<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 18, 1998
REGISTRATION NO. 333-60713
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TRENWICK GROUP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
6719
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
06-1152790
(I.R.S. EMPLOYER IDENTIFICATION NO.)
------------------------
METRO CENTER
ONE STATION PLACE
STAMFORD, CONNECTICUT 06902
(203) 353-5500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
JANE T. WIZNITZER
VICE PRESIDENT-LEGAL AFFAIRS AND SECRETARY
TRENWICK GROUP INC.
METRO CENTER
ONE STATION PLACE
STAMFORD, CONNECTICUT 06902
(203) 353-5510
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENTS FOR SERVICE)
------------------------
COPY TO:
JAMES R. CAMERON, ESQ.
BAKER & MCKENZIE
805 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 751-5700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
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<S> <C> <C> <C> <C>
6.70% Senior Exchange Notes of
Trenwick Group Inc............... $75,000,000 100% $75,000,000 $22,125
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</TABLE>
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(1) Estimated pursuant to Rule 457(f) for the sole purpose of calculating the
registration fee.
(2) Previously paid in connection with the filing on August 5, 1998.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
TRENWICK GROUP INC.
OFFER TO EXCHANGE ITS
6.70% SENIOR EXCHANGE NOTES DUE APRIL 1, 2003,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING
6.70% SENIOR NOTES DUE APRIL 1, 2003
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER 17, 1998, UNLESS EXTENDED.
---------------------------
Trenwick Group Inc., a Delaware corporation (the "Company"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus (as
the same may be amended or supplemented from time to time, the "Prospectus") and
in the accompanying Letter of Transmittal (which, together with the Prospectus
constitute the "Exchange Offer"), to exchange up to $75,000,000 aggregate
principal amount of its 6.70% Senior Exchange Notes due April 1, 2003 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement of which
this Prospectus forms a part, for a like principal amount of its outstanding
6.70% Senior Notes due April 1, 2003 (the "Old Notes" and, together with the
Exchange Notes, the "Notes"). The terms of the Exchange Notes are identical in
all material respects to the terms of the Old Notes, except that (i) the
Exchange Notes have been registered under the Securities Act and therefore will
not be subject to certain restrictions on transfer applicable to the Old Notes,
(ii) the Exchange Notes will be issued in minimum denominations of $1,000 and
will not contain the $100,000 minimum principal amount transfer restriction
applicable to the Old Notes and (iii) unlike the Old Notes, the Exchange Notes
will not provide for any increase in the interest rate payable thereon if the
Company does not or cannot fulfill certain obligations (which obligations will
be satisfied upon the consummation of the Exchange Offer) under a Registration
Rights Agreement dated as of March 27, 1998 (the "Registration Rights
Agreement") between the Company and Lehman Brothers Inc. as Initial Purchaser.
See "Description of Exchange Notes" and "Description of Old Notes."
On March 27, 1998, the Company issued $75,000,000 principal amount of Old
Notes. The Old Notes were issued pursuant to exemptions from, or in transactions
not subject to, the registration requirements of the Securities Act and
applicable state securities laws.
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Old Notes on or about August 18, 1998.
Except as provided below, the Exchange Notes will be represented by a
global Note or Notes in fully registered form, deposited with a custodian for
and registered in the name of a nominee of The Depository Trust Company ("DTC").
Beneficial interests in such global Note or Notes will trade in DTC's Same-Day
Funds Settlement System and secondary market trading activity in such interests
will therefore settle in immediately available funds.
Holders of the Exchange Notes will be entitled to receive interest payable
semi-annually on April 1 and October 1 of each year, commencing on October 1,
1998. The Notes are general unsecured obligations of the Company and rank senior
in right of payment to all existing and future subordinated indebtedness of the
Company and pari passu in right of payment to all existing and future senior
unsecured indebtedness of the Company. The Notes may not be redeemed prior to
maturity and do not provide for any sinking fund. See "Description of Exchange
Notes."
---------------------------
The Exchange Notes are being offered in exchange for Old Notes to satisfy
certain obligations of the Company under the Registration Rights Agreement. The
Company is making the Exchange Offer in reliance on the position of the staff of
the Division of Corporation Finance of the Securities and Exchange Commission
(the "Commission") as set forth in certain interpretive letters addressed to
third parties in other transactions. However, the Company has not sought its own
interpretive letter and there can be no assurance that the staff of the Division
of Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance of the
(Continued on the following page)
---------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD NOTES IN THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS AUGUST 18, 1998.
<PAGE> 3
(Continued from the previous page)
Commission, and subject to the two immediately following sentences, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and that such holder is not participating, and
has no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Any holder of Old Notes who is an "affiliate" of the Company or who intends to
participate in the Exchange Offer for the purpose of distributing Exchange
Notes, or any broker-dealer who purchased Old Notes from the Company for resale
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption under the Securities Act, however, (a) will not be able to
rely on the interpretations of the staff of the Division of Corporation Finance
of the Commission set forth in the above-mentioned interpretive letters, (b)
will not be permitted or entitled to tender such Old Notes in the Exchange Offer
and (c) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or other transfer of such Old
Notes unless such sale is made pursuant to an exemption from such requirements.
In addition, as described below, if any broker-dealer holds Old Notes acquired
for its own account as a result of market-making or other trading activities and
exchanges such Old Notes for Exchange Notes, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Notes.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Company, (ii) any Exchange Notes to be received by it are
being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Notes, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Notes. In addition, the Company may require such holder, as a
condition to such holder's eligibility to participate in the Exchange Offer, to
furnish to the Company (or an agent thereof) in writing information as to the
number of "beneficial owners" (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) on behalf of whom such holder holds
the Old Notes to be exchanged in the Exchange Offer. Each broker-dealer that
receives Exchange Notes pursuant to the Exchange Offer must acknowledge that it
acquired the Exchange Notes for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. The Letter of Transmittal states that, by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation Finance
of the Commission in the interpretive letters referred to above, the Company
believes that broker-dealers who acquired Old Notes for their own accounts, as a
result of market-making activities or other trading activities ("Participating
Broker-Dealers"), may fulfill their prospectus delivery requirements with
respect to the Exchange Notes received upon exchange of such Old Notes with a
prospectus meeting the requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as it contains a description
of the plan of distribution with respect to the resale of such Exchange Notes.
Accordingly, this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer during the period referred to
below in connection with resales of Exchange Notes received in exchange for Old
Notes where such Old Notes were acquired by such Participating Broker-Dealer for
its own account as a result of market-making or other trading activities.
Subject to certain provisions set forth in the Registration Rights Agreement,
the Company has agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such Exchange Notes for a period ending 90 days after
the Expiration Date (as defined herein) (subject to extension under certain
limited circumstances described below) or, if earlier, when all such Exchange
Notes have been disposed of by such Participating Broker-Dealer. See "Plan of
Distribution." However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of Exchange Notes received in exchange
for Old Notes pursuant to the Exchange Offer must notify the Company, or cause
the Company to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided for
that purpose in the Letter of Transmittal or may be delivered to the Exchange
Agent at the address set forth herein under "The Exchange Offer -- Exchange
Agent." Any Participating Broker-Dealer who is an "affiliate" of the Company may
not rely on such interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. See "The Exchange Offer -- Resales of Exchange Notes."
Each Participating Broker-Dealer who surrenders Old Notes pursuant to the
Exchange Offer will be deemed to have agreed that, upon receipt of notice from
the Company of the occurrence of any event or the discovery of any fact which
makes any statement contained or incorporated by reference in this Prospectus
untrue in any material respect or
(ii)
<PAGE> 4
(Continued from the previous page)
which causes this Prospectus to omit to state a material fact necessary in order
to make the statements contained or incorporated by reference herein, in light
of the circumstances under which they were made, not misleading or of the
occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of Exchange
Notes pursuant to this Prospectus until the Company has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the Exchange
Notes may be resumed, as the case may be. If the Company gives such notice to
suspend the sale of the Exchange Notes, it shall extend the 90-day period
referred to above during which Participating Broker-Dealers are entitled to use
this Prospectus in connection with the resale of Exchange Notes by the number of
days during the period from and including the date of the giving of such notice
to and including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales of
the Exchange Notes or to and including the date on which the Company has given
notice that the sale of Exchange Notes may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Notes. The Exchange Notes will be a new issue
of securities for which there currently is no market. Although the Initial
Purchaser has informed the Company that it currently intends to make a market in
the Exchange Notes, it is not obligated to do so, and any such market making may
be discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes. The Company currently does not intend to apply for listing of the
Exchange Notes on any securities exchange or for inclusion in the Nasdaq Stock
Market ("Nasdaq").
The Company has agreed to keep the Registration Statement, of which this
Prospectus forms a part, effective for a period of 30 calendar days (or longer
if required by applicable law or to allow Participating Broker-Dealers to
satisfy their prospectus delivery requirements) after notice of the Exchange
Offer is mailed to holders of the Old Notes.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the same rights (except for those rights
in respect of the Exchange Offer) and will be subject to the same limitations
applicable thereto under the Indenture dated as of March 27, 1998, as amended
and supplemented from time to time, between the Company and The First National
Bank of Chicago, as Trustee (the "Indenture"). Following consummation of the
Exchange Offer, the holders of Old Notes will continue to be subject to all of
the existing restrictions upon transfer thereof and the Company will not have
any further obligation to such holders (other than under certain limited
circumstances) to provide for registration under the Securities Act of the Old
Notes held by them. To the extent that Old Notes are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered Old Notes could be
adversely affected. See "Risk Factors -- Consequences of a Failure to Exchange
Old Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Old Notes may be tendered for exchange on or prior to 5:00 p.m., New York
City time, on September 17, 1998 (such time on such date being hereinafter
called the "Expiration Date"), unless the Exchange Offer is extended by the
Company (in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended). Tenders of Old Notes may be
withdrawn at any time on or prior to the Expiration Date. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. The Exchange Offer is, however, subject to certain conditions
which may be waived by the Company and to the terms and provisions of the
Registration Rights Agreement. Old Notes may be tendered in the Exchange Offer
for exchange in whole or in part in any integral multiples of $1,000
notwithstanding the requirement, applicable to all other transfers of Old Notes,
of a minimum principal transfer amount of $100,000. For purposes of tenders of
Old Notes in the Exchange Offer, the requirement for minimum principal transfers
of $100,000 will be waived. The Company has agreed to pay all expenses of the
Exchange Offer. See "The Exchange Offer -- Fees and Expenses." Holders of the
Old Notes whose Old Notes are accepted for exchange will not receive interest on
such Old Notes and will be deemed to have waived the right to receive interest
on such Old Notes accumulated from and including March 27, 1998. Accordingly,
holders of Exchange Notes as of the record date for the payment of interest on
October 1, 1998 will be entitled to receive interest accumulated from and
including March 27, 1998. See "The Exchange Offer -- Interest on Exchange
Notes."
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. No dealer-manager is being used in connection
with this Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
(iii)
<PAGE> 5
------------------------
NOTICE TO NEW HAMPSHIRE RESIDENTS:
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT
ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT, ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
------------------------
FOR NORTH CAROLINA RESIDENTS ONLY:
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT
APPROVED OR DISAPPROVED THE OFFERING OF THE SECURITIES MADE HEREBY NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
This Prospectus and documents incorporated herein by reference contain
statements which constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements appear in a
number of places in this Prospectus and in documents incorporated herein by
reference and include statements regarding the intent, belief or current
expectations of the Company or its officers with respect to, among other things,
(i) the use of proceeds of this Exchange Offer, (ii) the Company's financing
plans, (iii) property and casualty reinsurance industry trends affecting the
Company's condition or results of operations, (iv) trends affecting the
Company's financial condition or results of operations, (v) the impact of
competition and (vi) adequacy of loss reserves.
Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and the actual results may differ materially from those in the
forward-looking statements as a result of various factors, including but not
limited to, economic inflation, judicial trends and legislative changes. The
accompanying information contained in this Prospectus and in documents
incorporated herein by reference including, without limitation, the information
under "Risk Factors" and "Certain Federal Income Tax Consequences of the
Exchange Offer and Investment in the Exchange Notes," identifies important
factors that could cause such differences.
(iv)
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Available Information....................................... 1
Incorporation of Certain Documents by Reference............. 1
Prospectus Summary.......................................... 3
Risk Factors................................................ 8
Use of Proceeds............................................. 11
Ratios of Earnings to Fixed Charges......................... 11
Capitalization.............................................. 11
Selected Financial Data..................................... 12
Trenwick Group Inc. ........................................ 13
The Exchange Offer.......................................... 14
Description of Exchange Notes............................... 22
Description of Old Notes.................................... 30
Certain Federal Income Tax Consequences of the Exchange
Offer and Investment in the Exchange Notes................ 31
Plan of Distribution........................................ 33
Legal Matters............................................... 33
Experts..................................................... 33
</TABLE>
(v)
<PAGE> 7
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material may also be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. If available, such reports,
proxy statements and other information may also be accessed through the
Commission's electronic data gathering, analysis and retrieval system ("EDGAR")
via electronic means, including the Commission's web site on the Internet
(http://www.sec.gov). In addition, the Company's common stock, $.10 par value
per share, is listed on Nasdaq National Market and such material also is
available for inspection at the National Association of Securities Dealers, Inc.
at 1735 K Street, N.W. Washington, D.C. 20006.
This Prospectus forms a part of a registration statement on Form S-4 (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, and reference is hereby made
to the Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Exchange Notes. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated into this Prospectus by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1997;
and
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998 and June 30, 1998.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the Exchange Notes offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such document. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
<PAGE> 8
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document. The Company will provide,
without charge to any person to whom this Prospectus is delivered, on the
written or oral request of such person, a copy of any or all of the foregoing
documents incorporated by reference herein (other than exhibits thereto not
specifically incorporated by reference into the texts of such documents).
Requests for such documents should be directed to: Jane T. Wiznitzer, Vice
President-Legal Affairs and Secretary, Trenwick Group Inc., Metro Center, One
Station Place, Stamford, Connecticut 06902. Telephone requests may be directed
to (203) 353-5500.
2
<PAGE> 9
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information and financial statements included
and incorporated by reference in this Prospectus.
TRENWICK GROUP INC.
Trenwick Group Inc. is a holding company whose principal operating
subsidiaries, Trenwick America Reinsurance Corporation ("Trenwick America Re")
and Trenwick International Limited ("Trenwick International"), underwrite
reinsurance and specialty insurance.
Trenwick America Re, located in Stamford, Connecticut, provides treaty and
facultative reinsurance to insurers of property and casualty risks in the United
States. Trenwick America Re's business is primarily obtained through reinsurance
intermediaries. The major portion of the reinsurance it writes is casualty
business, including automobile liability, professional liability and general
liability. Reinsurance is provided both on an excess of loss and quota share
basis. In addition to underwriting reinsurance on its own account, Trenwick
America Re participates in specialized segments of the reinsurance market, such
as property catastrophe, malpractice liability and accident and health, through
strategic alliances with leaders in those segments.
Trenwick America Re is licensed or otherwise authorized to conduct
reinsurance business in every state and the District of Columbia. Trenwick
America Re's financial strength is rated "A+ (Superior)" by A.M. Best Company,
an independent insurance industry rating organization, and its claims-paying
ability is rated "A+ (Good)" by Standard & Poor's Rating Services. Financial
strength and claims-paying ratings are primarily based upon factors relevant to
reinsureds and policyholders and are not directed toward the protection of
investors.
Trenwick International, located in London, England, was acquired by the
Company in February 1998. Trenwick International underwrites treaty and
facultative reinsurance as well as speciality insurance on a worldwide basis.
Specialized insurance and facultative reinsurance classes include property
insurance of major industrial risks, property and liability insurance for the
leisure, hospitality and other industries, bonds for financial institutions,
engineering and extended warranty risks, accident and health, professional
indemnity, latent defects, yachts and general aviation. Trenwick International's
first branch office, specializing in facultative reinsurance of large technical
property risks, is scheduled to open in Paris, France in the autumn of 1998.
Trenwick International is licensed in the United Kingdom to underwrite all
non-life insurance classes and holds licenses in more than thirty additional
countries. Its financial strength is rated "A (Excellent)" by A.M. Best and its
claims-paying ability is rated "A+ (Good)" by Standard & Poor's Rating Services.
Trenwick America Re has provided Trenwick International with a claims payment
guarantee to enhance security to its policyholders.
The Company's principal executive office is located at Metro Center, One
Station Place, Stamford, Connecticut 06902, and its telephone number is (203)
353-5500.
THE EXCHANGE OFFER
The Exchange Offer........ Up to $75,000,000 aggregate principal amount of
Exchange Notes are being offered in exchange for a
like aggregate principal amount of Old Notes. Old
Notes may be tendered in the Exchange Offer for
exchange in whole or in part in any integral
multiples of $1,000 principal amount notwithstanding
the requirement, applicable to all other transfers of
Old Notes, of a minimum principal transfer amount of
$100,000. For purposes of tenders of Old Notes in the
Exchange Offer, the requirement for minimum principal
transfers of $100,000 will be waived. The Company is
making the Exchange Offer to satisfy its obligations
under the Registration Rights Agreement relating to
the Old Notes. For a description of the procedures
for tendering Old Notes, see "The Exchange
Offer -- Procedures for Tendering Old Notes."
3
<PAGE> 10
Expiration Date........... 5:00 p.m., New York City time, on September 17, 1998,
unless the Exchange Offer is extended by the Company
(in which case the Expiration Date will be the latest
date and time to which the Exchange Offer is
extended). See "The Exchange Offer -- Terms of the
Exchange Offer."
Conditions to the Exchange
Offer................... The Exchange Offer is subject to certain conditions
which may be waived by the Company in its sole
discretion. The Exchange Offer is not conditioned
upon any minimum principal amount of Old Notes being
tendered for exchange. See "The Exchange
Offer -- Conditions to the Exchange Offer."
Company's Rights to
Extend or Terminate
Exchange Offer.......... The Company reserves the right in its sole and
absolute discretion, subject to applicable law, at
any time and from time to time to (i) delay the
acceptance of the Old Notes for exchange, (ii)
terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) extend the
Expiration Date of the Exchange Offer and retain all
Old Notes tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Old
Notes to withdraw their tendered Old Notes, or (iv)
waive any condition or otherwise amend the terms of
the Exchange Offer in any respect. See "The Exchange
Offer -- Terms of the Exchange Offer."
Withdrawal Rights......... Tenders of Old Notes may be withdrawn at any time on
or prior to the Expiration Date by delivering a
written notice of such withdrawal to the Exchange
Agent in conformity with certain procedures set forth
below under "The Exchange Offer -- Withdrawal
Rights."
Procedures for Tendering
Old Notes................. Tendering holders of Old Notes must complete and sign
a Letter of Transmittal in accordance with the
instructions contained therein and forward the same
by mail, facsimile or hand delivery, together with
any other required documents, to the Exchange Agent,
either with the Old Notes to be tendered or in
compliance with the specified procedures for
guaranteed delivery of Old Notes. Certain brokers,
dealers, commercial banks, trust companies and other
nominees may also effect tenders by book-entry
transfer. Holders of Old Notes registered in the name
of a broker, dealer, commercial bank, trust company
or other nominee are urged to contact such person
promptly if they wish to tender Old Notes pursuant to
the Exchange Offer. See "The Exchange
Offer -- Procedures for Tendering Old Notes." Letters
of Transmittal and certificates representing Old
Notes should not be sent to the Company. Such
documents should only be sent to the Exchange Agent.
Resales of Exchange
Notes..................... The Company is making the Exchange Offer in reliance
on the position of the staff of the Division of
Corporation Finance of the Commission as set forth in
certain interpretive letters addressed to third
parties in other transactions. However, the Company
has not sought its own interpretive letter and there
can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a
similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff
of the Division of Corporation Finance of the
Commission, and subject to the two immediately
following sentences, the Company believes that
Exchange Notes
4
<PAGE> 11
issued pursuant to the Exchange Offer in exchange of
Old Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (other than
a holder who is a broker-dealer) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary
course of such holder's business and that such holder
is not participating, and has no arrangement or
understanding with any person to participate, in a
distribution (within the meaning of the Securities
Act) of such Exchange Notes. However, any holder of
Old Notes who is an "affiliate" of the Company or who
intends to participate in the Exchange Offer for the
purpose of distributing the Exchange Notes, or any
broker-dealer who purchased the Old Notes from the
Company for resale pursuant to Rule 144A or any other
available exemption under the Securities Act, (a)
will not be able to rely on the interpretations of
the staff of the Division of Corporation Finance of
the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted or
entitled to tender such Old Notes in the Exchange
Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities
Act in connection with any sale or other transfer of
such Old Notes unless such sale is made pursuant to
an exemption from such requirements. In addition, as
described below, if any broker-dealer holds Old Notes
acquired for its own account as a result of
market-making or other trading activities and
exchanges such Old Notes for Exchange Notes, then
such broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in connection
with any resales of such Exchange Notes. Each holder
of Old Notes who wishes to exchange Old Notes for
Exchange Notes in the Exchange Offer will be required
to represent that (i) it is not an "affiliate" of the
Company, (ii) any Exchange Notes to be received by it
are being acquired in the ordinary course of its
business, (iii) it has no arrangement or
understanding with any person to participate in a
distribution (within the meaning of the Securities
Act) of such Exchange Notes, and (iv) if such holder
is not a broker-dealer, such holder is not engaged
in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such
Exchange Notes. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the
Old Notes for its own account as a result of
market-making activities or other trading activities
and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
The Letter of Transmittal states that, by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities
Act. Based on the position taken by the staff of the
Division of Corporation Finance of the Commission in
the interpretive letters referred to above, the
Company believes that Participating Broker-Dealers
who acquired Old Notes for their own accounts as a
result of market-making activities or other trading
activities may fulfill their prospectus delivery
requirements with respect to the Exchange Notes
received upon exchange of such Old Notes (other than
Old Notes which represent an unsold allotment from
the original sale of the Old Notes) with a prospectus
meeting the requirements of the Securities Act, which
may be the prospectus prepared for an exchange offer
so long as it contains a description of the plan of
distribution with respect to the resale of such
Exchange Notes. Accordingly, this Prospectus, as it
may be amended or supplemented from
5
<PAGE> 12
time to time, may be used by a Participating
Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such
Old Notes were acquired by such Participating
Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to
certain provisions set forth in the Registration
Rights Agreement and to the limitations described
below under "The Exchange Offer -- Resales of
Exchange Notes," the Company has agreed that this
Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating
Broker-Dealer in connection with resales of such
Exchange Notes for a period ending 90 days after the
Expiration Date (subject to extension under certain
limited circumstances) or, if earlier, when all such
Exchange Notes have been disposed of by such
Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer who is
an "affiliate" of the Company may not rely on such
interpretive letters and must comply with the
registration and prospectus delivery requirements of
the Securities Act in connection with any resale
transaction. See "The Exchange Offer -- Resales of
Exchange Notes."
Effect of Not Accepting
the Exchange Offer........ Old Notes which are not tendered and accepted in the
Exchange Offer will remain outstanding and will be
entitled to all the rights presently accruing to them
except the right to an increased interest rate on the
Old Notes in certain events, if the Company does not
or cannot fulfill certain obligations under the
Registration Rights Agreement (which obligations will
be satisfied upon the consummation of the Exchange
Offer). See "Risk Factors -- Consequences of a
Failure to Exchange Old Notes." However, the Old
Notes will continue to be subject to restrictions on
transfer and, except for limited exceptions for
certain broker-dealers, will have no registration
rights. To the extent that Old Notes are not tendered
and accepted in the Exchange Offer, a holder's
ability to freely sell untendered Old Notes could be
adversely affected.
Exchange Agent............ The exchange agent with respect to the Exchange Offer
is The First National Bank of Chicago (the "Exchange
Agent"). The applicable addresses, and telephone and
facsimile numbers, of the Exchange Agent are set
forth in "The Exchange Offer -- Exchange Agent" and
the Letter of Transmittal.
Certain Federal Income Tax
Consequences............ The exchange of Exchange Notes for Old Notes pursuant
to the Exchange Offer should not result in any
income, gain or loss to the holders or the Company
for United States federal income tax purposes. See
"Certain Federal Income Tax Consequences of the
Exchange Offer and Investment in the Exchange Notes."
THE EXCHANGE NOTES
Securities Offered........ Up to $75,000,000 aggregate principal amount of
Exchange Notes which have been registered under the
Securities Act. The Exchange Notes will be issued,
and the Old Notes were issued, under the Indenture
(as defined herein). The terms of the Exchange Notes
are identical in all material respects to the terms
of the Old Notes, except that the Exchange Notes have
been registered under the Securities Act and will not
be subject to the $100,000 minimum principal amount
transfer restrictions and certain other restrictions
on transfer applicable to the Old Notes and will not
provide for
6
<PAGE> 13
any increase in the interest rate thereon which is
payable on the Old Notes if the Company does not or
cannot fulfill certain obligations under the
Registration Rights Agreement (which obligations will
be satisfied upon the consummation of the Exchange
Offer). See "The Exchange Offer -- Purpose of the
Exchange Offer," "Description of Exchange Notes" and
"Description of Old Notes."
Maturity Date............. April 1, 2003.
Interest Payment Dates.... April 1 and October 1 of each year, commencing
October 1, 1998.
Redemption................ The Exchange Notes are not subject to redemption
prior to maturity.
Ranking................... The Exchange Notes will be unsecured obligations and
will rank senior in right of payment to all existing
and future subordinated indebtedness of the Company
and pari passu with all existing and future senior
unsecured indebtedness of the Company. The Exchange
Notes will rank senior in right of payment to the
Company's obligations with respect to its 8.82%
Junior Subordinated Deferrable Interest Debentures
held by Trenwick Capital Trust I (the "Trust") in
respect of the $110.0 million 8.82% Subordinated
Capital Income Securities (the "Capital Securities")
issued by the Trust. See "Description of Exchange
Notes -- General" and "-- Ranking."
Covenants................. The Indenture does not contain financial covenants
requiring the Company to maintain a certain financial
condition or limitations on the amount of additional
debt that the Company or its subsidiaries may incur,
or on their ability to engage in a highly leveraged
transaction. However, the Indenture limits the
Company's ability to incur future secured
indebtedness without equally and ratably securing the
Notes and includes certain other restrictions.
Absence of Market for the
Notes................... The Exchange Notes will be a new issue of securities
for which there currently is no market. Although the
Initial Purchaser has informed the Company that it
currently intends to make a market in the Exchange
Notes, the Initial Purchaser is not obligated to do
so, and any such market making may be discontinued at
any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any
market for the Exchange Notes.
Use of Proceeds........... The Company will not receive any cash proceeds from
the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes in
exchange for Old Notes as described in this
Prospectus, the Company will receive Old Notes in
like principal amount. The Old Notes surrendered in
exchange for the Exchange Notes will be retired and
cancelled.
The net proceeds to the Company from the offer and
sale of the Old Notes were approximately $74.2
million. The Company contributed approximately $67.4
million of the net proceeds to its wholly-owned
subsidiary, Trenwick International, to support its
insurance and reinsurance operations, including
increasing its statutory capital to support its
underwriting capacity. Remaining net proceeds of
approximately $6.8 million are to be used for general
corporate purposes, which may include investments in
and advances to subsidiaries, the financing of growth
and expansion, the financing of possible future
acquisitions and other corporate purposes. See "Use
of Proceeds."
7
<PAGE> 14
RISK FACTORS
Prospective investors should carefully review the information included and
incorporated by reference in this Prospectus, as it may be amended or
supplemented from time to time, and should particularly consider the following
matters.
RANKING OF THE NOTES
The obligations of the Company under the Notes will be unsecured and will
rank senior in right of payment to all existing and future subordinated
indebtedness of the Company and pari passu in right of payment with all existing
and future senior unsecured indebtedness of the Company. The Notes are unsecured
and thus, in effect, will rank junior to any secured indebtedness of the
Company. Because the Company is a holding company, the right of the Company to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Notes to benefit indirectly from such distribution) is subject to
the prior claims of creditors of that subsidiary, including its reinsureds and
insureds, except to the extent that the Company may itself be recognized as a
creditor of that subsidiary. Accordingly, the Notes will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of Notes should look only to the assets of the Company
for payments on the Notes. At June 30, 1998, the Company's subsidiaries had
total liabilities of $834.2 million and $1.4 billion in total assets. (The
foregoing amounts do not include the obligations of the Company with respect to
the $110.0 million aggregate principal amount of its 8.82% Junior Subordinated
Deferrable Interest Debentures held by the Trust in respect of the $110.0
million of 8.82% Capital Securities issued by the Trust.)
HOLDING COMPANY STRUCTURE AND DIVIDEND RESTRICTIONS
The Company is an insurance holding company whose principal assets are the
capital stock of Trenwick America Re, which it owns through its wholly-owned
subsidiary Trenwick America Corporation and Trenwick International, which it
owns through its wholly-owned subsidiary Trenwick Holdings Limited. The
Company's principal source of funds, including funds available to pay interest
and principal on the Notes or make payments with respect to its capital stock,
is cash dividends from Trenwick America Re and Trenwick International.
Accordingly, the Company's ability to pay interest and principal on the Notes is
dependent on the receipt of such dividends.
The payment of dividends by Trenwick America Re is subject to limits
imposed by the insurance laws and regulations of the State of Connecticut, its
state of incorporation and domicile. Under those limits, the maximum amount of
shareholder dividends or other distributions that Trenwick America Re may
declare or pay to the Company within any twelve month period, without the
permission of the Connecticut Insurance Commissioner, is limited to the greater
of 10% of policyholder surplus at December 31 of the preceding year, or 100% of
net income, excluding realized capital gains, for the twelve month period ending
December 31 of the preceding year, both determined in accordance with statutory
accounting practices. For the purpose of computing the limitation, carryforward
provisions apply with respect to net income realized in the two previous
calendar years which has not already been paid out as dividends. The maximum
amount of dividends which can be paid by Trenwick America Re in 1998 without
regulatory approval is approximately $84.4 million.
Under the laws of the United Kingdom, Trenwick International must provide
the U.K. Treasury with 14 days' advance notice of any proposal to declare or pay
a dividend. Trenwick International may declare or pay the dividend, unless
during the 14-day period the U.K. Treasury has directed otherwise.
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES
The Old Notes were not registered under the Securities Act or any state
securities laws and therefore may not be offered, sold or otherwise transferred
except in compliance with the registration requirements of the Securities Act
and any other applicable securities laws, or pursuant to an exemption therefrom
or in a transaction not subject thereto, and in each case in compliance with
certain other conditions and restrictions. Old Notes which remain outstanding
after consummation of the Exchange Offer will continue to bear a legend
reflecting such restrictions on transfer. In addition, upon consummation of the
Exchange Offer, holders of Old
8
<PAGE> 15
Notes which remain outstanding will not be entitled to any rights to have such
Old Notes registered under the Securities Act or to any similar rights under the
Registration Rights Agreement (subject to certain limited exceptions). The
Company does not intend to register under the Securities Act any Old Notes which
remain outstanding after consummation of the Exchange Offer (subject to such
limited exceptions, if applicable). To the extent that Old Notes are tendered
and accepted in the Exchange Offer, a holder's ability to sell untendered Old
Notes could be adversely affected.
The Registration Rights Agreement provides, among other things, that, if an
Exchange Offer Registration Statement or a Shelf Registration Statement (if
required to be filed) is not declared effective by the Commission on or prior to
September 20, 1998, Additional Interest (as defined in the Registration Rights
Agreement) shall accrue on the principal amount of the Notes affected thereby,
commencing September 21, 1998, at a rate of 0.25% per annum of the principal
amount of such Old Notes for the period from the occurrence of such event until
such time as the Exchange Offer Registration Statement or any required Shelf
Registration Statement is declared effective. In addition, if the Exchange Offer
is not consummated on or prior to the 30th day after the date on which the
Exchange Offer Registration Statement is declared effective, Additional Interest
shall accrue on the principal amount of the Old Notes affected thereby until the
Exchange Offer is consummated. Upon the consummation of the Exchange Offer, the
Company will have satisfied its obligations under the Registration Rights
Agreement and holders of Old Notes will not be entitled to any such Additional
Interest thereon or any further registration rights under the Registration
Rights Agreement, except under limited circumstances with respect to certain
broker-dealers. See "Description of Old Notes."
ABSENCE OF PUBLIC MARKET
The Old Notes were issued to, and the Company believes the Old Notes are
currently owned by, a relatively small number of beneficial owners. The Old
Notes have not been registered under the Securities Act and will be subject to
restrictions on transferability if they are not exchanged for the Exchange
Notes. Although the Exchange Notes generally may be resold or otherwise
transferred by their holders (who are not affiliates of the Company) without
compliance with the registration or prospectus delivery requirements under the
Securities Act, they will constitute a new issue of securities with no
established trading market. Old Notes may be transferred by the holders thereof
only in blocks having a minimum principal transfer amount of not less than
$100,000. Exchange Notes may be transferred by the holders thereof in blocks
having a principal amount of $1,000 or integral multiples thereof. The Company
has been advised by the Initial Purchaser that the Initial Purchaser presently
intends to make a market in the Exchange Notes. However, the Initial Purchaser
is not obligated to do so and any market-making activity with respect to the
Exchange Notes may be discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act and may be limited during the Exchange Offer.
Accordingly, no assurance can be given that an active public or other market
will develop for the Exchange Notes or the Old Notes or as to the liquidity of
or the trading market for the Exchange Notes or the Old Notes. If an active
public market does not develop, the market price and liquidity of the Exchange
Notes may be adversely affected.
If a public trading market develops for the Exchange Notes, future trading
prices will depend on many factors, including, among other things, prevailing
interest rates, the Company's results and the market for similar securities.
Depending on prevailing interest rates, the market for similar securities and
other factors, including the financial condition of the Company, the Exchange
Notes may trade at a discount.
Notwithstanding the registration of the Exchange Notes in the Exchange
Offer, holders who are affiliates of the Company may publicly offer for sale or
resell the Exchange Notes only in compliance with the provisions of Rule 144
under the Securities Act or pursuant to another effective registration
statement.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
9
<PAGE> 16
AMOUNT OF LEVERAGE
As of June 30, 1998, after giving effect to the issuance of the Notes, the
Company's total indebtedness was $185.0 million. The Indenture does not limit
the Company's ability to incur debt. In addition, the Company may incur
additional indebtedness from time to time, in connection with acquisitions or
otherwise. The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including, but not limited to, the
following: (1) the Company's ability to obtain additional financing in the
future may be impaired; (2) the Company may be more leveraged than certain of
its competitors, which may place it at a disadvantage; and (3) the Company's
degree of leverage could make it more vulnerable to changes in general economic
conditions.
FLUCTUATION AND UNCERTAINTY OF PROPERTY AND CASUALTY INSURANCE AND REINSURANCE
INDUSTRY RESULTS
The results of companies in the property and casualty insurance and
reinsurance industries historically have been subject to significant
fluctuations and uncertainties. Profitability can be affected significantly by
volatile and unpredictable developments (including catastrophes); changes in
reserves resulting from the general claims and legal environments as different
types of claims arise and judicial interpretations relating to the scope of
insurers' and reinsurers' liability develop; fluctuations in interest rates and
currency exchange rates and other changes in the investment environment which
affect returns on invested capital; and inflationary pressures which affect the
size of losses. The demand for property and casualty insurance and reinsurance
can also vary significantly, generally rising as the overall level of economic
activity increases and falling as such activity decreases. The property and
casualty insurance and reinsurance industries historically have been cyclical.
The industries as a whole have been in a softening market in the United States
since the late 1980s primarily due to premium rate competition, which has
resulted in lower underwriting profitability. Competition in the worldwide
insurance market also has increased in recent years. The Company's results of
operations may be adversely affected by these fluctuations and uncertainties.
UNCERTAINTY REGARDING ADEQUACY OF LOSS RESERVES
The Company maintains loss reserves to cover its estimated ultimate
liability for losses and loss adjustment expenses with respect to reported and
unreported claims incurred as of the end of each accounting period. Reserves do
not represent an exact calculation of liability, but instead represent
estimates, generally involving actuarial projections at a given time, of what
the Company expects the ultimate settlement and administration of claims will
cost based on its assessment of facts and circumstances then known, estimates of
future trends in claims severity, frequency, judicial theories of liability and
other factors. These variables are affected by both internal and external
events, such as changes in ceding companies' claims handling procedures,
economic inflation, judicial trends and legislative changes. Many of these items
are not directly quantifiable, particularly on a prospective basis.
Additionally, there may be significant reporting lags between the occurrence of
a reinsured event and the time it is actually reported to the reinsurer. Reserve
estimates are continually refined in a regular ongoing process as experience
develops and further claims are reported and settled. Adjustments to reserves
are reflected in the results of the periods in which such estimates are changed.
Because establishment of reserves is an inherently uncertain process involving
estimates of future losses, there can be no certainty that currently established
reserves will prove adequate in light of subsequent actual experience. The
inherent uncertainties of estimating loss reserves are generally greater for
casualty coverages than for property coverages, due primarily to the longer
period of time that typically elapses before a definitive determination of
ultimate loss can be made, changing theories of legal liability involving
certain types of claims and changing political climates.
10
<PAGE> 17
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
in exchange for Old Notes as described in this Prospectus, the Company will
receive Old Notes in like principal amount. The Old Notes surrendered in
exchange for the Exchange Notes will be retired and cancelled.
The net proceeds to the Company from the offer and sale of the Old Notes
were approximately $74.2 million. The Company contributed approximately $67.4
million of the net proceeds to its wholly-owned subsidiary, Trenwick
International, to support its insurance and reinsurance operations, including
increasing its statutory capital to support its underwriting capacity. Remaining
net proceeds of approximately $6.8 million are to be used for general corporate
purposes, which may include investments in and advances to subsidiaries, the
financing of growth and expansion, the financing of possible future acquisitions
and other corporate purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company for the six months ended June 30, 1998 and for the five
years ended December 31, 1997:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------- --------------------------------
1998 1997 1996 1995 1994 1993
- ------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
4.3 5.7 7.4 6.6 4.4 5.2
</TABLE>
The ratios of earnings to fixed charges represent the number of times fixed
charges (interest expense, minority interest and one-third of all rent and
related costs, considered to represent an appropriate interest factor, charged
to income) are covered by income before income taxes and extraordinary item and
fixed charges.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at June 30, 1998 and December 31, 1997. The following data should be
read in conjunction with the financial information included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 and Quarterly
Reports on Form 10-Q for the three months ended March 31, 1998 and June 30,
1998, respectively, which are incorporated herein by reference. See
"Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Long-Term Debt:
Notes..................................................... $ 75,000 $ --
-------- --------
Company-obligated mandatorily redeemable preferred capital
securities of subsidiary trust holding solely junior
subordinated
debentures of the Company................................. 110,000 110,000
Preferred stock, $.10 par value, 2,000,000 shares
authorized;
none outstanding.......................................... -- --
-------- --------
Common stockholders' equity
Common stock, $.10 par value, 30,000,000 shares
authorized;
12,056,699 and 11,951,060 shares outstanding........... 1,206 1,195
Additional paid-in capital................................ 157,172 153,714
Retained earnings......................................... 195,411 183,218
Accumulated other comprehensive income.................... 22,386 20,245
Deferred compensation under stock award plan.............. (3,401) (723)
-------- --------
Total common stockholders' equity...................... 372,774 357,649
-------- --------
Total capitalization.............................. $557,774 $467,649
======== ========
</TABLE>
11
<PAGE> 18
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in connection
with the financial information included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997 and Quarterly Reports on Form 10-Q for
the three months ended March 31, 1998 and June 30, 1998, respectively, which are
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference." The selected financial data as of June 30, 1998 and June 30, 1997 is
unaudited; however, in the opinion of the Company's management, the selected
financial data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
----------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gross premiums written.............. $ 153,886 $ 132,418 $ 248,662 $247,358 $214,336 $153,834 $113,659
Net premiums written................ 119,449 108,404 195,230 226,364 197,162 139,635 101,392
Premiums earned..................... 116,788 101,019 190,156 211,069 177,394 132,683 93,180
Net investment income............... 27,360 23,852 48,402 41,226 36,828 33,932 34,954
Net realized investment gains
(losses).......................... 1,260 1,916 2,304 299 368 (196) 1,842
Other income........................ 332 10 10 -- -- -- --
Total revenues...................... 145,740 126,797 240,872 252,594 214,590 166,419 129,976
Income before income taxes and
extraordinary item................ 21,616 23,849 47,530 43,828 38,413 23,035 27,959
Extraordinary loss on debt
redemption; net of $558 income tax
benefit........................... -- 1,037 (1,037) -- -- -- --
Net income.......................... 18,220 17,357 35,252 33,848 29,841 20,282 23,739
Net earnings per share:
Basic income before extraordinary
item............................ 1.53 1.62 3.12 3.40 3.09 2.10 2.44
Basic net income.................. 1.53 1.53 3.03 3.40 3.09 2.10 2.44
Diluted income before
extraordinary item.............. 1.51 1.53 3.01 2.85 2.59 1.88 2.11
Diluted net income................ 1.51 1.53 3.01 2.85 2.59 1.88 2.11
Dividends per share:................ .50 .48 .97 .83 .75 .67 .57
RATIOS AND OTHER DATA:
GAAP combined ratios:
Claims and claims expense......... 59.6% 57.7% 57.6% 61.3% 63.7% 70.0% 68.5%
Policy acquisition expense........ 30.8 31.6 30.8 27.8 24.8 25.5 23.0
Underwriting expense.............. 9.0 7.7 8.1 6.7 7.1 7.7 11.0
---------- ---------- ---------- -------- -------- -------- --------
Combined.......................... 99.4 97.0 96.5% 95.8% 95.6% 103.2% 102.5%
========== ========== ========== ======== ======== ======== ========
Statutory combined ratios:
Claims and claims expense......... 57.6% 57.7% 57.6% 61.3% 63.7% 69.9% 68.6%
Policy acquisition expense........ 33.3 31.4 30.4 28.2 25.4 25.8 23.4
Underwriting expense.............. 8.2 6.9 7.9 6.2 6.4 7.4 10.2
---------- ---------- ---------- -------- -------- -------- --------
Combined.......................... 99.1% 96.0% 95.9% 95.7% 95.5% 103.1% 102.2%
========== ========== ========== ======== ======== ======== ========
Industry statutory combined
ratios(a)......................... (b) 101.5% 102.7% 103.8% 111.1% 106.7% 107.3%
========== ========== ========== ======== ======== ======== ========
Ratio of statutory net premiums
written to surplus................ 0.4:1 0.4:1 0.6:1 0.9:1 0.8:1 0.7:1 0.5:1
========== ========== ========== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Total cash and investments.......... $1,021,399 $ 836,550 $ 864,324 $754,210 $653,704 $551,784 $546,303
Total assets........................ 1,390,338 1,038,016 1,087,923 920,804 820,930 727,245 700,407
Total unpaid claims and claims
expenses.......................... 660,009 496,062 518,387 467,177 411,874 389,298 354,582
Convertible debentures.............. -- -- -- 103,500 103,500 103,500 103,500
Senior notes........................ 75,000 -- -- -- -- -- --
Company-obligated mandatorily
redeemable preferred capital
securities of subsidiary trust
holding solely junior subordinated
debentures of the Company......... 110,000 110,000 110,000 -- -- -- --
Common stockholders' equity......... 372,774 336,666 357,649 265,753 240,776 188,213 206,763
Book value per common share......... 30.92 28.20 29.93 26.34 24.36 19.48 20.94
STATUTORY CAPITAL AND SURPLUS OF
TRENWICK AMERICA RE................. $ 344,072 $ 304,533 $ 322,850 $286,284 $257,590 $236,056 $224,902
</TABLE>
- ---------------
(a) Source: Reinsurance Association of America.
(b) Data not yet available.
12
<PAGE> 19
TRENWICK GROUP INC.
Trenwick Group Inc. is a holding company whose principal operating
subsidiaries, Trenwick America Reinsurance Corporation ("Trenwick America Re")
and Trenwick International Limited ("Trenwick International"), underwrite
reinsurance and specialty insurance.
Trenwick America Re, located in Stamford, Connecticut, provides treaty and
facultative reinsurance to insurers of property and casualty risks in the United
States. Trenwick America Re's business is primarily obtained through reinsurance
intermediaries. The major portion of the reinsurance it writes is casualty
business, including automobile liability, professional liability and general
liability. Reinsurance is provided both on an excess of loss and quota share
basis. In addition to underwriting reinsurance on its own account, Trenwick
America Re participates in specialized segments of the reinsurance market, such
as property catastrophe, malpractice liability and accident and health, through
strategic alliances with leaders in those segments.
Trenwick America Re is licensed or otherwise authorized to conduct
reinsurance business in every state and the District of Columbia. Trenwick
America Re's financial strength is rated "A+ (Superior)" by A.M. Best Company,
an independent insurance industry rating organization, and its claims-paying
ability is rated "A+ (Good)" by Standard & Poor's Rating Services. Financial
strength and claims-paying ratings are primarily based upon factors relevant to
reinsureds and policyholders and are not directed toward the protection of
investors.
Trenwick International, located in London, England, was acquired by the
Company in February 1998. Trenwick International underwrites treaty and
facultative reinsurance as well as speciality insurance on a worldwide basis.
Specialized insurance and facultative reinsurance classes include property
insurance of major industrial risks, property and liability insurance for the
leisure, hospitality and other industries, bonds for financial institutions,
engineering and extended warranty risks, accident and health, professional
indemnity, latent defects, yachts and general aviation. Trenwick International's
first branch office, specializing in facultative reinsurance of large technical
property risks, is scheduled to open in Paris, France in the autumn of 1998.
Trenwick International is licensed in the United Kingdom to underwrite all
non-life insurance classes and holds licenses in more than thirty additional
countries. Its financial strength is rated "A (Excellent)" by A.M. Best and its
claims-paying ability is rated "A+ (Good)" by Standard & Poor's Rating Services.
Trenwick America Re has provided Trenwick International with a claims payment
guarantee to enhance security to its policyholders.
The Company's principal executive office is located at Metro Center, One
Station Place, Stamford, Connecticut 06902, and its telephone number is (203)
353-5500.
13
<PAGE> 20
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Company entered into the
Registration Rights Agreement with the Initial Purchaser, pursuant to which the
Company agreed to file with the Commission and to use its reasonable best
efforts to cause to become effective a registration statement with respect to
the exchange of the Old Notes for Exchange Notes with terms identical in all
material respects to the terms of the Old Notes. A copy of the Registration
Rights Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus constitutes a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Company under the Registration Rights Agreement. The form and terms of the
Exchange Notes are in all material respects identical to the form and terms of
the Old Notes except that the Exchange Notes have been registered under the
Securities Act and will not be subject to the $100,000 minimum principal amount
transfer restriction and certain other restrictions on transfer applicable to
the Old Notes. The Exchange Notes will not provide, as do the Old Notes, for any
increase in the interest rate thereon, if the Exchange Offer Registration
Statement is not declared effective or the Exchange Offer is not consummated or
any required Shelf Registration Statement is not declared effective. Upon the
consummation of the Exchange Offer, the Company will have satisfied its
obligations under the Registration Rights Agreement and holders of Old Notes
will not be entitled to any such Additional Interest thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances with respect to certain broker-dealers. See "Risk
Factors -- Consequences of a Failure to Exchange Old Notes" and "Description of
Old Notes."
NEITHER THE COMPANY NOR THE BOARD OF DIRECTORS OF THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS
OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE
EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD NOTES TO TENDER BASED ON
EACH SUCH HOLDER'S OWN FINANCIAL POSITION AND REQUIREMENTS.
The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Old Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Notes are registered
on the books of the Company or any other person who has obtained a properly
completed bond power from such holder, or any person whose Old Notes are held of
record by The Depository Trust Company ("DTC") who desires to deliver such Old
Notes by book-entry transfer at DTC.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $75,000,000 aggregate principal amount of Exchange Notes for a
like aggregate principal amount of Old Notes properly tendered on or prior to
the Expiration Date and not properly withdrawn in accordance with the procedures
described below. The Company will issue, promptly after the Expiration Date, up
to $75,000,000 aggregate principal amount of Exchange Notes in exchange for a
like principal amount of outstanding Old Notes validly tendered and accepted in
connection with the Exchange Offer. Old Notes may be tendered in the Exchange
Offer for exchange in whole or in part in any integral multiples of $1,000
principal amount notwithstanding the requirement, applicable to all other
transfers of Old Notes, of a minimum principal transfer amount of $100,000. For
purposes of tenders of Old Notes in the Exchange Offer, the requirement for
minimum transfers of $100,000 will be waived.
14
<PAGE> 21
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered. As of the date of this Prospectus, $75,000,000
aggregate principal amount of Old Notes was outstanding.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for or are
tendered but not accepted in connection with the Exchange Offer will remain
outstanding and be entitled to the benefits of the Indenture, but will not be
entitled to any further registration rights under the Registration Rights
Agreement, except under limited circumstances with respect to certain
broker-dealers. See "Risk Factors -- Consequences of a Failure to Exchange Old
Notes" and "Description of Old Notes."
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof promptly after the Expiration
Date.
Holders who tender Old Notes in connection with the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes in connection with the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes described below under "-- Fees
and Expenses," in connection with the Exchange Offer. See "-- Fees and
Expenses."
The term "Expiration Date" means 5:00 p.m., New York City time, on
September 17, 1998 unless the Exchange Offer is extended by the Company (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended). The Company has no present expectation
that the Expiration Date will be extended.
The Company expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time, to (i)
delay the acceptance of the Old Notes for exchange, (ii) terminate the Exchange
Offer (whether or not any Old Notes have theretofore been accepted for exchange)
if the Company determines, in its sole and absolute discretion, that any of the
events or conditions referred to under "-- Conditions to the Exchange Offer"
have occurred or exist or have not been satisfied, (iii) extend the Expiration
Date of the Exchange Offer and retain all Old Notes tendered pursuant to the
Exchange Offer, subject, however, to the right of holders of Old Notes to
withdraw their tendered Old Notes as described under "-- Withdrawal Rights," and
(iv) waive any condition or otherwise amend the terms of the Exchange Offer in
any respect. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, or if the Company waives a material
condition of the Exchange Offer, the Company will promptly disclose such
amendment by means of a Prospectus supplement that will be distributed to the
holders of the Old Notes, and the Company will extend the Exchange Offer to the
extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company may choose to make any public announcement and
subject to applicable law, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange, and will issue to the Exchange Agent, Exchange Notes for
Old Notes validly tendered and not withdrawn promptly after the Expiration Date.
In all cases, delivery of Exchange Notes in exchange for Old Notes tendered
and accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) Old
15
<PAGE> 22
Notes or a book-entry confirmation of a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC, including an Agent's Message if the
tendering holder has not delivered a Letter of Transmittal, (ii) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees or (in the case of a book-entry transfer) an
Agent's Message in lieu of the Letter of Transmittal, and (iii) any other
documents required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC. The
term "Agent's Message" means a message transmitted by DTC to and received by the
Exchange Agent and forming a part of a book-entry confirmation, which states
that DTC has received an express acknowledgment from the tendering Participant
(as defined herein), which acknowledgment states that such Participant has
received and agrees to be bound by the Letter of Transmittal and that the
Company may enforce such Letter of Transmittal against such Participant.
Subject to the terms and conditions of the Exchange Offer, the Company will
be deemed to have accepted for exchange, and thereby exchanged, Old Notes
validly tendered and not withdrawn as, if and when the Company gives oral or
written notice to the Exchange Agent of the Company's acceptance of such Old
Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act
as agent for the Company for the purpose of receiving tenders of Old Notes,
Letters of Transmittal and related documents, and as agent for tendering holders
for the purpose of receiving Old Notes, Letters of Transmittal and related
documents and transmitting Exchange Notes to validly tendering holders. Such
exchange will be made promptly after the Expiration Date. If for any reason
whatsoever, acceptance for exchange or the exchange of any Old Notes tendered
pursuant to the Exchange Offer is delayed (whether before or after the Company's
acceptance for exchange of Old Notes) or the Company extends the Exchange Offer
or is unable to accept for exchange or exchange Old Notes tendered pursuant to
the Exchange Offer, then, without prejudice to the Company's rights set forth
herein, the Exchange Agent may, nevertheless, on behalf of the Company and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Notes and
such Old Notes may not be withdrawn except to the extent tendering holders are
entitled to withdrawal rights as described under "-- Withdrawal Rights."
Pursuant to the Letter of Transmittal or Agent's Message in lieu thereof, a
holder of Old Notes will warrant and agree in the Letter of Transmittal that it
has full power and authority to tender, exchange, sell, assign and transfer Old
Notes, that the Company will acquire good, marketable and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances, and the Old Notes tendered for exchange are not subject to any
adverse claims or proxies. The holder also will warrant and agree that it will,
upon request, execute and deliver any additional documents deemed by the Company
or the Exchange Agent to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the Old Notes tendered pursuant to the
Exchange Offer.
PROCEDURES FOR TENDERING OLD NOTES
VALID TENDER. Except as set forth below, for Old Notes to be validly
tendered pursuant to the Exchange Offer, a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees or (in the case of a book-entry tender) an Agent's Message in lieu of
the Letter of Transmittal and any other required documents, must be received by
the Exchange Agent at its address set forth under "-- Exchange Agent," on or
prior to the Expiration Date and (i) tendered Old Notes must be received by the
Exchange Agent, or (ii) such Old Notes must be tendered pursuant to the
procedures for book-entry transfer set forth below and a book-entry
confirmation, including an Agent's Message if the tendering holder has not
delivered a Letter of Transmittal, must be received by the Exchange Agent, in
each case on or prior to the Expiration Date, or (iii) the guaranteed delivery
procedures set forth below must be complied with.
If less than all of the Old Notes are tendered, a tendering holder should
fill in the amount of Old Notes being tendered in the appropriate box on the
Letter of Transmittal or so indicate in an Agent's Message in lieu of the Letter
of Transmittal. The entire amount of Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
16
<PAGE> 23
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Exchange Agent will establish an account with
respect to the Old Notes at DTC for purposes of the Exchange Offer no later than
two (2) business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Notes by causing DTC to transfer such
Old Notes into the Exchange Agent's account at DTC in accordance with DTC's
procedures for transfers. However, although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees or an Agent's Message in lieu
of a Letter of Transmittal and any other required documents, must in any case be
delivered to and received by the Exchange Agent at its address set forth under
"-- Exchange Agent" on or prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES. Certificates for the Old Notes need not be endorsed
and signature guarantees on the Letter of Transmittal are unnecessary unless (a)
a certificate for the Old Notes is registered in a name other than that of the
person surrendering the certificate or (b) such holder completes the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" in
the Letter of Transmittal. In the case of (a) or (b) above, such certificates
for Old Notes must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the Letter of
Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1 to
the Letter of Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Old Notes pursuant to
the Exchange Offer and the certificates for such Old Notes are not immediately
available or time will not permit all required documents to reach the Exchange
Agent on or prior to the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, such Old Notes may nevertheless
be tendered, provided that all of the following guaranteed delivery procedures
are complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(c) the certificates (or a book-entry confirmation) representing all
tendered Old Notes, in proper form for transfer, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof or
Agent's Message in lieu thereof), with any required signature guarantees
and any other documents required by the Letter of Transmittal, are received
by the Exchange Agent within three (3) Nasdaq trading days after the date
of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
17
<PAGE> 24
Notwithstanding any other provision hereof, the delivery of Exchange Notes
in exchange for Old Notes tendered and accepted for exchange pursuant to the
Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of Old Notes, or of a book-entry confirmation with respect to
such Old Notes, and a properly completed and duly executed Letter of Transmittal
(or facsimile thereof or Agent's Message in lieu thereof), together with any
required signature guarantees and any other documents required by the Letter of
Transmittal. Accordingly, the delivery of Exchange Notes might not be made to
all tendering holders at the same time, and will depend upon when Old Notes,
book-entry confirmations with respect to Old Notes and other required documents
are received by the Exchange Agent.
The Company's acceptance for exchange of Old Notes tendered pursuant to any
of the procedures described above will constitute a binding agreement between
the tendering holder and the Company upon the terms and subject to the
conditions of the Exchange Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Notes will be determined by the Company, in its sole
discretion, whose determination shall be final and binding on all parties. The
Company reserves the absolute right, in its sole and absolute discretion, to
reject any and all tenders determined by them not to be in proper form or the
acceptance of which, or exchange for, may, in the opinion of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "-- Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Old Notes of any particular holder whether or not
similar conditions or irregularities are waived in the case of other holders.
The interpretation by the Company of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Old Notes will be deemed to
have been validly made until all irregularities with respect to such tender have
been cured or waived. Neither the Company, any affiliates or assigns of the
Company, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in tenders or incur any liability for
failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company, in its sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Old Notes that are held by or registered in the name
of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF EXCHANGE NOTES
The Company is making the Exchange Offer for the Exchange Notes in reliance
on the position of the staff of the Division of Corporation Finance of the
Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Company has not sought its own
interpretive letter and there can be no assurance that the staff of the Division
of Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject to the two immediately
following sentences, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business and that such
holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. However, any holder of Old Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange Offer
for the purpose of
18
<PAGE> 25
distributing Exchange Notes, or any broker-dealer who purchased Old Notes from
the Company for resale pursuant to Rule 144A or any other available exemption
under the Securities Act, (a) will not be able to rely on the interpretations of
the staff of the Division of Corporation Finance of the Commission set forth in
the above-mentioned interpretive letters, (b) will not be permitted or entitled
to tender such Old Notes in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Notes unless such sale is
made pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Old Notes acquired for its own account as a
result of market-making or other trading activities and exchanges such Old Notes
for Exchange Notes, then such broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
Exchange Notes.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to represent that (i) such holder
is not an "affiliate" of the Company, (ii) any Exchange Notes to be received by
such holder are being acquired in the ordinary course of its business, (iii)
such holder has no arrangement or understanding with any person to participate
in a distribution (within the meaning of the Securities Act) of such Exchange
Notes, and (iv) if such holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a distribution (within the meaning
of the Securities Act) of such Exchange Notes. In addition, the Company may
require such holder, as a condition to such holder's eligibility to participate
in the Exchange Offer, to furnish to the Company (or an agent thereof) in
writing information as to the number of "beneficial owners" (within the meaning
of Rule 13d-3 under the Exchange Act) on behalf of whom such holder holds the
Notes to be exchanged in the Exchange Offer. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Old Notes for its own account as the result of
market making activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
Based on the position taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters referred to above, the
Company believes that Participating Broker-Dealers who acquired Old Notes for
their own accounts as a result of market-making activities or other trading
activities may fulfill their prospectus delivery requirements with respect to
the Exchange Notes received upon exchange of such Old Notes (other than Old
Notes which represent an unsold allotment from the original sale of the Old
Notes) with a prospectus meeting the requirements of the Securities Act, which
may be the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such
Exchange Notes.
This Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer during the period referred to below
in connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such Participating Broker-Dealer for its
own account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the Company
has agreed that this Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of such Exchange Notes for a period ending 90 days after the Expiration Date
(subject to extension under certain limited circumstances described below) or,
if earlier, when all such Exchange Notes have been disposed of by such
Participating Broker-Dealer. See "Plan of Distribution." A Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of Exchange Notes received in exchange for Old Notes pursuant to the Exchange
Offer must notify the Company, or cause the Company to be notified, on or prior
to the Expiration Date, that it is a Participating Broker-Dealer. Such notice
may be given in the space provided for that purpose in the Letter of Transmittal
or may be delivered to the Exchange Agent at one of the addresses set forth
herein under "-- Exchange Agent." Any Participating Broker-Dealer who is an
"affiliate" of the Company may not rely on such interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
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<PAGE> 26
Each Participating Broker-Dealer who surrenders Old Notes pursuant to the
Exchange Offer will be deemed to have agreed that, upon receipt of notice from
the Company of the occurrence of any event or the discovery of any fact which
makes any statement contained or incorporated by reference in this Prospectus
untrue in any material respect or which causes this Prospectus to omit to state
a material fact necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances under which they
were made, not misleading or of the occurrence of certain other events specified
in the Registration Rights Agreement, such Participating Broker-Dealer will
suspend the sale of Exchange Notes pursuant to this Prospectus until the Company
has amended or supplemented this Prospectus to correct such misstatement or
omission and has furnished copies of the amended or supplemented Prospectus to
such Participating Broker-Dealer or the Company has given notice that the sale
of the Exchange Notes may be resumed. If the Company gives such notice to
suspend the sale of the Exchange Notes, it shall extend the 90-day period
referred to above during which Participating Broker-Dealers are entitled to use
this Prospectus in connection with the resale of Exchange Notes by the number of
days during the period from and including the date of the giving of such notice
to and including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales of
the Exchange Notes or to and including the date on which the Company has given
notice that the sale of Exchange Notes may be resumed.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under "-- Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of Old Notes to be withdrawn, and (if certificates for such Old
Notes have been tendered) the name of the registered holder of the Old Notes as
set forth on the Old Notes, if different from that of the person who tendered
such Old Notes. If Old Notes have been delivered or otherwise identified to the
Exchange Agent, then prior to the physical release of such Old Notes, the
tendering holder must submit the serial numbers shown on the particular Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in "-- Procedures
for Tendering Old Notes," the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of Old Notes, in
which case a notice of withdrawal will be effective if delivered to the Exchange
Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of
tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not
be deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described above under "-- Procedures for
Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof promptly after
withdrawal.
INTEREST ON EXCHANGE NOTES
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive interest on such Old Notes and will be deemed to have waived the right
to receive any interest on such Old Notes accumulated from and including March
27, 1998. Accordingly, holders of Exchange Notes as of the record date for the
payment of interest on October 1, 1998 will be entitled to interest accumulated
from and including March 27, 1998.
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CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Old Notes for any Exchange Notes, and, as
described below, may terminate the Exchange Offer (whether or not any Old Notes
have theretofore been accepted for exchange) or may waive any conditions to or
amend the Exchange Offer, if any of the following conditions have occurred or
exists or have not been satisfied:
(a) there shall occur a change in the current interpretation by the
staff of the Division of Corporation Finance of the Commission which
permits the Exchange Notes issued pursuant to the Exchange Offer in
exchange for Old Notes to be offered for resale, resold and otherwise
transferred by holders thereof (other than broker-dealers and any such
holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Company, would reasonably be expected
to impair its ability to proceed with the Exchange Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Company, threatened for that purpose or any governmental approval has
not been obtained, which approval the Company shall, in its sole
discretion, deem necessary for the consummation of the Exchange Offer as
contemplated hereby.
If the Company determines in its sole and absolute discretion that any of
the foregoing events or conditions has occurred or exists or has not been
satisfied, it may, subject to applicable law, terminate the Exchange Offer
(whether or not any Old Notes have theretofore been accepted for exchange) or
may waive any such condition or otherwise amend the terms of the Exchange Offer
in any respect. If such waiver or amendment constitutes a material change to the
Exchange Offer, the Company will promptly disclose such waiver or amendment by
means of a Prospectus supplement that will be distributed to the registered
holders of the Old Notes and will extend the Exchange Offer to the extent
required by Rule l4e-1 under the Exchange Act.
EXCHANGE AGENT
The First National Bank of Chicago has been appointed as Exchange Agent for
the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
By Registered or Certified Mail, Hand or Overnight Delivery:
The First National Bank of Chicago
c/o First Chicago Trust Company of New York
14 Wall Street
8th Floor, Window 2
New York, New York 10005
Attention: Corporate Trust Services Department
Confirm by Telephone:
(212) 240-8801
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 240-8938
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Delivery to an address other than as set forth above or transmission of
instructions via facsimile other than as set forth above, will not constitute a
valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable
out-of-pocket-expenses in connection therewith. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Old Notes, and in handling or
tendering for their customers.
Subject to the following sentence, holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, Exchange Notes are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes in connection with the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
The Company will not make any payment to brokers, dealers or other nominees
soliciting acceptances of the Exchange Offer.
DESCRIPTION OF EXCHANGE NOTES
Pursuant to the terms of the Indenture, the Company has issued the Old
Notes and will issue the Exchange Notes. The following summaries of certain
provisions of the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all of the provisions of
the Indenture, including the definitions therein of certain terms. A copy of the
Indenture has been filed as an exhibit to the Registration Statement.
Capitalized terms used herein have the meanings attributed to them in the
Indenture (unless otherwise defined herein).
The terms of the Exchange Notes include those stated in the Indenture and
(upon effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement) those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Exchange Notes are subject to all such terms, and holders of the Exchange Notes
are referred to the Indenture and the Trust Indenture Act for a statement of
them. As used herein, "Holder" or "Noteholder" refers to a registered holder of
the Exchange Notes.
GENERAL
The Notes (including the Old Notes and the Exchange Notes) are limited to
$75,000,000 aggregate principal amount, will mature on April 1, 2003 and will be
unsecured obligations of the Company. The Exchange Notes will be issued only in
fully registered form without coupons in denominations of $1,000 and integral
multiples thereof. The Exchange Notes will bear interest at the rate set forth
on the front cover of this Prospectus from March 27, 1998 (the date of original
issuance of the Old Notes), or from the most recent date to which interest has
been paid or duly provided for, payable semi-annually on April 1 and October 1
of each year, commencing October 1, 1998, to the registered holders at the close
of business on the March 15 or September 15 preceding such April 1 or October 1,
whether or not such day is a business day. Interest on the Exchange Notes will
be computed on the basis of a 360-day year of twelve 30-day months.
The Indenture and the Notes do not contain financial covenants requiring
the Company to maintain a certain financial condition or limitations on the
amount of additional debt that the Company or its subsidiaries may incur or on
their ability to engage in a highly leveraged transaction. However, the
Indenture restricts (subject to certain exclusions) the aggregate amount of
secured indebtedness that may be incurred by the Company and its Subsidiaries
(as defined in the Indenture) to not more than 10% of Consolidated Tangible Net
Worth (as defined below) unless the Noteholders are secured equally and ratably
thereunder. See
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"-- Certain Covenants -- Limitations on Liens." Based on the Company's
consolidated financial statements as of June 30, 1998, the aggregate amount of
secured indebtedness for borrowed money that the Company and its Subsidiaries
could incur (other than for the exclusions referred to in the Indenture), unless
the Noteholders are secured equally and ratably thereunder, would be
approximately $37.0 million. The Indenture also provides certain limitations on
transactions involving sales of assets or disposition of Capital Stock (as
defined therein) of Significant Subsidiaries (as defined therein). See
"-- Consolidation, Merger and Sale of Assets" and "-- Certain
Covenants -- Limitations on Disposition of Capital Stock of Significant
Subsidiaries."
As a holding company, the Company's principal source of funds, including
funds available to pay interest and principal on the Exchange Notes or make
payments with respect to its capital stock, is cash dividends from Trenwick
America Re and Trenwick International. Accordingly, the Company's ability to pay
interest and principal on the Exchange Notes is dependent on the receipt of such
dividends. The payment of dividends by Trenwick America Re is subject to limits
imposed by the insurance laws and regulations of the State of Connecticut, its
state of incorporation and domicile. Trenwick International is subject to
restrictions on the declaration or payment of dividends imposed under United
Kingdom law. See "Risk Factors -- Holding Company Structure and Dividend
Restrictions."
Principal of and interest on the Exchange Notes will be payable, and
transfers will be registrable, at the Corporate Trust Office of the Trustee in
the City of New York, New York, unless the Company otherwise notifies the
Trustee. No service charge will be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Interest may, at the option of the Company be paid by check mailed to the
address of a holder of the Exchange Notes as it appears on the Exchange Note
register. The Company has initially appointed the Trustee as Registrar and
Paying Agent for the Exchange Notes. The Trustee's current address is One First
National Plaza, Suite 0126, Chicago, Illinois 60670-0126, Attention: Corporate
Trust Services Division.
NO REDEMPTION OR SINKING FUND
The Exchange Notes are not redeemable prior to maturity and are not subject
to any sinking fund.
RANKING
The Notes will be general unsecured obligations and will rank senior in
right of payment to all existing and future subordinated indebtedness of the
Company and pari passu in right of payment to all existing and future senior
unsecured indebtedness of the Company. The Notes will rank senior in right of
payment to the Company's obligations with respect to its 8.82% Junior
Subordinated Deferrable Interest Debentures held by the Trust in respect of the
$110.0 million 8.82% Capital Securities issued by the Trust. Upon closing of the
offer and sale of the Old Notes, the Company contributed approximately $65.0
million to its wholly-owned subsidiary, Trenwick International, to support its
insurance and reinsurance operations, including increasing its statutory capital
to support its underwriting capacity. Remaining net proceeds of approximately
$9.2 million are to be used for general corporate purposes, which may include
investments in and advances to subsidiaries, the financing of growth and
expansion, the financing of possible future acquisitions and other corporate
purposes. See "Use of Proceeds."
The Company conducts its operations primarily through its subsidiaries. The
right of the Company to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Notes to benefit indirectly from such
distribution) is subject to the prior claims of creditors of that subsidiary,
including its reinsureds and insureds, except to the extent that the Company may
itself be recognized as a creditor of that subsidiary. Claims on the Company's
subsidiaries by creditors other than the Company include claims for policy
benefits and debt obligations as well as other liabilities incurred in the
ordinary course of business. Accordingly, the Notes will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and the holders of the Notes should look only to the assets of the
Company for payments on the Notes. As of June 30, 1998, the
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<PAGE> 30
Company's subsidiaries had $834.2 million in total liabilities and $1.4 billion
in total assets. As of June 30, 1998, the aggregate amount of indebtedness for
borrowed money of such subsidiaries was immaterial. (The foregoing amounts do
not include the obligations of the Company with respect to the $110.0 million
aggregate principal amount of its 8.82% Junior Subordinated Deferrable Interest
Debentures held by the Trust in respect of the $110.0 million 8.82% Capital
Securities issued by the Trust.) As of June 30, 1998, the aggregate amount of
indebtedness for borrowed money for Trenwick International was not material.
CERTAIN COVENANTS
Limitations on Liens. Except as provided below, neither the Company nor
any Significant Subsidiary (as defined in the Indenture) may incur, issue,
assume or guarantee any indebtedness for borrowed money (referred to in the
Indenture as "Indebtedness") secured by a Lien (as defined in the Indenture) on
any property or assets of the Company or any Significant Subsidiary, or any
shares of Capital Stock of any Significant Subsidiary, without effectively
providing that the Notes (together with, if the Company shall so determine, any
other Indebtedness which is not subordinated to the Notes) shall be secured
equally and ratably with (or prior to) such Indebtedness, so long as such
Indebtedness shall be so secured, unless after giving effect thereto, the
aggregate amount of all such secured Indebtedness of the Company and its
Subsidiaries would not exceed 10% of the Consolidated Tangible Net Worth of the
Company; provided, however, that this covenant shall not apply to, and there
shall be excluded from secured Indebtedness in any computation under this
covenant, Indebtedness secured by: (i) Liens existing on the date of the
Indenture; (ii) Liens on property of, or on any shares of stock of, any
corporation existing at the time such corporation becomes a Significant
Subsidiary or merges into or consolidates with the Company or a Significant
Subsidiary; (iii) Liens on property or shares of stock existing at the time of
acquisition thereof by the Company or any Significant Subsidiary; (iv) Liens to
secure the financing of the acquisition, construction or improvement of
property, or the acquisition of shares of stock by the Company or any
Significant Subsidiary, provided, that such Liens are created not later than one
year after such acquisition or, in the case of property, completion of
construction or commencement of commercial operation, whichever is later; (v)
Liens in favor of the Company or any Subsidiary; (vi) Liens in favor of or
required by governmental authorities; and (vii) any extension, renewal or
replacement as a whole or in part, of any Lien referred to in the foregoing
clauses (i) to (vi) inclusive; provided, however, that (a) such extension,
renewal or replacement Lien shall be limited to all or a part of the same
property or shares of stock that secured the Lien extended, renewed or replaced
and (b) the Indebtedness secured by such Lien at such time is not increased.
"Consolidated Tangible Net Worth" means, at any date, the total assets
appearing on the most recently prepared consolidated balance sheet of the
Company and its Subsidiaries as of the end of a fiscal quarter of the Company,
prepared in accordance with generally accepted accounting principles
consistently applied, less (a) the total liabilities appearing on such balance
sheet and (b) intangible assets. "Intangible assets" means the value (net of any
applicable reserves), as shown on or reflected in such balance sheet, of: (i)
all trade names, trademarks, licenses, patents, copyrights and goodwill; (ii)
organizational and development costs; and (iii) unamortized debt discount and
expense, less unamortized premium. "Intangible assets" excludes deferred policy
acquisition costs and deferred income tax assets.
Limitations on Disposition of Capital Stock of Significant
Subsidiaries. The Indenture provides that, except as provided in the covenant
relating to limitation on Liens, the Company will not, and will not permit any
Subsidiary (as defined in the Indenture) to sell, transfer or otherwise dispose
of any shares of Capital Stock of any Significant Subsidiary (or of any
Subsidiary having direct or indirect control of any Significant Subsidiary)
except for, subject to the covenant relating to consolidations, mergers and
sales (see "-- Consolidation, Merger and Sale of Assets"), (i) a sale, transfer
or other disposition of any Capital Stock of any Significant Subsidiary (or of
any Subsidiary having direct or indirect control of any Significant Subsidiary)
to the Company or a wholly-owned Subsidiary of the Company or (ii) a sale,
transfer or other disposition of all or any part of the Capital Stock of any
Significant Subsidiary (or of any Subsidiary having direct or indirect control
of any Significant Subsidiary) held by the Company and/or and any Subsidiary for
at least fair value (as determined by the Board of Directors of the Company
acting in good faith). "Significant Subsidiary" means any subsidiary of the
Company which at the time of determination has, (i) assets which constituted at
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<PAGE> 31
least 10% of the Company's consolidated total assets, or (ii) revenues which
constituted at least 10% of the Company's consolidated total revenues or (iii)
net earnings which constituted at least 10% of the Company's consolidated total
net earnings, all as determined as of the date of the Company's most recently
prepared quarterly financial statements or the 12-month period then ended. As of
the date of this Prospectus, the Significant Subsidiaries are Trenwick America
Re and Trenwick International.
EVENTS OF DEFAULT
Events of Default under the Indenture include: (i) failure of the Company
to pay any interest on any of the Notes when due, continued for 30 days; (ii)
failure of the Company to pay principal of any of the Notes when due; (iii)
failure of the Company to perform any other agreements in the Notes or the
Indenture, continued for 60 days after notice to the Company by the Trustee as
provided in the Indenture; (iv) failure of the Company or any Subsidiary to pay
when due (including any grace periods) any Indebtedness in excess of $10,000,000
or the default in the performance of any term or provision contained in any such
Indebtedness which results in the acceleration of maturity of such Indebtedness,
unless such acceleration of maturity is being contested in a good faith
proceeding or has been rescinded or annulled, as provided in the Indenture; and
(v) certain events of bankruptcy, insolvency or reorganization involving the
Company or any Significant Subsidiary.
In each such case, unless the principal of all of the Notes shall already
have become due, either the Trustee or the holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, by notice as provided
in the Indenture, may declare the principal of all the Notes and the interest
accrued thereon to be due and payable immediately, except that in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes shall automatically become due and payable without further
action or notice. If, at any time after the principal of the Notes shall have
been so declared due and payable, and before any judgment for the payment of the
moneys due shall have been obtained, the Company shall pay or deposit with the
Trustee a sum sufficient to pay all matured installments of interest upon all
the Notes and the principal of any and all Notes that shall have become due
otherwise than by acceleration (with interest upon such principal), and if any
and all Events of Default under the Indenture, other than the non-payment of the
principal of Notes that shall have become due by acceleration, shall have been
cured, waived or otherwise remedied as provided in the Indenture, then and in
every such case the holders of a majority in aggregate principal amount of the
Notes then outstanding, under certain circumstances, may waive all defaults and
rescind and annul such declaration and its consequences.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default (as defined) and unless also the holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the holders of a majority
in aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted by a holder of
a Note for the enforcement of payment of the principal of and premium, if any,
or interest on such Note on or after the respective due dates expressed in such
Note.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
principal amount of the outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby, (i) change the maturity of the principal of,
or any installment of interest on, any Note, (ii) reduce the principal amount
of, or interest on, any Note, (iii) impair the right to institute suit for the
enforcement of any payment on or with respect to any Note, (iv) reduce the
above-stated percentage of
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outstanding Notes necessary to modify or amend the Indenture, or (v) reduce the
percentage of aggregate principal amount of outstanding Notes necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with or merge with or into any other
corporation or convey, transfer or lease its properties or assets as an entirety
or substantially as an entirety to any person, unless (i) the successor or
purchaser is a corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia, (ii) such
successor or purchaser shall expressly assume, by supplemental indenture
satisfactory in form to the Trustee, the due and punctual payment of the
principal of and premium, if any, and interest on all the Notes and the
performance and observance of every covenant and condition of the Company under
the Indenture, and (iii) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing.
SATISFACTION AND DISCHARGE; DEFEASANCE
The Company may satisfy and discharge its obligations under the Indenture
by delivering to the Trustee for cancellation all outstanding Notes and paying
or causing to be paid all other sums payable thereunder by the Company, together
with an Officers' Certificate and Opinion of Counsel and subject to certain
other conditions. In addition, the Indenture provides that at any time the
Company may terminate substantially all of its obligations under the Indenture
and the Notes ("defeasance") (including the covenants described under
"-- Certain Covenants," but excluding its obligations to pay the principal of
and interest on the Notes, those relating to the defeasance trust, and certain
other obligations) by irrevocably depositing with the Trustee United States
legal tender or U.S. Government Obligations sufficient to pay all principal of
and remaining interest on the Notes to maturity to be discharged as and when due
and by complying with certain other conditions relating to discharge. "U.S.
Government Obligations" are direct, non-callable obligations of, or non-callable
obligations guaranteed by, the United States of America for the payment of which
obligation or guarantee the full faith and credit of the United States is
pledged. The conditions to defeasance include, among others, receipt by the
Trustee of an Opinion of Counsel to the effect that Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and will be subject to the same federal income tax as would have been the case
without the defeasance and delivery to the Trustee of an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to the
defeasance of the Notes have been complied with. If the Company exercises its
option to defease, payment of the Notes may not be accelerated because of an
Event of Default.
GOVERNING LAW
The Indenture and the Exchange Notes shall be governed by and construed and
interpreted in accordance with the laws of the State of New York, without regard
to conflicts of laws principles thereof.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
Exchange Notes initially will be represented by one Exchange Note
certificate in registered, global form (the "Global Note"). The Global Note will
be deposited upon issuance with the Trustee as custodian for DTC, in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC.
Except as set forth below, beneficial interests in the Global Note may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Note may not
be exchanged for Notes in certificated form except in the limited circumstances
described below. See "-- Exchange of Book-Entry Notes for Certificated Notes."
Other Exchange Notes will be issued only in registered, certificated (i.e.,
non-global) form without coupons. Other Exchange Notes may not be exchanged for
beneficial interests in the Exchange Global Note
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except in the limited circumstances described below. See "-- Exchange of
Certificated Notes for Book-Entry Notes."
Transfer of beneficial interests in the Global Note will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants,
which may change from time to time.
Depositary Procedures
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing companies and certain other organizations. Access to DTC's
system is also available to other entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established
by it, (i) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the Initial Purchaser with portions of the principal
amount of the Global Note and (ii) ownership of such interests in the Global
Note will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Note).
Investors in the Global Note may hold their interests therein directly
through DTC if they are participants in such system, or indirectly through
organizations which are participants in such system. The laws of some states
require that certain persons take physical delivery in certificated form of
securities that they own. Consequently, the ability to transfer beneficial
interests in the Global Note to such persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants and certain banks, the ability of a person having
beneficial interests in the Global Note to pledge such interests to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such interests, may be affected by the lack of a physical certificate
evidencing such interests. For certain other restrictions on the transferability
of the Notes, see "-- Exchange of Book-Entry Notes for Certificated Notes" and
"-- Exchange of Certificated Notes for Book-Entry Notes."
Except as described below, owners of interests in the Global Note will not
have Notes registered in their name, will not receive physical delivery of Notes
in certificated form and will not be considered the registered owners or holders
thereof for any purpose. The deposit of the Global Note with the Trustee as a
custodian for DTC and its registration with DTC or DTC's nominee effects no
change in the beneficial owners of interest in the Global Note.
Payments in respect of the Global Note registered in the name of DTC or its
nominee will be payable by the Trustee to DTC or its nominee in its capacity as
the registered holder under the Indenture. Under the terms of the Indenture, the
Trustee will treat the persons in whose names the Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Trustee nor any agent thereof has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Note, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the Global Note or
(ii) any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Company that its
current practice, upon receipt of any payment in respect of securities such as
the Notes, is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts
27
<PAGE> 34
proportionate to their respective holdings in principal amount of beneficial
interests in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments by
the Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee, or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
The Indenture will require that payments in respect of the Exchange Notes
represented by the Global Note (including principal, premium, if any, interest
and Additional Interest, if any) be made by wire transfer of immediately
available funds to the Clearing Agency (as defined herein), which shall credit
the relevant accounts at the Clearing Agency. With respect to the Other Exchange
Notes, the Company will make all payments of principal, premium, if any,
interest and Additional Interest, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Exchange Notes represented by the Global Note will trade in DTC's
Same-Day Funds Settlement System and any permitted secondary market trading
activity in such Notes will therefore settle in immediately available funds,
subject in all cases to the rules and procedures of DTC and its Participants.
Transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same-day funds. The Company expects that
secondary trading of the Other Exchange Notes will also be settled in
immediately available funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
Participants to whose account with DTC interests in the Global Note are credited
and only in respect of such portion of the principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Indenture, DTC reserves the
right to exchange the Global Note for Exchange Notes in certificated form and to
distribute such Exchange Notes to its Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company does not take responsibility for the accuracy thereof.
Exchange of Book-Entry Notes for Certificated Notes
The Global Note is exchangeable for Exchange Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary within 90 days or (y) has ceased to be a
clearing agency registered under the Exchange Act, (ii) the Company in its sole
discretion elects to cause the issuance of the Exchange Notes in certificated
form, (iii) there shall have occurred and be continuing an Event of Default or
any event which after notice or lapse of time or both would be an Event of
Default under the Indenture, or (iv) as provided in the following paragraph. In
addition, beneficial interests in the Global Note may be exchanged for
certificated Exchange Notes upon request but only upon at least 20 days prior
written notice given to the Trustee by or on behalf of DTC in accordance with
customary procedures. In all cases, certificated Exchange Notes delivered in
exchange for the Global Note or beneficial interests therein will be in fully
registered form, without coupons, in minimum denominations of $1,000 and
integral multiples of that amount. Upon issuance of Exchange Notes in definitive
form, the Trustee is required to register such Exchange Notes in the name of,
and cause the Exchange Notes to be delivered to, the person or persons (or
nominee thereof) identified as the beneficial owners as DTC shall direct.
Exchange of Certificated Notes for Book-Entry Notes
Old Notes were offered and sold to "qualified institutional buyers" in
reliance on Rule 144A ("Rule 144A Notes"). Old Notes were also offered to
institutional accredited investors in transactions exempt from registration
under the Securities Act not made in reliance on Rule 144A. However, all of the
Old Notes were
28
<PAGE> 35
purchased by "qualified institutional buyers" in reliance on Rule 144A and were
issued in registered, global (i.e., book-entry) form ("Old Global Notes").
Beneficial interests in the Old Global Notes may not be exchanged for Other Old
Notes in registered, certificated (i.e., non-global) form except in limited
circumstances. To the extent Old Global Notes have been exchanged for Other Old
Notes in registered, certificated form, beneficial interests in such Other Old
Notes shall, upon the valid exchange thereof, be represented by Other Exchange
Notes in registered, certificated (i.e., non-global) form. Exchange Notes issued
in certificated form may be exchanged for an interest in the Exchange Global
Note, unless the Exchange Global Note has previously been exchanged in whole for
Other Exchange Notes.
PAYMENT AND PAYING AGENCY
The clearing agency for the Exchange Notes (the "Clearing Agency") shall
initially be DTC. The Indenture will require that payments in respect of the
Exchange Notes represented by the Global Note (including principal, premium, if
any, interest and Additional Interest, if any) be made by wire transfer of
immediately available funds to the Clearing Agency, which shall credit the
relevant accounts at the Clearing Agency. With respect to the Other Exchange
Notes, the Company will make all payments of principal, premium, if any,
interest and Additional Interest, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The paying agent for the Exchange Notes (the "Paying Agent") shall
initially be the Trustee. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Trustee and the Company. In the
event that the Trustee shall no longer be the Paying Agent, the Company shall
appoint a successor (which shall be a bank or trust company acceptable to the
Company) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Trustee will act as registrar and transfer agent for the Notes.
Registration of transfers of the Exchange Notes will be effected without
charge by or on behalf of the Company, subject to payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Company will not be required to register or cause to be registered
the transfer of the Notes after they have been called for redemption.
INFORMATION CONCERNING THE TRUSTEE
The Trustee, other than during the occurrence and continuance of an Event
of Default, undertakes to perform only such duties as are specifically set forth
in the Indenture and, after such Event of Default, must exercise the same degree
of care and skill as a prudent person would exercise or use in the conduct of
his or her own affairs. Subject to this provision, the Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Notes unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred thereby. If no Event
of Default has occurred and is continuing and the Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
Indenture or is unsure of the application of any provision of the Indenture, and
the matter is not one on which holders of the Notes are entitled under the
Indenture to vote, then the Trustee shall take such action as is directed by the
Company and, if not so directed, shall take such action as it deems advisable
and in the best interests of the holders of the Notes and will have no liability
except for its own bad faith, negligence or willful misconduct.
The Trustee currently provides commercial banking and other services to the
Company.
29
<PAGE> 36
DESCRIPTION OF OLD NOTES
The information contained in this section is relevant to holders of Old
Notes whose Old Notes are not tendered or accepted for exchange by the
Expiration Date of the Exchange Offer. See "Risk Factors -- Consequences of a
Failure to Exchange Old Notes."
The terms of the Old Notes are identical in all material respects to terms
of the Exchange Notes, except that (i) the Old Notes have not been registered
under the Securities Act, are subject to certain restrictions on transfer and
are entitled to certain rights under the Registration Rights Agreement (which
rights will terminate upon consummation of the Exchange Offer, except under
limited circumstances), (ii) the Old Notes contain a $100,000 minimum transfer
restriction and certain other restrictions on transfer, and (iii) the Old Notes
provide for Additional Interest which will terminate as set forth below. The
Registration Rights Agreement provides that, if an Exchange Offer Registration
Statement or a Shelf Registration Statement (if required to be filed) is not
declared effective by the Commission on or prior to September 20, 1998,
Additional Interest shall accrue on the principal amount of the Old Notes
affected thereby, at the rate of 0.25% per annum of the principal amount of such
Old Notes, for the period from the occurrence of such event until such time the
Exchange Offer Registration Statement or any required Shelf Registration
Statement is declared effective. In addition, if the Exchange Offer is not
consummated on or prior to the 30th day after the date on which the Exchange
Offer Registration Statement is declared effective, Additional Interest shall
accrue on the principal amount of the Notes affected thereby, until the Exchange
Offer is consummated. Upon the completion of the Exchange Offer, the Company
will have satisfied its obligations under the Registration Rights Agreement and
the Old Notes will not be entitled to any such Additional Interest. Accordingly,
holders of Old Notes should review the information set forth under "Risk
Factors -- Consequences of a Failure to Exchange Old Notes" and "Description of
Exchange Notes."
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<PAGE> 37
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER AND INVESTMENT IN
THE EXCHANGE NOTES
The following summary describes the material United States federal income
tax consequences of the exchange of the Old Notes for Exchange Notes and
ownership of the Exchange Notes to a holder of an Exchange Note that is a
citizen or resident of the United States, a corporation, a partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, an estate the income of which is subject to
United States federal income taxation regardless of its source, or a trust which
is subject to the supervision of a court within the United States and the
control of one or more United States persons as described in Section 7701(a)(30)
of the Internal Revenue Code of 1986, as amended (the "Code") (a "Holder").
Except where noted, this summary deals only with Old Notes and Exchange Notes
held as capital assets and does not deal with special situations, such as those
of dealers in securities or currencies, financial institutions, life insurance
companies, persons holding Old Notes and Exchange Notes as part of a hedging or
conversion transaction or a straddle, certain expatriates, and holders of Old
Notes and Exchange Notes whose "functional currency" is not the U.S. dollar.
Furthermore, the discussion below is based upon the provisions of the Code, and
regulations, rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
federal income tax consequences different from those discussed below. In
addition, except as otherwise indicated, the following does not consider the
effect of any applicable foreign, state or local or other tax laws or estate or
gift tax considerations. PERSONS CONSIDERING THE EXCHANGE OFFER SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT
OF THEIR PARTICULAR SITUATIONS, AS WELL AS ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTION.
EXCHANGE OF OLD NOTES FOR EXCHANGE NOTES
The issuance of the Exchange Notes to holders of the Old Notes pursuant to
the terms set forth in this Prospectus should not constitute an exchange for
U.S. federal income tax purposes because (a) the Exchange Notes should not be
considered to differ materially in kind or extent from the Old Notes and (b) the
exchange will occur by operation of the terms of the Old Notes. Consequently, no
gain or loss would be recognized by holders of the Old Notes upon receipt of the
Exchange Notes, and ownership of the Exchange Notes will be considered a
continuation of ownership of the Old Notes. For purposes of determining gain or
loss upon the subsequent sale or exchange of the Exchange Notes, a Holder's
basis in the Exchange Notes should be the same as such Holder's basis in the Old
Notes exchanged therefor. A Holder's holding period for the Exchange Notes
should include the Holder's holding period for the Old Notes exchanged therefor.
The issue price and other tax characteristics of the Exchange Notes should be
identical to the issue price and other tax characteristics of the Old Notes
exchanged therefor.
STATED INTEREST ON EXCHANGE NOTES; MARKET DISCOUNT; BOND PREMIUM
Except as set forth below, interest on an Exchange Note will generally be
taxable to a Holder as ordinary income from domestic sources at the time it is
paid or accrued in accordance with the Holder's method of accounting for tax
purposes.
Market Discount. These market discount rules discussed below would apply
to any Holder who purchases an Exchange Note for less than the stated amount at
maturity of the Old Notes.
Any gain recognized by a Holder on the disposition (including a redemption)
of an Exchange Note that has accrued market discount will be treated as ordinary
income to the extent of the accrued market discount, provided that the amount of
market discount exceeds a statutorily-defined de minimis amount. The amount of
"market discount" would be the excess, if any, of (i) the Exchange Note's stated
redemption price at maturity over (ii) the purchase price of the Exchange Note.
Under the de minimis exception, there is no market discount if such excess is
less than 0.25% of the stated redemption price at maturity multiplied by the
number of complete years to maturity. Unless the Holder elects otherwise, the
accrued market discount would be the amount calculated by multiplying the market
discount by a fraction, the numerator of which is the number of
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<PAGE> 38
days the Exchange Note has been held and the denominator of which is the number
of days after the Holder's acquisition of the Exchange Note up to and including
its maturity date.
If a Holder of an Exchange Note acquired at a market discount disposes of
such Exchange Note in any transaction other than a sale, exchange or involuntary
conversion, even though otherwise non-taxable (e.g., a gift), such Holder will
be deemed to have realized an amount equal to the fair market value of the
Exchange Note and would be required to recognize as ordinary income any accrued
market discount to the extent of the deemed gain. A Holder of an Exchange Note
acquired at a market discount also may be required to defer the deduction of all
or a portion of the interest on any indebtedness incurred or maintained to carry
the Exchange Note until it is disposed of in a taxable transaction.
A Holder may elect to include the market discount in income as it accrues.
This election would apply to all market discount obligations acquired by the
electing Holder on or after the first day of the first taxable year to which the
election applies and may be revoked only with the consent of the Internal
Revenue Service. If a Holder of an Exchange Note so elects to include market
discount in income currently, the above-discussed rules with respect to ordinary
income recognition resulting from sales and certain other disposition
transactions and to deferral of interest deductions would not apply.
Bond Premium. If a Holder purchases an Exchange Note at a cost that
exceeds the amount payable on maturity (such excess being the "bond premium"),
the Holder may elect to amortize such bond premium on a constant interest basis
over the period from the acquisition date to the maturity date of such Exchange
Note and, except as future Treasury Regulations may otherwise provide, reduce
the amount of interest included in income in respect of the Exchange Note by
such amount. A Holder who elects to amortize bond premium must reduce its
adjusted basis in the Exchange Note by the amount of such allowable
amortization. An election to amortize bond premium would apply to all
amortizable bond premium on all taxable bonds held at or acquired after the
beginning of the Holder's taxable year as to which the election is made, and may
be revoked only with the consent of the Internal Revenue Service.
If an election to amortize bond premium is not made, a Holder will
generally receive a tax benefit from the bond premium only upon computing its
gain or loss upon the sale or other disposition or payment of the principal
amount of the Exchange Note.
SALE, EXCHANGE AND RETIREMENT OF EXCHANGE NOTES
A Holder's basis in an Exchange Note, in general, will be the Holder's cost
therefor, increased by any market discount previously included in income and
reduced by any amortized bond premium. Upon the sale, exchange, retirement or
other disposition of an Exchange Note, a Holder will recognize gain or loss
equal to the difference between the amount realized upon the sale, exchange,
retirement or other disposition and the basis of the Exchange Note. Except as
described above with respect to market discount, such gain or loss will be
capital gain or loss and will be long-term capital gain or loss if at the time
of sale, exchange, retirement or other disposition the Exchange Note has been
held for more than one year. Net long-term capital gain recognized by an
individual from the sale, exchange or retirement of an Exchange Note will
generally be subject to tax at a rate not to exceed 20%. The deductibility of
capital losses is subject to limitations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments on an
Exchange Note and to the proceeds of sale of an Exchange Note made to Holders
other than certain exempt recipients (such as corporations). A 31% backup
withholding tax will apply to such payments if the Holder fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income.
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<PAGE> 39
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account in
connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by Participating Broker-Dealers during the period referred to below in
connection with resales of Exchange Notes received in exchange for Old Notes if
such Old Notes were acquired by such Participating Broker-Dealers for their own
accounts as a result of market-making activities or other trading activities.
The Company has agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such Exchange Notes for a period ending 90 days after
the Expiration Date (subject to extension under certain limited circumstances
described herein) or, if earlier, when all such Exchange Notes have been
disposed of by such Participating Broker-Dealer. However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of Exchange Notes received in exchange for Old Notes pursuant to the Exchange
Offer must notify the Company, or cause the Company to be notified, on or prior
to the Expiration Date, that it is a Participating Broker-Dealer. Such notice
may be given in the space provided for that purpose in the Letter of Transmittal
or may be delivered to the Exchange Agent at one of its addresses set forth
herein under "The Exchange Offer -- Exchange Agent." See "The Exchange
Offer -- Resales of Exchange Notes."
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. Exchange Notes received by broker-dealers for
their own accounts in connection with the Exchange Offer may be sold from time
to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes.
Any broker-dealer that resells Exchange Notes that were received by it for
its own account in connection with the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Notes may be deemed to be
an "underwriter" within the meaning of the Securities Act, and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Baker & McKenzie, New York, New York.
EXPERTS
The consolidated financial statements of the Company and subsidiaries
incorporated by reference in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, have been incorporated herein by reference
in reliance upon the reports of PricewaterhouseCoopers LLP, independent
accountants, given upon the authority of such firm as experts in accounting and
auditing.
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<PAGE> 40
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of the State of Delaware ("Delaware Law")
authorizes corporations to limit or eliminate the personal liability of
directors to corporations and their stockholders for monetary damages for breach
of directors' fiduciary duty of care. Article IV of the Company's By-laws
requires indemnification of the Company's directors and officers to the fullest
extent permitted by the Delaware Law and provides for the advancement of defense
expenses provided the director or officer agrees to repay the advance if it is
ultimately determined that he is not entitled to indemnification. Article IV
also provides that the indemnification provided by the By-laws is not exclusive.
Section 145 (a) of the Delaware Law provides in general that a corporation may
indemnify anyone who is or may be a party to a legal proceeding by reason of his
service as a director or officer against expenses, judgments, fines and
settlement payments actually and reasonably incurred if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, as to any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145(b) of the
Delaware Law provides similarly where the proceeding is by or in the right of
the corporation to procure a judgment in its favor. Section 145(g) of the
Delaware Law allows a corporation to maintain insurance on behalf of any officer
or director against any liability incurred by him in such capacity, whether or
not the corporation would have the power to indemnify him against such liability
under law. The Company maintains such directors and officers liability insurance
in an amount aggregating $20.0 million.
Each of the Company's directors has entered into a supplementary indemnity
agreement with the Company which (i) confirms the indemnity set forth in the
By-laws and gives assurances that such indemnity will continue to be provided
despite any By-law changes and (ii) provides, subject to certain conditions,
that the director shall be indemnified to the fullest extent permitted by law
against all expenses, fines and settlement amounts incurred or paid by him in
any proceeding.
As permitted by Section 102(b)(7) of the Delaware Law, Article 12 of the
Company's Certificate of Incorporation eliminates personal liability of any
director to the Company and its stockholders for breach of the director's
fiduciary duty of care, except where the director has breached his duty of
loyalty, acted in bad faith, engaged in intentional or knowing misconduct,
negligently or willfully declared an improper dividend or effected an unlawful
stock purchase or redemption, or obtained an improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-1
<PAGE> 41
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<S> <C>
4.1 Indenture dated as of March 27, 1998 between Trenwick Group
Inc. and The National Bank of Chicago, as Trustee, relating
to the Notes*
4.2 Form of Exchange Note (included as Exhibit A to Exhibit
4.1)*
4.3 Registration Rights Agreement dated as of March 27, 1998
between Trenwick Group Inc. and Lehman Brothers Inc., as the
Initial Purchaser*
5.1 Opinion of Baker & McKenzie to Trenwick Group Inc. as to
legality of the Exchange Notes to be issued by Trenwick
Group Inc.*
12.1 Computation of consolidated ratios of earnings to fixed
charges
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Baker & McKenzie (included in Exhibit 5.1)*
24.1 Power of Attorney of certain directors of Trenwick Group
Inc.*
25.1 Form T-1 Statement of Eligibility of The First National Bank
of Chicago to act as trustee under the Indenture*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees*
99.5 Form of Letter to Clients*
</TABLE>
- ---------------
* Previously Filed
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act.");
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of Trenwick
Group Inc.'s annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 42
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer of controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by the controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired or involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE> 43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), Trenwick Group Inc. certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-4 and has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford and State of
Connecticut, on the 18th day of August, 1998.
TRENWICK GROUP INC.
By: /s/ JAMES F. BILLETT, JR.
------------------------------------
James F. Billett, Jr.
Chairman, President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES F. BILLETT, JR. Chairman, President, Chief August 18, 1998
- --------------------------------------------------- Executive Officer and Director
James F. Billett, Jr.
/s/ ALAN L. HUNTE Vice President, Chief Financial August 18, 1998
- --------------------------------------------------- Officer and Treasurer
Alan L. Hunte
* Director August 18, 1998
- ---------------------------------------------------
W. Marston Becker
* Director August 18, 1998
- ---------------------------------------------------
Anthony S. Brown
* Director August 18, 1998
- ---------------------------------------------------
Neil Dunn
* Director August 18, 1998
- ---------------------------------------------------
P. Anthony Jacobs
* Director August 18, 1998
- ---------------------------------------------------
Joseph D. Sargent
* Director August 18, 1998
- ---------------------------------------------------
Frederick D. Watkins
* Director August 18, 1998
- ---------------------------------------------------
Stephen R. Wilcox
* By: /s/ JAMES F. BILLETT, JR.
- ---------------------------------------------------
James F. Billett, Jr.
Attorney-in-fact
</TABLE>
II-4
<PAGE> 1
EXHIBIT 12.1
TRENWICK GROUP INC.
COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED -----------------------------------------------
JUNE 30, 1998 1997 1996 1995 1994 1993
------------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income........................... $18,220 $35,252 $33,848 $29,841 $20,282 $23,739
Extraordinary loss on debt
redemption, net of $558 income tax
benefit............................ -- 1,037 -- -- -- --
Income taxes......................... 3,396 11,241 9,980 8,572 2,753 4,220
------- ------- ------- ------- ------- -------
Income before income taxes and
extraordinary item................. 21,616 47,530 43,828 38,413 23,035 27,959
Fixed charges (as below)............. 6,520 10,140 6,826 6,805 6,785 6,737
------- ------- ------- ------- ------- -------
Earnings (for ratio calculation)..... $28,136 $57,670 $50,654 $45,218 $29,820 $34,696
======= ======= ======= ======= ======= =======
Fixed charges:
Interest expense..................... $ 1,349 $ 894 $ 6,503 $ 6,496 $ 6,469 $ 6,486
Minority interest.................... 4,851 8,920 -- -- -- --
Portion of rental expense which
approximates the interest factor... 320 326 323 309 316 251
------- ------- ------- ------- ------- -------
Total fixed charges.................. $ 6,520 $10,140 $ 6,826 $ 6,805 $ 6,785 $ 6,737
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges... 4.3 5.7 7.4 6.6 4.4 5.2
======= ======= ======= ======= ======= =======
</TABLE>
For purposes of computing the consolidated ratios of earnings to fixed
charges, "earnings" represent income before income taxes and extraordinary item
and fixed charges. "Fixed charges" include gross interest expense (other than on
deposits), minority interest and the proportion deemed representative of the
interest factor of rent expense.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 1 to the Registration Statement on Form
S-4 of our report dated January 27, 1998, which appears on page 47 of the 1997
Annual Report to Stockholders of Trenwick Group Inc., which is incorporated by
reference in its Annual Report on Form 10-K for the year ended December 31,
1997. We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page S-4 of such Annual Report
on Form 10-K. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ PricewaterhouseCoopers LLP
New York, New York
August 18, 1998
