CHANDLER INSURANCE CO LTD, PRES14A, 2000-11-22

CHANDLER INSURANCE CO LTD
PRES14A, 2000-11-22
FIRE, MARINE & CASUALTY INSURANCE

Previous: CHANDLER INSURANCE CO LTD, SC 13E3, EX-99.3(D)(3), 2000-11-22

Next: SUNAMERICA INCOME FUNDS, NSAR-A, 2000-11-22

<PAGE>
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12

CHANDLER INSURANCE COMPANY, LTD.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

N/A
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>

Payment of Filing Fee (Check the appropriate box):

<TABLE>
<S> <C> <C>
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------

/ / Fee paid previously with preliminary materials.

/X/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.

(1) Amount Previously Paid:
$2,765.87
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Schedule 13E-3
----------------------------------------------------------
(3) Filing Party:
Chandler Insurance Company, Ltd.
----------------------------------------------------------
(4) Date Filed:
November 22, 2000
----------------------------------------------------------
</TABLE>
<PAGE>
[LOGO]

Dear Shareholder:

You are cordially invited to attend a Special Meeting of Shareholders (the
"Special Meeting") of Chandler Insurance Company, Ltd., a Cayman Islands
corporation (the "Company"), to be held at 10:00 a.m. local time, on Tuesday,
January 16, 2001, at Lando's Restaurant, Hidalgo Street No. 270, in Ciudad
Acuna, Mexico. A Notice of Special Meeting, Proxy Statement and form of proxy
card are enclosed. At this meeting you will be asked:

1. To consider and vote upon a proposal to (A) amend by Special
Resolutions, in the proposed form attached hereto as Appendix A, the
Company's Memorandum of Association and Articles of Association to
(i) authorize the creation of Class A Common Shares, $0.50 par value per
share; (ii) authorize and designate the rights, preferences, privileges
and restrictions granted to and imposed on the Series A Cumulative
Convertible Preferred Shares, $1.00 par value per share, Series B
Cumulative Preferred Shares, $1.00 par value per share, and Series C
Cumulative Preferred Shares, $1.00 par value per share; (iii) provide for
the repurchase of capital shares; (iv) provide for the payment of cash in
lieu of issuing fractional shares; and (v) effect a 1-for-1,000,000
reverse stock split of the Company's common shares, $1.67 par value (the
"Common Shares"), thereby reducing the number of authorized Common Shares
from 10,000,000 shares to ten shares and providing a cash payment of
$10.00 per issued Common Share in lieu of the issuance of any resulting
fractional shares following the reverse stock split (the "Reverse Stock
Split") and (B) repurchase Common Shares held by certain management and
key shareholders in exchange for new shares of various other classes
and/or series of capital stock of the Company (each of (A) and (B) are
collectively referred to as the "Recapitalization Plan"); and

2. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.

The Board of Directors has adopted resolutions approving the
Recapitalization Plan pursuant to which the Company will repurchase Common
Shares beneficially owned by certain management and key shareholders (the
"Continuing Shareholders") in exchange for new shares of various other classes
and/or series of capital stock of the Company prior to the Reverse Stock Split.
All other holders of Common Shares (the "Public Shareholders") and certain
Continuing Shareholders will receive cash in lieu of the issuance of any
resulting fractional shares following the Reverse Stock Split. The accompanying
Proxy Statement describes the Reverse Stock Split and the Recapitalization Plan
and their effect on the Continuing Shareholders and the Public Shareholders.

It is important that your shares be represented at the Special Meeting.
Whether or not you expect to attend the Special Meeting in person, please sign
and date the enclosed proxy card and return it in the enclosed envelope at your
earliest convenience.

Very truly yours,

W. BRENT LAGERE
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER

December , 2000
<PAGE>
CHANDLER INSURANCE COMPANY, LTD.
ANDERSON SQUARE, FIFTH FLOOR
GRAND CAYMAN, CAYMAN ISLANDS, B.W.I.

------------------------

NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 16, 2001

---------------------

The Special Meeting of Shareholders (the "Special Meeting") of Chandler
Insurance Company, Ltd., a Cayman Islands corporation (the "Company"), will be
held at Lando's Restaurant, Hidalgo Street No. 270, in Ciudad Acuna, Mexico, on
Tuesday, January 16, 2001 at 10:00 a.m. local time, for the following purposes:

2. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.

Only shareholders of record at the close of business on December 1, 2000 are
entitled to notice of, and to vote at, the Special Meeting and any adjournments
or postponements thereof. A list of shareholders entitled to vote at the Special
Meeting will be available at the Special Meeting for examination by any
shareholder and at least ten days prior to the Special Meeting at the office of
the Secretary of the Company at the address listed above.
<PAGE>
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE DATE, EXECUTE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD TO THE COMPANY IN THE ENCLOSED
ADDRESSED AND STAMPED ENVELOPE. You may revoke the proxy at any time before the
proxy is exercised by delivering written notice of revocation to the Secretary
of the Company, by delivering a subsequently dated proxy card or by attending
the Special Meeting, withdrawing the proxy and voting in person.

By Order of the Board of Directors,

W. BRENT LAGERE
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER

December , 2000
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
INTRODUCTION................................................ 1

SUMMARY..................................................... 2

GENERAL INFORMATION......................................... 6
Persons Making the Solicitation......................... 6
Voting Securities and Record Date....................... 6
Shareholders List....................................... 6
Quorum and Vote Required................................ 6
The Proxy............................................... 7

THE RECAPITALIZATION PLAN................................... 8
Description of Recapitalization Plan.................... 8
Effective Date of Recapitalization Plan................. 9
Effects of the Recapitalization Plan.................... 9
Reasons for and Purpose of the Recapitalization Plan.... 11
Comparison of Capital Stock Before and After
Recapitalization Plan.................................. 12
Capital Share Repurchases Amendment..................... 15
Payment in Lieu of Fractional Shares Amendment.......... 16
Advantage and Disadvantages of the Recapitalization
Plan................................................... 17

SPECIAL FACTORS............................................. 19
Background of the Recapitalization Plan................. 19
Recommendation of the Special Committee and Board of
Directors; Fairness of the Recapitalization Plan....... 20
Fairness Opinion of Financial Advisor................... 23
Interests of Certain Persons............................ 28
Conduct of the Company's Business After the
Recapitalization Plan.................................. 29
Material U.S. Federal Tax Consequences.................. 29
Dissenters' Appraisal Rights............................ 30
Source of Funds......................................... 30
Exchange of Certificates................................ 31
Payment of Cash in Lieu of Fractional Shares............ 31

THE COMPANY................................................. 32
Executive Officers and Directors........................ 32
Financial Information................................... 33
Price Range of Common Shares; Dividends................. 34
Share Purchases......................................... 34
Certain Relationships and Related Transactions.......... 35

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 36
Shareholders Holding Over Five Percent.................. 37
Other Matters Regarding Beneficial Ownership............ 38
Insurance Regulation Concerning Change or Acquisition of
Control................................................ 38
</TABLE>

i
<PAGE>
<TABLE>
<S> <C>
LITIGATION.................................................. 38

SHAREHOLDERS' PROPOSALS..................................... 39

INCORPORATION BY REFERENCE.................................. 39

AVAILABLE INFORMATION....................................... 40

MISCELLANEOUS............................................... 40

APPENDIX A--SPECIAL RESOLUTIONS
APPENDIX B-- ORDINARY AND SPECIAL RESOLUTIONS TO AUTHORIZE PREFERRED
STOCK
APPENDIX C--FAIRNESS OPINION OF STEPHENS INC.
</TABLE>

ii
<PAGE>
CHANDLER INSURANCE COMPANY, LTD.
ANDERSON SQUARE, FIFTH FLOOR
GRAND CAYMAN, CAYMAN ISLANDS, B.W.I.
345-949-8177
------------------------

PROXY STATEMENT FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 16, 2001
---------------------

INTRODUCTION

This Proxy Statement is furnished to shareholders of Chandler Insurance
Company, Ltd., a Cayman Islands corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors of the Company (the
"Board") to be used at the Special Meeting of Shareholders of the Company to be
held on January 16, 2001 and at any adjournments or postponements thereof (the
"Special Meeting"). Shares represented by proxy cards in the form enclosed will
be voted at the Special Meeting if the proxy card is properly executed, returned
to the Company before the Special Meeting and not revoked. Any shareholder
giving a proxy may revoke it at any time before it is voted by delivering
written notice of revocation to the Secretary of the Company, by delivering a
subsequently dated proxy card or by attending the Special Meeting, withdrawing
the proxy and voting in person. Your attendance at the Special Meeting will not
constitute automatic revocation of the proxy. This Proxy Statement and the
enclosed proxy card form is first being sent to shareholders on or about
December , 2000.

The purpose of the Special Meeting is to consider and vote upon a proposal
to (A) amend by Special Resolutions, in the proposed form attached hereto as
Appendix A, the Company's Memorandum of Association and Articles of Association
to (i) authorize the creation of Class A Common Shares, $0.50 par value per
share (the "Class A Common Shares"); (ii) authorize and designate the rights,
preferences, privileges and restrictions granted to and imposed on the Series A
Cumulative Convertible Preferred Shares, $1.00 par value per share (the
"Series A Preferred Shares"), Series B Cumulative Preferred Shares, $1.00 par
value per share (the "Series B Preferred Shares"), and Series C Cumulative
Preferred Shares, $1.00 par value per share (the "Series C Preferred Shares");
(iii) provide for the repurchase of capital shares; (iv) provide for the payment
of cash in lieu of issuing fractional shares; and (v) effect a 1-for-1,000,000
reverse stock split of the Company's common shares, $1.67 par value (the "Common
Shares"), thereby reducing the number of authorized Common Shares from
10,000,000 shares to ten shares and providing a cash payment of $10.00 per
issued Common Share in lieu of the issuance of any resulting fractional shares
following the reverse stock split (the "Reverse Stock Split") and
(B) repurchase Common Shares held by certain management and key shareholders in
exchange for new shares of various other classes and/or series of capital stock
of the Company (each of (A) and (B) are collectively referred to as the
"Recapitalization Plan"). The Recapitalization Plan was approved by a Special
Committee of the Board (the "Special Committee") and recommended to the
Company's Board on November 14, 2000. On November 15, 2000, the Board approved
the Recapitalization Plan and recommended it for approval at the Special
Meeting.

As part of the Recapitalization Plan, subject to shareholder approval, the
Company will repurchase Common Shares beneficially owned by certain management
and key shareholders (the "Continuing Shareholders") in exchange for new shares
of various other classes and/or series of capital stock of the Company prior to
the Reverse Stock Split. All other holders of Common Shares (the "Public
Shareholders") and certain Continuing Shareholders on the Effective Date
(defined herein) will receive $10.00 per Common Share owned immediately prior to
the Reverse Stock Split in lieu of the issuance of any resulting fractional
shares following the Reverse Stock Split. As a result, the Public Shareholders
will no longer be shareholders of the Company.

THE RECAPITALIZATION PLAN OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY
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 FAIRNESS OR MERITS
OF THE RECAPITALIZATION PLAN OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY OR
UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY

THE FOLLOWING SUMMARY CONTAINS THE BASIC INFORMATION ABOUT THE TRANSACTIONS
PROPOSED IN THIS PROXY STATEMENT. IT LIKELY DOES NOT CONTAIN ALL THE INFORMATION
THAT IS IMPORTANT TO YOU. FOR A MORE COMPLETE UNDERSTANDING OF THE TRANSACTIONS
PROPOSED IN THIS PROXY STATEMENT, WE ENCOURAGE YOU TO READ THIS ENTIRE DOCUMENT
AND THE DOCUMENTS REFERRED TO AND INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT.

THE RECAPITALIZATION PLAN

At the Special Meeting, shareholders will consider and vote on the
Recapitalization Plan. The Recapitalization Plan consists of the following
components:

(A) authorization and creation of Class A Common Shares;

(B) authorization and designation of the rights, preferences, privileges and
restrictions granted to and imposed on the Series A Preferred Shares,
Series B Preferred Shares and Series C Preferred Shares;

(C) amendments to our Articles of Association providing for the repurchase
of capital shares and the payment of cash in lieu of issuing fractional
shares;

(D) repurchase all Common Shares owned by W. Brent LaGere and Mark T. Paden,
and LaGere will purchase 500,661 Class A Common Shares, and Paden will
purchase 125,165 Class A Common Shares;

(E) repurchase approximately 410,000 Common Shares owned by the Chandler
(U.S.A.), Inc. 401(k) Thrift Plan, and the Plan will allow participants
to invest in the Company's Series A Preferred Shares;

(F) repurchase approximately 1,245,000 Common Shares held by the Continuing
Shareholders, other than LaGere and Paden, and the Continuing
Shareholders, other than LaGere and Paden, will purchase approximately
485,000 Series B Preferred Shares and 760,000 Series C Preferred Shares;
and

(G) consummation of a 1-for-1,000,000 reverse stock split of our Common
Shares by reducing the number of authorized Common Shares from 10,000,000
shares to ten shares and making a cash payment of $10.00 per Common
Share, prior to giving effect to the Reverse Stock Split, in lieu of the
issuance of any resulting fractional shares following the Reverse Stock
Split, to be effective immediately following the completion of (A)--(F).
The proposed form of the Special Resolutions to Amend the Memorandum of
Association and Articles of Association are attached hereto as
Appendix A. Following the Reverse Stock Split, the Public Shareholders
will no longer be shareholders. See "The Recapitalization
Plan--Description of Recapitalization Plan."

EFFECTIVE DATE OF RECAPITALIZATION PLAN

The Recapitalization Plan will become effective immediately following the
closing of the Repurchase and Subscription Agreements with the Continuing
Shareholders, the completion of Series A Preferred Shares elections under the
Plan, and the sale of Class A Common Shares to Messrs. LaGere and Paden. If
approved, such events are expected to occur as soon as practicable after the
Special Meeting.

We have not set a specific deadline for consummating the Recapitalization
Plan and reserve the right to withdraw the Recapitalization Plan from the
shareholder approval process or postpone or adjourn the Special Meeting in order
to consider any superior bona fide third party proposal that might

2
<PAGE>
provide greater value to the Public Shareholders or any other reason. The
Recapitalization Plan does not contain nor is subject to any "break-up" fees or
expenses or other deal protection devices. As a result, moving forward with the
Recapitalization Plan would not restrict or impair us or the Board from
considering or pursuing any third party proposal, either before or after
shareholder approval is received.

DATE, TIME AND PLACE OF SPECIAL MEETING

The Special Meeting will be held on Tuesday, January 16, 2001 at 10:00 a.m.
local time, at Lando's Restaurant, Hidalgo Street No. 270, in Ciudad Acuna,
Mexico, for the purpose of considering and voting upon the Recapitalization
Plan. The Special Meeting may be postponed or adjourned for any reason.

VOTING SECURITIES AND RECORD DATE

Our only voting securities are Common Shares, $1.67 par value per share.
Holders of record of all Common Shares outstanding at the close of business on
December 1, 2000 will be entitled to one vote for each Common Share held of
record on the record date upon each matter presented the shareholders to be
voted upon at the Special Meeting. At the close of business on December 1, 2000,
we had outstanding Common Shares. The presence, in person or by
proxy, of a majority of our Common Shares outstanding on the record date will
constitute a quorum for the transaction of business at the Special Meeting. See
"General Information--Voting Securities and Record Date."

VOTE REQUIRED

The affirmative vote of the holders of two-thirds of the Common Shares which
are present in person or by proxy and voted at the Special Meeting is required
to approve the Recapitalization Plan at the Special Meeting. In addition, the
affirmative vote of a majority of Common Shares held by Public Shareholders
which are present in person or by proxy and voted at the Special Meeting is
required to approve the Recapitalization Plan.

As of the record date, the Continuing Shareholders beneficially owned
approximately [2,030,000] Common Shares, which represents approximately [61%] of
the outstanding Common Shares. The Continuing Shareholders are expected to vote
all of their shares in favor of the Recapitalization Plan at the Special
Meeting. See "General Information--Quorum and Vote Required."

DISSENTERS' APPRAISAL RIGHTS

No appraisal or dissenters' rights are available under the Cayman Islands
Companies Law to shareholders who dissent from the Recapitalization Plan.
Shareholders will be entitled to any other rights and remedies available under
the Cayman Islands Companies Law or federal or state securities laws in
connection with the adoption of the Recapitalization Plan. See "Special
Factors--Dissenters' Appraisal Rights."

REASONS AND PURPOSE OF RECAPITALIZATION PLAN

The Board believes that neither we nor our shareholders derive any material
benefit from the continued registration of our Common Shares under the Exchange
Act and that the monetary expense and burden to management of continued
registration significantly outweigh any benefits that may be received by us or
our shareholders as a result of such registration. The Board also is proposing
the Recapitalization Plan in order to provide a means for Public Shareholders to
receive cash for their Common Shares because there is limited trading market for
our Common Shares. See "The Recapitalization Plan--Reasons and Purpose of the
Recapitalization Plan."

3
<PAGE>
EFFECTS OF THE RECAPITALIZATION PLAN

The result of our Recapitalization Plan and purchase of fractional interests
of Common Shares after the Reverse Stock Split will be to reduce the number of
our record shareholders from approximately 140 to 25 and our beneficial
shareholders from 300 to 50. Furthermore, the Continuing Shareholders will be
our only holders of capital stock. As a result, the Common Shares will no longer
be registered with the SEC under Section 12(g) of the Exchange Act. Thus, we
will no longer be required to file reports with the SEC. See "The
Recapitalization Plan--Effects of the Recapitalization Plan."

FAIRNESS OF THE PRICE FOR FRACTIONAL INTERESTS

Our management proposed a cash payment of $10.00 per Common Share prior to
giving effect to the Reverse Stock Split in lieu of the issuance of any
resulting fractional shares following the Reverse Stock Split. They arrived at
this purchase price based on several factors such as lack of liquidity in a
trading market for the Common Shares and our historic, present and projected
earnings performance. A special committee of independent directors was appointed
by the Board to determine if the consideration to be received under, and the
approval process of, the Recapitalization Plan are fair. Based upon a number of
factors, the Special Committee concluded that the Recapitalization Plan,
including the consideration to be received by the Public Shareholders in lieu of
the issuance of any resulting fractional shares following the Reverse Stock
Split, is fair to and in the best interests of the shareholders and recommended
that the Board approve the Recapitalization Plan. Based upon the Special
Committee's recommendation and the fairness opinion delivered by Stephens Inc.
to the special committee, the Board believes that the Recapitalization Plan is
fair to, and in the best interests of, the Company and its shareholders,
including the Public Shareholders. See "Special Factors--Recommendation of the
Special Committee and Board of Directors; Fairness of the Recapitalization Plan"
and "Special Factors--Fairness Opinion of Financial Advisor."

FAIRNESS OPINION OF FINANCIAL ADVISOR

The Special Committee retained Stephens Inc. to act as independent
investment bankers and financial advisor to the Special Committee in connection
with its consideration of the proposed cash consideration to be received by the
Public Shareholders under the Recapitalization Plan. At the meeting of the
Special Committee held on November 14, 2000, Stephens delivered its opinion to
the Special Committee that the consideration of $10.00 per share to be paid to
the Public Shareholders was fair, from a financial point of view, to the Public
Shareholders. The full text of the written opinion of Stephens, which sets forth
the assumptions made, procedures followed, matters considered and scope of
review, is attached hereto as Appendix C. See "Special Factors--Fairness Opinion
of Financial Advisor."

SOURCE OF FUNDS

We estimate the total cost to be incurred by us in the Reverse Stock Split
for payment of fractional shares, including transaction expenses of
approximately $900,000, will be approximately $14.7 million. We intend to
finance the transaction through a $2.4 million sale of additional Class A Common
Shares to LaGere and Paden, an intercompany loan of up to $11.8 million from
Chandler Insurance (Barbados), Ltd., our direct subsidiary, and proceeds of
approximately $775,000 from the exercise of outstanding options. Management
believes that the use of the intercompany loan will not impair our financial
position or the financial position of our subsidiaries. See "Special
Factors--Source of Funds."

4
<PAGE>
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

We believe that the Recapitalization Plan will qualify as a reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended. Accordingly,
we will not recognize any gain or loss as a result of the Recapitalization Plan.
The receipt of cash for fractional shares of Common Shares will be a taxable
transaction for U.S. federal income tax purposes and may be a taxable
transaction under applicable state, local, foreign and other tax laws. For U.S.
federal income tax purposes, shareholders who receive cash in lieu of fractional
Common Shares will generally recognize gain or loss equal to the difference
between the shareholder's tax basis in the Common Shares and the amount of cash
received. The Continuing Shareholders who are, in effect, exchanging Common
Shares for different shares of capital stock of the Company as part of the
Recapitalization Plan should not recognize any gain or loss with respect to the
receipt of such new stock. Holders of Common Shares are urged to consult their
own tax advisor as to the tax consequences of the Recapitalization Plan. See
"Special Factors--Material U.S. Federal Income Tax Consequences."

5
<PAGE>
GENERAL INFORMATION

The Recapitalization Plan will constitute a going private transaction as
defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to the Common Shares, and the Company will
deregister the Common Shares under the Exchange Act if the Recapitalization Plan
is approved and consummated. In connection with the Recapitalization Plan, the
Company has filed a Transaction Statement on Schedule 13E-3 with the Securities
and Exchange Commission (the "SEC").

PERSONS MAKING THE SOLICITATION

The accompanying proxy is being solicited by the Board. The cost of
soliciting your proxy will be borne entirely by the Company and no other person
or persons will bear such costs either directly or indirectly. In addition to
the use of the mails, proxies may be solicited by personal interview, telephone
and telegram by directors and officers and employees of the Company and its
subsidiaries without additional consideration. Arrangements may also be made
with brokerage houses and other custodians, nominees, and fiduciaries to forward
solicitation material to the beneficial owners of shares held of record by such
persons, and the Company may reimburse them for reasonable out-of-pocket
expenses they incur in connection with forwarding the solicitation material.

VOTING SECURITIES AND RECORD DATE

The Company's only voting securities are Common Shares, $1.67 par value per
share. As of November 17, 2000, there were approximately 140 holders of record
and 300 beneficial holders of Common Shares. Holders of record of Common Shares
outstanding at the close of business on December 1, 2000 (the "Record Date")
will be entitled to one vote for each Common Share held upon each matter to be
voted upon at the Special Meeting and any adjournments or postponements thereof.
At the close of business on the Record Date, the Company had Common
Shares issued and outstanding and entitled to vote at the Special Meeting.

SHAREHOLDERS LIST

A list of shareholders entitled to vote at the Special Meeting, which will
be arranged in alphabetical order and which will show each shareholders's
address and number of shares registered in his or her name, will be open to any
shareholder to examine for any purpose related to the Special Meeting. Any
shareholder may examine this list during ordinary business hours commencing
December , 2000, and continuing through January 16, 2001 at the principal
office of the Company at Anderson Square, Fifth Floor, Grand Cayman, Cayman
Islands B.W.I.

QUORUM AND VOTE REQUIRED

The presence, in person or by proxy, of the holders of a majority of Common
Shares issued and outstanding and entitled to be voted as of the Record Date is
necessary to constitute a quorum at the Special Meeting. Unless a quorum is
present at the Special Meeting, no action may be taken at the Special Meeting
except the adjournment thereof until a later time. Each Common Share is entitled
to one vote at the Special Meeting. Abstentions and broker non-votes (i.e.
shares held by brokers or nominees as to which they have no discretionary power
to vote on a particular matter and have received no instructions from the
beneficial owners or persons entitled to vote thereon), if any, will not be
included in vote totals and, as such, will have no effect on any proposal.
However, abstentions and broker non-votes will be counted for purposes of
determining if a quorum exists.

6
<PAGE>
Public Shareholders which are present in person or by proxy and voted at the
Special Meeting is required to approve the Recapitalization Plan (the "Public
Shareholders Vote"). Participants in the Chandler (U.S.A.), Inc. 401(k) Thrift
Plan who do not elect to receive Series A Preferred Shares, or who will not
receive Series B Preferred Shares or Series C Preferred Shares as part of the
Recapitalization Plan shall be deemed Public Shareholders for purposes of the
Public Shareholders Vote.

As of the Record Date, the Continuing Shareholders beneficially owned
[2,030,000] Common Shares, which represents approximately [61%] of the
outstanding Common Shares. The Continuing Shareholders are expected to vote all
of their shares in favor of the Recapitalization Plan at the Special Meeting.
The Company also believes that Common Shares beneficially owned on the Record
Date by directors of the Company on the Special Committee will be voted in favor
of the Recapitalization Plan. The members of the Special Committee unanimously
approved the Recapitalization Plan, and the Board approved the Recapitalization
Plan with Messrs. LaGere and Paden abstaining from the vote. See "Special
Factors--Recommendation of the Special Committee and Board of Directors;
Fairness of the Recapitalization Plan."

Although not required by the Cayman Islands Companies Law (the "Law"), the
Recapitalization Plan will not be consummated, even if approved at the Special
Meeting, until the repurchases of Common Shares held by the Continuing
Shareholders and sales of new capital stock of the Company to the Continuing
Shareholders are completed.

THE BOARD, BASED UPON THE UNANIMOUS RECOMMENDATION OF THE SPECIAL COMMITTEE,
HAS DETERMINED THAT THE RECAPITALIZATION PLAN IS FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY AND ALL OF ITS SHAREHOLDERS, INCLUDING THE PUBLIC
SHAREHOLDERS. THE BOARD HAS APPROVED THE RECAPITALIZATION PLAN AND RECOMMENDS
THAT THE SHAREHOLDERS VOTE FOR APPROVAL THEREOF.

The Board is not aware of any other matter that will be presented for
consideration at the Special Meeting. However, if any other matter should
properly come before the Special Meeting, it is intended that proxies in the
accompanying form will be voted in respect thereof at the discretion of the
proxy holders.

THE PROXY

The Board has elected W. Brent LaGere and Mark T. Paden as proxies, and they
are named as such on the proxy card, a form of which is included with this Proxy
Statement. When shareholders have appropriately specified how their proxies
should be voted, the shares represented by proxy cards will be voted
accordingly. Unless the shareholder otherwise specifies therein, the shares
represented by his proxy card(s) will be voted (i) FOR the Recapitalization Plan
and (ii) at the discretion of the proxy holders, either FOR or AGAINST any other
matter or business that may properly come before the Special Meeting. The Board
does not know of any such other matter or business.

Any shareholder giving a proxy may revoke it at any time before it is voted
by delivering written notice of revocation to the Secretary of the Company, by
delivering a subsequently dated proxy card or by attending the Special Meeting,
withdrawing the proxy and voting in person. Your attendance at the Special
Meeting will not constitute automatic revocation of the proxy. Beneficial owners
of Common Shares held in the name of a broker or other intermediary may vote and
revoke a previous vote only through, and in accordance with, procedures
established by the record holder(s) or their agents(s).

7
<PAGE>
THE RECAPITALIZATION PLAN

DESCRIPTION OF RECAPITALIZATION PLAN

At the Special Meeting, shareholders will consider and vote on the
Recapitalization Plan. The Recapitalization Plan consists of the following
components:

(A) authorization and creation of Class A Common Shares;

(C) amendments to the Company's Articles of Association providing for the
repurchase of capital shares and the payment of cash in lieu of issuing
fractional shares;

(D) repurchase all Common Shares owned by W. Brent LaGere and Mark T. Paden,
and LaGere will purchase 500,661 Class A Common Shares, and Paden will
purchase 125,165 Class A Common Shares;

(E) repurchase approximately 410,000 Common Shares owned by the Chandler
(U.S.A.), Inc. 401(k) Thrift Plan, and the Plan will allow participants
to invest in the Company's Series A Preferred Shares;

(F) repurchase approximately 1,245,000 Common Shares held by the Continuing
Shareholders, other than LaGere and Paden (the "Remaining Continuing
Shareholders"), and the Remaining Continuing Shareholders will purchase
approximately 485,000 Series B Preferred Shares and 760,000 Series C
Preferred Shares; and

The Recapitalization Plan will involve various amendments to the Company's
Memorandum of Association and Articles of Association. The proposed form for
such amendments are set forth in Special Resolutions to Amend the Memorandum of
Association and Articles of Association (the "Special Resolutions"), attached
hereto as Appendix A.

If the Recapitalization Plan is approved and implemented, the Company's
Memorandum of Association and Articles of Association will be amended to
authorize for two classes of Common Shares: ten Common Shares and 2,100,000
Class A Common Shares. As described below, the Class A Common Shares will have
substantially similar rights to the current outstanding Common Shares, except
with regard to par value. See "--Comparison of Capital Stock Before and After
Recapitalization Plan."

If the Recapitalization Plan is approved and implemented, the Company
intends to enter into a Repurchase and Subscription Agreement with
Messrs. LaGere and Paden in order to repurchase their Common Shares and sell
approximately 625,826 Class A Common Shares to them (the "Class A Sale"). The
Class A Sale will not be implemented until the Recapitalization Plan is approved
at the Special Meeting.

If the Recapitalization Plan is approved and implemented, the Company's
Memorandum of Association and Articles of Association will be amended to provide
for the authorization and designation of the rights, preferences, privileges and
restrictions granted to and imposed on the Series A Preferred Shares, Series B
Preferred Shares and Series C Preferred Shares. As described

8
<PAGE>
below, the amendment will designate 500,000 shares as Series A Preferred Shares,
600,000 shares as Series B Preferred Shares and 850,000 shares as Series C
Preferred Shares and eliminate the previously established but undesignated
Series D Preferred Shares. See "--Comparison of Capital Stock Before and After
Recapitalization Plan."

If the Recapitalization Plan is approved and implemented, the Company
intends to enter into (i) Repurchase and Subscription Agreements with the
Remaining Continuing Shareholders in order to repurchase currently outstanding
Common Shares and to sell approximately 485,000 Series B Preferred Shares and
760,000 Series C Preferred Shares and (ii) a Repurchase Agreement with the Plan
in order to repurchase currently outstanding Common Shares held by participants
of the Plan who elect to participate in a fund of the Plan which will offer
approximately 410,000 Series A Preferred Shares (the "Preferred Shares Sale").
The Preferred Shares Sale will not be implemented until the Recapitalization
Plan is approved at the Special Meeting.

EFFECTIVE DATE OF RECAPITALIZATION PLAN

The Recapitalization Plan will become effective immediately following the
closing of the Repurchase and Subscription Agreements with the Continuing
Shareholders, the completion of Series A Preferred Shares elections under the
Plan and the sale of Class A Common Shares to LaGere and Paden (the "Effective
Date"). If approved, such events are expected to occur as soon as practicable
after the Special Meeting.

The Company has not set a specific deadline for consummating the
Recapitalization Plan and reserves the right to withdraw the Recapitalization
Plan from the shareholder approval process or postpone or adjourn the Special
Meeting in order to consider any superior bona fide third party proposal that
might provide greater value to the Public Shareholders or any other reason. The
Recapitalization Plan does not contain nor is subject to any "break-up" fees or
expenses or other deal protection devices. As a result, moving forward with the
Recapitalization Plan would not restrict or impair the Company or the Board from
considering or pursuing any bona fide third party proposal, either before or
after shareholder approval is received.

EFFECTS OF THE RECAPITALIZATION PLAN

All Public Shareholders and certain Continuing Shareholders will receive
$10.00 per share in lieu of the issuance of any resulting fractional shares
following the Reverse Stock Split for Common Shares owned by such shareholders
immediately prior to the Reverse Stock Split. The Public Shareholders will no
longer be shareholders of the Company.

If the Recapitalization Plan is approved and consummated, there will be no
holders of Common Shares following the Reverse Stock Split. LaGere and Paden
will remain as shareholders, beneficially owning 100% of the outstanding
Class A Common Shares. The Plan and the Remaining Continuing Shareholders will
remain as shareholders of the Series A Preferred Shares, Series B Preferred
Shares and Series C Preferred Shares.

The Company plans, as a result of the Recapitalization Plan, to become a
privately held company. The registration of the Common Shares under the Exchange
Act will be terminated. In addition, because the Common Shares will no longer be
publicly held, the Company will be relieved of the obligation to comply with the
proxy rules of Regulation 14A under Section 14 of the Exchange Act, and its
officers and directors and shareholders owning more than 10% of the Common
Shares will be relieved of the stock ownership reporting requirements and "short
swing" trading restrictions under Section 16 of the Exchange Act. Further, the
Company will no longer be subject to the periodic reporting requirements of the
Exchange Act and will cease filing information with the SEC. Among other things,
the effect of this change will be a savings to the Company in not having to
comply with the requirements of the Exchange Act.

9
<PAGE>
The Recapitalization Plan will decrease the number of issued and outstanding
Common Shares from to zero shares. With the exception of the number of
issued and outstanding shares, the terms of the Common Shares before and after
the Recapitalization Plan will remain the same. As stated throughout this Proxy
Statement, the Company believes that there are significant advantages in
effecting the Recapitalization Plan and "going private," and the Company plans
to avail itself of any opportunities it has as a private Company. Other than as
described in this Proxy Statement, neither the Company nor its management has
any current plans or proposals to effect any extraordinary corporate
transactions, such as a merger, reorganization, or liquidation; to sell or
transfer any material amount of its assets, except as may be needed to satisfy
liabilities of the Company; to change its dividend policy or indebtedness or
capitalization; or otherwise to effect any material change in its corporate
structure or business.

The Company currently has fully vested options outstanding to purchase
109,500 Common Shares. Of this number, options to purchase 1,500 Common Shares
are held by a Continuing Shareholder. The Company anticipates that all option
holders will exercise their options prior to the Effective Date of the
Recapitalization Plan.

REDUCTION IN NUMBER OF SHAREHOLDERS. As of the Record Date, there were
approximately holders of record and beneficial owners of Common
Shares. The Recapitalization Plan will constitute a going private transaction as
defined under Rule 13e-3 of the Exchange Act, and the Company will deregister
the Common Shares under the Exchange Act if the Recapitalization Plan is
approved and consummated. In connection with the Recapitalization Plan, the
Company has filed a Transaction Statement on Schedule 13E-3 with the SEC and
will file a Form 15 with the SEC once the Recapitalization Plan is approved and
consummated.

The Recapitalization Plan will reduce the record number of holders of Common
Shares of the Company from approximately 140 to zero. Approximately 110 record
shareholders and 250 beneficial shareholders will receive cash in lieu of the
issuance of any resulting fractional shares following the Reverse Stock Split.
These holders will no longer be shareholders of the Company and will not be
entitled to dividends, if any are declared, nor will they receive the benefits
or suffer the losses of any future changes in the value of capital stock of the
Company.

TERMINATION OF REGISTRATION WITH SECURITIES AND EXCHANGE COMMISSION. The
Recapitalization Plan will result in the Common Shares no longer being
registered under Section 12(g) of the Exchange Act. Under Section 12(g) and the
SEC's rules promulgated thereunder, a company's stock can be de-registered upon
application by the Company if its total shareholders number fewer than 300.
De-registration of the Common Shares will result in the Company no longer being
required to file annual or quarterly reports with the SEC. The elimination of
legal and accounting costs associated with quarterly reporting to the SEC and
the reduced costs of mailings to fewer shareholders are expected to yield
approximately $210,000 of savings in direct operating costs to the Company each
year.

REDUCTION IN THE NUMBER OF SHARES OUTSTANDING. The Company is authorized to
issue ten million Common Shares, $1.67 par value per share, of which
shares were issued and outstanding at the close of business on the Record Date.
As proposed, and if effected, the Recapitalization Plan would eliminate all
issued and outstanding Common Shares and would reduce the maximum number of
Common Shares which are authorized to ten shares, $1,670,000 par value. The
Board does not presently have any plans for issuance of Common Shares following
the Recapitalization Plan.

INCREASE IN PERCENTAGE OF CAPITAL STOCK HELD BY CONTINUING
SHAREHOLDERS. The Recapitalization Plan will increase the percentage of capital
stock ownership of each of the Continuing Shareholders. This increase will exist
because the Company is purchasing the fractional Common Shares resulting from
the proposed Reverse Stock Split and no Common Shares will be issued and
outstanding after the Reverse Stock Split and completion of the Recapitalization
Plan. Furthermore, LaGere and Paden will be the

10
<PAGE>
sole holders of Class A Common Shares, which will be the Company's only issued
and outstanding voting capital stock, and the Plan and the Continuing
Shareholders will be the sole holders of the Series A Preferred Shares,
Series B Preferred Shares and Series C Preferred Shares.

CONTINUING SHAREHOLDER RIGHTS. Shareholders who will be continuing holders
of capital stock of the Company will have the voting, liquidation and dividend
rights as set forth in "--Comparison of Capital Stock Before and After
Recapitalization Plan." The Common Shares no longer will be registered with the
SEC, and the Company will not be required to file quarterly, annual or other
reports with the SEC.

REASONS FOR AND PURPOSE OF THE RECAPITALIZATION PLAN

The main reason and purpose of the Recapitalization Plan is to purchase the
outstanding equity interests in the Company of the approximately 110 record
holders and 250 beneficial holders of Common Shares, at a price determined to be
fair by both the Special Committee and the Board in order (i) to eliminate the
cost of maintaining numerous shareholder accounts, (ii) to permit shareholders
to receive a fair price for their shares without having to pay brokerage
commissions or find a private purchaser, (iii) to allow the Continuing
Shareholders to own the Company and (iv) to relieve the Company of the
administrative burden and cost and competitive disadvantages associated with
filing reports and otherwise complying with the requirements of registration
under the Exchange Act by deregistering its Common Shares. The Board believes
that the Company derives no material benefit from the continued registration of
the Common Shares under the Exchange Act and that the monetary expense and
burden to the Company of continued registration significantly outweigh any
material benefit that may be received by the Company as a result of such
registration. To the extent to which the Recapitalization Plan is effectuated,
the Continuing Shareholders will benefit in that they alone will hold capital
stock in the Company and therefore may benefit from any future increase in the
Company's earnings.

The Company presently has approximately 140 record holders and approximately
300 beneficial holders of its Common Shares. Approximately 100 record
shareholders own fewer than 1,000 shares. In the aggregate, the these record
shareholders comprise less than approximately 1% of the outstanding Common
Shares. Approximately 180 beneficial shareholders own fewer than 1,000 shares.
In the aggregate, these beneficial shareholders comprise approximately 3% of the
outstanding Common Shares. The administrative burden and cost to the Company of
maintaining records in respect of these numerous accounts and the associated
cost of printing and mailing information to them is, in the Board's view,
excessive given the Company's size. These expenditures result in no material
benefit to the Company. The Recapitalization Plan will enable the Company to
eliminate much of this cost.

The Company had determined to remain a public corporation in the past to
help facilitate a public market for its shares. From 1992 until recently,
CenTra, Inc. and/or its affiliates have owned or controlled more than 40% of the
outstanding shares. See "The Company--Share Repurchases." Those shares have now
been canceled by implementation of a divestiture order issued by the U.S.
District Court for the District of Nebraska. See "The Company--Share
Repurchases." As a result, the trading volume of shares has been and continues
to be limited. Because the stock is so thinly traded, many shareholders lack
sufficient liquidity to sell their shares. The Recapitalization Plan offers the
Public Shareholders the opportunity to liquidate their interests at a premium
price.

The Board believes that the disadvantages to being a public company outweigh
any advantages. The Board has no present intention to raise capital through
sales of securities in a public offering in the future or to acquire other
business entities using stock as the consideration for any such acquisition.
Accordingly, the Company is not likely to make use of any potential advantage
(for raising capital, effecting acquisitions or other purposes) that the
Company's status as a reporting company may offer.

The Company incurs direct and indirect costs associated with compliance with
the SEC's filing and reporting requirements imposed on public companies. The
Company estimates it will realize a savings

11
<PAGE>
in direct operating costs of approximately $210,000 annually. In addition, the
Company incurs substantial indirect costs as a result of, among other things,
the executive time expended to prepare and review such filings, which the
Company estimates to be approximately 950 hours per year. Since the Company has
relatively few executive personnel, these indirect costs can be substantial and
in addition to direct monetary savings if the Recapitalization Plan is effected,
the time currently devoted to the public process could be devoted to other
purposes such as sales, marketing, underwriting and/or operational projects to
further promote the Company's business.

Although all of these factors have existed for some time, the Company began
to consider options that could accomplish the Company's objectives in 1998. This
led to the Company consulting legal counsel regarding the options available and
tax implications during 1999. Counsel provided a clear and detailed analysis of
the Company's options, risks and expenses relative to the public market. The
Company's analysis of these issues, which is detailed in this Proxy Statement,
led to the development of the Recapitalization Plan.

The Board has determined that the Recapitalization Plan is the most
expeditious and economical way of liquidating the Public Shareholders and
changing the Company's status from that of a reporting company to that of a more
closely held, non-reporting company. See "Special Factors--Recommendation of the
Special Committee and Board of Directors; Fairness of the Recapitalization Plan"
and "Special Factors--Fairness Opinion of Financial Advisor." Several factors
were considered in reaching its determination.

First, since at least 1992, the trading market for the Common Shares has
been illiquid. Given the lack of liquidity for common shareholders, the Company
chose to maximize the number of shareholders who would receive fair value for
their shares.

Second, the Board believed that it is highly speculative whether the Common
Shares would ever achieve significant market value because of the Company's
commitment to remain a regional business. Therefore, the Board determined to
provide value, which is higher than what can be achieved in the open market, to
as many of the holders of Common Shares as possible. In light of the Company's
objectives as stated above, the Company believed a reverse stock split best
accomplished its goals than other going private alternatives.

Third, the Company's financial condition has not experienced improvement
during the past two years, and there is no assurance that the Company will
experience profitable growth. The Company believes that it is in the best
interests of the holders of Common Shares to provide liquidity today to the
maximum number of shareholders.

Public Shareholders will no longer have any equity interest in the Company
and will not participate in any future earnings of the Company or any increases
in the value of the Company's assets or operations. Only the Continuing
Shareholders will benefit from any future increase in the Company's earnings.
Messrs. LaGere and Paden will continue to have a common equity interest in the
Company after the Recapitalization Plan, but such shares will not be freely
tradeable. See "Special Factors--Recommendation of the Special Committee and
Board of Directors; Fairness of the Recapitalization Plan" and "Special
Factors--Fairness Opinion of Financial Advisor."

COMPARISON OF CAPITAL STOCK BEFORE AND AFTER RECAPITALIZATION PLAN

The Memorandum of Association currently authorizes 10,000,000 Common Shares
and 3,000,000 Preferred Shares, $1.00 par value per share (the "Preferred
Shares"). As of December 1, 2000, the Company had outstanding Common
Shares and no Preferred Shares. The Recapitalization Plan would reduce the
authorized Common Shares of the Company from an aggregate of 10,000,000 shares
to ten shares. The Recapitalization Plan would also authorize 2,100,000 Class A
Common Shares, 500,000 Series A Preferred Shares, 600,000 Series B Preferred
Shares and 850,000 Series C Preferred

12
<PAGE>
Shares. After implementation of the Recapitalization Plan, approximately zero
Common Shares, 625,000 Class A Common Shares, 410,000 Series A Preferred Shares,
485,000 Series B Preferred Shares and 760,000 Series C Preferred Shares will be
issued and outstanding. The Company will also reserve approximately 410,000
Class A Common Shares for possible issuance upon conversion of the Series A
Preferred Shares. After implementation of the Recapitalization Plan,
approximately ten Common Shares, 1,065,000 Class A Common Shares, 90,000
Series A Preferred Shares, 115,000 Series B Preferred Shares and 90,000
Series C Preferred Shares will be authorized but unissued and available for
issuance from time to time by the Company for any proper corporate purpose. No
other capital shares would be authorized and available for issuance.

The current rights, powers and limitations of the Common Shares and
Preferred Shares are set forth in Ordinary and Special Resolutions to Authorize
Preferred Shares, adopted as of May 7, 1988, which amended Paragraph 6 of the
Company's Memorandum of Association and Section 7 to Article VIII of the
Company's Articles of Association, which is attached to this Proxy Statement as
Appendix B. The proposed rights, powers and limitations of the Common Shares,
Class A Common Shares, Series A Preferred Shares, Series B Preferred Shares and
Series C Preferred Shares to be outstanding following the Recapitalization Plan
will be set forth in the Special Resolutions, a proposed form of which is
attached to this Proxy Statement as Appendix A.

The following comparison of rights, powers and limitations should be read in
conjunction with, and is qualified in its entirety by reference to, such
Appendices A-1 and A-2.

CAPITAL STOCK BEFORE RECAPITALIZATION PLAN.

Common Shares.

Voting Rights. Holders of the Company's Common Shares are entitled to
one vote per share on all matters to be voted on by shareholders generally,
including the election of directors.

Dividends and Liquidation Rights. Holders of the Company's Common
Shares shall be entitled to participate equally in all dividends payable with
respect to the Common Shares and to share ratably, subject to the rights and
preferences of any Preferred Shares, in all assets of the Company in the event
of any voluntary or involuntary liquidation, dissolution or winding-up of the
affairs of the Company, or upon any distribution of the assets of the Company.

Preferred Shares. Currently, the Company's Memorandum of Association
authorizes 3,000,000 Preferred Shares. The Company's Articles of Association
sets forth the general rights, preferences, privileges and restrictions of the
Preferred Shares and has established four series of Preferred Shares, but none
of the Preferred Shares have been designated. Three of the established series of
Preferred Shares are redeemable, and one of the established series of Preferred
Shares is not redeemable. All series of the Preferred Shares are otherwise
identical and rank in parity with any other series of Preferred Shares. However,
the Board is allowed to set forth other rights, preferences, privileges and
restrictions when the Preferred Shares are designated into a particular series.

CAPITAL STOCK AFTER RECAPITALIZATION PLAN. The following is a description
of the two classes of common shares and three series of preferred shares which
will be authorized if the Recapitalization Plan is approved and implemented:

Common Shares. The rights of holders of Common Shares will be the same
before and after the consummation of the Recapitalization Plan, except the
Common Shares will rank PARI PASSU with the Class A Common Shares. However,
there will be no Common Shares issued and outstanding following the
Recapitalization Plan. Currently, the Company has no plans to effect any
offering of the Common Shares following the Recapitalization Plan. Furthermore,
following the Reverse Stock Split, there will only be ten shares, $1,670,000 par
value, authorized and available for issuance.

13
<PAGE>
Class A Common Shares.

Voting Rights. Holders of the Company's Class A Common Shares are
entitled to one vote per share on all matters to be voted on by shareholders
generally.

Dividends and Liquidation Rights. Holders of the Company's Class A
Common Shares shall be entitled to participate equally in all dividends payable
with respect to the Common Shares and the Class A Common Shares and to share
ratably, subject to the rights and preferences of the Series A Preferred Shares,
Series B Preferred Shares and Series C Preferred Shares, in all assets of the
Company in the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Company, or upon any distribution of the assets
of the Company.

Series A Preferred Shares. The Company will repurchase the Common
Shares held by the Plan, and the Plan will allow participants to elect to invest
in the Company's Series A Preferred Shares immediately following the repurchase.
The following is a summary of the material terms of the Series A Preferred
Shares:

Dividends. The holders of Series A Preferred Shares will receive cash
dividends at an annual rate of 6% of the liquidation value per share of $11.00.
Dividends accrue if not paid and are cumulative from the date of issuance.
However, the dividends accruing and payable on the Series A Preferred Shares are
payable only out of funds legally available for such purpose.

Liquidation Preference. For dividends or distribution of assets upon
liquidation, dissolution or winding up of the Company, the Series A Preferred
Shares rank senior to any Common Shares, Class A Common Shares and all
subsequently issued classes and series of capital shares of the Company and in
parity with the Series B Preferred Shares and Series C Preferred Shares. In the
event of any liquidation, dissolution or winding up of the Company, the holders
of Series A Preferred Shares will receive $11.00 per share plus all accrued and
unpaid dividends. A merger or consolidation of the Company, or the merger of any
other corporation into the Company, or a sale of all or substantially all of the
assets of the Company, shall be treated as a liquidation, dissolution or winding
up of the Company. However, a consolidation, merger or sale of all or
substantially all assets will not be treated as a liquidation, dissolution or
winding up of the Company unless the Company's shareholders will, immediately
after such transaction, hold less than 50% of the voting power of the surviving
or acquiring entity.

Conversion. Each share of Series A Preferred Shares is convertible into
one Class A Common Share, subject to adjustment.

Voting Rights. The Series A Preferred Shares do not have voting rights.

Series B Preferred Shares. The Company will repurchase the Common
Shares held by certain management shareholders and will sell those shareholders
Series B Preferred Shares immediately following the repurchase. The following is
a summary of the material terms of the Series B Preferred Shares:

Dividends. The holders of Series B Preferred Shares will receive cash
dividends at an annual rate of 6% of the liquidation value per share of $11.00.
Dividends accrue if not paid and are cumulative from the date of issuance.
However, the dividends accruing and payable on the Series B Preferred Shares are
payable only out of funds legally available for such purpose.

Liquidation Preference. For dividends or distribution of assets upon
liquidation, dissolution or winding up of the Company, the Series B Preferred
Shares rank senior to any Common Shares, Class A Common Shares and all
subsequently issued classes and series of capital shares of the Company and in
parity with the Series A Preferred Shares and Series C Preferred Shares. In the
event

14
<PAGE>
of any liquidation, dissolution or winding up of the Company, the holders of
Series B Preferred Shares will receive $11.00 per share plus all accrued and
unpaid dividends. A merger or consolidation of the Company, or the merger of any
other corporation into the Company, or a sale of all or substantially all of the
assets of the Company, shall be treated as a liquidation, dissolution or winding
up of the Company. However, a consolidation, merger or sale of all or
substantially all assets will not be treated as a liquidation, dissolution or
winding up of the Company unless the Company's shareholders will, immediately
after such transaction, hold less than 50% of the voting power of the surviving
or acquiring entity.

Conversion. The Series B Preferred Shares are not convertible into any
other class of capital shares of the Company.

Voting Rights. The Series B Preferred Shares do not have voting rights.

Series C Preferred Shares. The Company will repurchase the Common
Shares held by certain key shareholders and will sell those shareholders
Series C Preferred Shares immediately following the repurchase. The following is
a summary of the material terms of the Series C Preferred Shares:

Dividends. The holders of Series C Preferred Shares will receive cash
dividends at an annual rate of 8 1/2% of the liquidation value per share of
$12.00. Dividends accrue if not paid and are cumulative from the date of
issuance. However, the dividends accruing and payable on the Series C Preferred
Shares are payable only out of funds legally available for such purpose.

Liquidation Preference. For dividends or distribution of assets upon
liquidation, dissolution or winding up of the Company, the Series C Preferred
Shares rank senior to any Common Shares, Class A Common Shares and all
subsequently issued classes and series of capital shares of the Company and in
parity with the Series A Preferred Shares and Series B Preferred Shares. In the
event of any liquidation, dissolution or winding up of the Company, the holders
of Series C Preferred Shares will receive $12.00 per share plus all accrued and
unpaid dividends. A merger or consolidation of the Company, or the merger of any
other corporation into the Company, or a sale of all or substantially all of the
assets of the Company, shall be treated as a liquidation, dissolution or winding
up of the Company. However, a consolidation, merger or sale of all or
substantially all assets will not be treated as a liquidation, dissolution or
winding up of the Company unless the Company's shareholders will, immediately
after such transaction, hold less than 50% of the voting power of the surviving
or acquiring entity.

Conversion. The Series C Preferred Shares are not convertible into any
other class of capital shares of the Company.

Voting Rights. The Series C Preferred Shares shall have no voting
rights.

CAPITAL SHARE REPURCHASES AMENDMENT

If the Recapitalization Plan is approved and implemented, the Company's
Articles of Association will be amended to provide the Company with more
extensive ability to repurchase capital shares. Currently, the Company's
Articles of Association allow the Board to repurchase issued capital shares at
or below market value. As described below, this amendment is intended also to
provide the Board with the ability to repurchase Common Shares in a manner
approved by the Company's shareholders.

The Board has approved and recommends the adoption of an amendment to the
Articles of Association of the Company which would amend Article XII of the
Articles of Association to read in its entirety as follows:

15
<PAGE>
ARTICLE XII
CAPITAL SHARE REPURCHASES

The Board of Directors, in its sole discretion, may authorize
repurchases of any and all of the Company's issued capital shares at any
time at or below the then prevailing market value. Furthermore, subject to
the provisions of the Law and the Memorandum of Association and without
prejudice to any other Article contained herein, the Board may authorize
repurchases of any and all of the Company's issued capital shares, including
any redeemable capital shares, at any time, provided that the manner of
repurchase has first been authorized by Ordinary or Special Resolution of
the Company's shareholders, and may make payment therefor or for any
redemption of capital shares in any manner authorized by the Law, including
out of the Company's capital.

The amendment would allow the Company to repurchase capital shares, subject
to shareholder approval, at a premium price over the prevailing market value.
The Board has determined that the adoption of this amendment to the Articles of
Association is in the best interests of the Company. The purpose for the
amendment is to give the Company the ability to repurchase capital shares,
subject to shareholder approval, held by the Continuing Shareholders as part of
the Recapitalization Plan. However, neither the Class A Sale or Preferred Share
Sales, which include such repurchases, would occur if the Recapitalization Plan
is not approved at the Special Meeting.

PAYMENT IN LIEU OF FRACTIONAL SHARES AMENDMENT

If the Recapitalization Plan is approved and implemented, the Company's
Articles of Association will also be amended to provide for payment of cash in
lieu of issuing fractional shares at a price determined to be fair by an
investment banking firm selected by an independent committee of the Board.
Currently, the Company's Articles of Association do not address the status of
fractional shares when such shares exist. As described below, this amendment is
intended to provide the Board with this ability.

The Board has approved and recommends the adoption of an amendment to the
Articles of Association of the Company which would add a new Article XII to the
Articles of Association that would read in its entirety as follows:

ARTICLE XIII
FRACTIONAL SHARES

The Board of Directors, in its sole discretion, may authorize the
payment of cash in lieu of issuing fractional shares of the Company at any
time at a price determined to be fair by an independent investment banking
firm selected by an independent committee of the Board of Directors.

The amendment would allow the Company to pay shareholders cash in lieu of
issuing fractional shares at a price determined to be fair. The Board has
determined that the adoption of this amendment to the Articles of Association is
in the best interests of the Company. The purpose for the amendment is to give
the Company the ability to pay shareholders cash in lieu of issuing fractional
shares which would be created by the Recapitalization Plan. However, neither the
Reverse Stock Split nor the payment of cash in lieu of the issuance of any
resulting fractional shares following the Reverse Stock Split would occur if:
(i) the Recapitalization Plan is not approved at the Special Meeting and
(ii) the and Preferred Share Sales are not completed.

16
<PAGE>
ADVANTAGE AND DISADVANTAGES OF THE RECAPITALIZATION PLAN

The Recapitalization Plan will present certain potential advantages and
disadvantages to the Company, the Continuing Shareholders and the Public
Shareholders, respectively.

THE COMPANY AND THE CONTINUING SHAREHOLDERS. The potential advantages of
the Recapitalization Plan to the Company and the Continuing Shareholders include
the following:

- Eliminate Public Disclosure and Reporting Obligation. As a publicly held
corporation, the Company's operations and financial situation are open to
public scrutiny. Information concerning the Company, officers, directors,
and certain shareholders (information not ordinarily disclosed by
privately-held companies) will no longer be available to competitors once
the Recapitalization Plan has been approved and consummated.

- Eliminate Undue Management Demands. Once the Recapitalization Plan has
been approved and consummated, top management at the Company will be able
to focus on the Company's business rather than being consumed by preparing
written information about financial results and other Company matters that
must be reported to the public and the SEC once the Recapitalization Plan
has been approved and consummated.

- Eliminate Certain Costs. The costs of administration, legal, accounting,
and other fees associated with operating as a public company subject to
the reporting requirements of the Exchange Act will be eliminated once the
Recapitalization Plan has been approved and consummated.

- Benefit from the Company's Future Growth. The Continuing Shareholders will
have the opportunity to benefit from the Company's future growth, cash
flows and earnings, if any.

The potential disadvantages of the Recapitalization Plan to the Company and
the Continuing Shareholders include the following:

- Limited Access to Capital Markets. The Company may have limited or reduced
access to capital to finance future growth plans, meet working capital
needs, acquire other businesses, invest in facilities and equipment or
retire existing debt once the Recapitalization Plan has been approved and
consummated.

- Loss of Shareholder Control. Once the Recapitalization Plan is approved
and consummated, Messrs. LaGere and Paden's ownership of all the voting
capital stock of the Company will result in their complete control of the
Company and their exclusive ability to effect any fundamental corporate
changes without the approval of the Plan or any of the Remaining
Continuing Shareholders.

- Loss of Liquidity. Once the Recapitalization Plan has been approved and
consummated, there will be no public market for any of the capital stock
of the Company. Thus, the Continuing Shareholders may be unable to quickly
dispose of their shares at a readily ascertainable price due to the
absence of a public market for the Company's shares.

- Decreased Access to Information. The Company intends to terminate the
registration of its Common Shares under the Exchange Act if the
Recapitalization Plan is approved and consummated. As a result of such
termination, the Company will no longer be subject to the periodic
reporting requirements under the Exchange Act; therefore, holders of
capital stock will not have access to the same types of information
required by these reporting requirements.

THE PUBLIC SHAREHOLDERS. The potential advantages of the Recapitalization
Plan to the Public Shareholders include:

- Fair Price Without Brokerage Commission. The Public Shareholders will
receive what the Board considers a fair purchase price, in cash, of $10.00
per share in lieu of the issuance of any

17
<PAGE>
resulting fractional shares following the Reverse Stock Split with no
commission or fees subtracted therefrom if the Recapitalization Plan is
approved and consummated.

- Purchase Price Premium. The Public Shareholders will receive $10.00 per
share in lieu of the issuance of any resulting fractional shares following
the Reverse Stock Split, which represents a premium of 30% over the
closing bid price of the Common Shares one day prior to the public
announcement of the Recapitalization Plan and a premium of % over the
closing bid price on the Record Date.

- Liquidity. With some exceptions, the market price for the Common Share has
been idle with little or no trading volume. As a result, it has become
increasingly difficult for shareholders to dispose of their Common Shares
at a fair price. If approved and consummated, the Recapitalization Plan
will enable the Public Shareholders to dispose of their Common Shares at a
fair price notwithstanding the thin market for the Common Shares.

The potential disadvantages of the Recapitalization Plan to the Public
Shareholders are as follows:

- No Benefit from the Company's Future Growth. If the Capitalization Plan is
consummated, the Public Shareholders will not have the opportunity to
benefit from the Company's future growth, cash flows and earnings, if any.

- Taxable Event. The Public Shareholders' receipt of cash in lieu of the
issuance of any resulting fractional shares following the Reverse Stock
Split will constitute a taxable transaction for federal income tax
purposes if the Recapitalization Plan is approved and consummated.

18
<PAGE>
SPECIAL FACTORS

BACKGROUND OF THE RECAPITALIZATION PLAN

Of the Company's approximately 140 shareholders, 100 hold 1,000 or fewer
shares and represent less than 1% of the outstanding Common Shares. The Board
and the Company's management have held the view that the continued expense and
burden of maintaining small shareholder accounts is not cost efficient for a
business the size of the Company. Many of the Company's shareholders' interests
are so small that brokerage commissions or administrative inconvenience deter
them from selling shares. The Board also holds the view that the Company
generally derives no material benefit from continued registration under the
Exchange Act. The Company has remained a public corporation in the past to help
facilitate a public market for the shares. That market has not been as active or
liquid as the Company's management and some shareholders have desired. The Board
decided to consider a reverse stock split as a means to liquidate the interests
of holders of Common Shares at a fair price and then to deregister under the
Exchange Act. For a discussion as to why the Recapitalization Plan is being
proposed at this time, see "The Recapitalization Plan--Reasons and Purpose of
the Recapitalization Plan."

In 1998, the Company began considering options that could accomplish the
Company's objectives. The Company considered a number of options, including a
stock repurchase program, a tender offer, merger, a corporate reorganization and
a reverse stock split.

As the Company continued to consider its options, it became apparent that
the Recapitalization Plan with the Reverse Stock Split was the best alternative
for the holders of Common Shares and the Company. A stock repurchase plan could
be expected to cash out some shareholders and increase earnings per share;
however, the Company rejected this alternative because it would probably not
cash out all public shareholders and would not relieve the administrative
inconvenience and costs associated with being a public company. The lack of
assurance that a significant number of shareholders would tender or exchange
their shares made a tender offer and associated costs something the Company
could not justify.

A merger transaction was not an option as the Company was unaware of a
suitable merger candidate nor did it look for one as management believed that
the expense of the required documentation and regulatory requirements made a
merger transaction prohibitive. In addition, the Continuing Shareholders have
expressed their desire to retain their equity interests in the Company. The
Recapitalization Plan with the Reverse Stock Split was chosen because, if
approved by shareholders, its outcome was certain, expenses incurred by the
Company were moderate, and shareholders would receive cash for their fractional
shares as opposed to a corporate reorganization where shareholders would receive
no payment. Further, from a timing standpoint, the other alternatives would have
delayed the Company's deregistration under the Exchange Act as compared to the
Recapitalization Plan. No third party has expressed an interest in purchasing
the entire Company, Messrs. LaGere and Paden and the other Continuing
Shareholders do not intend to sell their positions.

In December 1999 and January 2000, LaGere, the Company's Chairman of the
Board, Chief Executive Officer and President, and Paden, the Company's Executive
Vice President, met with the Company and its legal counsel regarding the
different options available in light of the composition of the Company's
shareholders. After several discussions concerning the legal and technical
aspects, LaGere and Paden presented pertinent considerations and a proposal of a
reverse stock split to the Board in June 2000. On June 5, 2000, the Board
created a Special Committee of the Board of Directors, composed of Robert L.
Rice, James M. Jacoby and Paul A. Maestri. The members of the Special Committee
are not employees of the Company and have no business relations with
Messrs. LaGere and Paden. In June 2000, LaGere publicly announced the intent to
formulate a plan, led by senior management and key shareholders of the Company,
which would result in the Company becoming privately held.

19
<PAGE>
After its creation, the Special Committee convened on June 5, 2000 and
appointed Mr. Rice as Chairman of the Special Committee. The Special Committee
requested that Mr. LaGere present the Company and the Board with a more detailed
offer outlining the terms of the Continuing Shareholders' proposal. On June 12,
2000, the Special Committee held a telephonic meeting and decided to seek
independent counsel and interview investment bankers to act as financial
advisors regarding the financial terms of the proposal of the Continuing
Shareholders. The Special Committee engaged an independent law firm to act as
the Special Committee's legal counsel. The Company received an offer letter from
Mr. LaGere and the Continuing Shareholders on July 31, 2000. Through July and
August of 2000, the Special Committee interviewed investment bankers and engaged
Stephens Inc. ("Stephens") to act as the Special Committee's independent
investment banker and financial advisor. In September 2000, the Special
Committee had a meeting with Stephens and received Stephens' preliminary
analysis of the Continuing Shareholders' offer. The Special Committee held
another meeting with Stephens on November 6, 2000 where Stephens presented its
final analysis of the Continuing Shareholders' offer and indicated that it would
be in a position to issue a fairness opinion on the proposed cash consideration
to be paid to the Public Shareholders. On the same day, the Special Committee
met with Mr. LaGere to negotiate the terms of the Continuing Shareholders'
offer, and Mr. LaGere agreed to an 18-month standstill agreement, mechanisms
whereby the shareholder meeting could be adjourned to allow the Board to
consider other superior acquisition proposals and a press release announcing the
transaction. At the November 14, 2000 meeting of the Special Committee, Stephens
delivered its written opinion and advised the Special Committee that the cash
consideration of $10.00 per Common Share was fair to the Public Shareholders
from a financial point of view. The Special Committee made its recommendation to
the Board on November 15, 2000. See "--Recommendation of the Special Committee
and Board of Directors; Fairness of the Recapitalization Plan."

On November 15, 2000, the Board voted to adopt the recommendation of the
Special Committee as its own. The Board determined to pursue the
Recapitalization Plan with the Reverse Stock Split at a ratio of 1 for 1,000,000
and cause the Company to make a cash payment in lieu of issuing any fractional
shares resulting therefrom. The Board determined to pursue the reverse split
ratio of 1-to-1,000,000, because it desired to cash out all holders of Common
Shares, except certain shares held by Continuing Shareholders which would be
exchanged for other shares of capital stock of the Company immediately prior to
the Reverse Stock Split. This would allow the Public Shareholders to liquidate
their shares at a fair price rather than remaining minority shareholders in a
private company. The ratio of 1 for 1,000,000 would have the effect of cashing
out all Public Shareholders. See "The Recapitalization Plan--Reason and Purpose
of the Recapitalization Plan."

RECOMMENDATION OF THE SPECIAL COMMITTEE AND BOARD OF DIRECTORS; FAIRNESS OF THE
RECAPITALIZATION PLAN

The Board has determined that the Recapitalization Plan, including the cash
amount to be paid in lieu of fractional shares resulting from the Reverse Stock
Split and procedure for approving the Recapitalization Plan, is fair to, and in
the best interest of, the shareholders, including the Public Shareholders. The
Board recommends that the shareholders vote for approval and adoption of the
Recapitalization Plan. Each member of the Board and each officer of the Company
who owns Common Shares and the Continuing Shareholders have advised the Company
that they intend to vote their shares in favor of the Recapitalization Plan.
Before proposing the Recapitalization Plan, the Board and the Special Committee
eliminated from consideration alternative means of achieving its objectives for
the Company. See "--Background of the Recapitalization Plan."

On June 5, 2000, the Board established the Special Committee to review and
evaluate the fairness of the Recapitalization Plan and make a recommendation to
the Board. The Special Committee is composed of three of the Company's outside
directors, Robert L. Rice, James M. Jacoby and Paul A. Maestri, each of whom
owns less than 1% of the Company's Common Stock and none of whom is an

20
<PAGE>
officer or employee of the Company. The Special Committee retained Stephens, an
independent investment banking firm, to assist it in determining the fairness of
the cash consideration proposed to be paid to the Public Shareholders from a
financial point of view.

At a meeting of the Special Committee held on November 14, 2000, the Special
Committee unanimously approved the Recapitalization Plan and recommended that
the Board approve the Recapitalization Plan and recommend it to the Company's
shareholders for approval. At a meeting of the Board held on November 15, 2000,
the Board adopted the recommendation of the Special Committee as its own,
approved the Recapitalization Plan and recommended the matter to the
shareholders, with Messrs. LaGere and Paden abstaining from the vote.

In determining the fairness of the cash consideration to be paid in lieu of
fractional shares and to recommend approval of the Recapitalization Plan, the
Special Committee and the Board reviewed and considered a number of factors, and
in the case of the Board, the recommendations of the Special Committee,
including the following:

- the benefits and detriments to the Company and its shareholders in
deregistering the Common Shares under the Exchange Act;

- the means of effecting a going private transaction;

- the effects of the Reverse Stock Split on the Company and its
shareholders;

- the fairness opinion received by the Special Committee from Stephens that
the $10.00 per share to be received by the Public Shareholders is fair to
the Public Shareholders from a financial point of view;

- Stephens' presentation and report regarding its analysis of various
valuation reference ranges;

- the fact that the Reverse Stock Split consideration is more than 21% above
the market price of the Common Shares as of November 13, 2000;

- the fact that the Common Shares are thinly traded and constitute a
relatively illiquid investment;

- current and historical market prices of the Common Shares over the last
five years;

- the net book value of the Common Shares, the going concern value of the
Company and the liquidation value of the Company;

- the absence of any firm offers made by any unaffiliated person during the
past several years;

- the ability of the Board to consider any alternative proposal and adjourn
the Special Meeting or terminate before closing the transaction to explore
any superior acquisition proposals that may arise;

- the intention of the Continuing Shareholders to continue to operate the
Company and agreement not to sell the Company for at least 18 months after
the closing;

- the fact that the Company has never paid cash dividends on its Common
Shares and that the Board has no present intention of declaring or paying
any dividends;

- the assets, obligations, operations, and earnings of the Company and its
subsidiaries taken as a whole;

- the fact that shareholder litigation is pending against the Company;

- the fact that National American Insurance Company's A.M. Best rating has
declined from A- to B+;

21
<PAGE>
- the Special Committee's judgment regarding the prospects of the Company
based on management's projections; and

- all of the terms and conditions of the Recapitalization Plan, taken as a
whole.

The Special Committee and the Board determined that each of the foregoing
factors generally supported the conclusion that the Recapitalization Plan is
fair to the shareholders, including the Public Shareholders. The Special
Committee and the Board concluded that the foregoing factors indicated that the
alternative of not proceeding with the Recapitalization Plan would not be as
financially attractive to the Public Shareholders and would involve
substantially greater uncertainty without a commensurate possibility of gains.
In view of the wide variety of factors considered in connection with the
evaluation of the Recapitalization Plan, the Special Committee and the Board did
not find it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching its
determinations. In their considerations, individual members of the Special
Committee may have given differing weights to different factors. The Special
Committee and the Board determined that each of the factors discussed above were
supportive of their determination that the Recapitalization Plan is fair to the
Public Shareholders.

The Special Committee's conclusion is based, in part, upon the fairness
opinion issued to the Special Committee by Stephens. Because of its expertise
and independence, the Special Committee has placed particular weight on the
opinion of Stephens. Stephens delivered its oral opinion to the Special
Committee on November 6, 2000 and its written opinion, dated November 14, 2000,
to the effect that, the cash consideration to be received by the shareholders
for fractional shares, on the date of the opinion, is fair, from a financial
point of view. The Special Committee and the Board recommended the Continuing
Shareholder's offer of $10.00 per share partly to enable the Public Shareholders
of the Company to receive fair consideration for their Common Shares, with a
minimum of conditions and contingencies, due to its concern that the Public
Shareholders might lose the opportunity to receive a price that compared as
favorably to recent market prices for the Common Shares, given the inactive
trading market for the Common Shares. The Special Committee concluded that the
consideration was fair to the Public Shareholders.

The Special Committee and the Board recognized that the reporting
obligations, financial statement requirements, and costs associated with
maintaining shareholder relations place a disproportionate burden on small
public companies. The Company estimates that its annual direct operating costs
of maintaining its status as a public company are approximately $210,000. These
costs include legal and accounting costs associated with preparation of annual,
quarterly and other reports and proxy statements required by the SEC, fees paid
to Board members, the printing and mailing costs of communications to
shareholders and the cost of maintaining a transfer agent for the Common Shares.
In addition, the Company incurs significant expense in the form of management
and clerical time and effort spent dealing with public company issues. The Board
believes that the disproportionate nature of the costs of remaining a public
company, given the fact that only approximately 30% of the Common Shares
outstanding as of November 20, 2000 are held by the public, support the Board's
decision to approve the Recapitalization Plan. The Board recognized that
deregistration of the Common Shares would substantially reduce the information
required to be furnished by the Company to its shareholders and terminate the
Company's obligations to make filings with the SEC. The Board also recognized
that deregistration would likely affect liquidity of the Common Shares and
therefore could be detrimental to Continuing Shareholders. However, the Special
Committee recognized and the Board determined that neither the Company not its
shareholders derive any material benefit from registration of the Common Shares
and noted that trading in the Common Shares has been infrequent and sporadic for
many years and that the Company does not have and will likely not develop in the
future any significant trading market for its Common Shares. In addition, the
Board considered the opportunity presented by the Recapitalization Plan for the
shareholders to liquidate their holdings without incurring brokerage costs,
particularly given the relatively illiquid market of the Common

22
<PAGE>
Shares, and the future cost savings and competitive advantages that will inure
to the benefit of the Company and the Continuing Shareholders as a result of the
Company deregistering its Common Shares under the Exchange Act.

The Special Committee and the Board considered the fact that Continuing
Shareholders have stated that their interests in the Company are not for sale,
and that there have been no other offers by third parties to acquire the
Company, purchase a substantial part of the assets of the Company or purchase a
controlling block of the securities of the Company. Further, no assurances could
be given that the Continuing Shareholders' offer of $10.00 per share would
remain available if alternative proposals were sought from third parties. The
liquidation of the Company was not considered a reasonable alternative by the
Special Committee or the Board given the Continuing Shareholders' interest in
maintaining the Company as a going concern and the uncertainty of realizing fair
value of assets in a liquidation sale. Based on the foregoing factors, the
Special Committee and the Board do not believe that liquidation could have
resulted in greater value being received by the Public Shareholders. The Special
Committee did not give great weight to the current or historical market prices
of the Common Shares in making its determination with respect to the fairness of
the consideration to be received in the Recapitalization Plan given the fact
that the Company's stock is thinly traded. The Special Committee and the Board
also reviewed carefully the interests of certain of the Company's officers and
directors in the transaction and does not believe that its fairness
determination was adversely affected as a result of any such interests. See
"--Interests of Certain Persons in the Reverse Stock Split."

The Special Committee and the Board acknowledged that the transaction would
eliminate the opportunity for the Public Shareholders to participate in future
growth of the Company but would also eliminate the risk of any future decreases
in the value of the Company. Nonetheless, because the terms of the
Recapitalization Plan and the price to be paid the Public Shareholders were
determined through arms-length negotiations between the Continuing Shareholders
on the one hand, and the Special Committee, on the other hand, and the other
reasons set forth above, it was the opinion of the members of the Special
Committee and the Board that the $10.00 per share price was fair to the Public
Shareholders.

The Special Committee also believes that the transaction is being effected
in a manner that is fair procedurally to the Public Shareholders who will be
cashed out in the transaction and cease being shareholders of the Company.

The Board has concluded that the Recapitalization Plan, including the
Reverse Stock Split consideration and the negotiation and structure of the
Reverse Stock Split, is fair to the Public Shareholders and recommends that
shareholders vote to approve and adopt the Recapitalization Plan based upon the
recommendation of the Special Committee and the opinion of the Special
Committee's financial advisor to the effect that the $10.00 per share cash
consideration to be received in the Reverse Stock Split is fair from a financial
point of view to the Public Shareholders, which opinion, as well as the
conclusion and analysis of Stephens and the Special Committee, the Board has
adopted as its own.

FAIRNESS OPINION OF FINANCIAL ADVISOR

Stephens was retained by the Special Committee to act as its independent
investment banker and financial advisor in connection with the Special
Committee's consideration of the proposed cash consideration to be received by
Public Shareholders of the Company under the Recapitalization Plan. In
connection therewith, the Special Committee requested that Stephens evaluate the
fairness, from a financial point of view, of the amount of the cash
consideration to be paid to the Public Shareholders in the Recapitalization
Plan. At the meeting of the Special Committee held on November 6, 2000, Stephens
advised the Special Committee that Stephens believed that it would be able to
render, prior

23
<PAGE>
to the mailing of this Proxy Statement, a written opinion stating that the cash
consideration to be paid to the Public Shareholders under the Recapitalization
Plan was fair, from a financial point of view, to such shareholders. On
November 14, 2000, Stephens delivered a written fairness opinion to the Special
Committee. In connection with the delivery of its opinion, Stephens reviewed
with the Special Committee the assumptions on which its analyses were based and
the factors considered in connection therewith.

In arriving at its opinion, Stephens reviewed the proposed terms of the
Recapitalization Plan as described in various drafts of the Preliminary Proxy
Statement (the latest draft dated November 8, 2000) and related transaction
documents, and held discussions with certain senior officers, directors and
employees of the Company concerning the business, operations and prospects of
the Company. Stephens examined certain publicly available business and financial
information relating to the Company, as well as certain financial forecasts and
other data for the Company, which were provided to Stephens by the Company.
Stephens reviewed the financial terms of the Recapitalization Plan in relation
to, among other things: current and historical market prices and trading volumes
of the Common Shares, the historical and projected earnings, losses,
profitability and other operating data, and the capitalization and financial
condition of the Company. Stephens considered, to the extent publicly available,
the financial terms of certain other transactions recently effected which
Stephens considered relevant in evaluating the Recapitalization Plan and
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations
Stephens considered relevant in evaluating the Company's business. Stephens
considered, for the purposes of its opinion, recent trends in the property and
casualty insurance industry, the competitive position of the Company and the
recent downgrading by A.M. Best Company of the financial strength rating of the
Company's domestic insurance subsidiary, National American Insurance Company
("NAICO"), from A- (Excellent) to B+ (Very Good). In addition, Stephens
considered current financial, economic, and market conditions in arriving at its
opinion. Stephens noted that its opinion was necessarily based upon information
available, and financial, stock market and other conditions and circumstances
existing and disclosed to Stephens as of the date of its opinion.

In rendering its opinion, Stephens assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise reviewed by or
discussed with Stephens. With respect to financial forecasts and other
information provided to or otherwise reviewed by or discussed with Stephens, the
management of the Company advised Stephens that such forecasts and other
information were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of the Company as to the
future financial performance of the Company. Stephens inquired into the
reasonableness of the information it reviewed, including the information
provided by the Company (including the Company's projections) only to the
limited extent necessary to provide a reasonable basis for its opinion,
recognizing that Stephens provided only an informed opinion. Stephens did not
express any opinion as to the prices at which the Common Shares would trade in
the future if the Company were to remain a public company. Stephens did not make
or obtain an independent evaluation or appraisal of the assets, liabilities
(contingent and otherwise) or reserves of the Company nor did Stephens make any
physical inspection of the properties or assets of the Company. In addition,
although Stephens evaluated the cash consideration to be paid to the Public
Shareholders from a financial point of view, Stephens was not asked to and did
not determine the amount of the consideration payable in the Recapitalization
Plan.

The full text of the written opinion of Stephens dated November 14, 2000,
which sets forth the assumptions made, matters considered and limitations on the
review undertaken, is attached hereto as Appendix C and is incorporated herein
by reference. Holders of Common Shares are urged to read this opinion carefully
in its entirety. Stephens' opinion is directed only to the fairness of the cash
consideration to be received by the Public Shareholders from a financial point
of view. It does not

24
<PAGE>
address any other aspect of the Recapitalization Plan and does not constitute a
recommendation as to the appropriateness or suitability of the Recapitalization
Plan for any particular shareholder or shareholders, nor a recommendation to any
shareholder as to how such shareholder should vote at the Special Meeting. The
summary of the opinion of Stephens set forth in this Proxy Statement is
qualified in its entirety by reference to the full text of such opinion.

OVERVIEW. In its presentation to the Special Committee on November 6, 2000,
Stephens reviewed the corporate structure and lines of business of the Company.
Stephens noted that the Company's business consists predominantly of commercial
lines of property and casualty insurance, including standard property and
casualty, political subdivisions and surety bonds, written primarily in the
states of Oklahoma and Texas, and that the Company is withdrawing from writing
any more group accident and health business. Stephens noted that the Company
enjoys a favorable tax rate due to its domicile in the Cayman Islands and that
such benefit would not be available following the Recapitalization Plan.
Stephens reviewed the recent historical performance of the Company as well as
its projected future performance as described in the projections provided by the
management of the Company. Stephens reviewed certain GAAP and statutory
financial information for the Company, including net premiums earned, net
income, net operating income, book value, return on equity, loss, expense and
combined ratios, and the ratio of net premiums written to stockholders' equity.
Stephens noted that the Company's average return on average common equity for
the last five years was 2.8%, compared to a median of 6.5% and a mean of 6.8%
for the Company's peer group (identified below in the Comparable Company
Analysis). Stephens noted that the Company has traded in a 52-week range of
$6.00 to $8.75 per share and that the Company has generally traded at a discount
to its book value since 1990.

Stephens noted that $10.00 per share, the cash consideration proposed to be
paid to the Public Shareholders in the Recapitalization Plan, represented 68.9x
adjusted GAAP net income for the twelve months ended September 30, 2000, 14.1x
adjusted GAAP net income projected for 2001, and 65% of fully-diluted GAAP book
value as of September 30, 2000. Adjusted GAAP net income for the twelve months
ended September 30, 2000 was calculated without regard to (i) certain litigation
expenses considered to be nonrecurring and (ii) the estimated one-time benefit
realized upon the rescission of the reinsurance treaty with Reliance in 1999.
GAAP net income projected for 2001 was calculated without regard to (i) certain
litigation expenses considered to be nonrecurring and (ii) net realized
investment gains. Stephens further noted that the total transaction value
(purchase price plus debt assumed) represented 39.6x adjusted GAAP EBIT
(earnings before interest and taxes) and 14.8x adjusted GAAP EBITDA (earnings
before interest, taxes, depreciation and amortization) for the twelve months
ended September 30, 2000. In each case, GAAP EBIT and GAAP EBITDA were
calculated without regard to (i) certain litigation expenses considered to be
nonrecurring and (ii) the estimated one-time benefit realized upon the
rescission of the reinsurance treaty with Reliance in 1999.

VALUATION ANALYSIS. Stephens arrived at valuation ranges for the Company by
utilizing four principal valuation methodologies:

(1) Comparable company analysis--Comparable company analysis analyzes a
company's operating performance and outlook relative to a group of
publicly-traded peers to determine an implied unaffected market trading
value range.

(2) Analysis of selected acquisitions--The analysis of selected acquisitions
provides a valuation range based upon financial information of companies
in the same or similar industries which have been acquired in selected
recent transactions.

(3) Discounted cash flow analysis--Discounted cash flow analysis provides a
method for establishing a range of values of a business based on
projected earnings and capital requirements and the cash flows expected
to be generated by the operation of the business.

25
<PAGE>
(4) Premium analysis--Premium analysis compares the per share consideration
paid in acquisition transactions, including going private transactions,
to the market trading price per share at different points in time prior
to the announcement of the transaction.

No company used in the comparable company analysis described below is identical
to the Company, and no transaction used in the analysis of selected acquisitions
described below is identical to the Recapitalization Plan. Accordingly, an
analysis of the results of the analyses described below necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading value or the acquisition value of the companies to which they
are being compared.

COMPARABLE COMPANY ANALYSIS. Stephens compared certain financial
information and market data of the Company with a group of insurance companies
that Stephens believed to be appropriate for comparison. The group consisted
primarily of small to medium-sized regional property and casualty insurance
companies writing predominantly commercial lines of business and included
Acceptance Insurance Company, Allcity Insurance Company, American Country
Holdings, Inc., American Safety Insurance Group Ltd., Amwest Insurance
Group, Inc., Baldwin & Lyons, Inc., Capitol Transamerica Corp., Danielson
Holding Corp., EMC Insurance Group Inc., Gainsco Inc., Highlands Insurance
Group Inc., Meadowbrook Insurance Group, Inc., Merchants Group Inc., Paula
Financial, Penn America Group Inc., Philadelphia Consolidated Holding Corp.,
RTW Inc., Unico American Corp., and Zenith National Insurance. The financial
information compared included market capitalization, total market
capitalization, current price, the previous 52 weeks' high and low sales prices,
earnings per share for the last twelve months, estimated earnings per share for
2000 and 2001, five year compound growth rate and return on stockholders'
equity. Additional information compared included the ratio of earnings before
interest, taxes, depreciation and amortization to total market capitalization,
and loss, expense and combined ratios. In order to arrive at a public market
reference range for the Company, Stephens derived multiples for the comparable
companies, including price as a multiple of: (i) estimated earnings for 2001;
(ii) September 30, 2000 GAAP book value; and (iii) last twelve months' GAAP net
income. The market price information used in such analysis was as of
November 2, 2000. The earnings per share estimates used were based on estimates
as of November 2, 2000 provided by (i) Institutional Brokers Estimate System
("IBES"), a data service that monitors and publishes a compilation of earnings
estimates regarding companies of interest to institutional investors produced by
selected research analysts, and (ii) Zacks Investment Research, a full service
quantitative research firm.

With regard to the group of comparable insurance companies, price as a
multiple of estimated 2001 earnings ranged from 6.7x to 28.3x with a mean of
13.5x; price as a multiple of GAAP book value ranged from 0.3x to 2.1x with a
mean of 0.7x; and price as a multiple of last twelve months' GAAP net income
ranged from 5.9x to 43.6x with a mean of 11.3x. As used throughout this
discussion, the term "mean" refers to the arithmetic mean, calculated without
regard to the highest and lowest applicable multiples.

Based on its judgment of the relative similarity of the comparable companies
to the Company, Stephens then derived the ranges of these multiples deemed most
meaningful for its analysis (which were 9.0x to 12.0x 2001 estimated earnings,
0.6x to 0.8x September 30, 2000 GAAP book value and 10.0x to 13.0x last twelve
months' GAAP net income, adjusted as previously discussed) and applied these
multiples to the Company. For purposes of this analysis, the Company's estimated
earnings for 2001 were determined without regard to the Recapitalization Plan.
This analysis resulted in a public market reference range for the Company of
between $18.9 million and $25.1 million (or $5.69 per share to $7.57 per share).

ANALYSIS OF SELECTED ACQUISITIONS. The transactions used in the analysis
included the following acquisitions: Old Guard Group Inc. by the Westfield
Companies; American Indemnity Financial Corp. by United Fire & Casualty;
Association Casualty by Atlantic American Corp.; North East Insurance

26
<PAGE>
Company by Motor Club of America; Intercargo Corporation by EXEL Limited;
Gryphon Holdings Inc. by Markel Corporation; Walshire Assurance Company by
Kingsway Financial Services; Summit Holding Southeast Inc. by Liberty Mutual;
TITAN Holdings Inc. by United States Fidelity and Guaranty; Guaranty National
Corp. by Orion Capital Corp.; and Industrial Indemnity Holding by Fremont
General Corp. The financial information compared in the analysis included equity
consideration, total consideration, GAAP net income, GAAP book value, GAAP EBIT
and GAAP EBITDA of the acquired company. In order to arrive at an acquisition
reference range for the Company, Stephens derived multiples for the selected
acquisitions, including (i) the price paid for the equity of the acquired
company as a multiple of (a) GAAP net income and (b) GAAP book value and (ii)
the total consideration paid as a multiple of GAAP EBITDA.

With regard to the named acquisitions, price as a multiple of GAAP net
income ranged from 10.2x to 29.1x with a mean of 15.6x; price as a multiple of
GAAP book value ranged from 0.6x to 2.1x with a mean of 1.4x; and total
consideration as a multiple of GAAP EBITDA ranged from 4.6x to 21.9x with a mean
of 10.6x.

Based on the relative comparability of the selected acquisitions to the
Recapitalization Plan, Stephens then derived the ranges of these multiples
deemed most meaningful for its analysis (which were, with regard to price, 12.0x
to 16.0x last twelve months' GAAP net income, and 0.9x to 1.3x September 30,
2000 GAAP book value, and with regard to total consideration, 8.0x to 12.0x last
twelve months' GAAP EBITDA) and applied these multiples to the Company. This
analysis resulted in a range of values for the Company of between $22.7 million
and $36.4 million (or $6.85 per share to $10.97 per share).

DISCOUNTED CASH FLOW ANALYSIS. The stand-alone valuation of the Company was
determined by calculating the present value of the Company's 2004 terminal
value. (No dividends have ever been paid on the Common Shares of the Company and
no dividends were projected to be paid in the forecast provided by management of
the Company.) The terminal value of the Company's common equity at the end of
2004 was determined under two methods: multiplying projected GAAP net income for
2004 by numbers representing various terminal multiples (ranging from 12.0x to
16.0x) and multiplying the projected December 31, 2004 GAAP book value by
various terminal multiples (ranging from 0.9x to 1.3x). Earnings were projected
assuming that the Company performed in accordance with management's projections,
adjusted to eliminate (i) certain litigation expenses considered to be
nonrecurring and (ii) net realized investment gains. Management's projections
assume, among other things, that (i) direct premiums written will decline
slightly in 2001, with modest growth (averaging about 5% per year) thereafter,
which reflects the Company's elevated leverage position as noted by A.M. Best
Company in the recent downgrade of NAICO, (ii) the loss ratio will decrease to a
level which is more consistent with the Company's average experience during the
last four to six years and remain relatively constant, and (iii) the combined
ratio will fall between 100% and 101% in all years. The terminal values of the
Company were discounted to present values using different discount rates
(ranging from 13% to 17%) chosen to reflect different assumptions regarding the
required rates of return of holders or prospective buyers of the Company's
common equity. Stephens calculated a range of discounted cash flow values per
share on a fully diluted basis of $30.6 million to 38.7 million (or $9.22 per
share to $11.67 per share).

PREMIUM ANALYSIS. Two groups of transactions were used in this analysis.
The first group consisted of the same transactions that were analyzed in the
analysis of selected acquisitions. The second group consisted of selected going
private transactions (primarily in the financial services industry) where the
acquirer had ownership interests in the target prior to the transaction.
Premiums were calculated by comparing the offer price per share to the stock
price (i) one day prior to the offer and (ii) one month prior to the offer.

27
<PAGE>
With regard to the first group, premiums ranged from 10.0% to 65.2% with a
mean of 23.0% one day prior to the offer, and from 2.1% to 50.9% with a mean of
24.1% one month prior to the offer. With regard to the second group, premiums
ranged from -4.5% to 47.1% with a mean of 17.6% on day prior to the offer, and
from 1.2% to 62.6% with a mean of 28.8% one month prior to the offer.

Based on the foregoing analysis, Stephens derived a range of premiums for
its analysis as follows:

<TABLE>
<CAPTION>
SELECTED RANGE OF PREMIUMS
-------------------------------
ONE DAY PRIOR ONE MONTH PRIOR
------------- ---------------
<S> <C> <C>
Selected Acquisitions........................... 10% to 40% 10% to 40%
Going Private Transactions...................... 10% to 35% 15% to 45%
</TABLE>

Based on the Company's stock price of $7.69 one day prior to the offer and $8.25
one month prior to the offer, the analysis resulted in a range of values for the
Company as follows: $8.77 per share to $11.16 per share with regard to the
selected acquisitions and $8.97 per share to $11.17 per share with regard to the
going private transactions.

The summary set forth above does not purport to be a complete description of
the analyses performed by Stephens. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Stephens believes that its analyses must be considered as a
whole and that selecting portions of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its opinion.
In performing its analyses, Stephens made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of the Company. The analyses
performed by Stephens are not necessarily indicative of actual values, which may
be significantly more or less favorable than suggested by such analyses.
Additionally, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the prices at which such business actually may be sold.
Because such analyses are inherently subject to uncertainty, none of the
Company, Stephens or any other person assumes responsibility if future events do
not conform to the judgments reflected in the opinion of Stephens.

INFORMATION CONCERNING STEPHENS. Stephens is a nationally recognized
investment banking firm and, as a customary part of its investment banking
activities, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and for other purposes. Pursuant to Stephens'
engagement letter, the Company agreed to pay Stephens a fee of $100,000 upon
commencement of its engagement and $100,000 thirty days later. The Company also
agreed to pay an opinion fee of $200,000 upon and in connection with delivering
a fairness opinion. If Stephens is requested to update its opinion, the Company
will pay Stephens a fee of $50,000 upon delivery of the updated opinion. The
Company has agreed to reimburse Stephens for out-of pocket expenses and to
indemnify Stephens against certain liabilities in connection with rendering the
fairness opinion and serving as the Special Committee's financial advisor.

INTERESTS OF CERTAIN PERSONS

W. Brent LaGere is the Chairman of the Board of Directors and Chief
Executive Officer of the Company, and Mark T. Paden is the Executive Vice
President, Chief Financial Officer and a Director of the Company. Their
interests are not the same as those of the Public Shareholders and the benefits
they derive from the Recapitalization Plan will differ from those of the Public
Shareholders. The Recapitalization Plan will result in Messrs. LaGere and Paden
being the sole holders of voting capital shares of the Company. As a result,
LaGere and Paden will be able to control all aspects of the Company, and they
will be able to share a greater percentage of the benefits of the Company's
potential future growth, cash flows and earnings, if any, than their current
holdings would afford. Furthermore, the repurchase of Common Shares held by
LaGere and Paden and the sale of the same

28
<PAGE>
number of Class A Common Shares at the same price to LaGere and Paden will
constitute a tax-free exchange for federal income tax purposes. In contrast, the
Public Shareholders will not participate in a repurchase and sale and their
receipt of cash in lieu of the issuance of any resulting fractional shares
following the Reverse Stock Split will constitute a taxable transaction for
federal income tax purposes. The Public Shareholders also will not have an
opportunity to share the benefits of the Company's potential future growth, cash
flow and earnings, if any.

The increase in LaGere's and Paden's control of the Company will provide
them with the ability to cause the Company to effect certain fundamental
corporate changes. In addition, their control of the Company will permit them to
amend, alter or repeal all or certain provisions of the Company's Memorandum of
Association and Articles of Association.

CONDUCT OF THE COMPANY'S BUSINESS AFTER THE RECAPITALIZATION PLAN

The Company expects its business and operations to continue as they are
currently being conducted and, except as disclosed herein, the Recapitalization
Plan is not anticipated to have any effect upon the conduct of such business.
Messrs. LaGere and Paden have advised the Company that they have no current
plans to cause the Company to effect any extraordinary corporate transactions,
such as a merger, reorganization, or liquidation; to sell or transfer any
material amount of the its assets, except as may be needed to satisfy
liabilities of the Company; to change its dividend policy or indebtedness or
capitalization; or otherwise to effect any material change in its corporate
structure or business. If the Recapitalization Plan is approved and consummated,
all Public Shareholders at the Effective Date of the Recapitalization Plan will
no longer have any equity interest in, and will not be shareholders of, the
Company and therefore will not participate in its future potential or earnings
and growth. Instead, each Public Shareholder of Common Shares will have the
right to receive $10.00 per share in cash, without interest.

MATERIAL U.S. FEDERAL TAX CONSEQUENCES

THE FOLLOWING DISCUSSION SUMMARIZING CERTAIN U.S. FEDERAL INCOME TAX
CONSEQUENCES IS BASED ON CURRENT LAW AND IS INCLUDED FOR GENERAL INFORMATION
ONLY. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX EFFECTS OF THE RECAPITALIZATION PLAN IN LIGHT OF
THEIR INDIVIDUAL CIRCUMSTANCES.

The receipt of cash by a shareholder pursuant to the Recapitalization Plan
will be a taxable transaction for federal income tax purposes. The Public
Shareholders and certain Continuing Shareholders will receive cash in the
transaction. The Public Shareholders will have their entire stock interest in
the Company redeemed and generally will recognize gain or loss equal to the
difference between the cash received and the shareholder's adjusted tax basis in
the surrendered Common Shares. The gain or loss recognized generally will be
capital gain or loss if the Common Shares are held as a capital asset. Any such
capital gain or loss will be long-term capital gain or loss if the shareholder's
holding period for the Common Shares exceeds one year as of the Effective Date.

A shareholder who, in effect, exchanges Common Shares for new capital stock
of the Company will not be subject to the Reverse Stock Split and should not
recognize any gain or loss with respect to the receipt of such new stock for
U.S. federal income tax purposes.

Special taxation and withholding rules may apply to any shareholder that is
a nonresident alien or a foreign corporation. Those rules are beyond the scope
of this discussion and should be discussed with a personal tax advisor.
Shareholders will be required to provide their social security or other taxpayer
identification numbers (or, in some instances, certain other information) to the
Company in connection with the Reverse Stock Split to avoid backup withholding
requirements that might otherwise apply. See "--Exchange of Certificates" and
"--Payment of Cash in Lieu of Fractional Shares." Each shareholder

29
<PAGE>
should deliver such information when the Common Shares certificates are
surrendered following the Effective Date. Failure to provide such information
may result in backup withholding.

THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY
AND DOES NOT REFER TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF ANY SPECIFIC
SHAREHOLDER. SHAREHOLDERS, PARTICULARLY THOSE WHO HAVE ACQUIRED SHARES OF COMMON
SHARES IN COMPENSATION-RELATED TRANSACTIONS, ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS FOR MORE SPECIFIC AND DEFINITIVE ADVICE AS TO THE FEDERAL INCOME TAX
CONSEQUENCES TO THEM OF THE TRANSACTION, AS WELL AS ADVICE AS TO THE APPLICATION
AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.

DISSENTERS' APPRAISAL RIGHTS

No appraisal or dissenters' rights are available under the Law to
shareholders who dissent from the Recapitalization Plan. There may exist other
rights or actions under the Law or federal or state securities laws for
shareholders who are aggrieved by the Recapitalization Plan generally. Although
the nature and extent of such rights or actions are uncertain and may vary
depending upon facts or circumstances, shareholder challenges to corporate
action in general are related to the fiduciary responsibilities of corporate
officers and directors and to the fairness of corporate transactions.

SOURCE OF FUNDS

The Company estimates the total cost to be incurred by the Company in the
Reverse Stock Split for payment of fractional share interests will be
approximately $14.7 million. This amount includes the following estimated
transactional expenses:

<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 2,765.87
Legal Fees and Expenses..................................... $432,000.00
Accounting Fees and Expenses................................ $ 3,000.00
Financial Advisor Fees and Expenses......................... $406,500.00
Printing and Mailing Expenses............................... $ 7,500.00
Miscellaneous Expenses...................................... $ 48,500.00
</TABLE>

The Company intends to finance the transaction through (i) a $2.4 million
sale of Class A Common Shares to LaGere and Paden, (ii) up to an $11.8 million
intercompany loan from Chandler Insurance (Barbados), Ltd., a direct subsidiary
of the Company and (iii) proceeds of approximately $775,000 from the exercise of
outstanding options. Chandler (U.S.A.), Inc., an indirect subsidiary of the
Company ("Chandler USA"), intends to loan up to $11.0 million to Chandler
Barbados, its direct parent, under an unsecured intercompany loan agreement
payable upon demand to Chandler USA with interest at the rate published in the
Wall Street Journal. Up to $8.0 million of Chandler USA's intercompany loan to
Chandler Barbados will be from a dividend declared by NAICO. In turn, Chandler
Barbados intends to loan up to $11.8 million of the proceeds of the loan from
Chandler USA to the Company, its direct parent, to fund the Recapitalization
Plan. The intercompany loan from Chandler Barbados would be secured by a pledge
agreement between the Company and Chandler Barbados whereby all of the assets of
the Company are pledged to Chandler Barbados until the loan is repaid. The loan
will bear interest the New York Prime Rate. The Company has not made any plans
or arrangements to finance or repay the loan at this time. Management believes
that the use of the intercompany loan will not impair the Company's financial
position.

The Company does not have any alternative financing arrangements or plans.
All fees and expenses will be borne by the Company whether or not the
Recapitalization Plan is approved or consummated.

30
<PAGE>
EXCHANGE OF CERTIFICATES

Promptly following approval of the Recapitalization Plan, ChaseMellon
Shareholder Services, as Exchange Agent will mail transmittal letters and
instructions to all holders of Common Shares of record on the Record Date to be
used in surrendering their certificates representing Common Shares for cash, in
the case of Public Shareholders and certain Continuing Shareholders. Until such
surrender, certificates held by Public Shareholders representing Common Shares
will represent the right to receive cash. Shareholders are requested not to send
in their stock certificates for the Common Shares until they receive
instructions from the Exchange Agent.

As soon as practicable after the Special Meeting, the Company will file its
Special Resolutions with the Registrar of Companies in the Cayman Islands.

PAYMENT OF CASH IN LIEU OF FRACTIONAL SHARES

On the Effective Date, in accordance with the terms of the Recapitalization
Plan, holders of certificates representing fractional Common Shares will cease
to have any rights as shareholders of the Company and will have only the right
to receive cash for their fractional shares. No holder of fractional shares will
be entitled to receive cash until the certificates that evidence such fractional
shares are surrendered to the Exchange Agent and no interest will accrue in
respect thereof. Until so surrendered, all fractional shares will be deemed to
evidence the right to receive the amount of cash into which the same has been
converted in connection with the Recapitalization Plan. After the Effective
Date, there will be no further transfers on the records of the Company of
certificates representing fractional Common Shares, and, if such certificates
are presented to the Company or the Exchange Agent for transfer, they will be
canceled against delivery of certificates for cash. Within ten business days
after receipt of a certificate that evidences fractional shares, the Exchange
Agent will distribute cash with respect to the fractional shares that have been
properly surrendered and endorsed.

The Company will not be liable to any former holder of Common Shares for any
amount delivered by the Company to any public official or entity pursuant to
applicable abandoned property, escheat or similar laws.

31
<PAGE>
THE COMPANY

The Company is an insurance company organized and domiciled in the Cayman
Islands. Through its wholly owned subsidiaries, the Company operates in two
lines of business: property and casualty insurance and insurance agency
operations.

EXECUTIVE OFFICERS AND DIRECTORS

A brief description of each director and executive officer of the Company is
provided below. Directors hold office until the next annual meeting of
shareholders or until their respective successors are duly elected and
qualified. Executive officers are elected by the Board at its annual meeting and
hold office until its next annual meeting or until their respective successors
are duly elected and qualified. The business address for each of the current
directors and executive officers of the Company is Anderson Square, Fifth Floor,
Grand Cayman, Cayman Islands B.W.I. The current directors and executive officers
of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- --------------------------------------------------------
<S> <C> <C>
W. Brent LaGere...................... 55 Chairman of the Board, Chief Executive Officer,
President, and Director

Mark T. Paden........................ 44 Executive Vice President, Chief Financial Officer, and
Director

Brenda B. Watson..................... 60 Executive Vice President and Director

Richard L. Evans..................... 53 Vice President and Director

Steven R. Butler..................... 42 Vice President--Administration

Mark C. Hart......................... 45 Vice President--Accounting and Treasurer

James M. Jacoby...................... 65 Director

Paul A. Maestri...................... 70 Director

Robert L. Rice....................... 66 Director

W. Scott Martin...................... 50 Director
</TABLE>

W. BRENT LAGERE has been Chairman of the Board of the Company since
September 1983, Chief Executive Officer since March 1986 and President since
May 1997. Since October 1988 he has served in officer and director capacities
for various subsidiaries of the Company pursuant to an employment contract with
Chandler USA. Since 1971 he has served in various capacities with
LaGere &Walkingstick Insurance Agency, Inc. ("L&W").

MARK T. PADEN has served as Executive Vice President of the Company since
May 1998, was Vice President--Finance of the Company from August 1987 through
May 1998 and has been a director since May 1992. Since February 1987, Mr. Paden
has been an employee of L&W and/or Chandler USA. In May 1998, Mr. Paden was
elected Executive Vice President and Chief Operating Officer for Chandler USA,
L&W and NAICO. Mr. Paden has served as Chief Financial Officer of NAICO since
January 1988 and of L&W since May 1987, and also served as Vice
President--Finance of NAICO from January 1988 through May 1998 and of L&W from
May 1987 through May 1998. Mr. Paden has also been a director of Chandler USA
since July 1988, NAICO since November 1992 and L&W since October 1992.

BRENDA B. WATSON has been Executive Vice President of the Company since
October 1988, was a Vice President of the Company for three years prior thereto,
and has been a director of the

32
<PAGE>
Company since September 1985. Since October 1988, she has served in officer and
director capacities for various subsidiaries of the Company pursuant to an
employment contract with Chandler USA.

RICHARD L. EVANS has been a director of the Company since September 1983. He
has been a Vice President of the Company since August 1986, and since May 1989,
he has been an employee of Chandler USA. Mr. Evans has served L&W since 1979 in
various capacities. Mr. Evans has also been a director of Chandler USA since
May 1990.

STEVEN R. BUTLER has served as Vice President-Administration of the Company
since January 1987, and also serves as a director, the President and Treasurer
of Chandler Insurance Management (Barbados), Ltd. ("CIM Barbados"). He is also a
director and the Financial Director of Chandler Insurance Management, Ltd.
("CIM"), and is a director and serves as President of Chandler Barbados. The
Company began handling its own and Chandler Barbados' operations and
administrative affairs through CIM and CIM Barbados, respectively, in 1990. From
1984 through 1989, Mr. Butler served as Financial Director of Insurance
Management Services, Ltd. and, beginning in 1988, of its affiliate Insurance
Risk Management Services, Ltd., which performed substantially all of the
administrative management functions of the Company and Chandler Barbados,
respectively, through March 1990.

MARK C. HART has served as Vice President--Accounting and Treasurer of the
Company since May 1998. Since May 1988, Mr. Hart has been an employee of NAICO
and/or Chandler USA. In May 1998, Mr. Hart was elected Vice President--Finance
and Treasurer of Chandler USA, NAICO and L&W. Mr. Hart has been a Vice President
of Chandler USA since March 1994.

JAMES M. JACOBY has been a director since October 1993. He has been a
director of NAICO since August 1990. He has been an insurance agent for more
than five years and was formerly employed by NAICO from June 1990 to
March 1991. Mr. Jacoby retired in September 1994 from Alexander and
Alexander, Inc. where he was a Vice President with the Omaha, Nebraska office,
and is currently employed by Constructor's Bonding & Insurance in Omaha,
Nebraska where he is involved in servicing insurance accounts.

PAUL A. MAESTRI has been a director of the Company since October 1985. Since
February 1990 Mr. Maestri has engaged in personal investment activities. From
1980 to February 1990 Mr. Maestri was a director and the President and Chief
Executive Officer of P.A.M. Transport, Inc. He has also been a director of L&W
since December 1993, NAICO since May 1997 and CIM since May 1998.

ROBERT L. RICE has been in private practice as a certified public accountant
for more than five years and a director of the Company since May 1987. Mr. Rice
has also been a director of Chandler USA since June 1993, L&W since May 1997 CIM
since May 1998 and NAICO since March 2000.

W. SCOTT MARTIN has been President of the Tulsa Loan Production Office with
First Bank & Trust Company in Wagoner, Oklahoma since 1994. Mr. Martin also
serves as a director of First Bank & Trust in Wagoner, Oklahoma, First Bank of
Chandler in Chandler, Oklahoma, First National Bank in Burkburnett, Texas and
The Bank of Union in Union City, Oklahoma. Mr. Martin has been a director of the
Company since November 1999. Mr. Martin has also been a director of Chandler USA
and NAICO since March 2000.

FINANCIAL INFORMATION

The Company's unaudited consolidated financial statements as of
September 30, 2000 and for the three and nine months ended September 30, 2000
and 1999 are included in the Form 10-Q Quarterly Report as filed with the SEC.
The Consolidated Financial Statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations included in the Form 10-Q as of
and for the three and nine months ended September 30, 2000 and 1999 are
incorporated herein by reference.

33
<PAGE>
The Company's audited financial statements for the years ended December 31,
1999 and 1998 are included in the 1999 Annual Report on Form 10-K as filed with
the SEC. Those financial statements and the notes thereto are found in the
Form 10-K beginning at page F-1, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is set forth in the Form 10-K
beginning at page 21. The Consolidated Financial Statements and Management's
Discussion and Analysis of Operations are incorporated herein by reference.

PRICE RANGE OF COMMON SHARES; DIVIDENDS

The Common Shares have been traded in the over-the-counter market and quoted
on Nasdaq since June 9, 1986, the date of the Company's initial public offering,
under the symbol "CHANF". The Common Shares were included on the Nasdaq National
Market on March 17, 1987. Trading in the Company's Common Shares has been
sporadic and relatively inactive for many years.

The table below sets forth, for the periods indicated, the high and low
closing sale prices of the Company's Common Shares as reported on the Nasdaq
National Market.

<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON SHARES
-------------------
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1998:
First Quarter............................................. $ 8.38 $5.13
Second Quarter............................................ 8.00 7.19
Third Quarter............................................. 8.13 6.75
Fourth Quarter............................................ 7.88 7.00

FISCAL YEAR ENDED DECEMBER 31, 1999:
First Quarter............................................. $10.00 $7.25
Second Quarter............................................ 8.94 7.50
Third Quarter............................................. 8.13 7.25
Fourth Quarter............................................ 8.63 7.25

FISCAL YEAR ENDING DECEMBER 31, 2000:
First Quarter............................................. $ 8.50 $6.50
Second Quarter............................................ 8.63 7.50
Third Quarter............................................. 8.19 7.56
Fourth Quarter (through November 21, 2000)................ 8.63 7.50
</TABLE>

On May 31, 2000, the last trading day on which there was any trading in the
Company's Common Shares preceding the announcement of the Recapitalization Plan,
the closing sales price of the Company's Common Shares was $7.69.

The Company has never declared or paid a cash dividend on the Common Shares
and does not contemplate doing so in the foreseeable future.

SHARE PURCHASES

During December 1999, the Company acquired 1,989,200 of its Common Shares in
exchange for payment of $15,204,758 to CenTra, Inc. ("CenTra") and its
affiliates (collectively, the "CenTra Group") pursuant to a divestiture plan
proposed by NAICO, an indirect subsidiary of the Company, and approved by the
U.S. District Court for the District of Nebraska (the "Nebraska Court"). All
shares were canceled upon their return to the Company. The Nebraska Court had
ordered CenTra to divest all shares of the Company owned or controlled by it or
its affiliates.

34
<PAGE>
During December 1999, Chandler Insurance Management, Ltd., a wholly owned
subsidiary of the Company, transferred 524,475 shares of the Company's Common
Shares that it owned to the Company. The shares were canceled by the Company.

During November 2000, the Company acquired an additional 1,142,625 of its
Common Shares in exchange for payment of $6,882,500 to the CenTra Group and
affiliates pursuant to a ruling of the U.S. District Court in Oklahoma City,
Oklahoma in April 1997, which was upheld by the 10th Circuit Court of Appeals in
September 2000. Following the appeal, the Nebraska Court determined the method
of divestiture of these shares. The CenTra Group consists of CenTra, Inc.,
Ammex, Inc., DuraRock Underwriters, Ltd., M.J. Moroun, Ronald W. Lech, Norman E.
Harned, Agnes A. Moroun and Matthew T. Moroun.

During October and November 2000, the Plan has purchased approximately 213
shares for its participants at an average price of $7.91. All purchases for the
Plan are effected through State Street brokerage firm.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Chandler USA leases a rural property from Davenport Farms, Inc. ("Davenport
Farms"), a corporation owned by Messrs. LaGere, Evans and Paden. Chandler USA
has placed three mobile homes on the property, drilled a water well connected to
the mobile homes and made other smaller improvements to the property. Its
personnel maintains these improvements. These mobile homes and the property
provide hunting, fishing, lodging, dining and other outdoor recreational
activities for the entertainment of customers and business associates of
Chandler USA and/or its subsidiaries. Chandler USA pays no rent to Davenport
Farms but reimburses it for one-half of the utilities and for hunting supplies.
Chandler USA has also agreed to indemnify Davenport Farms for claims arising out
of its use of the property. Chandler USA retains the right to remove all
structures located upon the property when the lease terminates. In 1997, 1998
and 1999, Chandler USA incurred approximately $159,000, $217,000 and $202,000,
respectively, in expenses associated with its use of this property, including
$9,000, $7,000 and $8,000 paid to Davenport Farms for reimbursement of certain
expenses, such as utility and similar expenses, for the years 1997, 1998 and
1999, respectively.

35
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number of Common Shares of the Company
beneficially owed before the Recapitalization Plan (as of November 21, 2000) and
the number and type of new capital stock to be owned after the Recapitalization
Plan by (i) each director, (ii) the Company's Chairman and Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers for services rendered for the fiscal year ended December 31, 1999 and
(iii) all current directors and executive officers as a group:

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
---------------------------------------------------------------------------
NUMBER OF TYPE OF NEW NUMBER OF NEW
COMMON SHARES CAPITAL SHARES CAPITAL SHARES
NAME OF DIRECTOR OR EXECUTIVE OFFICER (PRE-SPLIT)(1) PERCENT(2) (POST-SPLIT) (POST-SPLIT)(1) PERCENT(3)
------------------------------------- -------------- ---------- -------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
W. Brent LaGere(4).................. 454,465 13.7% Class A C/S 500,661 80.0%
Series A P/S 75,152 18.4%

Brenda B. Watson(5)................. 53,566 1.6% Series A P/S 9,997 2.4%
Series B P/S 43,569 9.0%

Richard L. Evans.................... 59,522 1.8% Series A P/S 27,272 6.7%
Series B P/S 30,750 6.4%

Paul A. Maestri(6).................. 54,500 1.6% -- -- --

James M. Jacoby(6).................. 54,500 1.6% -- -- --

Robert L. Rice(6)................... 54,500 1.6% -- -- --

Mark T. Paden....................... 28,810 * Class A C/S 125,165 20.0%
Series A P/S 17,610 4.3%

W. Scott Martin(7).................. 33,000 1.0% Series C P/S 33,000 4.4%

Steven R. Butler.................... 3,200 * Series C P/S 3,200 *

All directors and officers as a group
(10 persons)(8).................. 791,564 23.2% Class A C/S 625,826 100.0%
Series A P/S 130,031 31.8%
Series B P/S 74,319 15.4%
Series C P/S 33,000 4.4%
</TABLE>

------------------------

* Less than 1%

(1) The rules of the SEC provide that, for the purposes hereof, a person is
considered the "beneficial owner" of shares with respect to which the
person, directly or indirectly, has or shares the voting or investment
power, irrespective of his economic interest in the shares. Unless otherwise
noted, each person identified possesses sole voting and investment power
over the shares listed, subject to community property laws.

(2) Based on 3,305,408 Common Shares outstanding on November 21, 2000. Common
Shares subject to options that are exercisable within 60 days of
November 21, 2000, are deemed beneficially owned by the person holding such
options for the purposes of calculating the percentage of ownership of such
person but are not treated as outstanding for the purpose of computing the
percentage of any other person.

(3) Based on 625,826 Class A Common Shares, 408,788 Series A Preferred Shares,
482,769 Series B Preferred Shares and 753,089 Series C Preferred Shares
estimated to be outstanding following the Recapitalization Plan.

36
<PAGE>
(4) Includes (i) 348,390 Common Shares owned by the W. Brent LaGere Irrevocable
Trust (the "Trust") and (ii) 22,500 Common Shares owned by W&L Holding Corp.
("W&L Holding"), a corporation, 100% of which is owned by the Trust.
Mr. LaGere disclaims beneficial ownership of the shares held by the Trust
and W&L Holding. The business address of Mr. LaGere is 1010 Manvel Avenue,
Chandler, Oklahoma, 74834.

(5) Includes 8,027 shares held by Ms. Watson's husband. Ms. Watson disclaims
beneficial ownership of the shares owned by her husband.

(6) Includes 34,500 Common Shares issuable upon exercise of outstanding options.

(7) Includes 1,500 Common Shares issuable upon exercise of outstanding options.

(8) Includes 105,000 Common Shares issuable upon exercise of outstanding
options. In addition, includes 3,528 Common Shares owned by another
executive officer of the Company not listed in the table above.

SHAREHOLDERS HOLDING OVER FIVE PERCENT

The following table sets forth the number of Common Shares of the Company
beneficially owed before the Recapitalization Plan and the number and type of
new capital stock owned after the Recapitalization Plan by persons, other than
those listed previously, who are known by the Company to own beneficially more
than 5% of the Company's Common Shares as of November 21, 2000. Except as
otherwise indicated, each of the persons named below has sole voting and
investment power with respect to the capital stock beneficially owned.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
---------------------------------------------------------------------------
NUMBER OF TYPE OF NEW NUMBER OF NEW
COMMON SHARES CAPITAL SHARES CAPITAL SHARES
NAME AND ADDRESS OF SHAREHOLDER (PRE-SPLIT)(1) PERCENT(2) (POST-SPLIT) (POST-SPLIT)(1) PERCENT(3)
------------------------------- -------------- ---------- -------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Benjamin T. Walkingstick(4)
1001 Manvel Avenue
Chandler, Oklahoma 74834.......... 377,529 11.4% Series B P/S 377,529 78.2%

Marvel List(5)
420 Bennett Boulevard
Chandler, Oklahoma 74834.......... 375,577 11.4% Class A C/S 370,890 59.3%
Series C P/S 4,687 *
</TABLE>

------------------------

* Less than 1%.

(2) Based on 3,305,408 Common Shares outstanding on November 21, 2000.

(4) Includes 2,500 Common Shares held by Mr. Walkingstick's wife, 16,256 Common
Shares held by Mr. Walkingstick's son, 3,562 Common Shares held by
Mr. Walkingstick's daughter, and 2,873 held

37
<PAGE>
by Mr. Walkingstick's grandchildren. Mr. Walkingstick disclaims beneficial
ownership of these shares.

(5) Includes 370,890 held by the Trust, of which 22,500 Common Shares are
directly owned by W&L Holding, which is 100% owned by the Trust. Ms. List
serves as trustee of the Trust.

OTHER MATTERS REGARDING BENEFICIAL OWNERSHIP

For purposes of these tables, unless otherwise indicated, the Company has
assumed that the following persons are affiliates: an entity's executive
officers and directors or its managing partners, persons holding more than 10%
of an entity, and those persons who are controlling, controlled by, or under
common control with such officers, directors, managing partners, or
shareholders.

Statements of percentages of ownership are made based upon pertinent
reporting requirements and guidelines specifically applicable to this Proxy
Statement. Determination of voting power under the Company's Articles of
Association or applicable insurance holding company laws may be at variance with
the above stated percentages.

INSURANCE REGULATION CONCERNING CHANGE OR ACQUISITION OF CONTROL

The Company's subsidiary, NAICO is a domestic property and casualty
insurance company organized under the insurance laws of Oklahoma (the "Insurance
Code"). The Insurance Code provides that the acquisition or change of "control"
of a domestic insurer or of any person that controls a domestic insurer cannot
be consummated without the prior approval of the Oklahoma Department of
Insurance. A person seeking to acquire control, directly or indirectly, of a
domestic insurance company or of any person controlling a domestic insurance
company must generally file with the relevant insurance regulatory authority an
application for change of control containing certain information required by
statute and published regulations and provide a copy of such to the domestic
insurer. In Oklahoma, control is generally presumed to exist if any person,
directly or indirectly, owns, controls, holds with the power to vote or holds
proxies representing 10% or more of the voting securities of the insurance
company or of any other person or entity controlling the insurance company. The
10% presumption is not conclusive and control may be found to exist at less than
10%.

In addition, many state insurance regulatory laws contain provisions that
require pre-notification to state agencies of a change in control of a
non-domestic insurance company admitted in that state. While such
pre-notification statutes do not authorize the state agency to disapprove the
change of control, such statutes do authorize issuance of a cease and desist
order with respect to the non-domestic insurer if certain conditions exist such
as undue market concentration.

Any future transactions that would constitute a change in control of the
Company would also generally require prior approval by the Oklahoma Department
of Insurance and would require pre-acquisition notification in those states
which have adopted pre-acquisition notification provisions and in which the
insurers are admitted. Because such requirements are primarily for the benefit
of policyholders, they may deter, delay or prevent certain transactions that
could be advantageous to the shareholders or creditors of the Company.

LITIGATION

On June 5 and 6, 2000, three civil lawsuits were filed against the Company,
its indirect subsidiary Chandler (U.S.A.), Inc., and all of the Company's
directors. All three suits have now been consolidated into a single proceeding.
The suit alleges that the plans announced on June 1, 2000 to take the Company
private are detrimental to the Public Shareholders. Each suit also requests that
it be certified as a class action and that the court enter a temporary
restraining order to prevent completion of the announced plan. The suit also
alleges that all defendants have breached and are breaching fiduciary

38
<PAGE>
duties owed to the plaintiffs and other shareholders. The plaintiffs have been
granted leave to amend their petitions but have not yet amended them. As a
result, the Company has not yet responded to the lawsuit but plans to file
timely responses denying the allegations. On June 12, 2000, CenTra made similar
allegations in an already pending lawsuit in the Nebraska Court involving a
court-ordered divestiture of the Company's shares owned by CenTra. See "The
Company--Share Purchases." CenTra requested that the court enjoin and restrain
LaGere and others from completing the announced plans. On July 20, 2000, the
Nebraska Court denied CenTra's request. On June 27, 2000, CenTra filed a similar
request in an already pending case in the U.S. District Court for the Western
District of Oklahoma (the "Oklahoma Court"). The Company has responded, but the
Oklahoma Court has not ruled.

SHAREHOLDERS' PROPOSALS

If the Recapitalization Plan is not approved and consummated, or if it is
not effected within the period currently contemplated, the Company will hold a
2001 Annual Meeting of the Shareholders in the middle of 2001. Shareholders may
submit proposals on matters appropriate for shareholder action at subsequent
annual meetings of the Company consistent with the Rule 14a-8 promulgated under
the Exchange Act. For such proposals to be considered for inclusion in the Proxy
Statement and Proxy relating to the 2001 Annual Meeting of Shareholders, such
proposals must be received by the Secretary of the Company on or before
January 5, 2001. With respect to the Special Meeting, the Company has received
no notifications that any shareholder proposal is intended to be raised from the
floor. Therefore, the proxy holders will be allowed to use their discretionary
voting authority if any such proposals are raised.

INCORPORATION BY REFERENCE

The following documents filed with the SEC by the Company are incorporated
by reference in this Proxy Statement: (i) the Annual Report of Form 10-K for the
fiscal year ended December 31, 1999, and (ii) the Quarterly Reports on
Form 10-Q for the periods ended March 31, June 30 and September 30, 2000.

All documents and reports filed by the Company with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement and prior to the date of the Special Meeting shall be deemed to
be incorporated by reference in this Proxy Statement and prior to be a part
hereof from the respective dates of the filing of such documents or reports.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein (or in any other subsequently filed documents which also is deemed to be
incorporated by reference herein) modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.

THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
TO SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER TO WHOM THIS PROXY STATEMENT IS DELIVERED, ON WRITTEN OR ORAL
REQUESTS OF SUCH PERSON AND BY FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS
WITHIN ONE BUSINESS DAY OF RECEIPT OF SUCH REQUEST, TO CHANDLER INSURANCE
COMPANY, LTD., ANDERSON SQUARE, FIFTH FLOOR, GRAND CAYMAN, CAYMAN ISLANDS
B.W.I., ATTN: STEVEN R. BUTLER (TELEPHONE: 345-949-8177). IN ORDER TO ENSURE
DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, REQUESTS MUST BE
RECEIVED NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE SPECIAL MEETING.

39
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other information
can be inspected and copied at the public reference facilities of the SEC at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center,
14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. In addition, such reports, proxy statements and other
information are available from the Edgar filings obtained through the SEC's
website http://www.sec.gov.

MISCELLANEOUS

The Board of Directors knows of no business other than that set forth above
to be transacted at the Special Meeting. If other matters requiring a vote of
the shareholders arise, the persons designated as proxies will vote the Common
Shares represented by the proxies in accordance with their best judgment and
Rule 14a-4 under the Exchange Act.

The information contained in the Proxy Statement relating to the occupations
and security holdings of the directors and executive officers of the Company and
their transactions with the Company is based upon information received from the
individual directors and officers. All information relating to any beneficial
owner of more than five percent of the Company's Common Shares is based upon
information contained in reports filed by such owner with the SEC.

By Order of the Board of Directors,

W. BRENT LAGERE
CHAIRMAN OF THE BOARD

December , 2000

40
<PAGE>
APPENDIX A

SPECIAL RESOLUTIONS

RESOLVED, that Paragraph 6 of the Memorandum of Association, relating to the
authorized share capital of the Company, is hereby amended to read in its
entirety as follows:

6. The authorized share capital of the Company shall consist of U.S.
$19,700,000, divided into ten (10) Common Shares having a par value of U.S.
$1,670,000, 2,100,000 Class A Common Shares having a par value of U.S. $0.50,
500,000 Series A Convertible Preferred Shares having a par value of U.S. $1.00,
600,000 Series B Preferred Shares having a par value of U.S. $1.00, and 850,000
Series C Preferred Shares having a par value of U.S. $1.00.

RESOLVED FURTHER, that the Articles of Association are hereby amended by
replacing Section 7 to Article VIII thereof, which Section shall read in its
entirety as follows:

SECTION 7. SHARES. The designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions of the Common
Shares, Class A Common Shares, Series A Preferred Shares, Series B Preferred
Shares, and Series C Preferred Shares authorized to be issued by the Company are
as follows:

A. COMMON SHARES. Except as otherwise provided by the Companies Law of the
Cayman Islands or by any resolution adopted by the Board of Directors
authorizing and fixing the relative powers, preferences and rights and the
qualifications, limitations or restrictions of any new capital stock of the
Company, the entire voting power of the shares of the Company for the
election of directors and for all other purposes, as well as all other
rights appertaining to shares of the corporation, shall be vested
exclusively in the Common Shares and the Class A Common Shares. Each Common
Share shall have one vote upon all matters to be voted on by the holders of
Common Shares and Class A Common Shares and shall be entitled to participate
equally in all dividends payable with respect to the Common Shares and the
Class A Common Shares and to share ratably, with the Class A Common Shares,
subject to the rights and preferences of the Series A Preferred Shares,
Series B Preferred Shares, and Series C Preferred Shares, in all assets of
the Company in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Company or upon any
distribution of the assets of the Company.

B. CLASS A COMMON SHARES. Except as otherwise provided by the Companies
Law of the Cayman Islands or by any resolution adopted by the Board of
Directors authorizing and fixing the relative powers, preferences and rights
and the qualifications, limitations or restrictions of new capital stock of
the Company, the entire voting power of the shares of the Company for the
election of directors and for all other purposes, as well as all other
rights appertaining to shares of the corporation, shall be vested
exclusively in the Common Shares and the Class A Common Shares. Each
Class A Common Share shall have one vote upon all matters to be voted on by
the holders of Common Shares and Class A Common Shares and shall be entitled
to participate equally in all dividends payable with respect to the Common
Shares and the Class A Common Shares and to share ratably with the Common
Shares, subject to the rights and preferences of the Series A Preferred
Shares, Series B Preferred Shares, and Series C Preferred Shares, in all
assets of the Company in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Company or upon
any distribution of the assets of the Company.

C. SERIES A CONVERTIBLE PREFERRED SHARES. The Series A Convertible
Preferred Shares, $1.00 par value (the "Series A Preferred Shares"), consist
of an aggregate of 500,000 shares. The rights,

A-1
<PAGE>
preferences, privileges and restrictions granted to and imposed on the
Series A Preferred Shares are as set forth below:

(1) DEFINITIONS. As used herein, the following terms shall have the
following definitions:

(a) "Convertible Securities" means any indebtedness, shares of stock,
or other securities of the Company convertible into or exchangeable
for Common Shares or Class A Common Shares.

(d) "Conversion Rights" shall have the meaning set forth in
Section C(4) hereof.

(e) "Issuance Date" means the date on which the first share of
Series A Preferred Shares is issued.

(g) "Option" means rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Shares, Class A Common Shares or
Convertible Securities.

(h) "Original Issue Price" means $10 per share of the Series A
Preferred Shares.

(2) DIVIDEND PROVISIONS. The holders of Series A Preferred Shares (the
"Holders") shall be entitled to receive dividends, which shall accrue and
be payable at a rate of 6% per annum (the "Dividend Rate") on the total
dollar amount allocated as a "Liquidation Preference Value," specifically
$11 per share. Dividends shall accrue and be payable semi-annually on the
first day of January and July (each a "Dividend Payment Date") on each of
the Series A Preferred Shares issued and outstanding as of such day to
the record Holders of such Series A Preferred Shares. Dividends on each
of the Series A Preferred Shares shall accrue and be cumulative from the
date of issuance. The dividends accruing and payable on the Series A
Preferred Shares shall be payable in cash out of funds legally available
therefor.

(3) LIQUIDATION PREFERENCE.

(a) PREFERRED SHARES. In the event of any liquidation, dissolution,
or winding up of the Company, either voluntary or involuntary, each
Holder of the Series A Preferred Shares shall be entitled to receive,
prior and in preference to any distribution in such liquidation,
dissolution or winding up of any of the assets of the Company to the
holders of the Common Shares or the Class A Common Shares by reason
of their ownership thereof, the amount of $11 per share (adjusted for
any share dividends, combinations or splits with respect to such
shares), plus all accrued or declared but unpaid dividends on such
Series A Preferred Shares then held. Series A Preferred Shares shall
rank PARI PASSU with each of the Series B Preferred Shares and
Series C Preferred Shares as to the receipt of the preferential
liquidation amount upon the occurrence of such event. If upon the
occurrence of any such distribution, the assets and funds of the
Company thus distributed among the Holders of the Series A Preferred
Shares shall be insufficient to permit the payment to such holders of
Series A Preferred Shares, Series B Preferred Shares and Series C
Preferred Shares of the full preferential amounts, then the entire
assets and funds of the Company legally available for distribution
shall be distributed ratably among the holders of the Series A
Preferred Shares, Series B Preferred Shares and Series C Preferred
Shares in proportion to the preferential amount each such holder is
otherwise entitled to receive.

A-2
<PAGE>
Shares and the Class A Common Shares pro rata based on the number of
Common Shares or Class A Common Shares held by each.

(c) CONSOLIDATION, MERGER, ETC. For purposes of this Section C, a
merger or consolidation of the Company with or into any other
corporation or corporations, or the merger of any other corporation
or corporations into the Company, in which consolidation or merger
the shareholders of the Company receive distributions in cash or
securities of another corporation or corporations as a result of such
consolidation or merger, or a sale of all or substantially all of the
assets of the Company, shall be treated as a liquidation, dissolution
or winding up of the Company. The Company shall provide written
notice of any such liquidation, dissolution, winding up, merger,
consolidation or sale of assets of the Company within 10 days prior
to the effective date of such event. Notwithstanding anything to the
contrary, a consolidation, merger or sale of all or substantially all
assets will not be treated as a liquidation, dissolution or winding
up of the Company unless the Company's shareholders of record as
constituted immediately prior to such transaction will, immediately
after such transaction, hold less than 50% of the voting power of the
surviving or acquiring entity.

(4) CONVERSION. The Holders of Series A Preferred Shares shall have the
following conversion rights (the "Conversion Rights"):

(a) RIGHT TO CONVERT. Each of the Series A Preferred Shares shall
be convertible, at the option of the Holder thereof, at any time
after the date of issuance of such share at the office of the Company
or transfer agent for the Series A Preferred Shares, into the number
of fully-paid and nonassessable Class A Common Shares (the
"Conversion Rate") as is determined by dividing the Original Issue
Price for the Series A Preferred Shares by the Conversion Price for
the Series A Preferred Shares in effect on the Conversion Date. The
initial Conversion Price shall be the Original Issue Price for the
Series A Preferred Shares; provided, however, that the Conversion
Price of the Series A Preferred Shares shall be subject to adjustment
as set forth in Section C(4)(c) hereof.

(b) MECHANICS OF CONVERSION. Before any Holder of Series A
Preferred Shares shall be entitled to convert any of such shares into
Class A Common Shares, such Holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Company or
transfer agent for the Series A Preferred Shares, and shall give
written notice by mail, postage prepaid, to the Company at its
principal corporate offices of the election to convert the same and
shall state therein the name or names in which the certificate or
certificates for Class A Common Shares are to be issued. The Company
shall, as soon as practicable thereafter, issue and deliver to such
Holder of Series A Preferred Shares, or to the nominee or nominees of
such holder, a certificate or certificates representing the number of
Class A Common Shares to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such
surrender of the Series A Preferred Shares to be converted, and the
person or persons entitled to receive the Class A Common Shares
issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such Class A Common Shares as of the
Conversion Date.

(c) ANTIDILUTION. The Conversion Rate shall be subject to
adjustment from time to time upon the occurrence of any of the events
enumerated in this Section C(4)(c).

(1) If at any time the Company shall (i) declare or pay a
dividend payable in, or other distribution of, additional
Class A Common Shares, (ii) subdivide its outstanding Class A
Common Shares into a larger number of Class A Common

A-3
<PAGE>
Shares, or (iii) combine its outstanding Class A Common Shares
into a smaller number of Class A Common Shares, then as a result
of an event described in clauses (i), (ii), or (iii), the
Conversion Rate shall be adjusted to equal the product of the
Conversion Rate in effect immediately prior to such event
multiplied by a fraction the numerator of which is equal to the
number of Class A Common Shares outstanding immediately after the
event and the denominator of which is equal to the number of
Class A Common Shares outstanding immediately prior to such
event.

(2) If the number of Class A Common Shares outstanding at any
time after the Issuance Date is decreased by a combination of the
outstanding Class A Common Shares, then following the record date
of such combination, the Conversion Rate for the Series A
Preferred Shares shall be appropriately increased so that the
number of Class A Common Shares issuable on conversion of each of
the Series A Preferred Shares shall be decreased in proportion to
such decrease in the outstanding Class A Common Shares.

(d) OTHER DISTRIBUTION. In the event the Company shall declare a
distribution payable in securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets
(excluding cash dividends) or Options or rights not referred to in
Section C(4)(c) hereof, then, in each such case for the purpose of
this Section C(4)(d), the Holders of Series A Preferred Shares shall
be entitled to a proportionate share of any such distribution as
though they were holders of the number of Class A Common Shares of
the Company into which their Series A Preferred Shares are
convertible as of the record date fixed for the determination of the
holders of Class A Common Shares of the Company entitled to receive
such distribution.

(e) REORGANIZATIONS AND RECAPITALIZATIONS. If at any time or from
time to time there shall be a reorganization or recapitalization of
the Class A Common Shares (other than a subdivision, combination or
merger or sale of assets transaction provided for in Section C(4)(c)
hereof), then, as a condition of such reorganization or
recapitalization, provision shall be made so that the Holders of
Series A Preferred Shares shall thereafter be entitled to receive
upon conversion of the Series A Preferred Shares the number of shares
of stock or other securities or property of the Company or otherwise,
to which a holder of Class A Common Shares deliverable upon
conversion would have been entitled on such reorganization or
recapitalization. In any such case, appropriate adjustment shall be
made, in the good faith determination of the Board of Directors of
the Company, in the application of the provisions of this
Section C(4)(e) with respect to the rights of the Holders of the
Series A Preferred Shares after the recapitalization to the end that
the provisions of this Section C(4)(e) (including adjustment of the
Conversion Rate then in effect and the number of shares receivable
upon conversion of the Series A Preferred Shares) shall be applicable
after that event in as nearly an equivalent manner as may be
practicable.

(f) NO IMPAIRMENT. The Company will not, by amendment of its
Memorandum of Association or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company,
but will at all times in good faith assist in the carrying out of all
the provisions of this Section C(4) and in the taking of all such
action (including the reduction of par value of the Class A Common
Shares or the Series A Preferred Shares) as may be necessary or
appropriate in order to protect the conversion rights of the Holders
of the Series A Preferred Shares.

A-4
<PAGE>
(g) NO FRACTIONAL SHARES. No fractional shares shall be issued upon
conversion of the Series A Preferred Shares and the number of
Class A Common Shares to be issued shall be rounded down to the
nearest whole share, and there shall be no payment to a Holder of
Series A Preferred Shares for any such rounded fractional shares.
Whether or not fractional shares result from such conversions shall
be determined on the basis of the total number of Series A Preferred
Shares the Holder is at the time converting into Class A Common
Shares and the number of Class A Common Shares issuable upon such
aggregate conversion.

(h) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate of Series A
Preferred Shares pursuant to this Section C(4), the Company, at its
expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each
Holder of Series A Preferred Shares a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the
written request of a Holder of Series A Preferred Shares, furnish or
cause to be furnished to such Holder a like certificate setting forth
(x) such adjustment and readjustment, (y) the Conversion Rate at the
time in effect, and (z) the number of Class A Common Shares and the
amount, if any, of other property which at the time would be received
upon the conversion of Series A Preferred Shares.

(i) RESERVATION OF SHARES ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized
but unissued Class A Common Shares, solely for the purpose of
effecting the conversion of the Series A Preferred Shares, such
number of its Class A Common Shares as shall from time to time be
sufficient to effect the conversion of all outstanding Series A
Preferred Shares, and if at any time the number of authorized but
unissued Class A Common Shares shall not be sufficient to effect the
conversion of all then outstanding Series A Preferred Shares, then in
addition to such other remedies as shall be available to the Holder
of such Series A Preferred Shares, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued Class A Common Shares to such
number of shares as shall be sufficient for such purposes.

(j) NOTICES. In the event that the Company shall propose at any
time to (w) declare any dividend or distribution upon its Class A
Common Shares, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of
earnings or earned surplus, (x) offer for subscription pro rata to
the holders of any class or series of its shares any additional
shares of any class or series or any other rights, (y) to effect any
reclassification or recapitalization of its Class A Common Shares
outstanding involving a change in the Class A Common Shares, or
(z) to merge or consolidate with or into any other corporation, or
sell, lease or convey all or substantially all of its property or
business, or to liquidate, dissolve or wind up, then, in connection
with each such event, the Company shall send to the Holders of the
Series A Preferred Shares:

(1) at least 20 days' prior written notice of the date on which a
record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the
holders of Class A Common Shares shall be entitled thereto);
and

(2) in the case of the matters referred to in subsections
(y) and (z) above, at least 20 days' prior written notice of
the date when the same shall take place (and specifying the
date on which the holders of Class A Common Shares shall be

A-5
<PAGE>
entitled to exchange their Class A Common Shares for
securities or other property deliverable upon the occurrence
of such events or the record date for the determination of
such holders if such record date is earlier).

Any notice required by the provisions of this Section C(4)(j)
to be given to the Holders of Series A Preferred Shares shall
be deemed given if sent by facsimile, by telex, or if
deposited in the United States mail, postage prepaid, and
addressed to each Holder of record at his, her or its address
appearing on the books of the Company.

(5) VOTING RIGHTS. Except as otherwise provided by law, the Holders of
Series A Preferred Shares shall have no voting rights.

D. SERIES B PREFERRED SHARES. The Series B Preferred Shares, $1.00 par
value (the "Series B Preferred Shares"), consist of an aggregate of 600,000
shares. The rights, preferences, privileges and restrictions granted to and
imposed on the Series B Preferred Shares are as set forth below:

(1) DIVIDEND PROVISIONS. The holders of Series B Preferred Shares (the
"Holders") shall be entitled to receive dividends, which shall accrue and
be payable at a rate of 6% per annum (the "Dividend Rate") on the total
dollar amount allocated as a "Liquidation Preference Value," specifically
$11 per share. Dividends shall accrue and be payable semi-annually on the
first day of January and July (each a "Dividend Payment Date") on each of
the Series B Preferred Shares issued and outstanding as of such day to
the record Holders of such Series B Preferred Shares. Dividends on each
of the Series B Preferred Shares shall accrue and be cumulative from the
date of issuance. The dividends accruing and payable on the Series B
Preferred Shares shall be payable in cash out of funds legally available
therefor.

(2) LIQUIDATION PREFERENCE.

(a) PREFERRED SHARES. In the event of any liquidation, dissolution,
or winding up of the Company, either voluntary or involuntary, each
Holder of the Series B Preferred Shares shall be entitled to receive,
prior and in preference to any distribution in such liquidation,
dissolution or winding up of any of the assets of the Company to the
holders of the Common Shares and the Class A Common Shares by reason
of their ownership thereof, the amount of $11 per share (adjusted for
any share dividends, combinations or splits with respect to such
shares), plus all accrued or declared but unpaid dividends on such
Series B Preferred Shares then held. Series B Preferred Shares shall
rank PARI PASSU with each of the Series A Preferred Shares and
Series C Preferred Shares as to the receipt of the preferential
liquidation amount upon the occurrence of such event. If upon the
occurrence of any such distribution, the assets and funds of the
Company thus distributed among the Holders of the Series B Preferred
Shares shall be insufficient to permit the payment to such holders of
Series A Preferred Shares, Series B Preferred Shares and Series C
Preferred Shares of the full preferential amounts, then the entire
assets and funds of the Company legally available for distribution
shall be distributed ratably among the holders of the Series A
Preferred Shares, Series B Preferred Shares and Series C Preferred
Shares in proportion to the preferential amount each such holder is
otherwise entitled to receive.

(b) COMMON SHARES. After the distributions described in Sections
C(3)(a), D(2)(a), and E(2)(a) hereof have been paid, then the
remaining assets of the Company available for distribution to
shareholders shall be distributed among the holders of the Common
Shares and Class A Common Shares pro rata based on the number of
Common Shares and Class A Common Shares held by each.

A-6
<PAGE>
(c) CONSOLIDATION, MERGER, ETC. For purposes of this Section D(2),
a merger or consolidation of the Company with or into any other
corporation or corporations, or the merger of any other corporation
or corporations into the Company, in which consolidation or merger
the shareholders of the Company receive distributions in cash or
securities of another corporation or corporations as a result of such
consolidation or merger, or a sale of all or substantially all of the
assets of the Company, shall be treated as a liquidation, dissolution
or winding up of the Company. The Company shall provide written
notice of any such liquidation, dissolution, winding up, merger,
consolidation or sale of assets of the Company within 10 days prior
to the effective date of such event. Notwithstanding anything to the
contrary, a consolidation, merger or sale of all or substantially all
assets will not be treated as a liquidation, dissolution or winding
up of the Company unless the Company's shareholders of record as
constituted immediately prior to such transaction will, immediately
after such transaction, hold less than 50% of the voting power of the
surviving or acquiring entity.

(3) VOTING RIGHTS. Except as otherwise provided by law, the Holders of
Series B Preferred Shares shall have no voting rights.

(E) SERIES C PREFERRED SHARES. The Series C Preferred Shares, $1.00 par
value (the "Series C Preferred Shares"), consist of an aggregate of 850,000
shares. The rights, preferences, privileges and restrictions granted to and
imposed on the Series C Preferred Shares are as set forth below:

(1) DIVIDEND PROVISIONS. The holders of Series C Preferred Shares (the
"Holders") shall be entitled to receive dividends, which shall accrue and
be payable at a rate of 8 1/2% per annum (the "Dividend Rate") on the
total dollar amount allocated as a "Liquidation Preference Value,"
specifically $12 per share. Dividends shall accrue and be payable
semi-annually on the first day of January and July (each a "Dividend
Payment Date") on each of the Series C Preferred Shares issued and
outstanding as of such day to the record Holders of such Series C
Preferred Shares. Dividends on each of the Series C Preferred Shares
shall accrue and be cumulative from the date of issuance. The dividends
accruing and payable on the Series C Preferred Shares shall be payable in
cash out of funds legally available therefor.

(2) LIQUIDATION PREFERENCE.

(a) PREFERRED SHARES. In the event of any liquidation, dissolution,
or winding up of the Company, either voluntary or involuntary, each
Holder of the Series C Preferred Shares shall be entitled to receive,
prior and in preference to any distribution in such liquidation,
dissolution or winding up of any of the assets of the Company to the
holders of the Common Shares and Class A Common Shares by reason of
their ownership thereof, the amount of $12 per share (adjusted for
any share dividends, combinations or splits with respect to such
shares), plus all accrued or declared but unpaid dividends on such
Series C Preferred Shares then held. Series C Preferred Shares shall
rank PARI PASSU with each of the Series A Preferred Shares and
Series B Preferred Shares as to the receipt of the preferential
liquidation amount upon the occurrence of such event. If upon the
occurrence of any such distribution, the assets and funds of the
Company thus distributed among the Holders of the Series C Preferred
Shares shall be insufficient to permit the payment to such holders of
Series A Preferred Shares, Series B Preferred Shares and Series C
Preferred Shares of the full preferential amounts, then the entire
assets and funds of the Company legally available for distribution
shall be distributed ratably among the holders of the Series A
Preferred Shares, Series B Preferred Shares and Series C Preferred
Shares in proportion to the preferential amount each such holder is
otherwise entitled to receive.

A-7
<PAGE>
(b) COMMON SHARES. After the distributions described in Sections
C(3)(a), D(2)(a), and E(2)(a) hereof have been paid, then the
remaining assets of the Company available for distribution to
shareholders shall be distributed among the holders of the Common
Shares and Class A Common Shares pro rata based on the number of
Common Shares and Class A Common Shares held by each.

(c) CONSOLIDATION, MERGER, ETC. For purposes of this Section E(2),
a merger or consolidation of the Company with or into any other
corporation or corporations, or the merger of any other corporation
or corporations into the Company, in which consolidation or merger
the shareholders of the Company receive distributions in cash or
securities of another corporation or corporations as a result of such
consolidation or merger, or a sale of all or substantially all of the
assets of the Company, shall be treated as a liquidation, dissolution
or winding up of the Company. The Company shall provide written
notice of any such liquidation, dissolution, winding up, merger,
consolidation or sale of assets of the Company within 10 days prior
to the effective date of such event. Notwithstanding anything to the
contrary, a consolidation, merger or sale of all or substantially all
assets will not be treated as a liquidation, dissolution or winding
up of the Company unless the Company's shareholders of record as
constituted immediately prior to such transaction will, immediately
after such transaction, hold less than 50% of the voting power of the
surviving or acquiring entity.

(d) VOTING RIGHTS. Except as otherwise provided by law, the Holders
of Series C Preferred Shares shall have no voting rights.

RESOLVED FURTHER, that the Articles of Association of the Company be amended by
replacing Article XII in its entirety as follows:

ARTICLE XII
CAPITAL SHARE REPURCHASES

RESOLVED FURTHER, that the Articles of Association of the Company be amended by
adding a new Article XIII, to read in its entirety as follows:

ARTICLE XIII
FRACTIONAL SHARES

A-8
<PAGE>
APPENDIX B

ORDINARY AND SPECIAL RESOLUTIONS
TO AUTHORIZE PREFERRED STOCK

RESOLVED, that Paragraph 6 of the Memorandum of Association, relating to the
authorized share capital of the Company, is hereby amended to read in its
entirety as follows:

The authorized share capital of the Company shall consist of U.S.$
19,700,000, divided into 10,000,000 Common Shares having a par value of
U.S.$1.67 each, and 3,000,000 Preferred Shares having a par value of U.S. $1.00
each. The Company shall have the power, except to the extent restricted by the
Companies Law (Cap. 22) of the Cayman Islands or by the Articles of Association,
to increase or reduce its authorized share capital. Every issue of shares shall
have such designation and such powers, preferences, rights, qualifications,
limitations and restrictions, as may be provided by or pursuant to the Articles
of Association of the Company, as the same may be amended from time to time.

RESOLVED FURTHER, that the Articles of Association are hereby amended by
adding a new Section 7 to Article VIII thereof, which Section shall read in its
entirety as follows:

Section 7. COMMON AND PREFERRED SHARES. The designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions of
the Common Shares and the Preferred Shares authorized to be issued by the
Company are as follows:

A. COMMON SHARES. Except as otherwise provided by the Companies Law of the
Cayman Islands or by any resolution adopted by the Board of Directors fixing
the relative powers, preferences and rights and the qualifications,
limitations or restrictions of any series of Preferred Shares, the entire
voting power of the shares of the Company for the election of directors and
for all other purposes, as well as all other rights appertaining to shares
of the corporation, shall be vested exclusively in the Common Shares. Each
Common Share shall have one vote upon all matters to be voted on by the
holders of the Common Shares, and shall be entitled to participate equally
in all dividends payable with respect to the Common Shares and to share
ratably, subject to the rights and preferences of any Preferred Shares, in
all assets of the Company in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Company, or
upon any distribution of the assets of the Company.

B. PREFERRED SHARES.

(1) The Preferred Shares may be issued from time to time in one or more
of the following four series. Series A Preferred Shares shall be redeemable
by the Company in whole or in part for an amount per share equal to the book
value (as determined in accordance with generally accepted accounting
principles) thereof on the last day of the calendar quarter preceding the
date of redemption fixed by the Board of Directors (the "Redemption Date").
Series B Preferred Shares shall be redeemable by the Company in whole or in
part for an amount per share equal to the original issue price thereof, plus
any dividends accrued thereon but unpaid on the Redemption Date. Series C
Preferred Shares shall be redeemable by the Company in whole or in part for
a fixed or definitely determinable amount per share as may be established by
the Board of Directors of the Company prior to issuance of such shares.
Series D Preferred Shares shall not be redeemable. At the discretion of the
Board of Directors, Preferred Shares may from time to time be issued in more
than one subseries of any of the four series described herein, and
references in this Section 7 to "series" of Preferred Shares shall be deemed
also to refer to subseries of any series. The Company shall give written
notice of any redemption and the price per Preferred Share to be paid in
connection therewith to all holders of the Preferred Shares to be redeemed
at least 14 days before the Redemption Date. As used in this Section 7,
"redemption" shall mean the right

B-1
<PAGE>
or obligation of the Company to require the conversion into cash of all or
part of any issued and outstanding series of Preferred Shares. No holder of
Preferred Shares shall have the right to require the Company to purchase
such Preferred Shares.

(2) Subject to the provisions of and the restrictions contained in the
Companies Law, the company may repurchase the Preferred Shares, in whole or
in part, either in the open market or in privately negotiated transactions,
at such times and in such manner as the Board of Directors shall from time
to time by resolution determine; provided, however, that any such repurchase
shall be at a price per share equal to the market value thereof on the date
of repurchase, or, if no market value is available or readily ascertainable,
the fair value thereof on the date of repurchase as determined by a
generally recognized investment banking or other appraisal firm selected by
the Board of Directors.

(3) Subject to the limitations set forth herein and the restrictions
contained in the Companies Law, the Board of Directors is expressly
authorized, prior to issuance of any series of Preferred Shares, to fix by
resolution or resolutions providing for the issue of any series the number
of shares included in such series and the designation, relative powers,
preferences and rights, and the qualifications, limitations or restrictions
of such series. Pursuant to the foregoing general authority vested in the
Board of Directors, but not in limitation of the powers conferred on the
Board of Directors thereby and by the Companies Law, the Board of Directors
is expressly authorized to determine with respect to each series of
Preferred Shares:

(a) the designation or designations of such series and the number of
shares (which number from time to time may be decreased by the Board of
Directors, but not below the number of such shares of such series then
outstanding, or may be increased by the Board of Directors unless
otherwise provided in creating such series) constituting such series;

(b) the rate or amount and times at which, and the preferences and
conditions under which, dividends shall be payable on shares of such
series, the status of such dividends as cumulative or non-cumulative, the
date or dates from which dividends, if cumulative, shall accumulate, and
the status of such shares as participating or non-participating after the
payment of dividends as to which such shares are entitled to any
preference;

(c) the rights and preferences, if any, of the holders of shares of
such series upon the liquidation dissolution or winding up of the affairs
of, or upon any distribution of the assets of, the Company, which amount
may vary depending upon whether such liquidation, dissolution or winding
up is voluntary or involuntary and, if voluntary, may vary at different
dates, and the status of the shares of such series as participating or
non-participating after the satisfaction of any such rights and
preferences;

(d) the full or limited voting rights, if any, to be provided for
shares of such series, in addition to the voting rights provided by law,
if any;

(e) the rights, if any, of holders of shares of such series to
convert such shares into, or to exchange such shares for, shares of any
other class or classes or of any other series of the same class, the
prices or rates of conversion or exchange, and adjustments thereto, and
any other terms and conditions applicable to such conversion or exchange;

(f) the limitations, if any, applicable while such series is
outstanding on the payment of dividends or making of distributions on, or
the acquisition or redemption of, Common Shares or any other class of
shares ranking junior, either as to dividends or upon liquidation, to the
shares of such series;

B-2
<PAGE>
(g) the conditions or restrictions, if any, upon the issue of any
additional shares (including additional shares of such series or any
other series or of any other class) ranking on a party with or prior to
the shares of such series either as to dividends or upon liquidation;

(h) the amount, terms, conditions and manner of operation of any
purchase, retirement or sinking fund to be provided for such series, and
any other regulations concerning repurchase or redemption of such series;

(i) if such series is redeemable by the Company, the terms and
conditions governing redemption (in addition to those specified in
subsection (B)(1) of this Section 7), including, without limitation,
whether such redemption shall be mandatory or at the option of the
Company; and

(j) any other relative powers, preferences and participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, of shares of such series.

All Preferred Shares shall be identical and of equal rank except as
provided herein and except in respect to the particulars that may be
fixed by the Board of Directors as provided above, and all shares to each
series of Preferred Shares shall be identical and of equal rank except as
to the times from which cumulative dividends thereon, if any, shall be
cumulative.

RESOLVED FURTHER, that so as to be consistent with the foregoing amendment,
Article III, Section 21, subsection (c) of the Articles of Association is hereby
amended to delete the words "redeem any of its shares, or" following the words
"Special Resolutions," so that such subsection will after amendment read as
follows:

(c) subject to the provisions of the Companies Act, the Company may
by Special Resolutions reduce its share capital, any capital redemption
reserve fund, or any share premium account.

RESOLVED FURTHER, that the officers of the Company are authorized, empowered
and directed to do all other things and acts, to execute and deliver all other
instruments, documents and certificates and to pay all costs, fees and taxes as
may be, in their sole judgment, necessary, proper or advisable in order to carry
out and comply with the purposes and intent of all of the foregoing resolutions;
and that all of the acts and deeds of the officers of the Company which are
consistent with the purposes and intent of such resolutions be and hereby are,
in all respects, approved, confirmed and adopted as the acts and deeds of the
Company.

B-3
<PAGE>
APPENDIX C

November 14, 2000

Special Committee of the Board of Directors
Chandler Insurance Company, Ltd.
5th Floor, Anderson Square
Grand Cayman, Cayman Islands

Gentlemen:

We have acted as your financial advisor in connection with your
consideration of the proposed cash consideration to be received by the
disinterested shareholders (as defined below) of Chandler Insurance
Company, Ltd. (the "Company") in the proposed recapitalization plan pursuant to
which certain members of senior management and certain stockholders of the
Company (collectively, the "Purchase Group") have proposed to take the Company
private by means of a reverse stock split in which the disinterested
shareholders of the Company would receive cash consideration of $10.00 per share
(the "Transaction"). The terms and conditions of the Transaction are more fully
described in the latest draft of the Preliminary Proxy Statement dated
November 8, 2000.

You have requested our opinion as independent investment bankers and
financial advisor as to the fairness to the disinterested shareholders of the
Company from a financial point of view of the cash consideration proposed to be
received by such shareholders in the Transaction. For purposes of this opinion,
the term "disinterested shareholders" means holders of the Company's one class
of common stock (the "Common Stock") who would receive cash consideration of
$10.00 per share in the Transaction, other than (1) directors, and officers of
the Company, (2) any holder of 10 percent or more of the outstanding shares of
Common Stock (assuming the exercise of options beneficially owned by the holder)
and (3) other parties and their affiliates who are part of the Purchase Group.

In connection with rendering our opinion we have:

(i) analyzed certain publicly available financial statements and reports
regarding the Company;

(ii) analyzed certain internal financial statements and other financial and
operating data (including financial projections) concerning the
Company prepared by management of the Company;

(iii) reviewed the reported prices and trading activity for the Common
stock;

(iv) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;

(v) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;

(vi) reviewed the financial terms of the Transaction as described in drafts
of the Preliminary Proxy Statement and related documents;

(vii) discussed with management of the Company (including W. Brent LaGere)
certain of its strategic alternatives and the operations of and future
business prospects for the Company including the financial forecasts
and related assumptions of the Company;

(viii) assisted in your deliberations regarding the cash consideration to be
received by the disinterested shareholders in the Transaction; and

(ix) considered other information as we considered relevant and performed
such other analyses and provided such other services as we have deemed
appropriate.

C-1
<PAGE>
We have relied on the accuracy and completeness of the information and
financial data provided to us by the Company, and our opinion is based upon such
information. We have inquired into the reliability of such information and
financial data and into the reasonableness of the Company's financial
projections only to the limited extent necessary to provide a reasonable basis
for our opinion, recognizing that we are rendering only an informed opinion and
not an appraisal or certification of value. With respect to the financial
projections prepared by management of the Company, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. For
purposes of this opinion, we have assumed that the Transaction, if approved,
would be completed with reasonable promptness.

As part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings, mergers and acquisitions and valuations for estate,
corporate and other purposes. We are familiar with the Company. In the ordinary
course of business, Stephens Inc. and its affiliates at any time may hold long
or short positions, and may trade or otherwise effect transactions as principal
or for the accounts of customers, in debt or equity securities or options on
securities of the Company. Stephens is receiving a fee, and reimbursement of its
expenses, in connection with its analysis and evaluation of the Transaction and
the issuance of this fairness opinion.

Based on the foregoing and our general experience as investment bankers, and
subject to the qualifications stated herein, we are of the opinion on the date
hereof that the consideration to be received by the disinterested shareholders
of the Company in the Transaction is fair to them from a financial point of
view.

Neither this opinion nor its substance may be disclosed by you to anyone
other than your advisors without our written permission, except that this
opinion and a summary discussion of our underlying analyses and role as your
financial advisor may be included in communications to the Company's
shareholders or any filing required by the Securities and Exchange Commission
provided that we approve the content of such disclosures prior to publication or
filing.

Very truly yours,
STEPHENS INC.

C-2
<PAGE>

FORM OF PROXY

CHANDLER INSURANCE COMPANY, LTD.

The undersigned (i) acknowledges receipt of the Notice dated December
__, 2000, of the Special Meeting of Shareholders of Chandler Insurance Company,
Ltd., a Cayman Islands corporation (the "Company"), to be held on January 16,
2000, at 10:00 a.m., local time, at Lando's Restaurant, Hidalgo Street No. 270,
in Ciudad Acuna, Mexico, and the Proxy Statement in connection therewith; and
(ii) appoints W. Brent LaGere and Mark T. Paden, and each of them, the
undersigned's proxies with full power of substitution, for and in the name,
place and stead of the undersigned, to vote upon and act with respect to all of
the shares of Common Shares of the Company standing in the name of the
undersigned on December 1, 2000, or with respect to which the undersigned is
entitled to vote and act, at the meeting and at any postponements or
adjournments thereof, and the undersigned directs that this proxy be voted as
set forth on the reverse.

If more than one of the proxies named herein shall be present in person
or by substitute at the meeting or at any postponements or adjournments thereof,
both of the proxies so present and voting, either in person or by substitute,
shall exercise all of the powers hereby given.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEM 1.

(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)

-------------------------------------------------------------------------------
-FOLD AND DETACH HERE-

<PAGE>

THE UNDERSIGNED HEREBY REVOKES ANY PROXY OR Please mark |X|
PROXIES HERETOFORE GIVEN TO VOTE UPON OR ACT your votes as
WITH RESPECT TO SUCH COMMON SHARES AND HEREBY indicated in
RATIFIES AND CONFIRMS ALL THAT THE PROXIES, THEIR this example
SUBSTITUTES, OR ANY OF THEM MAY LAWFULLY DO BY
VIRTUE HEREOF.

1. To adopt a proposal to (A) amend by Special Resolutions, in the proposed
form attached hereto as Appendix A, the Company's Memorandum of Association
and Articles of Association to (i) authorize the creation of Class A Common
Shares, $0.50 par value per share; (ii) authorize and designate the rights,
preferences, privileges and restrictions granted to and imposed on the
Series A Cumulative Convertible Preferred Shares, $1.00 par value per
share, Series B Cumulative Preferred Shares, $1.00 par value per share, and
Series C Cumulative Preferred Shares, $1.00 par value per share; (iii)
provide for the repurchase of capital shares; (iv) provide for the payment
of cash in lieu of issuing fractional shares; and (v) effect a
1-for-1,000,000 reverse stock split of the Company's common shares, $1.67
par value (the "Common Shares"), thereby reducing the number of authorized
Common Shares from 10,000,000 shares to ten shares and providing a cash
payment of $10.00 per issued Common Share in lieu of the issuance of any
resulting fractional shares following the reverse stock split and (B)
repurchase Common Shares held by certain management and key shareholders in
exchange for new shares of various other classes and/or series of capital
stock of the Company (each of (A) and (B) are collectively referred to as
the "Recapitalization Plan").

FOR AGAINST ABSTAIN
/ / / / / /

2. In the discretion of the proxies on any other matters that may properly
come before the meeting or any postponements or adjournments thereof.

FOR AGAINST ABSTAIN
/ / / / / /

Please date this proxy and sign your name exactly as it
appears hereon. Where there is more than one owner, each
should sign. When signing as an attorney, administrator,
executor, guardian or trustee, please add your title as
such. If executed by a corporation, the proxy should be
signed by a duly authorized officer.

Please mark, sign, date and return your proxy promptly in
the enclosed envelope whether or not you plan to attend the
Special Meeting. No postage is required. You may
nevertheless vote in person if you do attend.

Dated: , 200
------------------------------------------- --

-----------------------------------------------------------
Signature of Shareholder

-----------------------------------------------------------
Title, if applicable

-------------------------------------------------------------------------------
-FOLD AND DETACH HERE-