursuant to the
Plan of Liquidation, as of September 30, 1997, the Company's share capital
account, based on $0.05 par value per share, would have been approximately
$224,000, its share premium account would have been zero, and the amount of its
contributed surplus account would have been approximately $22,416,000.
Pursuant to the Insurance Act, the prior consent of the Minister of Finance
is required before an insurance company may reduce its total capital by more
than 15% and, accordingly, the consent of the Minister of Finance is required
before the Company can reduce its total capital as contemplated by Proposal 2
and effect the Initial Distribution. The Company intends to apply to the
Minister of Finance prior to the date of the Special Meeting for the required
consent to reduce its capital and effect the Initial Distribution. The Company
expects that, prior to payment of the Initial Distribution, the Company shall
have assigned to third parties or commuted all of its insurance obligations and
paid down or paid in full Nobel Holdings' existing credit facility (which the
Company believes represent substantially all of its historical operating
liabilities). In addition, the Company anticipates that, after each of the
contemplated reduction in the share capital and share premium accounts and the
making of the Initial Distribution, it will substantially exceed the minimum
solvency margin and liquidity ratio requirements under the Insurance Act.
Accordingly, the Company believes it will be able to obtain the consent of the
Minister of Finance to the reduction of total capital in a timely fashion,
although the giving of such consent is within the discretion of the Minister of
Finance and there can be no assurance that such consent can be obtained or that
such consent can be obtained on a timely basis. See "--Insurance Regulation."
In order to comply with the Companies Act, the Company will be required to
cause a notice of the reduction in capital to be published in an appointed
newspaper not more than 30 days and not less than 15 days prior to the date of
the Special Meeting. The notice must state the amount of the share premium and
share capital accounts as last previously determined by the Company, the amount
to which the share premium and share capital accounts are to be reduced, and the
date as from which the reduction is to have effect. The Company plans to publish
the required notice on or about the commencement of this time period.
In addition, on the effective date, which will be the date of the Special
Meeting, at least two directors of the Company must execute a sworn affidavit
declaring either that on that date the Company is solvent or that all the
creditors of the Company on that date have expressed in writing their
concurrence in the reduction. Generally, the Company is solvent if its assets
exceed its liabilities. The Company anticipates that at least two directors will
execute such an affidavit with respect to the Company's solvency on the date of
the Special Meeting.
Within 30 days after the effective date of the reduction of capital, the
Company will be required to file a memorandum, with a copy of the published
notice and the directors' affidavit, in the office of the Registrar of Companies
stating that the Company has complied with the applicable provisions of the
Companies Act.
TEMPORARY ADJOURNMENT OF THE SPECIAL MEETING. Pursuant to the Plan of
Liquidation, the Special Meeting will be temporarily adjourned until the later
of , 1998, or that date which is five business days after the last to
occur of the closing of the Sale, the dissolution and liquidation of Nobel
Holdings, the payment of the Initial Distribution (or the determination by the
Nobel Board that the Company cannot
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pay the Initial Distribution), and the 60-day anniversary of the Special Meeting
in order to permit those transactions to be completed prior to consideration of
Proposal 3 (the Liquidation).
DISSOLUTION OF NOBEL HOLDINGS. Promptly following consummation of the Sale,
Nobel Holdings intends to file a Certificate of Dissolution with the Secretary
of State of Delaware. Effective upon the filing of the Certificate of
Dissolution, Nobel Holdings will be dissolved. Pursuant to the provisions of the
Delaware General Corporation Law, however, Nobel Holdings will be continued for
a period of three years, or such longer period as a court of competent
jurisdiction may direct, in order to enable it to (i) prosecute and defend suits
whether civil, criminal, or administrative, (ii) gradually settle and close its
business, (iii) dispose of and convey its property, (iv) discharge its
liabilities, and (v) distribute any remaining assets to its stockholders, but
not for the purpose of continuing the business for which Nobel Holdings was
organized. With respect to any action, suit, or proceeding begun by or against
Nobel Holdings either prior to or within three years after the date of the
dissolution the action shall not abate by reason of dissolution of Nobel
Holdings. Nobel Holdings shall, solely for the purpose of such action, suit, or
proceeding, be continued as a body corporate beyond the three-year period and
until any judgment, orders, or decrees therein shall be fully executed, without
the necessity for any special direction to that effect by the Delaware Court of
Chancery.
The board of directors of Nobel Holdings and the Company as the sole
stockholder of Nobel Holdings have adopted a plan of distribution for the
payment and discharge of Nobel Holdings' liabilities and distribution of the
remaining assets to the Company following the filing of the Certificate of
Dissolution (the "Plan of Distribution"). The Plan of Distribution is subject to
the adoption of the Plan of Liquidation by the shareholders of the Company and
the filing of the Certificate of Dissolution. On the date of dissolution, the
Company expects Nobel Holdings to own no material assets other than the cash
proceeds from the Sale. Pursuant to the Plan of Distribution, Nobel Holdings
will promptly pay all known claims and obligations, whether matured or
unmatured. The Company will assume the obligation of, or make (or cause Nobel
Holdings to make) other reasonable provision for, full payment of (i) any known
claim or obligation that cannot be paid promptly, (ii) any contingent or
conditional claim or obligation known to Nobel Holdings, (iii) any claim or
obligation that is the subject of a pending action against Nobel Holdings, and
(iv) any claim or obligation that has not been made known to Nobel Holdings or
that has not arisen, but, based upon facts known to Nobel Holdings, is likely to
arise within ten years after the date of dissolution. Any remaining funds will
be transferred to the Company pursuant to a liquidating distribution.
The Company estimates that after Nobel Holdings pays all known claims and
obligations (including settlements at the closing of the Sale of Nobel Holdings'
$238,000, $172,000, and $409,000 intercompany indebtedness to Nobel Managing
Agents, Inc., Nobel Service Corporation, and NIA, respectively, and the payment
of its existing credit facility) and reasonable provision is made for any other
claims and obligations, the liquidating distribution from Nobel Holdings to the
Company will be approximately $47.4 million. If funds are left with Nobel
Holdings as a provision for any other claims and obligations, and if any such
claims or obligations are not realized, additional liquidating distributions may
be made to the Company during the period of the Liquidation. The Company does
not anticipate that there will be any such other claims and obligations.
THE INITIAL DISTRIBUTION. Following the dissolution and liquidation of
Nobel Holdings, the Company intends to pay the Initial Distribution to its
shareholders in an amount up to $13.00 in cash per Common Share. Following the
temporary adjournment of the Special Meeting, and subject to completion of the
foregoing components of the Plan of Liquidation, the Nobel Board intends to meet
to consider the amount of the Initial Distribution to be declared and paid. For
purposes of the Companies Act, the Initial Distribution will constitute a
dividend or a distribution out of the Company's contributed surplus account.
Under the Companies Act, in order for the Company to declare or pay the
Initial Distribution, and for the Nobel Board to determine the amount thereof,
the Company must not have reasonable grounds to believe that (i) the Company is,
or would after the payment of the Initial Distribution be, unable to pay its
liabilities as they become due or (ii) the realizable value of its assets would
thereby be less than the aggregate of its liabilities, its issued share capital
account, and its share premium account. In order to determine whether either
event would occur, the Nobel Board must (i) evaluate and determine the value
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of the Company's assets, (ii) evaluate and determine any known liabilities of
the Company, including the full amount payable under the Limited Recourse Loan,
(iii) evaluate and determine the likelihood of any threatened or potential
liabilities, including the possibility of any U.S. federal tax liabilities of
the Company, and (iv) include the assumption of any liabilities of Nobel
Holdings.
In addition to the requirements of the Companies Act, the Company must also
meet the relevant financial ratios and minimum statutory requirements under the
Insurance Act. Generally, the insurance tests under this statute take
precedence, so that compliance thereunder will also satisfy the requirements of
the Companies Act. Because payment of the Initial Distribution will result in a
reduction of the Company's total capital, the Company will also be required to
obtain the prior consent of the Minister of Finance pursuant to the provisions
of the Insurance Act. The Company intends to apply for this consent prior to the
Special Meeting. Subject to completion of the Sale, the reduction of the
Company's share capital and share premium accounts pursuant to the Plan of
Liquidation, and its continued satisfaction of the relevant financial ratios and
minimum statutory requirements, the Company expects the Minister of Finance to
grant the consent, although the giving of such consent is within the discretion
of the Minister of Finance and there can be no assurance that such consent can
be obtained or that such consent can be obtained on a timely basis. See
"--Insurance Regulation."
The Nobel Board will not be able to determine the amount of the Initial
Distribution until it completes a financial review of the Company and the
statutory requirements at the time of the proposed declaration of the Initial
Distribution. In addition, the Company must be in compliance with the statutory
requirements at the time of the proposed payment of the Initial Distribution. If
the foregoing components of the Plan of Liquidation had been completed as of the
date of this Proxy Statement, the Company believes it would have been able to
declare and pay an Initial Distribution equal to $13.00 per Common Share as of
the date hereof. There can, however, be no assurance that the Company will be
able, following the adoption of the Plan of Liquidation and the completion of
the foregoing components thereof, to declare and pay the Initial Distribution
or, if declared and paid, what the amount of the Initial Distribution will be.
The Nobel Board intends to declare the maximum amount per share, up to $13.00,
that at the time is lawful and in compliance with Bermuda law.
If Proposal 1 (the Sale) is not approved by the Company's shareholders at
the Special Meeting, neither Proposal 2 (the Plan of Liquidation) nor any other
proposal will be presented to the Company's shareholders for a vote, no other
business is contemplated to be presented to the shareholders, and the Special
Meeting will be subject to regular adjournment.
If Proposal 1 is approved by the Company's shareholders, but Proposal 2 is
not approved by the Company's shareholders, the Special Meeting will not be
temporarily adjourned, Proposal 3 (the Liquidation) will not be presented to the
Company's shareholders for a vote, and the Initial Distribution will not be
paid. The Sale will, nevertheless, be consummated and, except for the limited
role contemplated under the Sale Agreement, the Company's management will all
become employees of RenaissanceRe upon the Closing. The Company will have no
operating assets, no plans, or prospects. Accordingly, in this event, the
Company intends to call a separate special general meeting of shareholders for
the purpose of presenting an alternative proposal equivalent to Proposal 3 for
the voluntary winding up of the Company and will incur additional fees and
expenses in connection therewith.
THE LIQUIDATION
VOLUNTARY WINDING UP UNDER BERMUDA LAW. Under the Companies Act, the
Company may be wound up voluntarily pursuant to a resolution passed by its
shareholders at a general meeting. In connection with a shareholders' voluntary
winding up, the Company's shareholders are also required to appoint one or more
liquidators for the purpose of winding up the affairs and distributing the
assets of the Company. The Companies Act does not set forth specific
requirements for who can serve as a liquidator, except that a corporate entity
is not qualified for appointment unless empowered to serve as a liquidator
pursuant to a Bermuda statute. A liquidator is not required to be a director or
officer of the Company or a resident of Bermuda. The Company's shareholders may
also fix the compensation of a liquidator.
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The proposed voluntary winding up of the Company following the consummation
of the Sale is generally referred to herein as the "Liquidation." Pursuant to
Proposal 3, the Company contemplates the appointment by the Company's
shareholders of the Liquidator to serve as sole liquidator and approval by the
shareholders of compensation at a fixed hourly rate with a minimum fee to be
paid.
Within five weeks preceding the passage of the shareholder resolution for
the Liquidation, the majority of the Company's directors must each make a
written statutory declaration, including a statement of assets and liabilities
of the Company as of the latest practicable date, to the effect that they have
formed the opinion that the Company will be able to pay its debts in full within
the period specified in the declaration, which must begin upon the commencement
of the Liquidation and may not exceed 12 months from the commencement. The
statutory declaration must be delivered to the Registrar of Companies in Bermuda
for registration within the same five-week time period. Any director making this
declaration without reasonable grounds to do so is subject to imprisonment for
up to six months or a fine of up to $2,500. If the Company is unable to pay its
debts in full within the specified period, there is a rebuttable presumption
that the director lacked reasonable grounds for his opinion.
The Liquidation will be deemed to commence at the time the shareholders'
resolution for the Liquidation is passed. From that time, the Company will cease
to carry on its business, except so far as may be required for the beneficial
winding up thereof, although its corporate existence and corporate powers will
continue until the Company is dissolved upon completion of the Liquidation. In
addition, upon appointment of the Liquidator, all powers of the officers will
cease, except to the extent that the Company's shareholders provide otherwise
pursuant to a resolution passed at a general meeting or the Liquidator sanctions
the continued exercise of powers by the officers. Pursuant to Proposal 3, the
Company contemplates that the current officers of the Company will be authorized
to continue exercising their respective powers as officers for the purpose of
facilitating the Liquidation, including, without limitation, ensuring compliance
with all statutory and regulatory requirements.
Within 21 days after the commencement of the Liquidation and the appointment
of the Liquidator, (i) the Company must give notice of the voluntary winding up
by advertisement in an appointed newspaper in Bermuda, (ii) the Liquidator must
publish a notice of his appointment in an appointed newspaper in Bermuda, and
(iii) the Company must send written notice of the voluntary winding up to each
of its known claimants. The published notice of the Liquidation and the notices
to claimants will state that all claims must be received by the Liquidator
within 14 days after receipt of the notice or be barred. Notwithstanding such a
statement, the Liquidator will continue to receive and resolve claims received
during the period of the Liquidation. Every invoice, order for goods, or
business letter by or on behalf of the Company must contain a statement that the
Company is being wound up. In addition to the public notices and notices to
known claimants required by the Companies Act, the Liquidator may engage in
other procedures to determine the existence of and resolve potential or
unasserted claims or assure himself of the absence of such claims. Any of such
procedures or the assertion of claims or potential claims as a result of any of
the notices or procedures may cause a substantial delay in the shareholders'
receipt of the Final Distribution and, if such claims are for U.S. taxes or in
the aggregate approximate or exceed the principal amount of the Limited Recourse
Loan, the total amount of all liquidating distributions to be received and
retained by shareholders may be less than $14.00 per share.
The Liquidator will have broad powers with respect to the Liquidation,
including the exercise of the powers given under the Companies Act to a
liquidator in a winding up by the Supreme Court of Bermuda (the "Court"). The
Liquidator will have the power, in the name and on behalf of the Company, to:
(i) bring or defend any action or other legal proceeding; (ii) carry on the
business of the Company to the extent necessary for the beneficial winding up of
the Company; (iii) appoint an attorney to assist him in the performance of his
duties as the Liquidator; (iv) pay any classes of creditors in full; (v) make
any compromise or arrangement with creditors; (vi) compromise any claims; (vii)
sell and transfer the real and personal property of the Company; (viii) do all
acts and execute all deeds, receipts, and other documents and for that purpose
use, when necessary, the Company's seal; (ix) draw, accept, make, and endorse
any bill of exchange or promissory note; (x) raise on the security of the assets
of the Company any money required; (xi) appoint an agent to do any business that
the Liquidator is unable to do himself; and (xii) do
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all such other things as may be necessary for the winding up of the affairs of
the Company and distributing its assets. The Liquidator may also apply to the
Court to determine any question arising in the Liquidation.
The current directors and officers of the Company will continue to serve in
their respective capacities with the Company and Nobel Holdings for the purpose
of facilitating the Liquidation. The continued exercise of powers by the
Company's directors and officers will include, without limitation, compliance
with statutory and regulatory requirements to which the Company continues to be
or may become subject. The directors' and officers' authority will exclude such
powers and functions falling within the scope of the Liquidator under the
Companies Act.
The Act generally provides that after commencement of the Liquidation any
transfer of shares that is not made to the Liquidator or with his approval and
any alteration in the status of the Company's shareholders shall be void. The
Company will request that the Liquidator, immediately following his appointment,
expressly authorize the continued trading of the Company's registered Common
Shares. Any transfers of restricted securities, other than pursuant to Rule 144
under the Securities Act, will require the approval of the Liquidator.
The costs and expenses of the Liquidation, including the Liquidator's
compensation, are payable out of the Company's assets. Certain other debts and
obligations have priority of payment, in the following order, over other debts
and obligations: (i) all taxes owing to the government of Bermuda or any
municipality in Bermuda; (ii) all wages or salary; (iii) all accrued holiday
remuneration; (iv) amounts owed by the Company as an employer with respect to
pensions or insurance; and (v) all amounts due in respect of workers'
compensation claims. Payments with respect to these priority claims are,
however, limited to $2,500 to any one claimant, subject to certain exceptions.
All other debts and liabilities of the Company will be satisfied by the
Liquidator PARI PASSU.
During the period of the Liquidation, the Liquidator may at any time stay
the Liquidation either altogether or for a limited time if he is satisfied that
such a stay is in the best interests of the Company's shareholders or the
Company's creditors. The stay may be lifted upon an application to the Court by
any creditor of the Company to continue the winding-up proceedings. If at any
time the Liquidator is of the opinion that the Company will not be able to pay
its debts in full within the period specified in the directors' statutory
declaration, he is required to call and hold a meeting of creditors and present
a statement of the assets and liabilities of the Company.
The Liquidator may invest excess cash in investments that a committee of
creditors authorizes or, in the absence of a committee of creditors, as
authorized by the Company's shareholders or Court. Excess cash is cash of the
Company that the Liquidator determines is in excess of the cash required for the
time being to answer demands in respect of the Company's debts.
Subject to the priority of claims and the satisfaction of all claims, the
property of the Company will be distributed among the shareholders according to
their rights and interests in the Company. With respect to the Liquidation, the
Company's obligation under the Limited Recourse Loan will be determined only
after payment of the Final Distribution to the Company's shareholders. See
"--The Sale Agreement--Limited Recourse Loan."
There is no specified period for the Liquidation of the Company. If the
Liquidation will continue for more than one year, and for each succeeding year,
the Liquidator must call and hold a general meeting of shareholders. At each
meeting, the Liquidator must make an accounting and disclosure of the winding up
during the previous year. The Liquidator must also send to the Registrar of
Companies such information with respect to the Liquidation as may be required.
The actual period for the Liquidation will depend on the nature of the assets
and liabilities of the company to be liquidated. If the Liquidator at any time
concludes that the Company is insolvent, the Liquidator is required to call a
meeting of creditors. At that time the Liquidation ceases to be a members'
voluntary liquidation and becomes a creditors' voluntary liquidation, pursuant
to which the Company's creditors and a liquidator appointed by them will control
the liquidation process rather than the Liquidator appointed by the
shareholders.
After the Initial Distribution by the Company, to be effected prior to the
appointment of the Liquidator, it is not anticipated that any partial
liquidating distributions will be made by the Liquidator
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until the winding up of the Company's affairs has been completed and all of its
debts and obligations other than those pursuant to the Limited Recourse Loan
have been paid or settled. At that time, in accordance with the terms of the
Sale Agreement, the Limited Recourse Loan, the Companies Act, and subject to the
maximum amounts described herein, the Company expects that the Liquidator will
pay out the Company's remaining cash in accordance with the following
priorities:
(1) First, payment of the Final Distribution to shareholders, equal to not
more than $14.00 in cash per Common Share outstanding on the date of the Sale
Agreement (or issued in exchange for any employee options outstanding on such
date) less the amount per share paid in the Initial Distribution.
(2) Second, to the extent of available funds, payment of the $8,894,000
principal amount of the Limited Recourse Loan then remaining outstanding;
(3) Third, to the extent of available funds, payment of (i) accrued but
unpaid interest on the Limited Recourse Loan at the rate of 6% per annum from
the date of Closing until the payment date, and, (ii) to the extent of available
funds, if the payment date is after June 30, 1998, but prior to December 31,
1999, on a PARI PASSU basis with the accrued but unpaid interest on the Limited
Recourse Loan, an additional amount to the Company's shareholders accrued each
day from July 1, 1998, to the date of the Final Distribution at the rate of 6%
per annum on any portion of the amount described in clause (1) above that
remains unpaid after June 30, 1998; and
(4) Fourth, to the extent of available funds, payment of all remaining cash
to RenaissanceRe (or other holder of the promissory note relating to the Limited
Recourse Loan) as additional interest.
When the affairs of the Company are fully wound up, the Liquidator will be
required to make an account of the Liquidation, showing how the Liquidation has
been conducted and the property has been disposed of. The Liquidator will then
be required to call and hold a general meeting of the shareholders of the
Company for the purpose of disclosing this account and giving any explanation of
the account. One month's notice to shareholders, which shall also be published
by an advertisement in an appointed newspaper, is required with the respect to
this general meeting. If a quorum, which is at least two shareholders present in
person and representing in person or by proxy the holders of a majority of the
issued and outstanding Common Shares entitled to vote, is not present, the
Liquidator may notify the Registrar of Companies that the general meeting was
duly summoned and that no quorum was present. Upon such notification, the
requirements of holding the general meeting will be deemed to have been complied
with.
Within one week after the general meeting of the Company's shareholders, the
Liquidator is required to notify the Registrar of Companies that the company has
been dissolved. The Registrar of Companies will record that fact and the date of
dissolution in the appropriate register.
After the completion of the Liquidation and the dissolution of the Company,
the Court may, for a period of ten years, make an order declaring the
dissolution void upon an application by the Liquidator or by any other person
who appears to the Court to have an interest. The Liquidator is subject to
claims filed by claimants of the Company with respect to obligations and
liabilities that were not satisfied during the Liquidation. The Liquidator may
be held personally liable with respect to such claims to the extent a claimant
or claimants can establish that he acted negligently with respect to the claim
or the Liquidation generally.
If at any time during the Liquidation, the office of the Liquidator becomes
vacant for any reason, the Company may fill the vacancy in a general meeting of
its shareholders. The Court also has the authority to appoint a replacement to
fill a vacancy.
Prior to or during the Liquidation, any creditor or shareholder of the
Company may apply to the Court to have the Company wound up by the Court. The
Court may also, upon a showing of cause, remove the Liquidator and appoint a
replacement.
Pursuant to the Act, the Liquidator is subject to the assessment of default
fines for failure to comply with the specific requirements of the Act.
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<PAGE>
THE LIQUIDATOR. Since July 1995, Mr. Butterfield has been an Associate with
KPMG Bermuda specializing in all areas of the insurance and reinsurance
industry. He has responsibility for developing and overseeing the insolvency and
liquidation practice of the firm. Mr. Butterfield currently serves as liquidator
with respect to approximately 10 to 15 compulsory liquidations per year and
approximately 10 voluntary liquidations per year. From 1990 to 1995, Mr.
Butterfield served as Bermuda's Registrar of Companies. As Registrar of
Companies, Mr. Butterfield was responsible for the regulation of Bermuda's
insurance industry, which consists of approximately 1,300 insurance and
reinsurance companies. In addition, as Bermuda's official receiver while serving
as the Registrar of Companies, Mr. Butterfield oversaw all compulsory
liquidations during the five-year period as well as numerous voluntary
liquidations. Prior to 1990, Mr. Butterfield worked with Johnson and Higgins and
operated his own insurance consulting and risk management firm. Mr.
Butterfield's experience includes risk management, administration, regulation,
and operation of insurance and reinsurance companies. Mr. Butterfield obtained
his undergraduate degree in accounting in 1975 from St. Mary's University in
Halifax, Nova Scotia, and did post-graduate studies in accounting at the
University of Toronto, in Toronto Ontario.
If either Proposal 1 (the Sale) or Proposal 2 (the Plan of Liquidation) is
not approved by the Company's shareholders at the Special Meeting, Proposal 3
(the Liquidation) will not be presented to the shareholders for a vote, no other
business is contemplated to be presented, and the Special Meeting will be
subject to regular adjournment. In addition, in order to commence the
Liquidation at a subsequent time, it will be necessary for the Company to call
and hold a separate general meeting of its shareholders.
APPRAISAL RIGHTS
Under the laws of the Islands of Bermuda, shareholders who dissent to the
Sale, the Plan of Liquidation, or the Liquidation do not have a right to any
dissenter's rights or rights of appraisal or similar rights with respect to any
or all of the Transactions. Any shareholder may, however, apply to the Court to
determine any question arising in the Liquidation.
ACCOUNTING TREATMENT
The Sale will be accounted for as a sale of assets and a transfer of certain
liabilities. The Company expects to record a gain upon the consummation of the
Sale of approximately $8.3 million on a pre-tax basis and $5.4 million net of
taxes and after taking into account any net operating losses.
INSURANCE REGULATIONS
Nobel Insurance is subject to regulation under the insurance statutes of the
District of Columbia and all fifty states, including the State of Texas, where
Nobel Insurance is domiciled. The Texas Insurance Code provides that no person
may acquire control of a domestic insurance company, such as Nobel Insurance,
unless the potential acquirer has given notice to the insurance company and the
Texas Department of Insurance (the "Texas Department") and has obtained the
prior written approval of the Texas Department. The Sale and certain of the
transactions related thereto are subject to such regulations. Accordingly, the
Sale and such transactions may not be consummated prior to the filing of certain
prescribed notices and reports with the Texas Department and the receipt of
approval from the Texas Department.
Generally, the Texas Department may deny an application to acquire a
domestic insurer, if, after a public hearing, the Texas Department makes certain
adverse findings as provided by the Texas Insurance Code, which may include a
determination that immediately upon change of control, the insurer (i) would not
be able to satisfy the requirements for the issuance of a new certificate of
authority or a license to write the line or lines of insurance for which it is
presently licensed; (ii) the effect of such acquisition of control would be
substantially to lessen competition in any line or subclassification lines of
insurance in the State of Texas or tend to create a monopoly therein; (iii) the
financial condition of the acquiring party is such as might jeopardize the
financial stability of the domestic insurer, or prejudice the interest of its
policyholders; (iv) the plans or proposals which the acquiring party has to
liquidate the domestic insurer, cause it to declare dividends or make other
distributions, sell any of its assets, consolidate or merge it with any person,
make any material change in its business or corporate structure or management,
or cause the insurer to enter into material agreements, arrangements, or
transactions of any kind with any party, are unfair,
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<PAGE>
prejudicial, hazardous, or unreasonable to policyholders of the insurer and not
in the public interest; (v) the competence, trustworthiness, experience, and
integrity of those persons who would control the operation of the domestic
insurer are such that it would not be in the interest of policyholders of the
domestic insurer and of the public to permit the acquisitions of control; or
(vi) the acquisition of control would violate any law of the State of Texas, any
other state, or of the United States.
RenaissanceRe filed a Statement Regarding the Acquisition of Control of a
Domestic Insurer on Form A and related material with the Texas Department on
January 30, 1998, and presently expects that the Sale will be approved by the
Texas Department prior to the date of the Special Meeting. RenaissanceRe
believes that its application for approval to acquire Nobel Insurance is
supported by, among other things, the significant experience operating insurance
entities and the significant financial strength and stability of RenaissanceRe
and its affiliates. There can, however, be no assurance that the Texas
Department will approve the Sale or that such approval will occur on a timely
basis.
Pursuant to the Insurance Act, the prior consent of the Minister of Finance
is required before an insurance company may reduce its total capital by more
than 15% and, accordingly, the consent of the Minister of Finance is required
before the Company can reduce its total capital as contemplated by Proposal 2
and effect the Initial Distribution. The Company intends to apply to the
Minister of Finance prior to the date of the Special Meeting for the required
consent to reduce its capital and effect the Initial Distribution. The Company
expects that, prior to payment of the Initial Distribution, the Company shall
have assigned to third parties or commuted all of its insurance obligations and
paid down or paid in full its existing credit line (which the Company believes
represent substantially all of its historical operating liabilities). In
addition, the Company anticipates that, after each of the contemplated reduction
in the share capital and share premium accounts and the making of the Initial
Distribution, it will substantially exceed the minimum solvency margin and
liquidity ratio requirements under the Insurance Act. Accordingly, the Company
believes it will be able to obtain the consent of the Minister of Finance to the
reduction of total capital in a timely fashion, although the giving of such
consent is within the discretion of the Minister of Finance and there can be no
assurance that such consent can be obtained or that such consent can be obtained
on a timely basis.
TAX CONSEQUENCES
The laws of Bermuda do not impose any income taxes upon the Company or its
shareholders as a result of any of the Transactions.
The following discussion summarizes the material U.S. federal income tax
consequences of the Sale, the dissolution of Nobel Holdings, and the Liquidation
that are applicable to the Company and its shareholders. The discussion is based
on currently existing provisions of the Code, its legislative history, existing
and proposed regulations promulgated under the Code by the U.S. Treasury
Department, and current administrative rulings and court decisions, all as in
effect and existing on the date hereof and all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to the Company or its shareholders. This discussion does not
address all aspects of U.S. federal income taxation that may be relevant to the
Company or a particular shareholder of the Company, or the effects of state,
local, or foreign income taxation. Moreover, this summary does not address the
U.S. federal income tax consequences (i) to an employee of a U.S. Subsidiary
whose options to purchase Common Shares are converted into options to purchase
Renaissance Shares or (ii) to a shareholder of the Company of a purchase of
Common Shares by the Company pursuant to a tender offer or otherwise (rather
than liquidating distributions as discussed herein). In addition, the following
summary may not be applicable to a holder of Common Shares who received such
shares as employee compensation or pursuant to the exercise of an employee stock
option. The following summary of material U.S. federal income tax consequences
is not intended to constitute specific advice regarding the U.S. federal income
tax consequences of any of the Transactions to any particular individual holder
of Common Shares in light of such shareholder's particular tax situation.
Accordingly, shareholders of the Company should consult their tax advisors with
respect to the particular consequences to them of the Transactions, including
the applicability
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<PAGE>
of any state, local, or foreign tax laws to which they may be subject as well as
with respect to the possible effects of changes in the U.S. and other tax laws.
THE SALE. Pursuant to the Sale Agreement, Nobel Holdings will sell to
Renaissance Holdings, for cash consideration of $54,106,000 (the "Purchase
Price"), (i) the Shares of the U.S. Subsidiaries other than NIA, and (ii) the
NIA Assets. For U.S. federal income tax purposes, even though title to all of
the NIA capital stock is owned by Jeffry K. Amsbaugh as the designee of Nobel
Holdings as required for regulatory purposes, the Company has taken (and will
continue to take) the position that Nobel Holdings is the beneficial owner of
all of the stock of NIA and will report the sale of the NIA Assets for U.S.
federal income tax purposes as a sale of all of the stock of NIA to Renaissance
Holdings. At Renaissance Holdings' option, Nobel Holdings and Renaissance
Holdings will make a joint election under Section 338(h)(10) of the Code
("Section 338(h)(10)") with respect to the Sale. If a proper election ultimately
is made under Section 338(h)(10), then solely for U.S. federal income tax
purposes the sale of stock of the U.S. Subsidiaries will be ignored and the Sale
will be treated as (i) a sale by each U.S. Subsidiary, including NIA, of all of
its assets to a new separate subsidiary, each of which would be wholly owned by
Renaissance Holdings (the "deemed Section 338(h)(10) sale"), followed by (ii) a
complete liquidation of each U.S. Subsidiary in which each U.S. Subsidiary is
deemed to distribute all of the proceeds from the deemed Section 338(h)(10) sale
to Nobel Holdings (the "deemed Section 338(h)(10) liquidation").
Under Section 338, each U.S. Subsidiary would recognize gain on the deemed
Section 338(h)(10) sale equal to the excess of (i) the sum of the portion of the
Purchase Price paid by Renaissance Holdings that is allocable to such U.S.
Subsidiary and the amount of the U.S. Subsidiary's liabilities outstanding at
the time
of the Sale over (ii) the U.S. Subsidiary's tax basis in its assets immediately
before the Sale. Nobel Holdings would include such gain in its U.S. consolidated
return and the deemed Section 338(h)(10) liquidation would be tax-free to both
Nobel Holdings and the liquidating U.S. Subsidiary. If a Section 338(h)(10)
election is not made, then Nobel Holdings will recognize gain with respect to
the sale of the stock of each U.S. Subsidiary, including NIA, equal to the
difference between the portion of the Purchase Price allocable to the U.S.
Subsidiary in question and Nobel Holdings' tax basis in such stock. Under the
Sale Agreement, Nobel Holdings is required to pay any tax resulting from the
Sale. Regardless of whether a Section 338(h)(10) election is made, the Company
does not expect such tax to exceed $1.0 million after offsetting available tax
attributes.
THE LIQUIDATION AND DISSOLUTION OF NOBEL HOLDINGS. Subsequent to the Sale
and pursuant to the Plan of Liquidation, the Company will cause Nobel Holdings
to distribute to the Company the net cash remaining after the (i) sale of the
U.S. Subsidiaries, including NIA, and (ii) payment of Noble Holdings' debts and
obligations. Nobel Holdings thereafter will dissolve pursuant to Delaware law.
Neither Nobel Holdings nor the Company will recognize gain or loss on the
liquidation and dissolution of Nobel Holdings. Although no assurances can be
given, it is anticipated that the Initial Distribution and the Final
Distribution will be made in the year of the Sale.
THE LIQUIDATION. Provided the shareholders of the Company approve the Sale
Agreement and the Plan of Liquidation at the Special Meeting, the Sale will be
consummated and Nobel Holdings will pay its liabilities, distribute its
remaining assets to the Company, and dissolve. As soon as practicable
thereafter, the Company will make the Initial Distribution to its shareholders
pursuant to the Plan of Liquidation. Thereafter, the Company will reconvene the
Special Meeting to present to its shareholders a proposal for the voluntary
winding up of the Company under Bermuda law. Subject to payment of the Company's
liabilities, the Company presently expects that the Liquidator will make the
Final Distribution to the shareholders of the Company and dissolve the Company.
The U.S. federal income tax consequences to a holder of Common Shares who
receives an Initial Distribution and a Final Distribution will depend, in part,
upon whether or not the receipt of cash by such shareholder is treated as a
distribution in complete liquidation of the Company under Section 331 of the
Code rather than a non-liquidating distribution under Section 301 of the Code.
Subject to the application of Section 1248 of the Code discussed below, a
distribution (including one of a series of distributions) in complete
liquidation is treated as in full payment for the shareholder's Common Shares,
generally
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<PAGE>
resulting in the recipient shareholder recognizing gain or loss in an amount
equal to the difference between (i) the sum of the cash received in the
distribution and (ii) the shareholder's tax basis in the Common Shares. Such
gain or loss will be capital gain or loss if the Common Shares constitute a
capital asset in the hands of the shareholder as of the date of the
distribution. Any capital gain or loss will be long-term capital gain or loss if
the shareholder has held the Common Shares for more than eighteen months as of
the date of the distribution (or mid-term gain or loss if held more than one
year but not more than eighteen months). Under Section 331, a shareholder
recognizes gain on the receipt of an Initial Distribution only to the extent
that the amount of such Initial Distribution exceeds such shareholder's
aggregate tax basis in his Common Shares. A shareholder will not recognize loss
from an Initial Distribution, however, until the Final Distribution is received.
The Final Distribution will constitute a distribution in complete
liquidation of the Company under Section 331 of the Code. Further, the Company
believes that the Initial Distribution likewise will be characterized as a
distribution in complete liquidation of the Company under Section 331 of the
Code. Although Section 331 of the Code does not define the term "complete
liquidation," comparable regulations under Section 332 of the Code state that a
status of liquidation exists when the corporation ceases to be a going concern
and its activities are merely for the purpose of winding up its affairs, paying
its debts, and distributing any remaining balance to its shareholders. Case law
generally looks to a manifest intent to liquidate when the distribution occurs.
Under the present facts, the intent to liquidate the Company at the time the
Initial Distribution is made will be clearly evidenced by a number of facts. The
Initial Distribution will occur pursuant to the Plan of Liquidation which will
have been adopted by the Nobel Board and the shareholders of the Company. The
Plan of Liquidation also provides for the complete winding up and dissolution of
the Company, subject to approval of the Company's shareholders. Further, the
Initial Distribution will be paid only after substantially all of the operating
assets of the Company have been sold, the Company has ceased operating as a
going concern and all of the employees of the Company, including all of the
officers of the Company and of Nobel Holdings, will have become employees of
RenaissanceRe. Moreover, immediately after the Initial Distribution is made, the
remaining assets of the Company, comprised of cash and cash equivalents, will
represent the amount considered by the Company as sufficient to pay the
Company's unpaid liabilities plus a reserve for contingent liabilities. Although
the shareholders will not approve the winding up of the Company under Bermuda
law until after the Initial Distribution is made, the timing of shareholder
approval, which will also commence the Liquidation, is a procedural matter
intended to facilitate the consummation of the Sale.
Under current law, it is likely that a portion or all of a Company
shareholder's gain resulting from the liquidating distributions (both the
Initial Distribution and the Final Distribution) will be recharacterized as
ordinary income pursuant to Section 1248(a) of the Code. Section 1248(a)
provides that if a United States person exchanges stock in a controlled foreign
corporation ("CFC"), including in a liquidation of the CFC, and such shareholder
owns (directly, indirectly, or constructively) a specified percentage of the
CFC's stock (a "United States Shareholder"), then gain recognized on the
exchange of such stock will be included in the shareholder's gross income as a
dividend and taxed as ordinary income to the extent of a determinable portion of
the earnings and profits of the CFC. Pursuant to Sections 953(c)(1) and
953(c)(7) of the Code, which set forth special rules solely for a foreign
corporation which generates related person insurance income ("RPII"), a risk
exists that the Company might be treated as a CFC as of the date of the Initial
Distribution and that some or all of its shareholders might be deemed to be
subject to Section 1248. RPII is any insurance income attributable to a policy
of insurance or reinsurance under which the insured is a United States
shareholder of the foreign corporation in question or a related person to such
shareholder. The Company has RPII. Although Section 953(c) of the Code addresses
foreign corporations that have RPII, it is possible that the Internal Revenue
Service ("IRS") might argue successfully that Section 953(c)(7) and 1248(a) of
the Code apply with respect not only to the Company's earnings attributable to
its RPII but also to the Company's earnings attributable to its income that is
not characterized as RPII. Because the Common Shares are publicly traded and
widely held, the Company has been and currently is unable to determine whether
it insures any of its shareholders or persons related to any of its
shareholders. Therefore, the Company is unable to calculate the amount of its
income
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attributable to RPII and non-RPII sources. Shareholders of the Company should be
aware that Section 953(c)(8) of the Code authorizes the Secretary of the
Treasury to promulgate regulations to carry out the purpose of Section 953(c),
including Sections 953(c)(1) and (c)(7). Section 953(c)(8) specifically states
that such regulations, if and when issued, may provide that a person will not be
treated as a United States Shareholder (and, thus, will not be subject to
Section 1248(a) of the Code) with respect to any foreign corporation if neither
such person nor any related person to such person is (directly or indirectly)
insured under any policy of insurance or reinsurance issued by such foreign
corporation. Any future regulations under Section 953(c)(8) may address (i)
whether Section 1248 will apply to any of the liquidating distribution made by
the Company, (ii) if Section 1248 does apply, whether it would apply to all U.S.
persons who own Common Shares, only those who each own more than a threshold
percentage of the Common Shares, or only those who were or are an insured person
under a policy of insurance or reinsurance issued by the Company or related to
an insured person, and (iii) the amount of ordinary income that a shareholder
would recognize under Section 1248. Holders of Common Shares are urged to
consult their own tax advisors regarding the tax treatment to them of the
receipt of the liquidating distributions from the Company and, in particular,
the potential application of Sections 953(c) and 1248 of the Code.
Subsequent to the Initial Distribution, the Company will own solely cash and
cash equivalents which the Liquidator is expected to invest in permitted
investments and generate passive income. If the Company were characterized as a
passive foreign investment company ("PFIC") for U.S. federal income tax purposes
in any taxable year, then depending on certain corporate and shareholder
elections, a U.S. person owning Common Shares generally would be required to
either include in gross income its share of the Company's undistributed income
for such taxable year or pay an interest charge on the deferred tax when such
shareholder sells his Common Shares or receives a liquidating distribution from
the Company for such taxable year and each subsequent year. The Company will be
a PFIC for any taxable year if during such taxable year, 75% or more of its
gross income is "passive income" or 50% or more of its assets produce, or are
held for the production of, "passive income." Based on the anticipated nature of
the Company's income, assets, and activities subsequent to the Initial
Distribution, the Company believes that it will likely be treated as a PFIC for
the taxable years following the Sale. However, although no assurance can be
given at this time, it appears that the Company should not be a PFIC for the
taxable year of the Sale based on the Company's projected financial information
for 1998 . If the Common Shares were considered shares in a PFIC, a U.S. person
who holds Common Shares would be subject to special U.S. federal income tax
rules including the "excess distribution" rules that may require the U.S. person
to recharacterize all or a portion of his gain as ordinary income allocable over
such shareholder's entire holding period for the Common Shares. All excess
distributions allocated to prior years would be taxed at the highest tax rates
for each such prior year applicable to ordinary income. In addition, the U.S.
person would be liable for interest on the foregoing tax liability calculated as
if such liability had been due with respect to each prior year. Each U.S. person
that holds Common Shares should consider making a timely election for the first
taxable year of the Company following the year of the Sale (and as a protective
measure possibly for the taxable year of the Sale) to treat the Company as a
"qualified electing fund" under Section 1295 of the Code (IRS Form 8621). Such
election would avoid any adverse United States federal income tax consequences
resulting from the classification of the Company as a PFIC. By making the
qualified electing fund election, the U.S. person agrees to include in income
the shareholder's pro-rata share of the Company's "net capital gains" and
"ordinary earnings" to the extent of the Company's earnings and profits for each
taxable year the Company is a PFIC. However, the Company does not expect to
generate any significant undistributed net income after the Sale since any
earnings it does recognize would likely be offset by interest deductions under
the Limited Recourse Note. Holders of Common Shares are urged to consult their
own tax advisors regarding the Company's status as a PFIC and any PFIC elections
that may be available.
SHAREHOLDER TRANSFEREE LIABILITY. Under Section 6901 of the Code and
various other laws and equitable principles, the liquidation distributions by
the Company to its shareholders will cause the shareholders to be liable as
transferees for unpaid taxes incurred by the Company and its subsidiaries prior
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to its dissolution to the extent of the value of the distributions they receive.
Based on equitable legal principles, a transferee can be jointly and severally
liable for the unpaid taxes of the transferor to the extent of the value of the
assets received by the transferee. Generally, pursuant to Section 6501 of the
Code the statute of limitations relating to the assessment of income tax of the
Company and its subsidiaries is three years commencing with the date the return
of the Company or its subsidiary, as applicable is filed. The period of
limitations may be extended to six years from the date the return is filed,
however, if a taxpayer omits from gross income an amount exceeding 25% of the
amount stated in the return. Under a special rule set forth in Section 6901(c)
of the Code, the period of limitations for assessment for transferee liability
against the shareholders relating to unpaid taxes of the Company and its
subsidiaries is generally one year after the expiration of the limitation period
of the corporation in question. Thus, the shareholders of the Company could
remain liable under transferee liability with respect to unpaid taxes of a
taxable year of the Company or a subsidiary until four years after the return
for such taxable year is filed or, in the case of a 25% or more omission from
gross income, seven years after such return is filed. Holders of Common Shares
are urged to consult with their own tax advisors regarding transferee liability
and the extended assessment period under Sections 6501 and 6901 of the Code.
U.S. TAX POSITIONS ADOPTED BY THE COMPANY. Various U.S. tax risks exist
relating to the conduct of the Company's operations, which have been disclosed
previously to the shareholders of the Company in its Annual Reports on Form 10-K
filed with the Commission. It is the Company's position that it is not engaged
in a U.S. trade or business and accordingly is not required to pay U.S. income
tax. The Company currently files protective U.S. income tax returns in which it
reports no gross income which is effectively connected with a U.S. trade or
business. In addition, the Company does not believe it has been a PFIC for any
prior year. For a discussion of these specific tax matters, shareholders of the
Company are urged to refer to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996, which is enclosed with this Proxy Statement. See
"Incorporation of Certain Documents by Reference." There can be no assurance
that a taxing authority would agree with any tax reporting position taken by the
Company and its subsidiaries or that no assessment would be made by a taxing
authority for unpaid taxes. Any of such risks, if it materialized, could
potentially subject the shareholders to transferee liability as discussed above.
BACKUP WITHHOLDING. A shareholder may be subject, under certain
circumstances, to backup withholding at a 31% rate with respect to payments
received with respect to the Common Shares. This withholding generally applies
only if the shareholder (i) fails to furnish his or her social security or other
taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii)
is notified by the IRS that he, she, or it has failed to report properly
payments of interest and dividends and the IRS has notified the Company that he,
she, or it is subject to backup withholding, or (iv) fails, under certain
circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is his, her, or its correct number and that he,
she, or it is not subject to backup withholding. Any amount withheld from a
payment to a shareholder under the backup withholding rules is allowable as a
credit against the shareholder's U.S. federal income tax liability, provided
that the required information is furnished to the IRS. Certain shareholders
(including, among others, corporations) are not subject to backup withholding.
Shareholders should consult their tax advisors as to their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption.
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SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT OF THE COMPANY
The following table sets forth as of February 1, 1998 (the "Ownership Date")
(unless otherwise indicated) the amount and percentage of shares of Common
Shares that are deemed under the rules of the Commission to be "beneficially
owned" by (i) each person or "group" (as such term is used in Section 13(d)(3)
of the Exchange Act) known by the Company to be the beneficial owner of more
than 5% of the outstanding Common Shares, (ii) each director of the Company,
(iii) the named executive officers of the Company as of December 31, 1997, and
(iv) all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) PERCENTAGE
- - - -------------------------------------------------------------- ------------------ -------------
<S> <C> <C>
Khimji Family Partnership II, Ltd.(2) ........................ 447,647 9.9%
545 E. John Carpenter Freeway, Suite 1400
Irving, Texas 75062
Royce & Associates, Inc.(3) .................................. 444,812 9.8%
1414 Avenue of the Americas
New York, NY 10019
Munn, Bernhard & Associates(4) ............................... 357,160 7.9%
6 East 43rd Street
New York, NY 10017
TSI Management, Inc.(5) ...................................... 252,642 5.6%
1801 16th Avenue, S.W.
Seattle, WA 98134
Robert C. Duvall(6)(7) ....................................... 436,143 9.6%
Wampum Hardware Company
New Galilee, PA 16141
Jeffry K. Amsbaugh(8) ........................................ 438,981 9.6%
8001 LBJ Freeway, Suite 300
Dallas, TX 75251-1301
Thomas J. O'Shane(9).......................................... 14,800 *
Gregory E. Leonard(9)......................................... 14,500 *
Robert B. Sanborn(10)......................................... 11,500 *
Roger T. Rankin(10)........................................... 10,500 *
Bryan L. Martin(11)........................................... 57,096 1.3%
Thomas D. Nimmo(12)........................................... 4,400 *
All directors and executive officers as a group %
(8 persons)(6)(7)(8)(9)(10)(11)(12)......................... 987,920 21.1
</TABLE>
- - - ------------------------
* Less than 1% of the outstanding Common Shares.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
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(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(1) Under the rules of the Commission, a person is deemed to be the beneficial
owner of a security if such person, directly or indirectly, has or shares
the power to vote or direct the voting of such security or the power to
dispose or direct the disposition of such security. A person is also deemed
to be a beneficial owner of any securities if that person has the right to
acquire beneficial ownership within 60 days of the Ownership Date.
Accordingly, more than one person may be deemed to be a beneficial owner of
the same securities. Unless otherwise indicated by footnote, the named
individuals have sole voting and investment power with respect to the
Common Shares beneficially owned.
(2) Mahmood Khimji, Mehdi Khmiji, and Jaffer Khimji (all Canadian citizens), as
managers of Grosvenor, L.C., the general partner of Khimji Family
Partnership II, Ltd., may be deemed the beneficial owners of 447,647 Common
Shares as reflected in the Statement of Beneficial Ownership on Schedule
13D filed by such partnership on April 15, 1997.
(3) Includes 362,312 shares held in the name of Royce & Associates, Inc.
(formerly known as Quest Advisory Corporation) and 82,500 shares held in
the name of Royce Management Company (formerly known as Quest Management
Company) subject to a common Schedule 13G filing. Royce & Associates and
Royce Management are each investment advisors registered under Section 203
of the Investment Advisors Act of 1940 as reflected in the amended
Statement of Beneficial Ownership on Schedule 13G filed by such investment
advisor on February 5, 1998. Mr. Charles M. Royce may be deemed to be a
controlling person of Royce & Associates and Royce Management, and, as
such, may be deemed to beneficially own the shares owned by such persons.
(4) Includes 317,260 shares the owners for which Munn, Bernhard & Associates
acts as an investment advisor without voting control. In addition to such
shares, the following shares are owned individually and subject to a common
Schedule 13G filing: 5,000 shares held by Mr. Bernhard, individually,
30,400 shares held by Orson D. Munn, individually, 2,000 shares held by
Christine Munn, individually, and 2,500 shares held by Henry S. Langworthy,
individually, as reflected in the Statement of Beneficial Ownership on
Schedule 13G filed by such investment advisor on February 7, 1997.
(5) Includes 245,642 shares held in the name of TSI Management, Inc., 5,000
shares held by a trust for the benefit of Brent Baird (a Director of TSI)
and 2,000 shares held by Cinnamon Investments, Ltd., a corporation
controlled by Patrick Hodgson, Chairman and CEO of TSI, as reflected in the
Statement of Beneficial Ownership on Schedule 13D filed by such company on
December 13, 1996.
(6) Includes 143,364 shares held by Mr. Duvall and 275,779 shares held by
Wampum Hardware Company. Mr. Duvall shares the power to vote and dispose of
these latter shares.
(7) Includes 17,000 shares issuable under outstanding stock options currently
exercisable or exercisable within 60 days of the Ownership Date.
(8) Includes 344,681 shares held by Mr. Amsbaugh, 28,000 shares held jointly
with his wife, and 7,006 shares beneficially owned by other family members
of Mr. Amsbaugh which he has the sole or shared power to dispose of or
vote. Also includes 59,294 shares issuable under outstanding stock options
currently exercisable or exercisable within 60 days of the Ownership Date.
(9) Includes 14,500 shares issuable under outstanding stock options currently
exercisable or exercisable within 60 days of the Ownership Date.
(10) Includes 10,500 shares issuable under outstanding stock options currently
exercisable or exercisable within 60 days of the Ownership Date.
(11) Includes 36,500 shares issuable under outstanding stock options currently
exercisable or exercisable within 60 days of the Ownership Date.
(12) Includes 4,400 shares issuable under outstanding stock options currently
exercisable or exercisable within 60 days of the Ownership Date.
42
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, Nobel Insurance entered into an excess of loss reinsurance treaty
for its low-value dwelling program, which at present is subscribed to by two
companies, including Renaissance Reinsurance Ltd., a wholly owned subsidiary of
RenaissanceRe, which treaty has subsequently been renewed for a series of
one-year terms. RenaissanceRe's participation in such reinsurance treaty
represented approximately $427,000 and $320,000 in Nobel Insurance's ceded
premiums written in fiscal years 1996 and 1997, respectively, or approximately
1.1% and 1.0%, respectively, of Nobel Insurance's overall ceded premiums for
such periods.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
In considering the Transactions, the Company's shareholders should be aware
that the directors and executive officers of the Company have interests in the
Transactions in addition to their interests as shareholders of the Company
generally, as described below.
EMPLOYMENT. Upon the Closing, all of the employees of the Company,
including all of the officers of the Company and Nobel Holdings, will become
employees of RenaissanceRe. RenaissanceRe has agreed that for a period of one
year following the Closing, RenaissanceRe will cause the U.S. Subsidiaries to
provide their respective employees, including all officers of the Company, with
employee benefit plans, programs, policies, or arrangements substantially
equivalent to those maintained by the Company, Nobel Holdings, or the U.S.
Subsidiaries. From and after the Closing, RenaissanceRe will assume and perform
the severance agreements, dated as of May 9, 1997, among the Company, Nobel
Service Corporation, and each of Jeffry K. Amsbaugh, Douglas W. Caudill, Bryan
L. Martin, Thomas D. Nimmo, Michael C. Wojcik, and Joel R. Crisalli.
One of the conditions to RenaissanceRe's obligation to consummate the Sale
is that Mr. Amsbaugh, as the President and Chief Executive Officer of Nobel
Insurance, shall have entered into employment arrangements satisfactory to
RenaissanceRe. Mr. Amsbaugh is expected to continue service under his current
employment agreement with Nobel Service Corporation, one of the U.S.
Subsidiaries included in the Sale. Mr. Amsbaugh's employment agreement had an
original three-year term that expired December 31, 1995, but contains a clause
which automatically extends the agreement on each December 31 for an additional
one-year period, with the base salary to be adjusted for inflation, unless
terminated earlier pursuant to the terms of the agreement. Effective January 1,
1998, Mr. Amsbaugh's employment agreement was renewed automatically for the
third consecutive year, with a base salary for 1998 of $310,473. Mr. Amsbaugh is
entitled to receive a bonus of up to 100% of base salary depending upon
attaining corporate and individual goals agreed to annually with the Board of
Directors. Under certain conditions Mr. Amsbaugh would be entitled to severance
payments equal to one year's compensation if the employment agreement is
terminated.
STOCK OPTIONS. Pursuant to the Sale Agreement, the Company and Nobel
Holdings have delivered to RenaissanceRe copies of waiver letters executed by
certain executive officers of the U.S. Subsidiaries consisting of Messrs.
Amsbaugh, Caudill, Martin, Nimmo, Wojcik, and Crisalli. Each such executive
officer has waived the right to receive cash consideration upon completion of
the Liquidation with respect to the executive officer's options to purchase
Common Shares outstanding under the Company's Employee Stock Option Plan. In
exchange, effective upon the Closing, each such executive officer will have his
or her outstanding options converted into options to purchase RenaissanceRe
Common Shares. The number of RenaissanceRe Shares to be received shall equal the
number of Common Shares subject to the options being converted divided by the
ratio of the fair market value per share of the RenaissanceRe Shares to the fair
market value per share of the Common Shares, in each case calculated immediately
prior to the Closing. The exercise price of each Renaissance Option to be
received will generally be equal to the exercise price of each option being
converted multiplied by the same ratio. All other terms and conditions of such
options will remain unchanged, and such conversion shall be effected in a manner
consistent with the requirements of Section 424(a) of the Code and the
regulations thereunder.
43
<PAGE>
With respect to all other options outstanding under the Company's Employee
Stock Option Plan, the Company and RenaissanceRe have agreed that the Company is
permitted to accelerate vesting so that the options will be fully vested
immediately upon the Closing of the Sale. They also have agreed that the Company
can elect to pay cash to non-executive employees equal to the difference between
$14.00 and the exercise price per share multiplied by the number of options held
by such non-executive employees, in lieu of issuing Common Shares upon exercise
of such options. The Company anticipates that non-executive employees holding
such other options in respect of 91,955 shares of Common Stock will exercise the
options and be paid such difference immediately upon the Closing.
INDEMNIFICATION. RenaissanceRe, the Company, and Nobel Holdings have agreed
that all indemnification rights existing in favor of the present or former
directors, officers, employees, fiduciaries, and agents of the Company, Nobel
Holdings, and the U.S. Subsidiaries as provided in their respective
organizational documents as of the Closing shall survive the Closing. With
respect to the Company and Nobel Holdings, the rights will survive until the
completion of the Liquidation. For the U.S. Subsidiaries, the rights will
continue in full force and effect for six years after the Closing. The parties
have excluded from the continuing indemnification protection any liabilities
arising with respect to any United States federal taxes incurred by the Company,
Nobel Holdings, or the U.S. Subsidiaries prior to the Closing. RenaissanceRe
will also cause the U.S. Subsidiaries to maintain in effect for not less than
six years from the Closing the same or equivalent directors' and officers'
liability coverage as maintained, for the benefit of directors and officers of
the Company, Nobel Holdings, and the U.S. Subsidiaries, on the date of the Sale
Agreement, provided that neither Renaissance Holdings nor the U.S. Subsidiaries
are required to expend in excess of $100,000 in the aggregate for related
premiums or to purchase coverage for any United States federal tax liability.
CONTINUING SERVICE. RenaissanceRe and Renaissance Holdings have agreed that
certain officers of the Company (Jeffry K. Amsbaugh, Thomas D. Nimmo, Douglas W.
Caudill, and Bryan L. Martin), will be permitted to continue functioning in
their respective capacities as directors and/or officers of the Company and
Nobel Holdings solely for the purpose of facilitating the liquidation of Nobel
Holdings and the Liquidation, including, without limitation compliance with
statutory and regulatory requirements to which the Company or Nobel Holdings
continues to be or may become subject, but expressly excluding such powers and
functions falling within the scope of the Liquidator under the Companies Act.
The Company's non-employee directors (Robert C. Duvall, Gregory E. Leonard,
Thomas J. O'Shane, Roger T. Rankin, and Robert B. Sanborn) will continue to
receive the same level of cash compensation as in effect immediately prior to
the Closing, plus a quarterly cash retainer of $2,500 in lieu of stock options
having equivalent value and previously granted as part of directors'
compensation. Directors who are officers of the Company or Nobel Holdings and
were employees of the Company prior to the Closing, as well as all other
continuing officers, will receive no additional compensation.
IRREVOCABLE PROXIES. Pursuant to the Sale Agreement, the Company and Nobel
Holdings have delivered irrevocable proxies in favor of RenaissanceRe in respect
of all the Common Shares owned by each of Jeffry K. Amsbaugh, Douglas W.
Caudill, Robert C. Duvall, Bryan L. Martin, Robert B. Sanborn, and Thomas J.
O'Shane, who own an aggregate of 539,111 Common Shares, or % of the
outstanding Common Shares. The irrevocable proxies grant RenaissanceRe a proxy
to vote the shares subject to the irrevocable proxies in favor of the Sale or
any similar transaction, in favor of the Sale Agreement or any agreement
evidencing the Sale, in favor of any related transactions, and against any
transaction or matter that conflicts with the Sale. The Company and Nobel
Holdings also agreed to use their reasonable best efforts to cause another
shareholder, Wampum Hardware Company (which owns 275,779 Common Shares, or %
of the outstanding Common Shares), to execute and deliver an irrevocable proxy
in favor of the Sale prior to the Special Meeting, which has been obtained as of
the date of this Proxy Statement. Additionally, the irrevocable proxies provide
that, until the termination of the Sale Agreement, the parties thereto and their
affiliates shall not, directly or indirectly, solicit any proposal or offer from
any third party relating to any acquisition proposal in respect of the Company
or any of its subsidiaries, or participate in any discussions or negotiations
regarding any such proposals.
44
<PAGE>
INDEPENDENT AUDITORS
KPMG Bermuda is the Company's independent auditor and has acted in this
capacity in connection with the consolidated financial statements of the Company
incorporated herein by reference. Representatives of KPMG Bermuda are expected
to attend the Special Meeting, will have an opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Any proposals that shareholders of the Company desire to have presented at
the 1998 annual general meeting of shareholders, if any, must have been received
by the Company at its principal executive offices not later than December 29,
1997. No proposals were received by such date.
If the Plan of Liquidation and the Liquidation are approved by the Company's
shareholders, the Liquidator will have the authority to call general meetings of
shareholders after the Liquidation has commenced. Accordingly, the Nobel Board
has taken no action with respect to calling an annual general meeting for 1998.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. UNLESS OTHERWISE NOTED AS BEING
DELIVERED HEREWITH, SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE WITHOUT
CHARGE TO ANY PERSON TO WHOM THIS PROXY STATEMENT IS DELIVERED UPON WRITTEN OR
ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO NOBEL INSURANCE
LIMITED, FALCONER HOUSE, GROUND LEVEL, 108 PITTS BAY ROAD, HAMILTON, BERMUDA HM
AX, ATTENTION: COMPANY SECRETARY, TELEPHONE 441-292-7104. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ,
1998.
The information in the following documents filed by the Company with the
Commission (File No. 0-10071) pursuant to the Exchange Act, is incorporated by
reference in this Proxy Statement:
(a) Annual Report on Form 10-K for the year ended December 31, 1996,
filed with the Commission on March 28, 1997 (and via EDGAR on July 9, 1997),
a copy of which is being delivered herewith;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997,
filed with the Commission on May 14, 1997 (and via EDGAR on July 14, 1997);
(c) Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
filed with the Commission on August 13, 1997;
(d) Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, filed with the Commission on November 13, 1997, a copy of which is
being delivered herewith;
(e) Current Report on Form 8-K filed with the Commission on January 16,
1998; and
(f) Proxy Statement dated as of April 7, 1997, filed in definitive form
with the Commission on April 14, 1997 (and via EDGAR on July 17, 1997), with
respect to the information incorporated by reference into the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, with
respect to Items 401 (management), 402 (executive compensation), and 404
(certain relationships and related transactions) of Regulation S-K
promulgated under the Securities Act and the Exchange Act.
Any statements made herein or in documents incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed documents which is also
45
<PAGE>
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement.
The information relating to the Company contained in this Proxy Statement
should be read together with the information in the documents incorporated by
reference.
All information contained in this Proxy Statement which relates solely to
RenaissanceRe or Renaissance Holdings has been supplied by RenaissanceRe or
Renaissance Holdings, respectively. Information regarding the Sale has been
supplied by the Company, RenaissanceRe and/or Renaissance Holdings, and all
other information has been supplied by the Company.
By Order of the Board of Directors,
Douglas W. Caudill
SECRETARY
Hamilton, Bermuda
, 1998
46
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following sets forth unaudited pro forma condensed consolidated
information for the Company. The unaudited pro forma condensed consolidated
income statement for the year ended December 31, 1996 and for the nine months
ended September 30, 1997, give effect to the Sale and the liquidation of Nobel
Holdings and the Liquidation as if such events had occurred on January 1, 1996
and 1997, respectively. The gain on sale of U.S. subsidiaries has been evaluated
based on the balances for the U.S. subsidiaries included in the Historical
Company Balance Sheet as of September 30, 1997. The unaudited pro forma
condensed consolidated balance sheet as of September 30, 1997, has been prepared
as if the Transactions had occurred on September 30, 1997. There can be no
assurances that the Transactions will be consummated.
The unaudited pro forma condensed consolidated financial information does
not purport to present the actual results of operations or financial position of
the Company had the transactions or events assumed therein in fact occurred on
the dates indicated, nor is it necessarily indicative of the results of
operations that may be achieved in the future. The unaudited pro forma condensed
consolidated information is based on certain assumptions and adjustments
described in the notes thereto and should be read in conjunction therewith. The
unaudited pro forma condensed consolidated financial information should also be
read in conjunction with the historical consolidated financial statements,
including the notes thereto, of the Company.
F-1
<PAGE>
NOBEL INSURANCE LIMITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA INTERIM PRO FORMA
ADJUSTMENTS PRO FORMA ADJUSTMENTS FINAL
HISTORICAL ----------- ----------- ----------- PRO FORMA
COMPANY SALE POST-SALE LIQUIDATION COMPANY
---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and short-term investments................... $ 16,594 $(11,364)(a)
63,000(b)
(1,695)(c)
(4,356)(d) $ 9,100(h)
768(e) (64,813)(i)
(275)(f) $ 62,672 (6,959)(j) $ --
Bonds and notes................................... 95,393 (84,832)(a) 10,561 (10,561)(h) --
Equity securities................................. 8,488 (8,403)(a) 85 (85)(h) --
Other investments................................. 227 (227)(a) -- -- --
---------- ----------- ----------- ----------- ---------
Total cash and investments...................... 120,702 (47,384) 73,318 (73,318) --
Net premiums receivable........................... 23,868 (22,718)(a) 1,150 (1,150)(h) --
Reinsurance recoverable on paid and unpaid
claims.......................................... 38,252 (38,252)(a) -- -- --
Prepaid reinsurance premiums...................... 17,897 (17,897)(a) -- -- --
Other receivables and assets...................... 14,483 (5,044)(a)
95(c) -- --
(2,631)(f) 6,903 (6,903)(h) --
---------- ----------- ----------- ----------- ---------
Total assets.................................... $ 215,202 $(133,831) $ 81,371 $(81,371) $ --
---------- ----------- ----------- ----------- ---------
---------- ----------- ----------- ----------- ---------
LIABILITIES
Reserves for claims and claim expenses............ $ 83,138 $(74,776)(a) $ 8,362 $(8,362)(h) $ --
Unearned premiums................................. 37,134 (37,134)(a) -- -- --
Reinsurance premiums payable...................... 22,482 (22,482)(a) -- -- --
Accounts payable and accrued liabilities.......... 11,396 (10,279)(a) 1,117 (1,117)(h) --
Other liabilities................................. 4,559 (203)(a)
8,894(b)
(4,356)(d) 8,894 (8,894)(j) --
---------- ----------- ----------- ----------- ---------
Total liabilities................................. 158,709 (140,336) 18,373 (18,373) --
Shareholders' equity.............................. 56,493 6,505(g) 62,998 (62,998)(k) --
---------- ----------- ----------- ----------- ---------
Total liabilities and shareholders' equity........ $ 215,202 $(133,831) $ 81,371 $(81,371) $ --
---------- ----------- ----------- ----------- ---------
---------- ----------- ----------- ----------- ---------
</TABLE>
F-2
<PAGE>
NOBEL INSURANCE LIMITED
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------
PRO FORMA ADJUSTMENTS
HISTORICAL -------------------------- PRO FORMA
COMPANY SALE LIQUIDATIONS COMPANY
---------- ----------- ------------ ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Premiums and fees earned.................. $65,824 $(65,700)(a) $ (124)(e) $ --
Investment and other income............... 7,034 (5,488)(a) 306(c)
(1,852)(e) --
Gain on sale of U.S. Subsidiaries......... -- 8,264(b) -- 8,264
---------- ----------- ------------ ----------
Total................................... 72,858 (62,924) (1,670) 8,264
---------- ----------- ------------ ----------
Expenses:
Claims and claims expense................. 42,197 (45,368)(a) 3,171(e) --
Operating Expenses........................ 28,443 (27,765)(a) 120(d) 120
(678)(e)
---------- ----------- ------------ ----------
Total................................... 70,640 (73,133) 2,613 120
---------- ----------- ------------ ----------
Net income before income taxes.............. 2,218 10,209 (4,283) 8,144
Income tax expense (benefit)................ (2,069) 1,972(a) 104(c) 2,906
2,906(b) (7)(e)
---------- ----------- ------------ ----------
Net income.................................. $ 4,287 $ 5,331 $(4,380) $ 5,238
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
Per Share Data:
Net income per share...................... $ 0.92 $ 1.15 $ (0.95) $ 1.13
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
Average number of capital shares 4,659 4,629 4,629 4,629
outstanding.............................
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
</TABLE>
F-3
<PAGE>
NOBEL INSURANCE LIMITED
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
----------------------------------------------------
PRO FORMA ADJUSTMENTS
HISTORICAL -------------------------- PRO FORMA
COMPANY SALE LIQUIDATIONS COMPANY
---------- ----------- ------------ ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Premiums and fees earned.................. $31,788 $(31,651)(a) $ (137)(e) $ --
Investment and other income............... 6,296 (5,526)(a) 270(c) --
(1,040)(e)
Gain on sale of U.S. Subsidiaries......... -- 8,264(b) -- 8,264
---------- ----------- ------------ ----------
Total................................... 38,084 (28,913) (907) 8,264
---------- ----------- ------------ ----------
Expenses:
Claims and claims expense................. 16,578 (17,614)(a) 1,036(e) --
Operating Expenses........................ 16,937 (14,900)(a) 120(d) 120
(2,037)(e)
---------- ----------- ------------ ----------
Total................................... 33,515 (32,514) (881) 120
---------- ----------- ------------ ----------
Net income before income taxes.............. 4,569 3,601 (26) 8,144
Income tax expense (benefit)................ 1,388 (1,480)(a) 92(c) 2,906
2,906(b) --(e)
---------- ----------- ------------ ----------
Net income.................................. $ 3,181 $ 2,175 $ (118) $ 5,238
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
Per Share Data:
Net income per share...................... $ 0.69 $ 0.47 $ (0.03) $ 1.13
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
Average number of capital shares 4,614 4,629 4,629 4,629
outstanding.............................
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
</TABLE>
F-4
<PAGE>
NOBEL INSURANCE LIMITED
NOTES TO
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO PRO FORMA BALANCE SHEET:
THE SALE:
(a) Eliminates balances included in Historical Company for the U.S.
Subsidiaries.
(b) RenaissanceRe sale proceeds $54,106 and Limited Recourse Loan $8,894.
(c) Transaction expenses-DLJ, KPMG Peat Marwick, Gardere & Wynne, and Directors
and Officers insurance.
(d) Repay Nobel Holdings debt, including intercompany debt of $818.
(e) Stock options
<TABLE>
<CAPTION>
SHARES CASH
--------- ---------
<S> <C> <C>
Exercise employee stock options expiring in 1998 prior to closing.................. 40,086 $ 360
Exercise director stock options.................................................... 83,250 787
--------- ---------
123,336 1,147
---------
---------
Vest and pay stock appreciation right value for unexercised non-executive employee
stock options.................................................................... 91,955 (379)
--------- ---------
---------
Net cash....................................................................... $ 768
---------
---------
</TABLE>
(f) U.S. income tax on Nobel Holdings gain from disposition. Taxable gain is
offset by net operating loss and other tax attributes. Tax is Alternative
Minimum Tax. See note (g).
(g) Pro forma change in shareholders' equity:
<TABLE>
<S> <C> <C>
Proceeds from issuing 123,336 shares for stock options exercised... $ 1,147
---------
Proceeds of sale of U.S. Subsidiaries.............................. $ 54,106
Transaction expenses............................................... (1,600)
Compensation expense for stock appreciation right value for
non-executive employee stock options............................. (379)
---------
52,127
Net assets of U.S. Subsidiaries.................................... 43,863
---------
Gain on sale of U.S. Subsidiaries--pretax........................ 8,264
Income tax expense............................................... 2,906
---------
Gain on sale of U.S. Subsidiaries--after tax..................... 5,358
---------
Change in shareholders' equity..................................... $ 6,505
---------
---------
</TABLE>
THE LIQUIDATIONS (INCLUDING NOBEL HOLDINGS):
(h) Realize assets and settle liabilities at face value less estimated
liquidation expense of $25.
(i) Distribution to shareholders at $14.00 per share. Assumes no additional
amount. Initial liquidating distribution of $13.00 per share and final
liquidating distribution of $1.00 per share:
<TABLE>
<S> <C> <C>
Shares issued and outstanding................................... 4,506,156 $ 63,086
Shares issued for stock option exercise......................... 123,336 1,727
--------- ---------
4,629,492 $ 64,813
--------- ---------
--------- ---------
</TABLE>
F-5
<PAGE>
NOBEL INSURANCE LIMITED
NOTES TO
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The actual liquidating distribution may be less if, during the Liquidation,
contingent liabilities for U.S. income taxes emerge or other contingent
liabilities emerge in excess of the Company's assets and the amounts
available under the Limited Recourse Loan.
(j) Repay Limited Recourse Loan.
The actual amount available for repayment will include investment income
earned net of operating expenses incurred during the liquidation period, as
well as any adjustments based on realization of assets and settlement or
commutation of liabilities. See note (k) with respect to extinguishment of
the Limited Recourse Loan.
<TABLE>
<S> <C> <C> <C>
(k) Pro forma change in Shareholders' Equity:
Distribution to shareholders........................... $ (64,813)
Gain from extinguishment of Limited Recourse Loan...... 1,935
Pro forma liquidation expenses
D&O Insurance.......................................... $ (95)
Liquidator fees and expenses........................... (25)
---
Total expenses......................................... (120)
---------
Change in shareholders' equity......................... $ (62,998)
---------
---------
</TABLE>
NOTES TO PRO FORMA INCOME STATEMENTS
THE SALE:
(a) Eliminates balances included in Historical Company for U.S. Subsidiaries
being sold to RenaissanceRe.
(b) Pro forma gain realized on Sale of U.S. Subsidiaries. See note (g) to the
Notes to Pro Forma Balance Sheet. The gain has been evaluated based on the
balances for the U.S. Subsidiaries included in the Historical Company
Balance Sheet as of September 30, 1997.
THE LIQUIDATIONS (INCLUDING NOBEL HOLDINGS)
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C> <C>
(c) Eliminate interest expense on Nobel Holdings debt...... $ 306 $ 270
--------- ---------
--------- ---------
(d) Liquidation expenses...................................
Liquidator fees and expense............................ $ 25 $ 25
D & O insurance........................................ 95 95
--------- ---------
--------- ---------
Total expenses......................................... $ 120 $ 120
--------- ---------
--------- ---------
</TABLE>
(e) Eliminate operating results assuming liquidations occurred January 1, 1996
and 1997, respectively. Actual operating results will include investment
income earned net of operating expenses incurred during the liquidation
period, as well as any adjustments based on realization of assets and
settlement or commutation of liabilities. The Sale Agreement provides for
payment of accrued interest on the Limited Recourse Loan at the rate of 6%
per annum from the date of Closing until the payment date to the extent of
available funds.
F-6
<PAGE>
APPENDIX A
STOCK PURCHASE AGREEMENT
BY AND AMONG
RENAISSANCERE HOLDINGS LTD.
RENAISSANCE U.S. HOLDINGS, INC.
AND
NOBEL INSURANCE LIMITED
NOBEL HOLDINGS, INC.
FOR THE PURCHASE AND SALE OF ALL
THE OUTSTANDING CAPITAL STOCK OF
NOBEL INSURANCE COMPANY,
NOBEL INSURANCE AGENCY, INC.
NOBEL SERVICE CORPORATION
NOBEL MANAGING AGENTS, INC.
IAS CLAIM SERVICES, INC.
DATED
DECEMBER 19, 1997
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I. SALE AND PURCHASE
Section 1.1. Agreement to Sell and to Purchase....................................... A-4
Section 1.2. Closing................................................................. A-4
Section 1.3. Assignment of NIA Assets................................................ A-5
Section 1.4. Purchase Price.......................................................... A-5
Section 1.5. Actions of the Sellers.................................................. A-5
Section 1.6. Shareholders' Meeting................................................... A-5
Section 1.7. Other Transactions; Purchaser Loan...................................... A-6
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 2.1. Representations and Warranties of the Sellers........................... A-7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Section 3.1. Representations and Warranties of Parent and the Purchaser.............. A-17
ARTICLE IV. COVENANTS
Section 4.1. Conduct of Business of the Companies.................................... A-19
Section 4.2. Access; Confidentiality................................................. A-20
Section 4.3. Reasonable Best Efforts; Notification................................... A-20
Section 4.4. No Solicitation......................................................... A-21
Section 4.5. Publicity............................................................... A-22
Section 4.6. Indemnification......................................................... A-22
Section 4.7. Benefits................................................................ A-23
Section 4.8. Conversion of Options................................................... A-23
Section 4.9. Rating Agency and Regulatory Presentations.............................. A-23
Section
4.10. Certain Tax Matters..................................................... A-24
Section
4.11. Intercompany Accounts................................................... A-24
Section
4.12. Covenant Not To Compete................................................. A-25
Section
4.13. Exchange Act Filings.................................................... A-25
Section
4.14. INA Commutation......................................................... A-25
Section
4.15. Irrevocable Proxies..................................................... A-25
Section
4.16. Certain Matters......................................................... A-25
ARTICLE V. CONDITIONS
Section 5.1. Conditions to Each Party's Obligations.................................. A-26
Section 5.2. Conditions to the Obligation of the Sellers............................. A-26
Section 5.3. Conditions to the Obligations of Parent and the Purchaser............... A-27
ARTICLE VI. TERMINATION
Section 6.1. Termination............................................................. A-28
Section 6.2. Effect of Termination................................................... A-29
Section 6.3. Termination Fee......................................................... A-29
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE VII. MISCELLANEOUS
Section 7.1. Fees and Expenses....................................................... A-30
Section 7.2. Amendment and Modification.............................................. A-30
Section 7.3. Nonsurvival of Representations and Warranties........................... A-30
Section 7.4. Notices................................................................. A-30
Section 7.5. Interpretation.......................................................... A-31
Section 7.6. Counterparts............................................................ A-31
Section 7.7. Entire Agreement; No Third Party Beneficiaries; Rights of Ownership..... A-31
Section 7.8. Severability............................................................ A-31
Section 7.9. Governing Law........................................................... A-31
Section
7.10. Assignment.............................................................. A-31
Section
7.11. Enforcement............................................................. A-31
Section
7.12. Extension; Waiver....................................................... A-31
Section
7.13. Procedure for Termination, Amendment, Extension or Waiver............... A-32
Section
7.14. Fiduciary Duty.......................................................... A-32
Section
7.15. Definitions............................................................. A-32
Exhibit A Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit B Form of Amended and Restated Trust Agreement
Exhibit C Form of Promissory Note
Exhibit D Form of Irrevocable Proxy
</TABLE>
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated December 19, 1997 (the "AGREEMENT"), by and
among RENAISSANCERE HOLDINGS LTD., an Islands of Bermuda company ("PARENT"),
RENAISSANCE U.S. HOLDINGS, INC., a Delaware corporation and a wholly owned
subsidiary of Parent (the "PURCHASER"), NOBEL INSURANCE LIMITED, an Islands of
Bermuda company ("LIMITED"), and NOBEL HOLDINGS INC., a Delaware corporation
("HOLDINGS" and together with Limited, the "SELLERS"). Parent, the Purchaser,
Limited and Holdings are sometimes individually referred to herein as a "Party"
and collectively as the "Parties". Capitalized terms used herein but not defined
after their use shall have the meaning assigned to them in Section 7.15 hereof.
WHEREAS, Holdings owns all of the issued and outstanding shares of capital
stock (collectively, the "SHARES") of each of Nobel Insurance Company, a Texas
corporation ("Nobel Insurance"), Nobel Service Corporation, a Delaware
corporation, and IAS Claim Services, Inc., a Delaware corporation; Nobel
Insurance owns all of the issued and outstanding shares of common stock of Nobel
Managing Agents, Inc., a Texas corporation; and Jeffry K. Amsbaugh holds title
to all of the issued and outstanding shares of Nobel Insurance Agency, Inc., a
Texas Local Recording Agency ("NIA"), on behalf of Holdings (collectively, the
"COMPANIES");
WHEREAS, the Purchaser desires to purchase the Shares and the NIA Assets (as
defined herein) from the Sellers, and the Sellers desire to sell the Shares and
the NIA Assets to the Purchaser, in each case upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of each Party have approved this
Agreement and the transactions (other than the liquidation of each of Limited
and Holdings) contemplated hereby (the "TRANSACTIONS") and (ii) the liquidation
of each of Limited and Holdings, upon the terms and subject to the conditions
hereinafter set forth, and the Boards of Directors of each of Limited and
Holdings have unanimously determined that it is fair to, and in the best
interests of, Limited and Holdings and their respective shareholders to sell the
Shares and the NIA Assets upon the terms and subject to the conditions
hereinafter set forth, and have recommended that the shareholders of each of
Limited and Holdings adopt and approve this Agreement and the Transactions; and
WHEREAS, directors and officers of Limited, who hold in the aggregate
539,311 issued and outstanding shares of Limited, have executed and delivered to
Parent Irrevocable Proxy Agreements, dated the date hereof, or have agreed to
execute and deliver Irrevocable Proxy Agreements substantially in such form.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained,
intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I.
SALE AND PURCHASE
Section 1.1. AGREEMENT TO SELL AND TO PURCHASE. On the Closing Date (as
hereinafter defined) and upon the terms and subject to the conditions set forth
in this Agreement, Holdings shall sell, assign, transfer, convey and deliver all
of the Shares and the NIA Assets to the Purchaser, and the Purchaser shall
purchase and accept all of the Shares and the NIA Assets from Holdings.
Section 1.2. CLOSING. The closing of such sale and purchase (the
"CLOSING") shall take place at 10:00 a.m., local time, on a date (the "CLOSING
DATE") following the earlier of the last or first day of the month immediately
following satisfaction or waiver of all the conditions set forth in Article V
hereof (provided that such date is more than five Business Days after such
satisfaction or waiver). The Closing shall take place at the offices of Appleby,
Spurling & Kempe, Hamilton, Bermuda, unless another date or
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<PAGE>
place is agreed to in writing by the parties hereto. At the Closing, the Sellers
shall deliver to the Purchaser or its designees stock certificates representing
all of the Shares, duly endorsed in blank for transfer or accompanied by
appropriate stock powers duly executed in blank, with all taxes, direct or
indirect, attributable to the transfer of such Shares paid or provided for in
full. Additionally, Holdings shall sell, assign, transfer, convey and deliver to
Purchaser or its designees, and Purchaser shall purchase and accept from
Holdings, all of the assets and rights of Holdings of every nature, kind and
description, tangible and intangible, wherever located, in or to NIA (the "NIA
ASSETS"). At the Closing (i) in full consideration and exchange for the Shares
and the NIA Assets, the Purchaser shall pay to the Sellers the Purchase Price as
provided in Section 1.4 hereof and (ii) Parent shall make the loan described in
Section 1.7 hereof.
SECTION 1.3. ASSIGNMENT OF NIA ASSETS. The sale, transfer, assignment and
delivery by Holdings of all of its rights, title and interest in the NIA Assets
to the Purchaser, as herein provided, shall be effected on the Closing Date by
deeds, bills of sale, endorsements, assignments and other instruments of
transfer and conveyance satisfactory in form and substance to counsel for the
Purchaser.
Section 1.4. PURCHASE PRICE. The aggregate purchase price for the Shares
and the NIA Assets (the "PURCHASE PRICE") shall be $54,106,000. The Purchaser
shall on the Closing Date pay to Holdings the Purchase Price by bank wire
transfer of immediately available funds to such account as Holdings shall
designate in writing not less than five Business Days prior to the Closing Date.
Section 1.5. ACTIONS OF THE SELLERS. The Sellers hereby approve of and
consent to the Transactions and represent and warrant that the Board of
Directors of each Seller, at a meeting duly called and held, has (i) determined
that this Agreement and the Transactions are fair to and in the best interests
of the shareholders of Limited and Holdings, as applicable, (ii) received the
opinion of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
financial advisor to Limited, to the effect that the amount of the proceeds to
be received by the holders of Limited Shares from a Liquidating Dividend or
other distribution in the amount of not more than $14.00 per Limited Share is
fair to the shareholders of Limited from a financial point of view, (iii)
approved this Agreement and the Transactions and (iv) resolved, subject to the
fiduciary duties of the Board of Directors of Limited, to recommend that the
shareholders of Limited and Holdings approve and adopt this Agreement and the
Transactions.
Section 1.6. SHAREHOLDERS' MEETING.
(a) In order to consummate the Transactions, and to the extent required by
applicable law, Limited, acting through its Board of Directors, shall, in
accordance with applicable law:
(i) duly call, give notice of, convene and hold a special general
meeting of its shareholders (the "SPECIAL MEETING") as promptly as
practicable following the date hereof for the purpose of considering and
taking action upon the approval of the Transactions and the adoption of this
Agreement, and the adoption of a resolution of liquidation of Limited in
accordance with applicable law; PROVIDED, HOWEVER, that Limited may delay
the Liquidation and subsequently hold a separate special general meeting of
its shareholders for the purpose of considering such a resolution if the
Board of Directors of Limited determines in good faith that it is not in the
best interest of Limited and its shareholders to commence immediately the
Liquidation of Limited;
(ii) prepare and file with the Securities Exchange Commission (the
"SEC") a preliminary proxy or information statement in accordance with the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") relating to
the Transactions and this Agreement and use its best efforts (x) to obtain
and furnish the information required to be included by the Exchange Act and
the SEC in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, to respond promptly to any comments made by the
SEC with respect to the preliminary proxy or information statement and cause
a definitive proxy or information statement, including any amendment or
supplement thereto (the "PROXY STATEMENT") to be mailed to its shareholders,
provided that no amendment or supplement to the Proxy Statement will be made
by the Sellers or on behalf of any of them without prior consultation
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<PAGE>
with Parent and its counsel and (y) to obtain the necessary approvals of the
Transactions and this Agreement and the Liquidation by its shareholders; and
(iii) include in the Proxy Statement, subject to its fiduciary duties,
the recommendation of the Boards of each of Holdings and Limited that the
respective shareholders of each of Holdings and Limited vote in favor of the
approval of the Transactions and the adoption of this Agreement.
(b) Parent will provide Limited with any information regarding Parent and
the Purchaser required by applicable law to be included in the Proxy Statement.
Parent and each incurred by Seller shall vote, or cause to be voted, all of the
Shares then owned by it, or any of their respective subsidiaries and Affiliates,
in favor of the approval of the Transactions and the adoption of this Agreement.
Section 1.7. OTHER TRANSACTIONS; PURCHASER LOAN.
(a) From and after the date hereof, the Sellers shall take all reasonable
measures and actions in furtherance of the Liquidation of the Sellers.
Immediately following approval by the holders of Limited Shares at the Special
Meeting of the Liquidation, or at a subsequent special general meeting of
holders of Limited Shares called for such purpose, each of Holdings and Limited
shall commence liquidation proceedings in accordance with applicable law and
shall use their reasonable best efforts to consummate the Liquidation as
promptly as possible and to effectuate a distribution or distributions to
holders of Limited Shares which shall aggregate, together with all other funds
or assets received by holders of Limited Shares after the date hereof through
any dividends, distributions, repurchases, tenders or otherwise, including,
without limitation, the Liquidating Dividend, not more than $14.00 in respect of
each Limited Share outstanding as of the date hereof (or issued in exchange for
the exercise of any employee options outstanding on the date hereof) (the "TOTAL
DISTRIBUTION"). In the event that Limited shall repurchase, by tender offer,
public purchase, private purchase or otherwise, any outstanding Limited Share,
the purchase price for each such share, together with all transaction costs
related thereto, shall not exceed $14.00 per Limited Share. The final
distribution to holders of Limited Shares as part of the liquidation of Limited
is referred to herein as the "LIQUIDATING DIVIDEND".
(b) On the Closing Date, Parent shall loan to Limited an amount equal to
$8,894,000 in exchange for the execution and delivery by Limited of a
participating promissory note of Limited substantially in the form of Exhibit C
hereto (the "NOTE"), which shall bear interest at the rate of 6.0% per annum,
shall mature on the date of, and immediately after, the payment of the
Liquidating Dividend or, in any event, not later than December 31, 1999, and
shall be entitled to receive as additional interest a participating payment as
described below (the "PARTICIPATING PAYMENT"). The proceeds of the Note shall be
available to Limited, together with the other assets of Limited, to pay the
actual expenses incurred by Limited in connection with the Transactions
contemplated hereby and the Liquidation as well as to pay generally other
liabilities of Limited; PROVIDED, HOWEVER, that in no event shall any payments
from the proceeds of the Note be permitted in respect of any U.S. Federal Taxes.
After payment of all such permitted expenses and liabilities, and immediately
after payment of the Liquidating Dividend, Limited shall apply all remaining
assets of Limited (the "REMAINING AMOUNT") to the payment of principal of,
interest on and the Participating Payment with respect to the Note and if
applicable, the Dividend Accrual (as defined in the Note). In the event that the
Remaining Amount is less than the principal of and interest on the Note and if
applicable, the Dividend Accrual, Parent shall be entitled to receive only the
Remaining Amount (less any required payment of the Dividend Accrual) as full
payment of the Note and Limited, upon such payment, shall have no further
obligation to Parent with respect to the Note. Prior to maturity thereof, the
Note shall not restrict, and payment on the Note shall be subordinate to
distributions by Limited for, repurchases by Limited of Limited Shares at a
price not in excess of $14.00 per Limited Share (including all other funds or
assets received by holders of Limited Shares) through any dividends,
distributions, repurchases, tenders or otherwise, or any combination thereof.
A-6
<PAGE>
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 2.1. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Limited and
Holdings, jointly and severally, represent and warrant to each of Parent and the
Purchaser as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Limited is a company, and
Holdings and each of the Companies is a corporation, duly organized, validly
existing and in good standing under the applicable Laws of the jurisdiction in
which each is organized and each has the requisite corporate power and authority
to carry on its business as now being conducted. Each of the Sellers and the
Companies is duly qualified as a foreign corporation or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed (individually or in the aggregate) would not have or
reasonably be expected to have a Material Adverse Effect. Schedule 2.1(a) sets
forth the jurisdiction and kind of each such license and qualification held by
each of the Companies. The Sellers have made available to Parent complete and
correct copies of the Organizational Documents of each of the Sellers and each
of the Companies, in each case as amended to the date of this Agreement. The
respective Organizational Documents of the Sellers and the Companies are in full
force and effect. The Sellers have made available to Parent complete and correct
copies of the minute books of each of the Sellers and the Companies. Such minute
books include copies of minutes of all meetings of the directors or shareholders
of each of the Sellers and the Companies held on or after January 1, 1993 and
complete and accurate copies of all resolutions passed by the directors or
actions by written consent of the shareholders on or after January 1, 1993.
(b) SUBSIDIARIES. Except as set forth in Schedule 2.1(b) of the Sellers
Disclosure Schedule, the list of subsidiaries of the Sellers filed by Limited
(including by incorporation by reference) with the most recent Report on Form
10-K of Limited is a true and accurate list of all the subsidiaries of the
Sellers. All the outstanding shares of capital stock of each of the Companies
(except NIA) are owned of record, and with respect to NIA, beneficially, by
Holdings or by another wholly owned subsidiary of Holdings, in each case free
and clear of all Liens, except as set forth in Schedule 2.1(b) of the Sellers
Disclosure Schedule. There are no other Persons in which the Sellers or the
Companies has a direct or indirect ownership interest. Except as set forth in
Schedule 2.1(b) of the Sellers Disclosure Schedule, there are no agreements or
understandings pursuant to which either Sellers or any of the Companies may be
obligated or required, under any circumstance, to make contributions to the
capital of any subsidiaries of the Sellers or the Companies.
(c) CAPITAL STRUCTURE. The authorized capital stock of each of the
Companies and the number of shares of capital stock of each of the Companies
issued and outstanding as of the date hereof are as set forth as Schedule 2.1(c)
of the Sellers Disclosure Schedule, and except as set forth in such Schedule
2.1(c): (i) no shares of capital stock or other voting securities of any of the
Companies are issued, reserved for issuance or outstanding; (ii) there were no
stock appreciation rights, restricted stock grants or contingent stock grants
and there are no other outstanding contractual rights to which any of the
Companies is a party the value of which is based on the value of the Shares;
(iii) all of the outstanding Shares are, and any Shares which may be issued
pursuant to options will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights; and (iv) there are
no bonds, debentures, notes or other indebtedness of either Seller or any of the
Companies having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of
either Seller or any of the Companies may vote. Except as set forth above, as of
the date of this Agreement there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which any of the Companies is a party or by which any of them is
bound obligating any of the Companies to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of any of the Companies or obligating
A-7
<PAGE>
any of the Companies to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
There are not outstanding any contractual obligations of any of the Companies to
repurchase, redeem or otherwise acquire any shares of capital stock of either
Seller or any of the Companies.
(d) AUTHORITY; AUTHORIZATION; BINDING AGREEMENT. Each of the Sellers has
the requisite corporate power and authority to enter into this Agreement and,
subject to approval of this Agreement by the shareholders of Limited voting at
the Special Meeting, to consummate the Transactions contemplated by this
Agreement and the Liquidation. The execution and delivery of this Agreement by
each of the Sellers and the consummation by each of the Sellers of the
Transactions contemplated hereby and the Liquidation have been duly authorized
by all necessary corporate action on the part of the Sellers, subject to any
necessary approval of this Agreement by the shareholders of Limited voting at
the Special Meeting. This Agreement has been duly executed and delivered by the
Sellers and, assuming this Agreement constitutes the valid and binding
obligation of Parent and the Purchaser, constitutes the valid and binding
obligation of each of the Sellers, enforceable against the Sellers in accordance
with its terms.
(e) CONSENTS. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state or local government
or any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign (a "GOVERNMENTAL ENTITY")
or any other Party, is required by either Seller or any of the Companies in
connection with the execution and delivery of this Agreement by the Sellers or
the consummation by the Sellers of the Transactions contemplated hereby or the
Liquidation, except for (i) the filing of a premerger notification and report
form by the Sellers under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), (ii) the filing with the SEC of the Proxy
Statement, (iii) any notices, consents or other filings which may be required
under the Companies Act (the "BERMUDA FILINGS AND CONSENTS"), (iv) as may be
required by any applicable state securities or "blue sky" Laws, (v) the filings
to be made with, notifications to be given to, and the approvals to be obtained
from, the Governmental Entities identified on Schedule 2.1(e) of the Sellers
Disclosure Schedule pursuant to insurance and other Laws (the "REQUIRED FILINGS
AND APPROVALS") and (vi) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not have or reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(f) NON-CONTRAVENTION. Except as set forth in Schedule 2.1(f) of the
Sellers Disclosure Schedule, the execution and delivery of this Agreement do
not, and the consummation of the Transactions contemplated hereby and the
Liquidation and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any lien or other encumbrance upon any of
the properties or assets of either Seller or any of the Companies under (i) the
Organizational Documents of either Seller or any of the Companies, (ii) provided
the Required Filings and Approvals are made or obtained, any material contract
or loan or credit agreement, note, bond, mortgage, indenture or other instrument
of, or document governing, indebtedness for money borrowed or any permit,
concession, franchise or license applicable to the Companies or their respective
properties or assets or (iii) provided that any required filings under the HSR
Act are made and any required Bermuda Filings and Consents and Required Filings
and Approvals are made or obtained, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to either Seller or any of the
Companies or their respective properties or assets.
(g) PROXY STATEMENT. The Proxy Statement will not, on the date the Proxy
Statement is first mailed to Limited's shareholders and, as it may be amended or
supplemented from time to time, at the time of the Special Meeting contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not false or misleading.
The Proxy Statement will comply as to form in all
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<PAGE>
material respects with the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Sellers
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or the Purchaser in writing for the express
purpose of inclusion or incorporation by reference therein.
(h) SEC DOCUMENTS; FINANCIAL STATEMENTS OF LIMITED; UNDISCLOSED
LIABILITIES. Limited has filed all reports, proxy statements, forms, and other
documents required to be filed with the SEC under the Securities Act of 1933, as
amended (the "SECURITIES ACT") and the Exchange Act since January 1, 1995 (the
"SEC DOCUMENTS"). As of their respective dates, (i) the SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and (ii) none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Limited included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP during the periods involved
and fairly present in accordance with GAAP the consolidated financial position
of Limited and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations, shareholders, equity and cash flows
for the periods then ended and, in the opinion of management, reflect all
adjustments necessary for a fair presentation for such periods, including
unaudited interim periods. Except as set forth in Schedule 2.1(h) of the Sellers
Disclosure Schedule and except as set forth in the SEC Documents filed and
publicly available prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent consolidated
balance sheet included in the SEC Documents and the consolidating balance sheet
delivered to Parent prior to the date of this Agreement, neither Seller nor any
of the Companies has any liabilities or obligations, of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth on
a balance sheet of Limited and its consolidated subsidiaries or in the notes
thereto.
(i) STATUTORY STATEMENTS. Schedule 2.1(i) of the Sellers Disclosure
Schedule contains true and complete copies of the Annual Statements of Nobel
Insurance for each of the years ended December 31, 1993, 1994, 1995 and 1996 and
Quarterly Statements of Nobel Insurance for the three-month, six-month and
nine-month periods ended March 31, 1997, June 30, 1997 and September 30, 1997.
The Annual Statements and the Quarterly Statements of Nobel Insurance have been
prepared in accordance with SAP throughout the periods involved and in
accordance with the books and records of Nobel Insurance. Each of the statutory
financial statements contained in the Annual Statements and the Quarterly
Statements fairly presents the assets, liabilities and capital and surplus, of
Nobel Insurance as of the dates thereof in accordance with SAP, subject, in the
case of the Quarterly Statements, to the absence of footnote disclosure and any
other adjustments described therein, and were correct in all material respects
when filed and there were no material omissions therefrom.
(j) FINANCIAL STATEMENTS OF THE COMPANIES. The Companies' GAAP Financial
Statements, as included in the Proxy Statement, if any, will be based on the
books and records of the Sellers and the Companies, will fairly present in all
material respects the financial condition and consolidated and consolidating
results of operations of the Companies, as of the dates and for the periods
indicated therein, will have been prepared in accordance with GAAP and
Regulation S-X (as in effect at the time of the respective financial statements)
consistently applied, and will have been (to the extent required by the
Regulation S-X or otherwise by the SEC) audited by KPMG Peat Marwick LLP.
(k) INSURANCE RESERVES. The aggregate Loss Reserves of each of Limited and
Nobel Insurance as recorded in their respective Annual Statements and Quarterly
Statements, and the aggregate reserves for claims and claims expenses reflected
on the consolidated balance sheets of Limited at, December 31, 1995, December
31, 1996, March 31, 1997, June 30, 1997, and September 30, 1997, make a good and
sufficient
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provision, in the aggregate, before any consideration of the discount for the
time value of money for all unpaid losses and loss adjustment expenses, gross
and net as to reinsurance ceded under the terms of policies and agreements of
the Companies, computed in accordance with standards and principles established
by the Actuarial Standards Board, consistently applied (except as otherwise
noted therein), and meet the requirements of the insurance laws of applicable
insurance authorities.
(l) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Schedule
2.1(l) of the Sellers Disclosure Schedule and except as set forth in the SEC
Documents filed prior to the date of this Agreement, since September 30, 1997
each of the Companies has conducted its respective businesses in all material
respects only in the ordinary course, and there has not been any:
(i) change in the business, condition (financial or otherwise), permits,
assets, liabilities, working capital, earnings or operations of any of the
Companies, except for changes which have not or would not be reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect;
(ii) acquisition of assets or properties material to the Companies taken
as a whole or of securities or business of any other Person by any of the
Companies (in each case, other than acquisitions in the ordinary course of
business consistent with past practice) or any merger, consolidation or
amalgamation involving any of the Companies;
(iii) sale, assignment, lease or transfer of any material assets
(including any portion of the investment portfolio) of any of the Companies,
other than in the ordinary course of business consistent with past
practices;
(iv) incurrence by any of the Companies of any indebtedness for borrowed
money or incurrence, assumption or guarantee of, or any other act to become
responsible for, any obligations of any other Person, or making of loans or
advances by any of the Companies to any Person (including, without
limitation, any broker or agent), except the issuance of insurance policies
in the ordinary course of business consistent with past practice;
(v) cancellation of any indebtedness or waiver or compromise of any
rights (including agent balances) having a value to any of the Companies of
$50,000 or more, whether or not in the ordinary course of business (other
than settlements in the ordinary course of business of claims and salvage
and subrogation rights arising under contracts of insurance underwritten,
assumed or ceded by Nobel Insurance which settlements have not had nor would
be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect);
(vi) failure of any of the Companies to pay any credit or any amount
owed to such creditor (in excess of $50,000 in the aggregate for all such
creditors) when due, except where the amount due is being disputed in good
faith;
(vii) payment by any of the Companies of any liability material to the
Companies taken as a whole before the same became due in accordance with its
terms other than in the ordinary course of business consistent with past
practice;
(viii) material change in the underwriting, reinsurance, marketing, claim
processing and payment, financial or accounting practices or policies of any
of the Companies, except as required by law, generally accepted accounting
principles or SAP;
(ix) (A) entry into or modification of any reinsurance or retrocession
agreement by any of the Companies other than in the ordinary course of
business consistent with past practice, except for those which have not had
nor are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect or (B) termination or commutation of any reinsurance
or retrocession agreement with annual premium at the time of such
termination or commutation of $500,000 or more;
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(x) entry into, termination or modification by any of the Companies of
any contract, agreement, commitment, transaction or instrument with any
Affiliate of any of the Companies, or any other contract, agreement,
commitment, transaction, or instrument material to the Companies taken as a
whole (including, without limitation, relating to any borrowing, lending,
capital expenditure, capital contribution or capital financing), except
entry into, terminating or modifying contracts, agreements, commitments,
transactions, or instruments in the ordinary course of business;
(xi) any capital expenditure or execution of any lease or commitment for
the foregoing by any of the Companies involving annual payments in excess of
$50,000;
(xii) lapse or termination or failure to renew any Permit (as defined
below) of any of the Companies, in each case other than with respect to
Permits the failure of which to be in effect would not have or would not be
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect;
(xiii) (A) declaration, setting aside for payment of any dividends or
distributions (whether in cash, stock or property) in respect of any capital
stock of either Seller or any of the Companies or (B) any redemption,
purchase or other acquisition of any of the capital stock of either Seller
or any of the Companies;
(xiv) issuance by any of the Companies of, or commitment of any of the
Companies to issue, any shares of capital stock or obligators or securities
convertible into or exchangeable for shares of capital stock;
(xv) purchase or disposition of any securities or investment assets
otherwise than in compliance with the written investment guidelines of the
Companies furnished to Parent and the Purchaser; or
(xvi) agreement by either Seller or any of the Companies to do any of the
foregoing.
(m) LITIGATION. Except as set forth in Schedule 2.1(m) of the Sellers
Disclosure Schedule or in the SEC Documents, there are (i) no suits, actions or
proceedings pending or, to the knowledge of the Sellers, threatened against
either Seller or any of the Companies, other than those relating to insurance
claims and, (ii) no judgments, decrees, injunctions or orders of any
Governmental Entity or arbitrator outstanding against any of the Companies,
except for any such judgments, decrees, injunctions or orders that would not
have or would not be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect.
(n) EMPLOYEES.
(i) Schedule 2.1(n) of the Sellers Disclosure Schedule lists (x) all
Employee Benefit Plans, (y) all employment contracts and similar
arrangements between either Seller or any of the Companies and any of the
employees of any of the Companies and (z) all plans and arrangements
pursuant to which either Seller or any of the Companies is, or may be or
become, obligated to make any payment to confer any benefit upon or
accelerate the vesting or exercise of any benefit for any officer, director,
employee or agent of either Seller or any of the Companies as a result of or
in connection with any of the Transactions contemplated by this Agreement or
any transaction or transactions resulting in a change of control of any of
the Companies. No officer, director, executive or key employee of either
Seller or any of the Companies has any plans to terminate his, her or their
employment. Except as set forth in Schedule 2.1(n) of the Sellers Disclosure
Schedule, (A) each Seller and each of the Companies have complied with all
Laws relating to the employment of labor, including provisions thereof
relating to wages, hours, equal opportunity, and collective bargaining,
except where the failure to so comply would not have or would not be
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect, (B) no labor dispute with employees of any of the Companies
exists or, to the knowledge of the Sellers, is threatened, except for such
disputes which would not have or would not be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect, (C) each
Employee Benefit Plan conforms in all material respects to, and its
administration is in
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conformity in all material respects with, all applicable laws, no material
liability has been or is expected to be incurred by any of the Companies
with respect to any Employee Benefit Plan in excess of amounts accrued
except for benefits payable or contributions due under the terms of such
plans with respect to future services, and full payment has been made of all
amounts that any of the Companies is required to have paid as contributions
to each Employee Benefit Plan, (D) the Sellers have provided Parent with a
true and correct copy of each of the Employee Benefit Plans and all
contracts relating thereto, or to the funding thereof, and copies of all
required filings with respect thereto for the past three fiscal years, (E)
all Employee Benefit Plans intended to satisfy applicable tax qualification
requirements or other requirements necessary to secure favorable tax or
other legal treatment comply in all material respects with such
requirements, and (F) adequate accruals for all obligations under the
Employee Benefit Plans are reflected in the financial statements of Limited
and in the respective financial statements of the Companies, to the extent
they are responsible for such obligations. Neither Seller nor any of the
Companies nor any of their ERISA Affiliates has incurred or expect to incur
any liability under Title IV of ERISA. Neither Seller nor any of the
Companies nor any of their ERISA Affiliates has ever maintained, contributed
to or had any liability with respect to an employee benefit plan subject to
Title IV of ERISA. All contributions to Employee Benefit Plans required to
be made by either Seller or any of the Companies or any of their respective
ERISA Affiliates in accordance with the terms of the plans, any applicable
collective bargaining agreement and, when applicable, Section 302 of ERISA
or Section 412 of the Code, have been timely made.
(ii) There are no pending or, to the knowledge of the Sellers,
threatened claims for indemnification against either Seller or any of the
Companies by directors, officers, employees and agents of either Seller or
any of the Companies.
(iii) Schedule 2.1(n) of the Sellers Disclosure Schedule, which shall be
delivered to Parent within ten Business Days after the date hereof, shall
contain true, correct and complete copies of waiver letters, executed and
delivered by certain executives of the Companies (the "EXECUTIVES"), wherein
each such Executive will have fully waived the right to receive cash
consideration upon a liquidation, dissolution or similar transaction
involving either Seller in respect of such Executive's options to purchase
Limited Shares (each, an "OPTION"), such waiver being given in exchange for
the right of each such Executive to receive options to purchase common
shares, par value $1.00 per share, of Parent as described in Section 4.8.
Each of such waiver letters will be in full force and effect on the date of
such delivery.
(o) TAXES.
(i) Limited has filed all income Tax Returns required to be filed by the
Islands of Bermuda, and Holdings and each of the Companies has filed all
Federal and all material state, local and foreign income Tax Returns and all
other material Tax Returns required to be filed by it. Limited is not
required to file income Tax Returns in the United States because it is a
foreign corporation not engaged in a trade or business within the United
States; Limited has filed protective Federal income Tax Returns which report
that it has no gross income which is effectively connected with a United
States trade or business. All such Tax Returns are complete and correct in
all material respects; and each Seller or any of the Companies has paid in
full or has had paid on its behalf all Taxes shown as due on such Tax
Returns or otherwise due (except for Taxes as are being contested in good
faith by appropriate proceedings) or has provided adequate reserves in its
most recent financial statements contained in the SEC Documents and
otherwise on the books of the Companies (including for Taxes being
contested) for all Taxes payable by either Seller or by any of the Companies
for all taxable periods and portions thereof through the date of such
financial statements.
(ii) Except as set forth in Schedule 2.1(o) of the Sellers Disclosure
Schedule, no deficiencies for any Taxes have been asserted or assessed
against either Seller or any of the Companies, for which Limited and the
Companies have not provided adequate reserves fully reflected in the
Companies'
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GAAP Financial Statements delivered to Parent. No Governmental Entity is
presently conducting a Tax audit or investigation with respect to either
Seller or any of the Companies, or has asked for an extension or waiver of
an applicable statute of limitations. The Federal income Tax Returns of
Holdings and the Companies consolidated in such Tax Returns, including Nobel
Insurance, have been examined by the Internal Revenue Service and no change
letter issued for all years through December 31, 1992 and all Tax Returns
thereafter are open and subject to examination. Neither Seller nor any of
the Companies within the past five years has filed Tax Returns on a
consolidated, combined or unitary basis with any group of entities except
the group with which it presently files Tax Returns. With respect to Taxes
or any Tax Return, no power of attorney has been executed by either Seller
or any of the Companies.
(iii) Except as disclosed on Schedule 2.1(o) of the Sellers Disclosure
Schedule, no amounts payable as a result of the Transactions contemplated by
this Agreement under the Benefit Plans or any other plans or arrangements
will constitute a "parachute payment" to a "disqualified individual" as
those terms are defined in Section 280G of the Code, without regard to
whether such payment is reasonable compensation for personal services
performed or to be performed in the future.
(iv) LIENS FOR TAXES. Except as set forth in Schedule 2.1(o) of the
Sellers Disclosure Schedule, there are no Liens or other Encumbrances on any
of the assets of either Seller or any of the Companies that arose in
connection with any failure (or alleged failure) to pay any Tax.
(v) AUDIT HISTORY. Except as set forth in Schedule 2.1(o) of the Sellers
Disclosure Schedule, there is no action, suit, proceeding, investigation,
audit or claim now pending or, to the knowledge of either Seller, proposed
against or with respect to either Seller or any of the Companies or any
affiliated group of which either Seller and any of the Companies is or has
been a member that relates to Tax liabilities attributable to items of
income, gain, deduction, loss or credits of either Seller or any of the
Companies.
(vi) WITHHOLDING. Each Seller and each of the Companies have withheld
and paid all Federal, state and local Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
(p) COMPLIANCE WITH APPLICABLE LAWS.
(i) Except as set forth in Schedule 2.1(p) of the Sellers Disclosure
Schedule, (x) each of the Sellers and each of the Companies and, to the
knowledge of the Sellers, any independent agents acting on behalf of the
Sellers or the Companies (the "AGENTS"), have at all times complied and are
presently complying in all material respects with all applicable laws
(whether statutory or otherwise), rules, regulations, orders, ordinances,
judgments or decrees of all governmental authorities (Federal, state, local
or otherwise) (collectively, "LAWS"), and (y) neither Seller nor any of the
Companies, nor to the knowledge of the Sellers, any Agent, has received
notification of any asserted present or past failure to so comply.
(ii) Except as set forth on Schedule 2.1(p) of the Sellers Disclosure
Schedule, the Companies hold all Permits necessary for the ownership and
conduct of the respective businesses of the Companies in each of the
jurisdictions in which the Companies conduct or operate their respective
businesses in the manner now conducted, and each of such Permits is in full
force and effect except where the failure to hold any Permit or the failure
of any Permit to be in full force and effect would not have or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The consummation of the Transactions contemplated by this
Agreement will not result in any revocation, cancellation or suspension of
any such Permit, and, there are no pending or, to the knowledge of the
Sellers, threatened suits, proceedings or investigations with respect to
revocation, cancellation, suspension or nonrenewal thereof, and no event has
occurred which
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(whether with notice or lapse of time or both) will result in such a
revocation, cancellation, suspension or nonrenewal thereof, in any such case
except where such a revocation, cancellation, suspension or non-renewal
would not have or would not reasonably be expected to have, individually or
in the aggregate, have a Material Adverse Effect;
(q) INSURANCE BUSINESS; COMPLIANCE WITH INSURANCE LAWS
(i) Except as set forth on Schedule 2.1(q) of the Sellers Disclosure
Schedule, the business and operations of Nobel Insurance have been conducted
in compliance with all applicable federal, state and local statutes and
regulations regulating the business and products of insurance and all
applicable orders and directives of insurance regulatory authorities and
market conduct recommendations resulting from market conduct examinations of
insurance regulatory authorities (collectively, "Insurance Laws"), except
where the failure to so conduct such business and operations would not have
or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Nobel Insurance.
(ii) All insurance policies issued by Nobel Insurance are in a form
acceptable to applicable regulatory authorities or have been filed and not
objected to (or such objection has been withdrawn or resolved) by such
authorities within the period provided for objection, except where the
failure to issue policies in an acceptable form would not have or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Nobel Insurance. None of the Companies other than Nobel
Insurance has issued any insurance policies.
(iii) Except as set forth on Schedule 2.1(q) of the Sellers Disclosures
Schedule, (X) all material reports, statements, documents, registrations,
filings and submissions to state insurance regulatory authorities complied
in all material respects with applicable law in effect when filed and (Y) no
material deficiencies have been asserted by any such regulatory authority
with respect to such reports, statements, documents, registrations, filings
or submissions that have not been satisfied or that would have or reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on Nobel Insurance.
(iv) Except as set forth on Schedule 2.1(q) of the Sellers Disclosure
Schedule, all premium rates established by Nobel Insurance that are required
to be filed with or approved by insurance regulatory authorities have been
so filed or approved, the premiums charged conform to the premiums so filed
or approved and comply (or complied at the relevant time) with the Insurance
Laws applicable thereto, except where such failures to comply would not have
or would not be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Nobel Insurance.
(v) In addition, (X) there is no pending or, to the knowledge of either
Seller or Nobel Insurance, threatened, charge by any insurance regulatory
authority that Nobel Insurance has violated, nor any pending or, to the
knowledge of either Seller or Nobel Insurance, threatened investigation by
any insurance regulatory authority with respect to possible violations of,
any applicable Insurance Laws, except where such violations would not have
or would not be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Nobel Insurance and (Y) Nobel Insurance is not
subject to any order or decree of any insurance regulatory authority
relating specifically to Nobel Insurance (as opposed to insurance companies
generally), except for any such order or decree that would not have or would
not be reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Nobel Insurance.
(vi) Nobel Insurance and its Agents have marketed, sold and issued
insurance products in compliance, in all material respects, with all
Insurance Laws applicable to the business of Nobel Insurance and in the
respective jurisdictions in which such products have been sold, including,
without limitation, in compliance with (A) all applicable prohibitions
against "redlining" and (B) all applicable requirements relating to the
disclosure of the nature of insurance products as policies of insurance
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except where any such failure to comply would not or would not be reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect.
(vii) Prior to the date hereof, the Sellers have delivered to Parent a
true and complete copy of any actuarial reports prepared by actuaries,
independent or otherwise, with respect to Nobel Insurance since December 31,
1995, and all attachments, addenda, supplements and modifications thereto
(the "ACTUARIAL ANALYSES"). To the knowledge of the Sellers, the information
and data furnished by or on behalf of Nobel Insurance to its independent
actuaries in connection with the preparation of the Actuarial Analyses were
accurate in all material respects. Furthermore, each Actuarial Analysis was
based upon an accurate inventory of policies in force for Nobel Insurance at
the relevant time of preparation, was prepared using appropriate modeling
procedures accurately applied and in conformity with generally accepted
actuarial standards consistently applied, and the projections contained
therein were properly prepared in accordance with the assumptions stated
therein.
(viii) Prior to the date hereof, the Sellers have delivered to Parent a
true and correct list on an aggregate basis of the maximum underlying
retentions (net of all reinsurance maintained) on all insurance and
reinsurance policies written or entered into by Nobel Insurance since
December 31, 1995.
(r) BROKERS. No broker, investment banker, financial advisor or other
Person, other than DLJ, is entitled to any broker's, finder's, financial
advisor's consultant or other intermediary or other similar fee or commission in
connection with the Transactions contemplated by this Agreement or the
Liquidation based upon arrangements made by or on behalf of either Seller.
Limited and/or Holdings is solely responsible for any such payment, fee or
commission that may be due DLJ.
(s) OPINION OF FINANCIAL ADVISOR. Limited has received an opinion of DLJ,
to the effect that, as of the date of this Agreement, the amount of the proceeds
to be received by the holders of the Limited Shares from a Liquidating Dividend
or other distribution in the amount of not more than $14.00 per Limited Share is
fair to Limited's shareholders from a financial point of view, and a complete
and correct signed copy of such opinion has been delivered to Parent.
(t) TITLE TO ASSETS. Schedule 2.1(t) of the Sellers Disclosure Schedule
sets forth a complete list of all real property and material interests in real
property owned in fee by the Companies (the "OWNED REAL PROPERTY") and sets
forth all material real property and interests in real property leased by any of
the Companies as of the date hereof (the "LEASED REAL PROPERTIES"). Each of the
Companies has (i) good, valid, marketable and fee simple title to all the Owned
Real Property owned by them, free and clear of all Liens, except for such Liens
as shown on Schedule 2.1(t) of the Sellers Disclosure Schedule and (ii) a valid
leasehold interest in the Leased Real Property leased by them. Each of the
Companies has sufficiently good and valid title to, or an adequate leasehold
interest in, all of their other material tangible properties and assets (the
"OTHER ASSETS") in order to allow them to conduct, and continue to conduct,
their respective businesses as currently conducted, except where the failure to
have such title or interest would not have or would not be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect.
(u) CONTRACTS.
(i) Except as set forth in Schedule 2.1(u) of the Sellers Disclosure
Schedule, none of the Companies, nor any of their respective assets,
businesses or operations, is as of the date of this Agreement a party to, or
is bound or affected by, or receives benefits under any contract, agreement,
undertaking or treaty or amendment thereto, that
(a) would be required to be filed as an exhibit to an Annual Report on
Form 10-K of Limited as of the date of this Agreement that has not been
filed as an exhibit to an SEC Document filed prior to the date hereof;
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(b) except as listed on Schedule 2.1(u) of the Sellers Disclosure
Schedule, contains any undertakings or commitments to, any governmental or
regulatory authority materially affecting the business of the Companies
taken as a whole and not made in the ordinary course of business;
(c) except as described in Schedule 2.1(u) of the Sellers Disclosure
Schedule, contains covenants limiting the freedom of the Companies to engage
in any line of business in any geographic area or to compete with any Person
or to incur indebtedness for borrowed money;
(d) except as described in Schedule 2.1(u) of the Sellers Disclosure
Schedule, contains any "change in control" or similar provisions; or
(e) provides for the indemnification by either Seller or any of the
Companies of any Person except for contracts entered into in the ordinary
course of business consistent with past practice.
(ii) Except as set forth on Schedule 2.1(u) of the Sellers Disclosure
Schedule, neither Seller nor any of the Companies is (and, to the knowledge
of the Seller, no other party is) (x) in material breach of or materially in
default under, any of the Contracts or (y) in breach or default under any of
the Contracts (with or without notice or lapse of time or both) if any
breach or default would permit a party other than one or more of the
Companies to terminate such Contract. Neither Seller nor any of the
Companies has sent or received any notice of an intention to terminate any
Contract, except as described on Schedule 2.1(u). Except as set forth on
Schedule 2.1(u) of the Sellers Disclosure Schedule, one or more of the
Companies is a party to each contract material to the conduct of the
business of any of the Companies, and, except as disclosed in such Schedule
2.1(u), each such Company will retain all of the benefits to which such
party is entitled under each such Contract after consummation of the
Transactions contemplated hereby.
(v) NO OTHER AGREEMENTS TO SELL THE COMPANIES OR THE ASSETS OF THE
COMPANIES. Except as set forth in Schedule 2.1(v) of the Sellers Disclosure
Schedule, neither Seller nor any of the Companies has any agreement, absolute or
contingent, with any other Person to sell the capital stock, assets or business
of either Seller or any of the Companies or to effect any merger, amalgamation,
consolidation or other reorganization of either or any of the Companies or to
enter into any agreement with respect thereto.
(w) PROPRIETARY RIGHTS. Except as set forth in Schedule 2.1(w) of the
Sellers Disclosure Schedule, the Companies do not possess any rights or title to
or interest in the trademarks, service marks, copyrights, secrets, software or
other proprietary rights that are material to the business of any of the
Companies.
(x) YEAR 2000. None of the custom-made software or hardware designed or
purchased or licensed by either Seller or any of the Companies from third
parties and, to the knowledge of the Sellers, none of the commercially available
software purchased by either Seller or any of the Companies and used by any of
the Companies in the course of the operation or management of, or the compiling,
reporting or generation of data relating to, the Companies contains any
deficiency (x) in the ability of such software or hardware to identify correctly
or perform calculations or other processing with respect to dates after December
31, 1999 or (y) that would cause such software or hardware to be fit no longer
for the purpose for which it was intended by reason of the changing of the date
from 1999 to 2000.
(y) TRANSACTIONS WITH CERTAIN PERSONS. Other than as disclosed in the SEC
Documents, (1) neither any officer, director nor employee of either Seller, nor
any of the Companies nor any member of any such Person's immediate family is
presently a party to any material transaction with any of the Companies,
including, without limitation, any Contract, or other binding arrangement (x)
providing for the furnishing of material services (except in such Person's
capacity as an officer, director, employee or consultant) by such Person, (y)
providing for the rental of material real or personal property from, or (z)
otherwise requiring material payments to (other than for services as officers,
directors or employees of either Seller or any of the Companies) any such
Person.
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(z) REINSURANCE AND RETROCESSIONS. Schedule 2.1(z) of the Sellers
Disclosure Schedule contains a list as of the date of this Agreement of all
treaty reinsurance or retrocession treaties, facultative agreements, and
agreements (each, for purposes of this paragraph, a "treaty" or "agreement") in
force to which Nobel Insurance is a party (including any terminated or expired
treaty or agreement under which there remains any outstanding recoverables with
respect to paid or unpaid case reserves in excess of $50,000), any terminated or
expired treaty or agreement under which there remains any outstanding liability
from one reinsurer with respect to paid or unpaid case reserves in excess of
$50,000 and any treaty or agreement with any Affiliate of Nobel Insurance, the
effective date of each such treaty or agreement, and the termination date of any
treaty or agreement which has a definite termination date. Nobel Insurance is
not in default in any respect as to any provision of any reinsurance or
retrocession treaty or agreement, nor has it failed to meet the underwriting
standards required for any business reinsured thereunder except for defaults
which would not have or would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. Except as set forth in Schedule
2.1(z) of the Sellers Disclosure Schedule, since January 1, 1995, Nobel
Insurance has not entered into any reinsurance transactions with Limited of any
kind whatsoever, and no reinsurance balances between Nobel Insurance and Limited
were outstanding as of the date hereof.
(aa) INTERCOMPANY ACCOUNTS. Schedule 2.1(aa) of the Sellers Disclosure
Schedule (x) fully describes all arrangements with respect to any intercompany
transactions involving any of the Companies (collectively, "INTERCOMPANY
ARRANGEMENTS") and includes all supporting documentation and/or descriptive
information reasonably necessary to evaluate such Intercompany Arrangements, and
(y) contains a complete list of all intercompany balances as of a recent date
between any Affiliate of any of the Companies, on the one hand, and any of the
Companies, on the other. Since the date as to which information is given in such
Schedule 2.1(aa), there has not been any incurrence or accrual of liability (as
a result of allocations or otherwise) by any of the Companies to any Affiliate
of any of the Companies or other transaction between any of the Companies and
any Affiliates of any of the Companies.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Section 3.1. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE
PURCHASER. Parent and the Purchaser represent and warrant to the Sellers as
follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Parent is a company, and
the Purchaser is a corporation, duly organized, validly existing and in good
standing under the Laws of Bermuda and Delaware, respectively, and each has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of Parent and the Purchaser is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed would not have or reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. The Purchaser is a
wholly owned subsidiary of Parent.
(b) AUTHORITY; AUTHORIZATION; BINDING AGREEMENT. Parent and the Purchaser
have the requisite corporate power and authority to enter into this Agreement
and to consummate the Transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and the Purchaser and the consummation by
Parent and the Purchaser of the Transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and the
Purchaser, as applicable. This Agreement has been duly executed and delivered by
Parent and the Purchaser and, assuming this Agreement constitutes the valid and
binding obligation of the Sellers, constitutes a valid and binding obligation of
Parent and the Purchaser.
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(c) CONSENTS. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
Parent or the Purchaser in connection with the execution and delivery of this
Agreement or the consummation by Parent or the Purchaser, as the case may be, of
any of the Transactions contemplated hereby; except for (i) the filing of a
premerger notification and report form under the HSR Act, (ii) filing and
obtaining of any required Bermuda Filings and Consents, (iii) as may be required
by an applicable state securities or "blue sky" Laws, (iv) the filing and
obtaining of the Required Filings and Approvals and (v) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect.
(d) NONCONTRAVENTION. The execution and delivery of this Agreement do not,
and the consummation of the Transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (i) the Organizational
Documents of Parent or the Purchaser or (ii) provided that any required filings
under the HSR Act are made and any required Bermuda Filings and Consents and the
Required Filings or Approvals are made or obtained, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or the
Purchaser or their respective properties or assets, other than, in the case of
clause (ii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not have or reasonably be expected to
have a Material Adverse Effect.
(e) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Parent or the Purchaser in writing expressly for inclusion or
incorporation by reference in the Proxy Statement will, on the date the Proxy
Statement is first mailed to Limited's shareholders and at the time of the
Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
(f) FINANCING. Parent presently has, and at all times up to and including
the Closing Date will have, sufficient funds available to it to provide the
financing for the purchase of the Shares and the NIA Assets, and shall provide
the Purchaser with the funds necessary to consummate the Transactions
contemplated hereby in accordance with the terms hereof.
(g) INTERIM OPERATIONS OF THE PURCHASER. The Purchaser was formed solely
for the purpose of engaging in the Transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the Transactions contemplated hereby. Parent shall cause the
Purchaser to fulfill the Purchaser's covenants, agreements and obligations under
this Agreement.
(h) OWNERSHIP OF SHARES. As of the date of this Agreement, and at all
times prior to the Closing Date, none of the Parent, the Purchaser nor any of
their Affiliates shall own, directly or indirectly, any Shares.
(i) INVESTMENT INTENT. The Shares will be acquired hereunder solely for
the account of the Purchaser and its specified designees, for investment, and
not with a view to the resale or distribution thereof, subject to the right of
the Purchaser and any such designees to sell, assign, transfer or distribute any
or all of the Shares to any corporation which is an Affiliate of the Purchaser.
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ARTICLE IV.
COVENANTS
Section 4.1. CONDUCT OF BUSINESS OF THE COMPANIES. Until the Closing Date,
except as specifically contemplated by this Agreement, the Sellers shall cause
each of the Companies to carry on their respective businesses in the ordinary
course of business consistent with past practice and shall use their
commercially reasonable best efforts consistent with good business judgment to
preserve intact their current business organizations, keep available the
services of their current officers and key employees and preserve their
relationships consistent with past practice with producers, brokers, insureds,
suppliers, distributors, customers and others having business dealings with
them. Without limiting the generality of the foregoing, each Seller covenants
and agrees that, except (x) as expressly contemplated by this Agreement or (y)
as previously consented to in writing by Parent, which consent shall not be
unreasonably withheld, the Sellers will not, and will not permit any of the
Companies, to:
(i) amend the Organizational Documents of any of the Companies;
(ii) (x)(A) declare, set aside for payment or pay any dividend or other
distribution payable in cash, stock or property with respect to the capital
stock of any of the Companies or (B) redeem, purchase or otherwise acquire
directly or indirectly any of the capital stock of any of the Companies; (y)
issue, sell, deliver or authorize the issuance of any shares of capital
stock or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
capital stock of any of the Companies or (z) split, combine or reclassify
the outstanding capital stock of any of the Companies;
(iii) (a) create, incur, assume, maintain or permit to exist any
long-term debt or any short-term debt for borrowed money, except pursuant to
existing credit agreements in the ordinary course of business, (b) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any person
except in the ordinary course of its insurance and reinsurance business,
consistent with past practices (except customary letters of credit issued in
the ordinary course of business consistent with past practices), or (c) make
any loans, advances or capital contributions to, or investments in, any
person;
(iv) except as required by this Agreement, authorize, recommend, propose
or announce an intention to authorize, recommend or propose, or, enter into,
any agreement in principle or any agreement with respect to any plan of
liquidation or dissolution, any acquisition of a material amount of assets
or securities, any sale, transfer, lease, license, pledge, mortgage, or
other disposition or encumbrance of any assets or securities or any change
in the capitalization of any of the Companies, or except for insurance and
reinsurance agreements entered into in the ordinary course of business,
consistent with past practice, (x) any other material agreements,
commitments or contracts, (y) any amendment or modification thereof or (z)
any release or relinquishment of any material rights thereunder;
(v) (x) enter into any employment or severance agreement with or, except
in accordance with the normal practices of the Sellers and the Companies set
forth in Schedule 2.1(m) of the Sellers Disclosure Schedule, grant any
severance or termination pay to any officer, director or key employee of any
of the Companies; (y) hire or agree to hire any new or additional key
employees or officers at an annual salary in excess of $100,000 or (z)
terminate an executive officer of any of the Companies (other than for good
or just cause) or diminish the duties or responsibilities of such officer;
(vi) except as required to comply with applicable law or provided in
this Agreement, (A) adopt, enter into, terminate or amend any Employee
Benefit Plan or other arrangement for the current or future benefit or
welfare of any director, officer or current or former employee, except to
the extent necessary to coordinate any such Employee Benefit Plans with the
terms of this Agreement, (B) increase in any manner the compensation or
fringe benefits of, or pay any bonus to, any director,
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officer or employee (except for normal increases or bonuses in the ordinary
course of business consistent with past practice to employees other than
directors, officers or senior management personnel and that, in the
aggregate, do not result in a significant increase in benefits or
compensation expense to any of the Companies relative to the level in effect
prior to such action (but in no event shall the aggregate amount of all such
increases exceed 10% of the aggregate annualized compensation expense of
Limited and its subsidiaries reported in the most recent audited financial
statements of Limited included in the SEC Documents)), (C) pay any benefit
not provided for under any Employee Benefit Plan, (D) grant any awards under
any bonus, incentive, performance or other compensation plan or arrangement
or Employee Benefit Plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units
or restricted stock, or the removal of existing restrictions in any Employee
Benefit Plans or agreements or awards made thereunder) or (E) except as
required by the current terms thereof take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Employee Benefit Plan;
(vii) change any accounting method, practice or policy used by it unless
required by a concurrent change in GAAP;
(viii) change the method of determining the GAAP reserves for any guaranty
fund assessment, second injury fund assessment, special insurance assessment
or similar assessment or Tax;
(ix) fail to pay any Tax when due or make any material Tax election or
settle or compromise any material Tax liability;
(x) knowingly undertake any act, or suffer to exist any condition,
causing any insurance policy naming it as a beneficiary or a loss payee to
be canceled or terminated;
(xi) take any action which causes any representation or warranty of the
Sellers in this Agreement to become untrue or which would result in a
material breach of any covenant made by the Sellers in this Agreement;
(xii) (A) make any investment other than in accordance with the written
investment guidelines previously provided to Parent or (B) invest in any
derivative securities;
(xiii) enter into any Intercompany Arrangements other than those disclosed
in Schedule 2.1(aa) of the Sellers Disclosure Schedule; or
(xiv) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
Section 4.2. ACCESS; CONFIDENTIALITY. Upon reasonable notice and subject
to applicable Law and any confidentiality provisions to which any of the
Companies may be subject, each of the Companies shall, and the Sellers shall
cause the Companies to, afford to the officers, employees, accountants, counsel,
financing and reinsurance sources and other representatives of Parent, access,
during normal business hours during the period prior to the Closing Date, to all
its properties, books, contracts, commitments and records. Except as otherwise
agreed to in writing by the Sellers, until Parent and the Purchaser shall have
purchased the Shares pursuant to this Agreement, Parent will be bound by the
terms of the Confidentiality Agreement.
Section 4.3. REASONABLE BEST EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the Parties agrees to use all reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other Parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Transactions contemplated by this Agreement, including
(i) the obtaining of all necessary actions or nonactions, waivers,
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consents and approvals from any Governmental Entity and the making of all
necessary registrations and filings (including filings with any Governmental
Entity, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of any of the Transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed, and (iv) the execution and
delivery of any additional instruments necessary to consummate the Transactions
contemplated by, and to fully carry out the purposes of, this Agreement;
PROVIDED, HOWEVER, that in connection with any filing or submission or other
action required to be made or taken by any Party to effect the Transactions
contemplated hereby, neither Seller nor any of the Companies shall without the
prior written consent of Parent commit to any divestiture transaction and Parent
shall not be required to divest or hold separate or otherwise take or commence
to take any action that, in the reasonable discretion of Parent, materially
limits its ability to conduct the business of the Companies or its ability to
retain any material portion of the assets of the Companies.
(b) The Sellers shall give prompt notice to Parent of (i) any representation
or warranty made by either of them contained in this Agreement becoming untrue
or inaccurate in any respect or (ii) the failure by it to comply with or satisfy
in any material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; PROVIDED, HOWEVER, that no such
notification shall affect the representations, warranties, covenants or
agreements of the Parties or the conditions to the obligations of the Parties
under this Agreement.
Section 4.4. NO SOLICITATION.
(a) Neither Seller shall, nor shall either Seller permit any of the
Companies to, nor shall either Seller independently authorize or permit any of
the Companies to authorize (and shall use their respective best efforts not to
permit) any officer, director or employee of, or any investment banker, attorney
or other advisor or representative of, the Sellers or any of the Companies to,
solicit or initiate, or knowingly encourage the submission of, any Takeover
Proposal (as defined below). Notwithstanding the foregoing, and subject to
compliance with Section 4.4(c) hereof, if prior to the Closing Date, the Board
of Directors of Limited, after consultation with and based upon advice received
from outside legal counsel to Limited experienced in such matters, determines
that a failure to act with respect to any such Takeover Proposal would be
inconsistent with its fiduciary duties to Limited's shareholders under
applicable Law, Limited may (A) furnish information with respect to the Sellers
or the Companies to any Person in response to an unsolicited request pursuant to
a confidentiality agreement with terms and conditions similar to the
Confidentiality Agreement and (B) participate in discussions and negotiations
regarding any potential Takeover Proposal. For purposes of this Agreement,
"TAKEOVER PROPOSAL" means (x) any proposal or offer from any Person relating to
any direct or indirect acquisition or purchase of all or a substantial part of
the assets of the Companies or of any class of equity securities of either of
the Sellers or any of the Companies or any tender offer or exchange offer that
if consummated would result in any Person beneficially owning shares of any
class of equity securities of either of the Sellers or any of the Companies, or
any merger, consolidation business combination, sale of substantially all of the
assets, recapitalization, liquidation, dissolution or similar transaction
involving either of the Sellers or any of the Companies other than the
Transactions contemplated by this Agreement, or (y) any other transaction the
consummation of which would reasonably be expected to impede, interfere with,
prevent or materially delay the consummation of the Transactions contemplated by
this Agreement.
(b) Subject to compliance by the directors of Limited with their fiduciary
duties, neither the Board of Directors of Limited nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or the Purchaser, the approval or recommendation by Limited's
Board of Directors or any such committee of this Agreement or the Transactions,
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any definitive
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agreement to consummate any Takeover Proposal. Notwithstanding the foregoing, in
the event that prior to consummation of the Transactions Limited's Board of
Directors determines, after consultation with and based upon advice received
from outside legal counsel to Limited experienced in such matters, that failure
to act with respect to any Takeover Proposal would be inconsistent with its
fiduciary duties to Limited's shareholders under applicable law, Limited's Board
of Directors may (subject to the terms of this and the following sentences)
withdraw or modify its approval or recommendation of the offer, this Agreement
or the Transactions, approve or recommend, or propose to approve or recommend, a
Takeover Proposal, or enter into an agreement with respect to a Takeover
Proposal, in each case at any time after 11:59 P.M. on the next Business Day
following Parent's receipt of written notice (a "NOTICE OF TAKEOVER PROPOSAL")
advising Parent that Limited's Board of Directors has received a Takeover
Proposal, specifying the material terms and conditions of such Takeover
Proposal, identifying the Person making such Takeover Proposal and delivering a
copy of any documentation delivered in connection therewith; PROVIDED that
Limited shall not enter into a definitive agreement to consummate a Takeover
Proposal unless Limited shall have furnished Parent with a Notice of Takeover
Proposal within the time frame provided in the immediately preceding clause in
advance of any date that it intends to enter into such agreement. In addition,
if Limited enters into a definitive agreement with respect to any Takeover
Proposal, it shall concurrently with entering into such agreement pay, or cause
to be paid, to Parent the Termination Fee (as defined in Section 6.3).
(c) In addition to the obligations of the Sellers set forth in Section
4.4(b), the Sellers shall advise Parent of any Takeover Proposal, or any
proposal with respect to any Takeover Proposal and the material terms and
conditions of such Takeover Proposal.
(d) Limited shall be entitled, in the exercise of the fiduciary duties of
its Board of Directors, to notify any Person that has made a Takeover Proposal
of the material terms and conditions of any change or modification to the terms
and conditions of this Agreement, or of any alternative transaction that may be
proposed by Parent, the Purchaser or any of their Affiliates (a "RESPONSIVE
OFFER"). Parent and Purchaser agree that all such Responsive Offers shall remain
open for at least two full Business Days after receipt by the Sellers.
Section 4.5. PUBLICITY. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to Parent
and Limited. Thereafter, so long as this Agreement is in effect and except in
respect of releases and announcements by Limited in connection with a Takeover
Proposal, neither Limited, Parent nor any of their respective Affiliates shall
issue or cause the publication of any press release or other announcement with
respect to the Transactions contemplated hereby without the prior consultation
of the other Party.
Section 4.6. INDEMNIFICATION.
(a) Parent and the Sellers agree that all rights to indemnification existing
in favor of the present or former directors, officers, employees, fiduciaries
and agents of Limited, Holdings and the Companies (collectively, the
"INDEMNIFIED PARTIES") as provided in the Organizational Documents of Limited
and the Companies as in effect as of the Closing Date shall survive, in the case
of Limited and Holdings until the Liquidation, and in the case of the Companies
shall continue in full force and effect for six years after the Closing Date
(without modification or amendment, except as required by applicable law), to
the fullest extent permitted by law; PROVIDED, HOWEVER, that none of Parent, the
Purchaser or any of the Companies shall have any obligations under this Section
4.6 in favor of any Indemnified Party with respect to liabilities arising with
respect to any U.S. Federal Taxes incurred by either Seller, or by any of the
Companies prior to the Closing Date. Parent shall cause the Companies to
maintain in effect for not less than six years from the Closing Date the current
policies of the directors' and officers' liability insurance maintained by the
Companies, and shall cause the Companies to maintain in effect coverage
equivalent to the directors' and officers' liability insurance maintained on the
date hereof by Limited (provided that Parent may substitute therefor polices of
at least equivalent coverage containing terms and conditions which are no less
advantageous than the policies of the Companies and Limited presently in place)
with respect to matters
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occurring prior to the Closing Date; PROVIDED, however, that in no event shall
Purchaser or the Companies be required to expend any amount in excess of
$100,000 aggregate premiums to maintain or procure insurance coverage pursuant
to this Section 4.6; and PROVIDED, further, that none of the Parent, Purchaser
or any of the Companies shall be required to purchase coverage for any
Indemnified Party in respect of any liability of such person arising from any
potential U.S. Federal Tax liability incurred by either Seller, or incurred by
any of the Companies prior to the Closing Date. In the event the payment of such
amount for any year is insufficient to maintain such insurance or equivalent
coverage cannot otherwise be obtained, Parent shall cause the Companies to
purchase as much insurance as may be purchased for the amount indicated.
(b) This Section 4.6 shall survive the consummation and closing of the
Transactions contemplated hereby and is intended for the benefit of the
Indemnified Parties, and each of the Indemnified Parties shall be entitled to
enforce the covenants contained herein.
(c) If any of the Companies or any of their respective successors or assigns
(i) reorganizes, amalgamates or consolidates with or merges into any other
Person and is not the resulting, continuing or surviving corporation or entity
of such reorganization, amalgamation, consolidation or merger, or (ii)
liquidates, dissolves or transfers all or substantially all of its properties
and assets to any Person or Persons, then, and in such case, proper provision
will be made so that the successors and assigns of the Companies assumes all of
the obligations of the Companies, as the case may be, set forth in this Section
4.6.
Section 4.7. BENEFITS. For a period of one year following the Closing
Date, Parent shall cause the Companies to provide the employees of the Companies
with employee benefit plans, programs, policies or arrangements (the "SUCCESSOR
BENEFIT PLAN") as are substantially equivalent, in the aggregate, as those
currently provided by the Sellers or the Companies (the "CURRENT BENEFIT
PLANS"). Except to the extent that benefits may be duplicated, each Successor
Benefit Plan shall give full credit for each employee's period of service with
the Sellers or the Companies prior to the Closing for all purposes for which
such service was recognized under the Current Benefit Plans prior to the Closing
Date, including, but not limited to, recognition of service for vesting, amount
of benefits, eligibility to participate, and eligibility for disability and
early retirement benefits (including subsidies relating to such benefits) and
full credit for deductibles satisfied under the benefit plans toward any
deductibles for the same period following the Closing Date, and shall waive any
pre-existing condition limitation for any employee covered under a Current
Benefit Plan immediately prior to the Closing.
Section 4.8. CONVERSION OF OPTIONS. On the Closing Date, all Options held
by the Executives identified in Schedule 2.1(n) of the Sellers Disclosure
Schedule shall be converted into options to purchase common shares of the Parent
(the "PARENT OPTIONS") as follows: (a) the number of common shares of Parent
subject to each Parent Option to be received by each such Executive shall be
equal to (i) the number of Limited Shares subject to each Option held by the
Executive divided by (ii) the ratio of the fair market value of the common
shares of Parent to the fair market value of the Limited Shares, calculated in
each case immediately prior to the Closing Date (the "CONVERSION RATIO"); and
(b) the exercise price of each such Parent Option to be received by each
Executive shall be equal to (i) the exercise price of each such Option held by
the Executive multiplied by (ii) the Conversion Ratio; PROVIDED, HOWEVER that
the aggregate spread value of the Parent Options to be received by each
Executive shall equal the aggregate spread value of the Options to be
surrendered for conversion by such Executive, determined in each case
immediately prior to the Closing Date. All other terms and conditions of such
Options shall remain unchanged, and such conversion shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code and the
regulations promulgated thereunder.
Section 4.9. RATING AGENCY AND REGULATORY PRESENTATIONS. The Sellers shall
give Parent prior reasonable notice of any meetings prior to the Closing Date
with A.M. Best or any insurance regulatory authority, and shall use its
reasonable best efforts to permit Parent to have a representative at such
meetings.
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Section 4.10. CERTAIN TAX MATTERS
(i) Tax Sharing Agreements. The Sellers will cause any tax sharing
agreement between either or both of Sellers and any of the Companies to be
terminated as of the Closing Date and to have no further effect for any
taxable year (whether the current year, a future year, or a prior year). Any
amounts due under any such agreement as of the Closing Date will be
appropriately accounted for in the individual balance sheets.
(ii) SECTION 338(H)(10) ELECTION. At the Purchaser's option, Holdings
will join with the Purchaser in making an election under Section 338(h)(10)
of the Code (and any corresponding elections under state, local, or foreign
tax law) (collectively, a "Section 338(h)(10) Election") with respect to the
purchase and sale of the stock of the any or all of the Companies hereunder.
Sellers will pay any Tax attributable to the making of the Section
338(h)(10) Election. If the Purchaser chooses to make a Section 338(h)(10)
Election, the Purchaser shall prepare an allocation of the Purchase Price,
as adjusted for indebtedness and any other relevant items, among the various
assets of the Companies. Such allocation will be binding on each Seller,
except to the extent it is manifestly unreasonable. Each of Parent, the
Purchaser, Limited and Holdings agrees to file all federal, state and other
Tax Returns consistent with such allocation.
(iii) GAIN FROM SALE. Any Tax attributable to the sale of the Companies
will be paid in full by the Sellers, who will be responsible for the
preparation and filing of the Tax Returns on which the gain, if any, from
the sale of the Companies is included. Seller shall furnish to Purchaser for
its review and comment a draft of such Tax Returns at as soon as practicable
after such draft first becomes available, but in any event at least 10
Business Days prior to the filing of such Tax Return.
Section 4.11. INTERCOMPANY ACCOUNTS.
(i) All intercompany accounts (other than the NSC Receivable) between
the Companies and the Sellers as of the Closing shall be settled at fair
value as of the last month-end prior to the Closing Date (irrespective of
the terms of payment of such intercompany accounts) in the manner provided
in this Section. Subject to the procedure described in subsection (ii) below
for resolving disagreements, the net amount of such intercompany balance
shall be paid in cash at Closing (x) by the Companies, if such net amount is
owed to Holdings or Limited or (y) by Holdings or Limited, respectively, if
such net amount is owed by Holdings or Limited to one or more of the
Companies. As promptly as practicable after the date hereof, Sellers shall
prepare and deliver to Parent a statement setting out in reasonable detail
the calculation of the intercompany account balances set forth on Schedule
2.1(aa) of the Sellers Disclosure Schedule based upon the latest available
financial information as of such date and, to the extent reasonably
requested by Parent, provide Parent with supporting documentation to verify
the underlying intercompany charges and transactions.
(ii) At least 15 Business Days prior to the Closing Date, the Sellers
shall deliver to Parent a statement setting out in reasonable detail the
calculation of such intercompany account to be settled pursuant to
subsection (i) above. Parent and the Seller shall cooperate in the
preparation of any such calculation including the provision of supporting
documentation to verify the underlying intercompany charges, transactions
and payments. If Parent disagrees with calculation of such intercompany
balances Parent may, within 15 days after the Closing Date, deliver a notice
to the Seller disagreeing with such calculation and setting forth Parent's
calculation of such amount. If Parent and Sellers are unable to resolve such
disagreement within 15 days thereafter, such disagreement shall be resolved
by independent accountants of nationally recognized standing reasonably
satisfactory to Parent and Sellers. The net amount of any such intercompany
balance shall be paid in cash promptly thereafter.
(iii) Within 10 Business Days of the Closing Date, Parent shall cause NSC
to settle in full the NSC Receivable; PROVIDED, HOWEVER, that in no event
shall the amount owed in respect of the NSC Receivable exceed $5.1 million.
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Section 4.12. COVENANT NOT TO COMPETE.
(a) Each of the Sellers agrees that, for a period of six years after the
Closing Date, it shall not compete with the Companies in the Restricted Area (as
hereinafter defined) and shall not engage or participate, directly or
indirectly, in the Restricted Area in the business or businesses which are
engaged in by the Companies as of the Closing Date. For purposes of this
Agreement, the term "Restricted Area" shall mean any state of the United States
in which the Companies have had annual sales during the 12-month period ending
December 31, 1997 in excess of $500,000;
(b) The Sellers agree that a monetary remedy for a breach of the agreement
set forth in Section 4.13(a) hereof will be inadequate and impracticable and
further agree that such a breach would cause Parent and the Purchaser
irreparable harm, and that Parent and the Purchaser shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damages. In the event of such a breach, the Sellers agree that Parent and
the Purchaser shall be entitled to such injunctive relief, including temporary
restraining orders, preliminary injunctions and permanent injunctions as a court
of competent jurisdiction shall determine; and
(c) If any provision of this Section 4.13 is held invalid in part, it shall
be curtailed, both as to time and location, to the minimum extent required for
its validity and shall be binding and enforceable with respect to the Sellers as
so curtailed.
Section 4.13. EXCHANGE ACT FILINGS. The Sellers shall, as may be
reasonably requested, assist Parent in making all necessary filings under the
Exchange Act and the rules and regulations thereunder or required by the New
York Stock Exchange, Inc., including the provision of such financial information
concerning the Companies as may be required in any such filings.
Section 4.14. INA COMMUTATION. The Sellers shall use their reasonable best
efforts, in consultation with Parent, fully and completely to commute and novate
all of the obligations of the Sellers or any of the Companies to Insurance
Company of North America, a subsidiary of CIGNA, on terms reasonably acceptable
to each of Parent and Limited.
Section 4.15. IRREVOCABLE PROXIES. Contemporaneously with the execution of
this Agreement, the Sellers have delivered Irrevocable Proxies in favor of
Parent in respect of all the Limited Shares owned by each of Messrs. Jeffry K.
Amsbaugh, Robert C. Duvall, Bryan L. Martin and Douglas W. Caudill. Within five
Business Days of the date hereof, the Sellers shall deliver Irrevocable Proxies
in favor of Parent substantially in the form of Exhibit D hereto in respect of
all of the Limited Shares owned by each of Messrs. Thomas J. O'Shane and Robert
B. Sanborn and shall use their reasonable best efforts to cause Wampum Hardware
Company to execute and deliver an Irrevocable Proxy in favor of Parent in
respect of all of the Limited Shares owned by it prior to the Shareholders
Meeting.
Section 4.16. CERTAIN MATTERS.
(i) Parent and Purchaser acknowledge that certain of the officers and
directors of Limited and Holdings (who shall be identified within 10
Business Days of the Closing and who shall be reasonably acceptable to each
of Parent and Limited) who shall be employees of Parent or a Subsidiary
thereof following the Closing shall be permitted to continue functioning in
their respective capacities as officers and/or directors of Limited and
Holdings solely for the purpose of facilitating the Liquidation of Limited
and Holdings and the event or events, if any, following the Closing and
prior to the commencement of such Liquidation. Parent and Purchaser further
acknowledge and recognize that the exercise of such officers' and directors'
duties in such capacities will not be deemed to be a conflict of interest
with their respective duties and responsibilities as employees of Parent or
a Subsidiary thereof.
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(ii) From and after the Closing, Parent agrees to assume and perform
each of the Severance Agreements dated as of May 9, 1997, and more
particularly described on Schedule 2.1(n) to the Sellers Disclosure
Schedule, in the same manner as Limited was obligated to perform thereunder.
(iii) From and after the Closing, Parent shall perform any
indemnification obligations of Limited and shall cause the Companies to
perform any indemnification obligations of the Companies under the
agreements listed in Schedule 4.6 of the Sellers Disclosure Schedule, but
only to the extent such obligations exist as of the date hereof.
ARTICLE V.
CONDITIONS
Section 5.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligation of each Party hereunder to consummate the Transactions contemplated
by this Agreement shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions, any one or more of which may
be waived by the mutual consent of the parties:
(a) SHAREHOLDER APPROVAL. This Agreement and the Transactions shall have
been approved and adopted by the requisite vote of the shareholders of Limited
required by applicable law and the Organizational Documents of Limited.
(b) STATUTES. No statute, rule, order, decree or regulation shall have
been enacted or promulgated by any Government Entity of competent jurisdiction
which prohibits the consummation of the Transactions;
(c) INJUNCTIONS. There shall be no order or injunction of a Governmental
Entity of competent jurisdiction in effect precluding, restraining, enjoining or
prohibiting consummation of this Agreement and the Transactions; and
(d) REQUIRED FILINGS AND APPROVALS. All Required Filings and Approvals
shall have been made and obtained.
Section 5.2. CONDITIONS TO THE OBLIGATION OF THE SELLERS. The obligation
of the Sellers to consummate the Transactions shall also be subject to the
satisfaction, or waiver by the Sellers, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES.
(i) All representations and warranties of the Purchaser and Parent
contained in this Agreement (considered collectively) and each of the
representations and warranties of the Purchaser and Parent contained in this
Agreement (considered individually) which is not qualified by its terms as
to materiality shall have been true and correct in all material respects at
the time of this Agreement, and shall be true and correct in all material
respects at the Closing Date as though made on and as of such time.
(ii) Each representation and warranty of the Purchaser and the Parent
contained in this Agreement which is by its terms qualified as to
materiality shall have been true and correct in all respects as of the date
of this Agreement, and shall be true and correct in all respects as of the
Closing Date as if made on and as of such time.
(b) PRIOR PERFORMANCE. The Purchaser and Parent shall have performed in
all material respects their respective obligations under this Agreement required
to be performed by it prior to the Closing Date.
Parent and the Purchaser will furnish the Sellers with such certificates
and other documents to evidence the fulfillment of the conditions set forth
in this Section 5.2 as the Sellers may reasonably request.
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Section 5.3. CONDITIONS TO THE OBLIGATIONS OF PARENT AND THE
PURCHASER. The obligation of the Parent and the Purchaser to consummate the
transactions contemplated by this Agreement shall also be subject to the
satisfaction, or waiver by the Parent, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES.
(i) All representations and warranties of the Sellers (considered
collectively) and each of the representations and warranties of the Sellers
contained in this Agreement (considered individually) which is not qualified
by its terms as to materiality contained in this Agreement shall have been
true and correct in all material respects at the time of this Agreement, and
shall be true and correct in all material respects on the Closing Date as
though made on and as of such time; and
(ii) Each representation and warranty of the Sellers contained in this
agreement which is qualified by its terms as to materiality shall have been
true and correct in all respects as of the date of this Agreement, and shall
be true and correct in all respects as of the Closing Date as if made on and
as of such time.
(b) PRIOR PERFORMANCE. Each of the Sellers and the Companies shall have
performed in all material respects its respective obligations under this
Agreement required to be performed by such Person prior to the Closing Date.
(c) NO MATERIAL ADVERSE CHANGE. Other than as expressly disclosed in
Schedule 2.1(l) of the Sellers Disclosure Schedule, since September 30, 1997
there shall not have occurred any event, change, or development (including,
without limitation, the suspension, revocation or other termination of any
Permit) which individually or in the aggregate has had or is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect; PROVIDED,
HOWEVER, that for purposes of this Section 5.3(c) no event, change or
development shall be deemed a Material Adverse Effect to the extent that such
event, change or development arises solely from (A) any actions taken by the
Sellers or the Companies in compliance with the express provisions of this
Agreement or (B) general economic conditions generally affecting the industries
in which the Companies conduct their respective businesses.
(d) TRANSFER TAXES. The Sellers shall have caused all appropriate stock
transfer tax stamps to be affixed to the certificates representing the Shares.
(e) EMPLOYMENT ARRANGEMENTS. The President and Chief Executive Officer of
Nobel Insurance shall have entered into employment arrangements satisfactory to
Parent.
(f) CONSENTS AND APPROVALS. Parent shall have received evidence
satisfactory to it that all consents and approvals required for the consummation
of the Transactions contemplated hereby or the ownership and operation by Parent
of the Companies and its business have been obtained and all required filings
have been made.
(g) FINANCIAL STATEMENTS. The unaudited financial statements of the
Companies as of and for the latest three-month period for which unaudited
financial statements are available and the unaudited financial statements of the
Companies as of and for the latest monthly period ended prior to the Closing
Date for which unaudited financial statements of the Companies are available,
true, correct and complete copies of which shall have been delivered to Parent,
shall (except as expressly disclosed in Schedule 2.1(l) of the Sellers
Disclosure Schedule) each reflect no material change from the September 30, 1997
financial statements of the Companies previously delivered to Parent.
(h) ASSIGNMENT OF ALL INTERESTS IN NIA. Holdings shall have executed and
delivered a Bill of Sale, Assignment and Assumption Agreement satisfactory to
Parent and its counsel in their sole discretion, substantially in the form of
Exhibit A hereto, together with any other instruments reasonably requested by
Parent, assigning to the Purchaser all of the rights, title and interest of
Holdings in NIA.
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(i) Jeffry K. Amsbaugh shall have executed an Amended and Restated Trust
Agreement, substantially in the form attached hereto as Exhibit B and
satisfactory to Parent and its counsel, in respect of the shares of capital
stock of NIA held of record by Mr. Amsbaugh for the benefit of Holdings.
(j) All reinsurance arrangements of any kind whatsoever between Nobel
Insurance and Limited shall have been commuted at the face value of the related
reserves as of the Closing Date, on terms satisfactory to Parent.
(k) The Sellers will furnish Parent and the Purchaser with such certificates
and other documents to evidence the fulfillment of the conditions set forth in
this Section 5.3 as Parent may reasonably request.
ARTICLE VI.
TERMINATION
Section 6.1. TERMINATION. This Agreement may be terminated by written
notice and the Transactions contemplated herein may be abandoned at any time
prior to the Closing Date:
(a) By the mutual written consent of Parent and the Sellers.
(b) By either of Parent or the Sellers: (i) if any Governmental Entity
having competent jurisdiction shall have enacted a law or regulation or issued
an order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Transactions contemplated by this
Agreement and such law, regulation, order, decree, ruling or other action shall
have become final and non-appealable; PROVIDED, HOWEVER, that the Party seeking
to terminate this Agreement under this paragraph (b) shall have used reasonable
best efforts to remove or lift any such law, regulation, order, decree or
ruling; or (ii) if the conditions to closing contained in Section 5.1 hereof are
not satisfied by June 30, 1998, unless such failure of satisfaction or failure
to close is due to the failure or refusal of the terminating party to perform or
observe the covenants and agreements contained herein to be performed or
observed by it on or before the Closing.
(c) By the Sellers:
(i) Subject to payment to Parent of the Termination Fee described in
Section 6.3 below, if the Sellers shall, in compliance with Section 4.4(b)
hereof, enter into a definitive agreement with respect to a Takeover
Proposal; or
(ii) if (a) there shall have been a breach of any representation or
warranty (without giving effect to any materiality or similar qualifications
contained therein) on the part of Parent or the Purchaser having a Material
Adverse Effect on Parent or the Purchaser or (b) there shall have been a
breach of any covenant or agreement on the part of Parent or the Purchaser
resulting in a Material Adverse Effect on Parent or the Purchaser, which
breach shall not have been cured within 10 days following written notice to
Parent and the Purchaser of such breach; PROVIDED that it has complied with
all provisions thereof, including the notice provision therein.
(d) By Parent:
(i) (a) if, the Board of Directors of Limited or of Holdings shall have
withdrawn, or modified or changed in a manner adverse to Parent or the
Purchaser such Board's approval or recommendation of this Agreement or the
Transactions or shall have entered into a definitive agreement for the
consummation of a Takeover Proposal in accordance with Section 4.4(b), (b)
the Board of Directors of Limited shall have recommended any proposal other
than by Parent or the Purchaser in respect of a Takeover Proposal, (c) the
Sellers shall have exercised a right with respect to a Takeover Proposal
referenced in Section 4.4(b) and shall, directly or through any of their
representatives, continue discussions with any third party concerning a
Takeover Proposal for more than twenty (20) days after the date of receipt
of such Takeover Proposal, (d) a Takeover Proposal that is publicly
disclosed shall
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have been commenced, publicly proposed or communicated to either Seller or
any of the Companies which contains a proposal as to price (without regard
to whether such proposal specifies a specific price or a range of potential
prices) and the Sellers shall not have rejected such proposal within twenty
(20) days of its receipt or, if sooner, the date its existence first becomes
publicly disclosed, or (e) any Person or group (as defined in Section
13(d)(3) of the Exchange Act) other than Parent or the Purchaser or any of
their respective Affiliates shall have become the beneficial owner of more
than 15% of the outstanding shares of either Seller;
(ii) if (a) there shall have been a breach of any representation or
warranty (without giving effect to any materiality or similar qualifications
contained therein) on the part of the Sellers having a Material Adverse
Effect, or (b) there shall have been a breach of any covenant or agreement
on the part of the Sellers resulting in a Material Adverse Effect, which
breach shall not have been cured within 10 days following written notice to
the Sellers of such breach, which breach shall not have been cured within 10
days following written notice to the Sellers of such breach; PROVIDED that
it has complied with all provisions thereof, including the notice provision
therein; provided, however, that for purposes of this clause (ii), no event,
change or development shall be deemed a Material Adverse Effect to the
extent that such event, change or development arises solely from (A) any
actions taken by the Sellers or the Companies in compliance with the express
provisions of this Agreement or (B) general economic conditions or matters
generally affecting the industries in which the Companies conduct their
respective businesses.
Section 6.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either of the Sellers or Parent as provided in Section 6.1 hereof,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, the Purchaser or the Sellers,
other than the last sentence of Section 4.2 hereof, this Section 6.2 and
Sections 7.1, 7.4, 7.5, 7.7, 7.8, 7.9, 7.11, 7.12 and 7.15 hereof. Nothing
contained in this Section 6.2 shall relieve a Party of its breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
Section 6.3. TERMINATION FEE.
If: (I) Parent shall have terminated this Agreement pursuant to Section
6.1(d)(i)(a) or (b); or (II) (A) Parent shall have terminated this Agreement
pursuant to Section 6.1(d)(i)(c), (d) or (e) or the Sellers shall have
terminated this Agreement pursuant to Section 6.1(c)(ii) and (B) within twelve
(12) months of any such termination either Seller or any of the Companies shall
have entered into a definitive agreement with respect to a Takeover Proposal or
a Takeover Proposal with respect to either Seller or any of the Companies shall
have been consummated; or (III) the Sellers shall have terminated this Agreement
pursuant to Section 6.1(c)(i); then, in any such case, the Sellers shall pay to
Parent a termination fee of $3,000,000 PLUS an amount equal to the reasonably
documented out-of-pocket expenses incurred by Parent and the Purchaser in
connection with this Agreement and the Transactions contemplated hereby
(including attorneys' fees and expenses) (but not to exceed $400,000)
(collectively, the "TERMINATION FEE"), which amount shall be payable by wire
transfer of immediately available funds to such account as Parent may designate
in writing to the Sellers. The Sellers shall pay the Termination Fee
simultaneously with any termination pursuant to Section 6.1(c)(i) and promptly,
but in no event later than two Business Days, after the date of any other such
termination or event.
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ARTICLE VII.
MISCELLANEOUS
Section 7.1. FEES AND EXPENSES.
Except as provided elsewhere in this Agreement, all fees and expenses
incurred in connection with this Agreement and the Transactions contemplated
hereby shall be paid by the Party incurring such fees or expenses, whether or
not the Transactions are consummated.
Section 7.2. AMENDMENT AND MODIFICATION. Subject to applicable Law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the shareholders of Limited contemplated
hereby, by written agreement of the Parties hereto, at any time prior to the
Closing Date with respect to any of the terms contained herein.
Section 7.3. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the Closing
Date. This Section 7.3 shall not limit any covenant or agreement of the Parties
which by its terms contemplates performance after the Closing Date of the
Transactions.
Section 7.4. Notices. All notices and other communications hereunder shall
be in writing and shall be delivered personally, by express courier or mailed by
registered or certified mail (return receipt requested), first class postage
prepaid, or telecopied with confirmation of receipt to the Parties at the
addresses specified below (or at such other address for a Party as shall be
specified by like notice). Any such notice shall be effective upon receipt, if
personally delivered or telecopied, one day after delivery to a courier for
next-day delivery, or three days after mailing, if deposited in the mail, first
class postage prepaid.
(a) if to Parent or the Purchaser, to:
RenaissanceRe Holdings Ltd.
Renaissance House
8-12 East Broadway
Pembroke HM 19 Bermuda
Attn: Keith S. Hynes, Senior Vice President
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Attn: John S. D'Alimonte, Esq.
(b) if to the Sellers, to:
Nobel Insurance Limited
108 Pitts Bay Road
Hamilton, Bermuda HMAX
Attention: President
with a copy to:
Nobel Insurance Group
8001 LBJ Freeway, Suite 300
Dallas, Texas 75251-1301
Attention: Jeffry K. Amsbaugh
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with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
Attn: John K. Sterling, Esq.
Section 7.5. INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation".
Section 7.6. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the Parties and delivered to the other Parties.
Section 7.7. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, among the Parties with respect to the subject matter hereof
and thereof, and (b) except as provided in Section 4.6 hereof is not intended to
confer upon any Person other than the Parties hereto any rights or remedies
hereunder.
Section 7.8. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 7.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 7.10. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the Parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other Parties, except that the Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the Parties and their respective successors and
assigns.
Section 7.11. ENFORCEMENT. The Parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the Parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the Transactions contemplated hereby, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the Transactions contemplated by this
Agreement in any court other than a Federal or state court sitting in the State
of Delaware.
Section 7.12. EXTENSION; WAIVER. At any time prior to the Closing Date,
the Parties may (a) extend the time for the performance of any of the
obligations or other acts of the other Parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document
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delivered pursuant to this Agreement or (c) waive compliance with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a Party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such Party. The failure of any
Party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
Section 7.13. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 6.1 hereof, an amendment of
this Agreement pursuant to Section 7.2 hereof or an extension or waiver pursuant
to Section 7.12 hereof shall, in order to be effective, require in the case of
Parent, the Purchaser or the Sellers, action by its Board of Directors or the
duly authorized designee of its Board of Directors.
Section 7.14. FIDUCIARY DUTY. Notwithstanding anything to the contrary in
this Agreement, no provision of this Agreement shall be construed to prevent the
exercise by any director of Limited (or Limited's actions thereon) of his or her
fiduciary duties as contemplated to be exercised by Section 4.4 hereof.
Section 7.15. DEFINITIONS. For purposes of this Agreement:
"Actuarial Analyses" has the meaning assigned thereto in Section 2.1(q).
"Affiliate" of any Person means any other Person that controls (as such term
is defined in the Exchange Act), is controlled by or is under common control
with such Person.
"Agents" has the meaning assigned thereto in Section 2.1(p).
"Annual Statements" shall mean the annual statements filed pursuant to state
insurance laws, in conformity with SAP, in an insurer's domiciliary state.
"Bermuda Filings and Consents" has the meaning assigned thereto in Section
2.1(e).
"Business Day" means any day other than a Saturday, Sunday, United States
federal holiday or a holiday in Bermuda.
"Closing" has the meaning assigned thereto in Section 1.2.
"Closing Date" has the meaning assigned thereto in Section 1.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies" has the meaning assigned to it in the recitals hereto.
"Companies Act" shall mean the Bermuda Companies Act 1981, as amended.
"Companies' GAAP Financial Statements" shall mean the audited Consolidated
Balance Sheet of each of the Companies and the Consolidated Statement of
Operations, Consolidated Statements of Shareholder's Equity and Consolidated
Statements of Cash Flows of each such Subsidiary as of and for the periods
indicated therein as may be included in the Proxy Statement, if any, prepared in
accordance with GAAP together with the notes thereon and the related reports of
KPMG Peat Marwick LLP.
"Confidentiality Agreement" means the confidentiality agreement, dated June
3, 1997, between Limited and Parent.
"Contracts" means all agreements, contracts, commitments and undertakings
(other than contracts of insurance or reinsurance or retrocession agreements) to
which either Seller or any of the Companies is a party, an obligor or a
beneficiary and (i) the performance or non-performance of which is individually
or, with respect to any related series of agreements, in the aggregate, material
to the Companies, taken as a whole, or (ii) which provide for an aggregate
purchase price or payments of more than $100,000 under any
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agreement during any two-year period (or $100,100 in the aggregate, during any
two-year period, in the case of any related series of agreements.
"Conversion Ratio" has the meaning assigned thereto in Section 4.8.
"Current Benefit Plans" has the meaning assigned in Section 4.7.
"Employee Benefit Plan" shall mean each benefit plan maintained or
contributed to by either Seller or any of the Companies or with respect to which
either Seller or any of the Companies may have any liability which provides (or
is intended to provide) benefits to the employees of either Seller or any of the
Companies (or other service providers to either Seller or any of the Companies),
including each pension, retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance, medical or
hospitalization program, sickness, accident, disability or death benefit program
or any other fringe benefit.
"Encumbrance" means any claim, Lien (statutory or other), pledge, option,
charge, easement, security interest, right-of-way, encroachment, encumbrance,
mortgage, or other rights of third parties.
"Environmental Law" means any and all applicable Federal, state or local
laws or regulations relating to the protection of the environment or of human
health as it may be affected by the environment.
"Environmental Permits" means any license, permit, order, consent, approval,
registration, authorization, qualification or filing required under any
Environmental Law.
"ERISA Affiliate" shall mean any person (as defined in Section 3(9) of
ERISA) that is or has been a member of any group of persons described in Section
414(b), (c), (m) or (o) of the Code, including either Seller or any of the
Companies, as applicable.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Act" has the meaning assigned thereto in Section 1.6.
"Executives" has the meaning assigned thereto in Section 2.1(n).
"GAAP" means United States generally accepted accounting principles applied
on a consistent basis.
"Governmental Entity" has the meaning assigned thereto in Section 2.1(e).
"Holdings" means Nobel Holdings, Inc., a Delaware corporation, wholly owned
by Limited.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"Indemnified Parties" has the meaning assigned thereto in Section 4.6.
"Insurance Laws" has the meaning assigned thereto in Section 2.1(q).
"Intercompany Arrangements" has the meaning assigned thereto in Section
2.1(aa).
"Laws" has the meaning assigned thereto in Section 2.1(p).
"Leased Real Properties" has the meaning assigned thereto in Section 2.1(r).
"Lien" means any conditional sale agreement, easement, encroachment,
encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or other security arrangement,
or any adverse right or interest, charge or claim of any nature whatsoever of,
on, or with respect to any asset, property or property interest; PROVIDED,
HOWEVER, that the term "Lien" shall not include:
(i) liens for Taxes, assessments and governmental charges not yet due
and payable or being contested in good faith;
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(ii) mechanics', carriers', workers', repairers', materialmens',
warehousemens', and other similar liens arising or incurred in the ordinary
course of business;
(iii) any interest or title of a lessor (or its creditors) or lessee
under any lease (including any lien granted by such lessor or lessee and any
lien arising under Article 2 of the Uniform Commercial Code or the filing of
any Uniform Commercial Code financing statement with respect to any such
lease); or
(iv) liens shown on the financial statements included in the SEC
Documents; and
(v) to the extent the following do not, individually or in the
aggregate, materially detract from the value or use of real property for its
current purposes, (x) survey exceptions or encroachments, (y) reciprocal
easements and (z) other non-monetary encumbrances or defects in title.
"Limited" means Nobel Insurance Limited, an Islands of Bermuda corporation.
"Limited Shares" shall mean the common shares, par value $1.00 per share, of
Limited.
"Liquidation" shall mean any liquidation, winding-up, dissolution,
self-tender, redemption or other similar transaction of Limited, to be
consummated in accordance with applicable law after the Closing Date.
"Liquidating Dividend" has the meaning assigned thereto in Section 1.7.
"Loss Reserves" means all reserves customarily established by property and
casualty insurance companies under SAP for incurred losses including, without
limitation, case reserves, reserves for incurred but not reported losses and
reserves for loss adjustment expenses, both allocated and unallocated.
"Material Adverse Change" or "Material Adverse Effect" means, when used in
connection with (i) the Companies, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that has a material adverse effect on the business, properties,
assets, financial condition or results of operations of the Companies taken as a
whole and (ii) with respect to the Sellers, the Parent or the Purchaser, the
ability of any of them to perform its obligations hereunder.
"NIA" has the meaning assigned to it in the recitals hereto.
"NIA Assets" shall have the meaning ascribed thereto in Section 1.2.
"Nobel Insurance" means Nobel Insurance Company, a Texas insurance company.
"Note" has the meaning assigned thereto in Section 1.7.
"Notice of Takeover Proposal" has the meaning assigned thereto in Section
4.4(b).
"NSC" means Nobel Service Corporation.
"NSC Receivable" means the receivable of not more than $5.1 million due from
NSC to Limited, as fully described and set forth in Schedule 2.1(aa) of the
Sellers Disclosure Schedule.
"Options" has the meaning assigned thereto in Section 2.1(n).
"Organizational Documents" means, with respect to any Person, the articles
of association, memorandum of association, certificate of incorporation, by-laws
and similar documents (including any shareholders and similar agreement) of such
Person.
"Other Assets" has the meaning assigned thereto in Section 2.1(t).
"Owned Real Property" has the meaning assigned thereto in Section 2.1(r).
"Parent" means RenaissanceRe Holdings Ltd., a Bermuda company.
"Parent Options" has the meaning assigned thereto in Section 4.8.
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"Participating Payment" has the meaning assigned thereto in Section 1.7.
"Permits" shall mean all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings with and under all
Federal, state, local or foreign laws and governmental or regulatory bodies and
all industry or other nongovernmental self-regulatory organizations (including,
without limitation, Environmental Permits).
"Person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"Proxy Statement" has the meaning assigned thereto in Section 1.6(a).
"Purchaser" means Renaissance U.S. Holdings, Inc., a Delaware corporation.
"Quarterly Statements" shall mean the quarterly statements filed pursuant to
state insurance laws, in conformity with SAP, in an insurer's domiciliary state.
"Registrar" has the meaning assigned thereto in Section 2.5.
"Remaining Amount" has the meaning assigned thereto in Section 1.7.
"Required Filings and Approvals" has the meaning assigned thereto in Section
2.1(e).
"Responsive Offer" has the meaning assigned thereto in Section 5.4(d).
"Restricted Area" has the meaning assigned thereto in Section 4.13(a).
"SAP" shall mean statutory accounting principles and practices required or
permitted by applicable insurance Governmental Entities in an insurer's
domiciliary state applied on a consistent basis through the periods involved.
"SEC Documents" has the meaning assigned thereto in Section 2.1(h).
"SEC" has the meaning assigned thereto in Section 1.6(a).
"Securities Act" has the meaning assigned thereto in Section 1.7(a).
"Shares" has the meaning assigned thereto in the recitals.
"Special Meeting" has the meaning assigned thereto in Section 1.6(a)(i).
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture or other entity in which such Person (i) owns,
directly or indirectly, 50% or more of the outstanding voting securities or
equity interests, (ii) is entitled to elect at least a majority of the Board of
Directors or similar governing body, or (iii) is a general partner.
"Successor Benefit Plans" has the meaning assigned thereto in Section 4.7.
"Takeover Proposal" has the meaning assigned thereto in Section 4.4(a).
"Tax Returns" means all returns, reports, or similar statements required to
be filed with respect to any tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated tax.
"Taxes" means all Federal, state, local and foreign income, payroll,
franchise, property, sales, excise and any and all other Taxes, tariffs, duties,
fees, assessments or governmental charges of any nature whatsoever, including
interest, additions and penalties.
"Termination Fee" has the meaning assigned thereto in Section 6.3.
"Total Distribution" has the meaning assigned thereto in Section 1.7.
"Transactions" has the meaning assigned thereto in Section 1.2(a).
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IN WITNESS WHEREOF, Parent and the Purchaser and Limited and Holdings have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
<TABLE>
<S> <C> <C>
RENAISSANCECERE HOLDINGS LTD.
By: /s/ KEITH S. HYNES
-----------------------------------------
Name: Keith S. Hynes
Title: Executive Vice President
RENAISSANCE U.S. HOLDINGS, INC.
By: /s/ KEITH S. HYNES
-----------------------------------------
Name: Keith S. Hynes
Title: President and Chief Executive
Officer
NOBEL INSURANCE LIMITED
By: /s/ JEFFRY K. AMSBAUGH
-----------------------------------------
Name: Jeffry K. Amsbaugh
Title: President
NOBEL HOLDINGS, INC.
By: /s/ JEFFRY K. AMSBAUGH
-----------------------------------------
Name: Jeffry K. Amsbaugh
Title: President
</TABLE>
A-36
<PAGE>
APPENDIX B
PLAN OF LIQUIDATION
OF
NOBEL INSURANCE LIMITED
This Plan of Liquidation is adopted as of , 1998, by Nobel
Insurance Limited, a Bermuda exempted company (the "Company").
WHEREAS, Nobel has entered into that certain Stock Purchase Agreement dated
December 19, 1997 (the "Sale Agreement"), by and among RenaissanceRe Holdings
Ltd. ("RenaissanceRe"), Renaissance U.S. Holdings, Inc., ("Renaissance
Holdings"), the Company and Nobel Holdings, Inc. ("Nobel Holdings"), which
provides for the sale of the Company's United States operating subsidiaries (the
"Sale") to Renaissance Holdings; and
WHEREAS, subject to approval and adoption of the Sale Agreement by the
shareholders of the Company, the Company has determined that it is in the best
interests of the Company and its shareholders to voluntarily wind up the
Company; and
WHEREAS, the Company has determined that it is in the best interests of the
Company and its shareholders to adopt a plan of liquidation with respect to the
voluntary winding up of the Company upon the terms and conditions set forth
herein;
NOW, THEREFORE, the Company hereby sets forth the following Plan of
Liquidation:
1. Subject to compliance by the Company with the applicable provisions of
The Companies Act 1981 (the "Companies Act") and the Insurance Act 1978 (the
"Insurance Act"), effective immediately upon approval and adoption by the
shareholders of the Company, at a special general meeting of shareholders
("Special Meeting") duly called and held for such purpose, of this Plan of
Liquidation, (a) the Company's share capital account shall be reduced by
decreasing the par value of the capital shares of the Company ("Common Shares")
from $1.00 per share to $0.05 per share and (b) the amount of such reduction
(equal to the number of Common Shares outstanding on such effective date
multiplied by $0.95 per share) shall be transferred to the Company's contributed
surplus account. The Board of Directors of the Company hereby authorizes any two
directors to swear the affidavit required in accordance with the applicable
provisions of the Companies Act and authorizes the Secretary of the Company to
sign and file all appropriate documents and forms with respect to such reduction
of capital with the Registrar of Companies of Bermuda.
2. Subject to compliance by the Company with the applicable provisions of
the Companies Act and the Insurance Act, effective immediately upon approval and
adoption by the shareholders of the Company at the Special Meeting of this Plan
of Liquidation, (a) the Company's premium share account as of such effective
date shall be reduced to zero and (b) the amount of such reduction shall be
transferred to the Company's contributed surplus account. The Board of Directors
of the Company hereby authorizes any two directors to swear the affidavit
required in accordance with the applicable provisions of the Companies Act that
the Company is solvent or that all creditors of the Company on that date have
expressed in writing their concurrence in the reduction. In addition, the Board
of Directors of the Company authorizes the Secretary of the Company to sign and
file all appropriate documents and forms with respect to such reduction of
capital with the Registrar of Companies of Bermuda.
3. Upon approval and adoption by the shareholders of the Company at the
Special Meeting of this Plan of Liquidation, the Special Meeting shall be
temporarily adjourned for the purpose of implementing this Plan of Liquidation
until the later of , 1998, or that date which is five business days
following the last to occur of the consummation of the Sale, the dissolution and
liquidation of Nobel Holdings, the payment of an initial liquidating
distribution to the shareholders of the Company (or the determination by the
Board of Directors of the Company that the Company cannot pay an initial
liquidating distribution), and the 60-day anniversary of the Special Meeting.
B-1
<PAGE>
4. During the period the Special Meeting is temporarily adjourned, the
Company shall consummate the Sale pursuant to the Sale Agreement.
5. As promptly as practicable following the consummation of the Sale, the
Company, as the sole stockholder of Nobel Holdings, shall cause Nobel Holdings
to file a Certificate of Dissolution with the Secretary of State of the State of
Delaware in accordance with the provisions of the Delaware General Corporation
Law ("DGCL").
6. Pursuant to the provisions of the DGCL, the Company shall cause Nobel
Holdings to, and the Company as the sole stockholder of Nobel Holdings shall,
adopt, or shall have adopted subject to adoption by the shareholders of the
Company of this Plan of Liquidation and the filing of a Certificate of
Dissolution, a plan of distribution, pursuant to which (a) Nobel Holdings shall
pay all of its known claims and obligations, matured or unmatured, (b) the
Company shall assume the obligation of, or make, or cause Nobel Holdings to
make, other reasonable provision for, full payment of (i) any known claim or
obligation of Nobel Holdings that cannot be paid promptly, (ii) any contingent
or conditional claim or obligation known to Nobel Holdings, (iii) any claim or
obligation that is the subject of a pending action against Nobel Holdings, and
(iv) any claim or obligation that has not been made known to Nobel Holdings or
that has not arisen, but, based upon facts known to Nobel Holdings, is likely to
arise within ten years after the date of Nobel Holdings' dissolution, and (c)
Nobel Holdings shall distribute all the remaining property of Nobel Holdings to
the Company. Such plan of distribution shall be implemented and the distribution
of remaining property to the Company shall be completed as promptly as
practicable following the filing of the Certificate of Dissolution.
7. As promptly as practicable following the distribution to the Company of
all the remaining property of Nobel Holdings, the Company shall make an initial
liquidating distribution to the shareholders of the Company in an amount up to
$13.00 in cash per Common Share, subject to compliance with applicable
restrictions and consent requirements under Bermuda law, including, without
limitation, the provisions of the Companies Act and the Insurance Act. The
determination of the amount of an initial liquidating distribution, if any,
shall be made by the Board of Directors of the Company as promptly as
practicable following the temporary adjournment of the Special Meeting.
8. As promptly as practicable following the payment of the initial
liquidating distribution to shareholders of the Company (or the determination by
the Board of Directors of the Company that the Company cannot pay an initial
liquidating distribution), and subject to the time periods set forth in Section
3 hereof, the Company shall reconvene the Special Meeting, at which reconvened
Special Meeting the Company shall present to the shareholders of the Company a
proposal to (a) voluntarily wind up the Company (the "Liquidation") in
accordance with the laws of Bermuda, including the Companies Act and The
Companies (Winding-Up) Rules 1982 (the "Winding-Up Rules"), (b) appoint a
liquidator of the Company with full power and authority to conduct the
Liquidation of the Company under the Companies Act and the Winding-Up Rules, (c)
set the compensation of such liquidator, and (d) authorize the directors and
officers of the Company to continue their respective authority subject to such
limitations as may be determined by the Board of Directors of the Company and
set forth in such proposal.
9. This Plan of Liquidation is intended to comply with the requirements of
Section 331(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and shall be interpreted and applied in a manner consistent with such
provisions. Accordingly, the distributions made by the Company to its
shareholders as contemplated by this Plan of Liquidation, specifically including
the distribution to shareholders set forth in Section 7 above, are intended to
be distributions in complete liquidation of the Company pursuant to Section
331(a) of the Code.
10. This Plan of Liquidation is subject to approval and adoption by the
shareholders of the Company and shall have no force and effect until such
approval and adoption shall have been obtained.
[THE NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE.]
B-2
<PAGE>
IN WITNESS WHEREOF, the Company has hereby approved and adopted this Plan of
Liquidation as of the date first above written.
<TABLE>
<S> <C> <C>
NOBEL INSURANCE LIMITED
By:
-----------------------------------------
Jeffry K. Amsbaugh
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
CERTIFICATE OF APPROVAL AND ADOPTION
BY THE SHAREHOLDERS OF
NOBEL INSURANCE LIMITED
The undersigned, being the duly elected, qualified, and acting Secretary of
Nobel Insurance Limited, does hereby certify that the foregoing Plan of
Liquidation of Nobel Insurance Limited was duly adopted by the requisite
affirmative vote of the shareholders of the Company at a special general meeting
of the shareholders of the Company duly called and held for such purpose on
, 1998.
--------------------------------------
Douglas W. Caudill
SECRETARY
B-3
<PAGE>
APPENDIX C
December 18, 1997
Board of Directors
Nobel Insurance Limited
108 Pitts Bay Road
Hamilton HM08, Bermuda
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the holders of common shares, par value $1.00 per share ("Company Common
Shares") of Nobel Insurance Limited (the "Company") of the proceeds to be
received by such holders from the distribution of $14.00 per share (the
"Distribution") pursuant to the liquidation of the Company (the "Liquidation").
In connection with the Liquidation, the Company has entered into the Stock
Purchase Agreement, dated as of December 18, 1997 (the "Agreement"), by and
among RenaissanceRe Holdings Ltd. ("RenaissanceRe"), Renaissance U.S. Holdings,
Inc., a wholly owned subsidiary of RenaissanceRe ("Renaissance Holdings"), the
Company and Nobel Holdings, Inc., a wholly owned subsidiary of the Company
("Holdings"), pursuant to which the Company and Holdings will sell (the "Sale")
all of the outstanding capital stock of Nobel Insurance Company, Nobel Insurance
Agency, Inc., Nobel Service Corporation and IAS Claim Services, Inc.
(collectively, the "Subsidiaries"). The Agreement contemplates that promptly
following approval by the holders of Company Common Shares of the transactions
contemplated in the Agreement (the "Transactions"), the Company and Holdings
shall commence liquidation proceedings and use their reasonable best efforts to
consummate the Liquidation as promptly as possible and to effectuate a
distribution to holders of Company Common Shares of not more than $14.00 per
share.
We understand that promptly following consummation of the Sale, Holdings
shall liquidate, distributing all of its proceeds from such liquidation,
including the proceeds from such sale (net of appropriate satisfaction of its
remaining liabilities) to the Company, which, in turn, will liquidate and
distribute to holders of Company Common Shares the net proceeds of such
liquidation after appropriate satisfaction of its remaining liabilities. For
purposes of our opinion, we have assumed that the amount of such distribution
will be $14.00 per share, or approximately $63 million in the aggregate.
In arriving at our opinion, we have reviewed the drafts dated December 16,
1997 of the Agreement, including exhibits thereto, and the Form of Irrevocable
Proxy of certain holders of Company Common Shares relating to approval of the
Transactions. We understand that no draft resolutions or other documentation
with respect to the liquidation are available and as a result we have not
reviewed any such resolutions or documentation. We also have reviewed financial
and other information that was publicly available or furnished to us by the
Company, including information provided during discussions with management.
Included in the information provided during discussions with management were
certain financial projections of the Company for the period beginning January 1,
1997 and ending December 31, 1998, prepared by the management of the Company. In
addition, we have compared certain financial and securities data of the Company
with various other companies whose securities are traded in public markets,
reviewed the historical stock prices and trading volumes of the Company Common
Shares, reviewed prices and premiums paid in certain business combinations and
conducted such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. We have not assumed any
responsibility
C-1
<PAGE>
Board of Directors
Nobel Insurance Limited
Page 2 December 18, 1997
for making an independent evaluation of any assets or liabilities or for making
any independent verification of any of the information reviewed by us. We have
relied as to certain legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Liquidation or related transactions or any other business
strategies being considered by the Company's Board of Directors, nor does it
address the Board's decision to proceed with the Liquidation or related
transactions. Our opinion also does not address the anticipated satisfaction of
those liabilities of the Company which will remain following the Sale. As
discussed above, we have assumed that the full distribution of $14.00 per share
will be made to holders of Company Common Shares in the Liquidation. Our opinion
does not constitute a recommendation to any such holder as to how such holder
should vote on the proposed Transactions.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the amount of the proceeds to be received by the holders of
Company Common Shares from the Distribution is fair to such holders from a
financial point of view.
<TABLE>
<S> <C> <C>
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ ROBERT S. FLEISCHER
-----------------------------------------
Robert S. Fleischer
MANAGING DIRECTOR
</TABLE>
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<PAGE>
APPENDIX D
FORM OF PROMISSORY NOTE
NOBEL INSURANCE LIMITED
6.0% SUBORDINATED PARTICIPATING NOTE DUE DECEMBER 31, 1999
$8,894,000 , 1998(1)
NOBEL INSURANCE LIMITED, a company duly organized and existing under the
laws of the Islands of Bermuda (hereinafter called the "Company"), for value
received, hereby promises to pay to RENAISSANCERE HOLDINGS LTD. or order, on the
Maturity Date (as defined herein), the principal sum of EIGHT MILLION EIGHT
HUNDRED AND NINETY-FOUR THOUSAND DOLLARS ($8,894,000) (or so much thereof as
shall not have been prepaid) in such coin or currency of the United States of
America as at the time of payment shall be legal tender for public and private
debts, at the principal office of the Company in Hamilton, Bermuda (or at such
other place as the Company and the holder of this Note may agree upon in
writing), and to pay interest (computed on the basis of a 360-day year of twelve
30-day months) at said office (or such other place as aforesaid), in like coin
or currency, on the unpaid portion of said principal sum from the date hereof,
at maturity, at the rate of six percent (6.0%) per annum until such unpaid
portion of such principal amount shall be paid, together with additional
interest, if any, as provided in Section 3 below.
1. Stock Purchase Agreement. This Note has been issued pursuant to the
provisions of the Stock Purchase Agreement, dated December 19, 1997, by and
among RenaissanceRe Holdings Ltd. and Renaissance U.S. Holdings, Inc. and Nobel
Insurance Limited and Nobel Holdings, Inc. ("Nobel Holdings") (the "Agreement").
Terms used in this Note which are defined in the Agreement are used herein as so
defined.
2. Subordination. The holder of this Note (by its acceptance of this Note)
acknowledges that it is intended that this Note shall be admitted for the
purpose of calculating the Company's solvency for the purposes of the Insurance
Act 1978 of Bermuda, and accordingly hereby agrees with and for the benefit of
each obligee and holder, respectively, of the obligations and indebtedness of
the Company, except as expressly limited by this Section 2, and notwithstanding
any contrary provision of any law, rule or regulation, or instrument, contract
or agreement to which the Company is party or by which its property is bound,
that the obligations and indebtedness evidenced by this Note are junior and
subordinate in all respects first, to the policy claims of insurance or
reinsurance policyholders of the Company, second, to all other obligations and
indebtedness of the Company, except for obligations and indebtedness of the
Company in respect of any U.S. Federal Taxes, the obligee or holder of which
shall not benefit from this Section 2, and third, to the payment of the
Liquidating Dividend. Prior to maturity hereof, this Note shall not restrict,
and payment on this Note shall be subordinate to distributions by Limited for,
repurchases by Limited of Limited Shares at a price not in excess of $14.00 per
Limited Share (including all other funds or assets received by holders of
Limited Shares) through any dividends, distributions, repurchases, tenders or
otherwise, or any combination thereof.
3. Maturity; Additional Interest. This Note shall become due and payable
(without any requirement for any notice or demand from the holder hereof) on
(the "Maturity Date") the earlier of (i) the date of the payment of the
Liquidating Dividend as provided in the Agreement (the "Liquidation Date") and
(ii) December 31, 1999 (the "Outside Payment Date"), as follows:
i. In the event this Note becomes due and payable on the Liquidation
Date, the total amount due and payable under this Note shall be the Remaining
Amount, regardless of whether the Remaining
- - - ------------------------
(1)Closing.
D-1
<PAGE>
Amount is less than or greater than the sum of the principal amount hereof and
accrued interest hereon to the date of payment. The Company shall apply the
Remaining Amount (x) first, to the payment of the principal amount hereof, (y)
second, to accrued interest hereon through the date of payment, and (z) third,
as additional interest on this Note.
ii. Notwithstanding the foregoing, if the Liquidation Date is after
June 30, 1998 but prior to the Outside Payment Date, then the Company shall
apply the Remaining Amount (x) first, to the payment of the principal amount
hereof, (y) second, to the payment to the holder of this Note of the accrued
interest hereon through the date of payment and, as a distribution in addition
to the Total Distribution, to the payment to the holders of the then outstanding
Limited Shares of the Dividend Accrual (as defined herein), which payments shall
be made on a PARI PASSU basis and, if the balance of the Remaining Amount shall
be insufficient to satisfy the full amounts thereof, such remaining balance
shall be paid on a pro rata basis with respect to such interest amount and the
Dividend Accrual, and (z) third, to the holder hereof as additional interest on
this Note. "Dividend Accrual" shall mean an amount calculated as interest each
day during the applicable period at a rate equal to 6.0% per annum on the
difference between $14.00 and the portion of the Total Distribution theretofore
paid, multiplied by the number of the outstanding Limited Shares on the day as
to which such calculation is being made.
iii. In the event this Note becomes due and payable on the Outside
Payment Date, the total amount due and payable on this Note shall be an amount
equal to all of the assets of the Company in excess of (a) such reserves as the
liquidator of the Company appointed pursuant to the Bermuda Companies Act 1981
shall determine is necessary to be retained for the payment of all (1) remaining
liabilities of the Company other than this Note and any U.S. Federal Taxes and
(2) expenses of the Company to be incurred to complete the Liquidation plus (b)
the aggregate amount of the Total Distribution then remaining unpaid with
respect to all then outstanding Limited Shares. The Company shall apply such
payment (x) first, to the payment of the principal amount hereof, (y) second, to
accrued interest hereon through the date of payment, and (z) third, as
additional interest on this Note.
iv. Payment of the amounts to the holder herof pursuant to the
applicable provision of this Section 3 shall constitute full and complete
payment of this Note.
4. Liquidating Dividend. To the extent that the Liquidating Dividend is
made, the holder of this Note will make no claim to the assets comprising the
same.
5. Prepayment. This Note is not subject to prepayment at the option of the
Company.
6. Default. Subject to Section 2 above, if either the Company or Nobel
Holdings shall breach any covenant to be performed by them or shall default in
the performance of any of its obligations under the Agreement to be performed by
them after the date hereof, the holder of this Note may, at its sole option, by
written notice to the Company, declare this Note to be due and payable,
whereupon the same shall forthwith mature and become due and payable, together
with interest accrued thereon, without presentment, demand, protest or further
notice, all of which are hereby waived.
7. Enforcement. In case of the acceleration of the maturity hereof, the
holder of this Note may proceed to protect and enforce its rights by suit in
equity, action at law and/or by other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Note or in
aid of the exercise of any power granted in this Note, or may proceed to enforce
the payment of this Note or to enforce any other legal or equitable right of the
holder of this Note. The Company agrees to pay, and save the holder hereof
harmless against, any cost or liability for any expense (including without
limitation reasonable attorneys' fees) arising in connection with the
enforcement by the holder of its rights under this Note or the Agreement.
8. Governing Law. This Note shall be construed in accordance with the laws
of the Islands of Bermuda.
D-2
<PAGE>
9. Successors and Assigns. All the covenants, stipulations, promises and
agreements contained in this Note by or on behalf of the Company shall bind its
successors and assigns, whether so expressed or not.
10. Course of Dealings not a Waiver. No course of dealings between the
Company and the holder hereof shall operate as a waiver of any right of any
holder hereof and no delay on the part of the holder hereof in exercising any
right hereunder shall so operate.
IN WITNESS WHEREOF, NOBEL INSURANCE LIMITED has caused this Note to be
signed in its corporate name and its common seal to be hereunto affixed by one
of its officers thereunto duly authorized.
NOBEL INSURANCE LIMITED
By:
--------------------------------------
Name:
Title:
[Common Seal]
D-3
<PAGE>
PROXY
NOBEL INSURANCE LIMITED
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby (1) acknowledges receipt of the Notice dated
, 1998, of the special meeting of shareholders of Nobel Insurance
Limited (the "Company") to be held at the Marriott Castle Harbour Hotel in
Tuckers Town, Bermuda, on , 1998, at 10:00 a.m., local time, and the
Proxy Statement in connection therewith, and (2) appoints Robert C. Duvall and
Jeffry K. Amsbaugh, and each of them, as proxies with full power of substitution
and revocation, for and in the name, place, and stead of the undersigned, to
vote upon and act with respect to all of the Common Shares of the Company
standing in the name of the undersigned or with respect to which the undersigned
is entitled to vote and act at said meeting and at any postponements or
adjournments thereof, and the undersigned directs that this proxy be voted as
indicated on the reverse side hereof. If only one of the above proxies shall be
present in person or by substitute at such meeting or at any postponements or
adjournments thereof, that proxy so present and voting, either in person or by
substitute, shall exercise all of the powers hereby given.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all that
said proxies, their substitutes, or any of them may lawfully do by virtue
hereof. Capitalized terms used but not defined shall have the meanings
attributed to such terms in the Proxy Statement.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR THE MATTERS SPECIFICALLY REFERRED TO BELOW.
1. Approval and adoption of the Stock Purchase Agreement, dated December 19,
1997, by and among the Company, Nobel Holdings, Inc., RenaissanceRe
Holdings, Ltd., and Renaissance U.S. Holdings, Inc., and the transactions
(other than the winding up of Nobel Holdings and the Company) contemplated
thereby, as described and set forth in the Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
2. If Proposal 1 is approved, approval and adoption of the Plan of Liquidation
dated as of , 1998, as described and set forth in the Proxy
Statement.
/ / FOR / / AGAINST / / ABSTAIN
(Continued and to be signed on reverse side)
<PAGE>
3. Upon reconvening of the Special Meeting, approval of the following items:
(a) Voluntarily wind up the Company in accordance with the laws of Bermuda,
including The Companies Act 1981 and The Companies (Winding-Up) Rules
1982.
(b) Appoint Malcolm Butterfield of KPMG Bermuda as the Liquidator of the
Company (in such capacity, the "Liquidator") to act as liquidator to
carry out the Liquidation under The Companies Act 1981 and The Companies
(Winding-Up) Rules 1982.
(c) Compensate the Liquidator with a fee of not more than $325 per hour with
a minimum fee of $5,000, plus reimbursement of out-of-pocket expenses.
(d) Notwithstanding the appointment of the Liquidator, continue the
authority of the directors (Jeffry K. Amsbaugh, Robert C. Duvall, Gregory
E. Leonard, Thomas J. O'Shane, Roger T. Rankin, and Robert B. Sanborn)
and officers (Jeffry K. Amsbaugh, Thomas D. Nimmo, Douglas W. Caudill,
and Bryan L. Martin) of the Company to exercise such powers as directors
and officers, respectively, of the Company as may be necessary or
appropriate to facilitate the Liquidation, including without limitation
compliance with statutory and regulatory requirements to which the
Company continues to be or may become subject, but expressly excluding
such powers and functions falling within the scope of the Liquidator
under the Companies Act.
/ / FOR / / AGAINST / / ABSTAIN
4. In the discretion of the proxies on any other matter that may properly come
before the meeting or any postponements or adjournments thereof.
/X/ Please mark votes as in this example
<TABLE>
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Please date this proxy and sign your name exactly as it appears hereon. Where
there is more then one owner, each should sign. When signing as an attorney,
MARK HERE FOR administrator, executor, guardian, or trustee, please add your title as such
ADDRESS CHANGE / / if executed by a corporation, the proxy should be signed by a duly authorized
AND NOTE BELOW officer.
Please sign this proxy and return it promptly whether or not you expect to
ATTEND MEETING / / attend the meeting. You may nevertheless vote in person if you do attend.
Signature Date:
Signature Date:
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