<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 1998
REGISTRATION NO. 333-49257
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ACE LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CAYMAN ISLANDS [NOT APPLICABLE]
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
THE ACE BUILDING
30 WOODBOURNE AVENUE
HAMILTON HM 08, BERMUDA
(441) 295-5200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 664-1666
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
PETER N. MEAR EDWARD S. BEST ROBERT SULLIVAN
GENERAL COUNSEL AND MAYER, BROWN & PLATTSKADDEN, ARPS, SLATE, MEAGHER
SECRETARY & FLOM LLP
190 SOUTH LASALLE STREET
ACE LIMITED CHICAGO, ILLINOIS 60603 919 THIRD AVENUE
30 WOODBOURNE AVENUE (312) 782-0600 NEW YORK, NEW YORK 10022
HAMILTON HM 08 (212) 735-3000
BERMUDA
(441) 295-5200
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
DATED APRIL 14, 1998
PRELIMINARY PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL , 1998)
16,500,000 Shares
LOGO
Ordinary Shares
(par value $0.041666667 per share)
All of the Ordinary Shares, par value $0.041666667 per share (the "Ordinary
Shares"), of ACE Limited, a Cayman Islands company (the "Company"), offered
hereby (the "Offering") are being sold by the Company. The Ordinary Shares are
listed on the New York Stock Exchange (the "NYSE") under the symbol "ACL". On
April 13, 1998, the last reported sales price of the Ordinary Shares on the
NYSE Composite Tape was $37 3/16 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Ordinary Shares will be purchased from the Company by J.P. Morgan
Securities Inc. (the "Underwriter") at a price of $ per share (resulting in
$ aggregate net proceeds (before expenses) to the Company). The
Company will pay certain expenses of the Offering estimated at $500,000.
The Ordinary Shares may be offered by the Underwriter from time to time in one
or more transactions (which may involve block transactions) on the NYSE, in the
over-the-counter market, through negotiated transactions or otherwise at market
prices prevailing at the time of the sale or at prices otherwise negotiated,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriter. See "Underwriting."
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").
The Ordinary Shares are offered, subject to prior sale, when, as and if
accepted by the Underwriter named herein and subject to approval of certain
legal matters by counsel for the Underwriter. It is expected that delivery of
the Shares will be made against payment therefor in immediately available funds
on or by April , 1998 at the office of J.P. Morgan Securities Inc., 60 Wall
Street, New York, New York.
J.P. MORGAN & CO.
April , 1998
<PAGE>
No person is authorized in connection with the Offering to give any information
or to make any representation not contained or incorporated by reference in
this Prospectus, and any information or representation not contained or
incorporated herein must not be relied upon as having been authorized by the
Company or the Underwriter. This Prospectus relates solely to the Ordinary
Shares and it may not be used or relied on in connection with any other offer
or sale of securities of the Company. This Prospectus does not constitute an
offer to sell or a solicitation of any offer to buy by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. Neither the delivery of this Prospectus at any time nor any sale
made hereunder shall under any circumstance imply that the information herein
is correct as of any date subsequent to the date hereof.
No action has been or will be taken by the Company or the Underwriter that
would permit a public offering of the Ordinary Shares or possession or
distribution of this Prospectus in any jurisdiction where action for that
purpose is required, other than in the United States. Persons into whose
possession this Prospectus comes are required by the Company and the
Underwriter to inform themselves about and to observe any restrictions as to
the Offering of the Ordinary Shares and the distribution of this Prospectus.
In this Prospectus, references to "dollar" and "$" are to United States
currency, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Use of Proceeds......... S-2
Capitalization.......... S-3
Underwriting............ S-3
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents
by Reference...................... 2
The Company........................ 4
The CAT Acquisition................ 5
Use of Proceeds.................... 5
Taxation of Shareholders of the
Company........................... 5
Plan of Distribution............... 12
Legal Matters...................... 12
Experts............................ 13
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Available Information................. 2
Enforcement of Civil Liabilities under
United States Federal Securities
Laws................................. 2
</TABLE>
USE OF PROCEEDS
The net proceeds from the sale of the Ordinary Shares offered hereby (after
deducting underwriting discounts and commissions and estimated expenses of the
Offering) are estimated to be approximately $ million. A portion of the net
proceeds will be used to repay $385 million of indebtedness incurred by the
Company in connection with the acquisition of CAT Limited ("CAT") on April 1,
1998 and the remaining net proceeds will be used for general corporate
purposes, which may include acquisitions. The aforementioned indebtedness was
borrowed under the Company's existing revolving credit agreement and bears
interest (5.97% as of April 13, 1998) at a rate based upon the London Interbank
Offered Rate.
S-2
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of December 31, 1997 and as adjusted to give effect to (i) the acquisition
of ACE USA, Inc. on January 2, 1998, (ii) a three-for-one split of the
Company's Ordinary Shares effective March 2, 1998, (iii) the acquisition of CAT
on April 1, 1998 and (iv) the Offering and the application of the net proceeds
therefrom. The following table should be read in conjunction with the Company's
consolidated financial statements, and the notes thereto, incorporated by
reference herein.
<TABLE>
<CAPTION>
-----------------------
AS OF DECEMBER 31,
1997
-----------------------
ACTUAL AS ADJUSTED
Dollars in Millions ---------- -----------
<S> <C> <C>
Long-term debt......................................... $ --
Shareholders' equity:
Ordinary Shares (par value $0.041666667; 300,000,000
shares authorized, 163,414,356 shares issued and
outstanding, 179,914,356 shares issued and
outstanding as adjusted)............................ 6,809
Additional paid-in capital........................... 1,086,802
Unearned stock grant compensation.................... (4,250)
Net unrealized appreciation on investments........... 174,302
Cumulative translation adjustments................... 709
Retained earnings.................................... 1,354,180
----------
Total shareholders' equity......................... $2,618,552
----------
Total capitalization............................... $2,618,552
==========
</TABLE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus Supplement (the "Underwriting
Agreement"), the Underwriter has agreed to purchase, and the Company has agreed
to sell to it, the Ordinary Shares. Under the terms and conditions of the
Underwriting Agreement, the Underwriter is obliged to take and pay for all such
Ordinary Shares, if any are taken.
It is expected that all or a substantial portion of the Ordinary Shares offered
hereby may be sold by the Underwriter to purchasers in one or more transactions
(which may involve block transactions) on the NYSE or on other national
securities exchanges on which the Ordinary Shares are traded or otherwise. The
distribution of the Ordinary Shares may also be effected from time to time in
special offerings, exchange distributions and/or secondary distributions
pursuant to and in accordance with the rules of the NYSE or such other
exchanges, in the over-the-counter market, in negotiated transactions through
the writing of options on the Ordinary Shares (whether such options are listed
on an options exchange or otherwise), or in a combination of such methods at
prevailing market prices or at negotiated prices. The Underwriter may effect
such transactions by selling Ordinary Shares to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the Underwriter and/or the purchasers of such Ordinary Shares
for whom they may act as agents or to whom they may sell as principal.
In connection with the sale of the Ordinary Shares, the Underwriter may receive
compensation from purchasers of the Ordinary Shares for whom it may act as
agent or to whom it may sell as principal in the form of commissions or
discounts, in each case in amounts which will not exceed those customary in the
types of transactions involved. The Underwriter and any dealers that
participate in the distribution
S-3
<PAGE>
of the Ordinary Shares may be deemed to be underwriters, and any discounts
received by them from the Company and any compensation received by them on
resale of the Ordinary Shares by them may be deemed to be discounts and
commissions, under the Securities Act.
The Company has agreed that, without the consent of the Underwriter, it will
not, for a period of 90 days after the date of this Prospectus, (A) sell,
pledge, assign or transfer or dispose of any equity securities of the Company
or any option, right, warrant or contract to purchase any equity securities of
the Company or any securities convertible into or exercisable or exchangeable
for any equity security of the Company or (B) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of the Ordinary Shares, whether any such transaction described in
clause (A) or (B) above is to be settled by delivery of Ordinary Shares or such
other securities, in cash or otherwise, other than (x) any issuances of
Ordinary Shares, options, or other securities or rights pursuant to any
employee or director compensation, option, savings, benefit or other plan of
the Company, (y) any issuances upon exercise, conversion or exchange of any
securities or obligations outstanding on the date of the Underwriting Agreement
and (z) any issuances of equity securities as consideration for an acquisition.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act.
From time to time in the ordinary course of its business, the Underwriter and
its affiliates have engaged in and may in the future engage in commercial
and/or investment banking transactions with the Company.
Meryl D. Hartzband, a Managing Director of the Underwriter, is a director of
the Company.
S-4
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 14, 1998
PROSPECTUS
18,975,000 SHARES
ACE LIMITED
ORDINARY SHARES
(PAR VALUE $0.041666667)
-----------
This prospectus relates to 18,975,000 ordinary shares, par value $0.041666667
per share ("Ordinary Shares"), of ACE Limited, a Cayman Islands company (the
"Company"), which may be offered from time to time by the Company (the
"Offering"). The Company may, from time to time, as determined by market
conditions, offer shares in ordinary brokerage transactions on the New York
Stock Exchange, Inc., by means of one or more block trades, secondary
distributions, exchange distributions or special offerings, through a broker-
dealer who purchases such shares as principal and resells them for its own
account, or in other transactions to be determined at the time of sale. Such
sales may be consummated using one or more broker-dealers. The specific terms
of the offering and sale of the Ordinary Shares in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include the public offering price and the aggregate number
of Ordinary Shares offered. If any broker-dealers are involved in the sale of
any of the Ordinary Shares, their names and any applicable purchase price, fee,
commission or discount arrangement between or among them will be set forth in
or will be calculable from the information set forth in the applicable
Prospectus Supplement. No Ordinary Shares may be sold without delivery of the
applicable Prospectus Supplement describing the method and terms of the
offering thereof. See "Plan of Distribution."
The Ordinary Shares are listed on the New York Stock Exchange, Inc. (the
"NYSE") under the symbol "ACL." On April 13, 1998, the last reported sales
price of the Ordinary Shares on the NYSE was $37 3/16 share.
This Prospectus may not be used to consummate sales of Ordinary Shares unless
accompanied by a Prospectus Supplement.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
Prospectus dated , 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates, or at the Commission's worldwide
web site at http://www.sec.gov. Such reports, proxy statements and other
information concerning the Company may also be inspected and copied at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Ordinary Shares offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which
are contained in exhibits to the Registration Statement as permitted by the
rules and regulations of the Commission. Statements made in this Prospectus as
to the contents of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.
ENFORCEMENT OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
The Company is a Cayman Islands company and certain of its officers and
directors are residents of various jurisdictions outside of the United States.
All or a substantial portion of the assets of the Company and such officers
and directors, at any one time, are or may be located in jurisdictions outside
of the United States. Therefore, it ordinarily could be difficult for
investors to effect service of process within the United States on any of the
parties who reside outside the United States or to recover against them on
judgments of United States courts predicated upon civil liability under the
United States federal securities laws. Notwithstanding the foregoing, the
Company has appointed CT Corporation System, 1633 Broadway, New York, New York
10019, as its agent to receive service of process with respect to actions
against it arising out of or in connection with the United States federal
securities laws or out of violations of such laws in any federal or state
court in the United States, in any case relating to the transactions covered
by this Prospectus. The Company has been advised by Maples and Calder, its
Cayman Islands counsel, that there is doubt as to whether the courts of the
Cayman Islands would enforce (i) judgments of United States courts obtained in
actions against such persons or the Company predicated solely upon United
States federal securities laws and (ii) original actions brought in the Cayman
Islands against such persons or the Company predicated solely upon United
States federal securities laws. There is no treaty in effect between the
United States and the Cayman Islands providing for such enforcement, and there
are grounds upon which Cayman Islands courts may not enforce judgments of
United States courts. Certain remedies available under the United States
federal securities laws would not be allowed in Cayman Islands courts as
contrary to that jurisdiction's public policy.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-11778) are
incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended September 30,
1997;
(b) Quarterly Report on Form 10-Q for the quarter ended December 31,
1997;
2
<PAGE>
(c) Current Report on Form 8-K, as amended (Date of earliest event
reported: January 2, 1998);
(d) Current Report on Form 8-K (Date of earliest event reported: March
25, 1998); and
(e) The description of the Ordinary Shares included in the Registration
Statement on Form 8-A dated March 2, 1993, as amended by Amendment No. 1
thereto dated March 11, 1993, filed under Section 12 of the Securities
Exchange Act of 1934.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, prior
to the termination of the Offering that all securities offered have been sold
or which deregisters all securities then remaining unsold, shall be deemed to
be incorporated herein by reference and shall be deemed a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein will be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is, or is deemed to be, incorporated by reference herein modifies
or supersedes any such statement. Any such statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the request of such
person, a copy of any of the foregoing documents incorporated herein by
reference (other than the exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Requests should
be directed to Investor Relations, ACE Limited, The ACE Building, 30
Woodbourne Avenue, Hamilton HM 08, Bermuda (telephone (441) 295-5200,
facsimile (441) 295-5221).
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
----------------
FOR NORTH CAROLINA INVESTORS: THE OFFERED SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH
CAROLINA, NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE
ADEQUACY OF THIS DOCUMENT. THE BUYER IN NORTH CAROLINA UNDERSTANDS THAT
NEITHER THE COMPANY NOR ITS SUBSIDIARIES ARE LICENSED IN NORTH CAROLINA
PURSUANT TO CHAPTER 58 OF THE NORTH CAROLINA GENERAL STATUTES, NOR COULD THEY
MEET THE BASIC ADMISSIONS REQUIREMENTS IMPOSED BY SUCH CHAPTER AT THE PRESENT
TIME.
----------------
NO OFFERED SECURITIES MAY BE OFFERED OR SOLD IN THE CAYMAN ISLANDS. PERSONS
RESIDENT IN BERMUDA FOR BERMUDA EXCHANGE CONTROL PURPOSES MAY REQUIRE THE
PRIOR APPROVAL OF THE BERMUDA MONETARY AUTHORITY IN ORDER TO ACQUIRE ANY
OFFERED SECURITIES.
----------------
In this Prospectus, references to "dollar" and "$" are to United States
currency, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
3
<PAGE>
THE COMPANY
ACE is a holding company incorporated with limited liability under the
Cayman Islands Companies Law (1995 Revision) and maintains its principal
business office in Bermuda. The Company, through its Bermuda-based operating
subsidiaries, A.C.E. Insurance Company, Ltd., Corporate Officers & Directors
Assurance Ltd. ("CODA") and Tempest Reinsurance Company Limited ("Tempest"),
provides insurance and reinsurance for a diverse group of international
clients. Through its U.S.-based subsidiary, ACE USA, Inc. (formerly
Westchester Specialty Group, Inc.) ("ACE USA"), the Company provides
commercial and umbrella coverages to a broad range of clients in the United
States. In addition, the Company provides funds at Lloyd's to support
underwriting by syndicates managed by Methuen Underwriting Limited ("MUL"),
ACE London Aviation Limited ("ALA") and ACE London Underwriting Limited
("ALU"), its indirect wholly owned subsidiaries.
The Company's long-term business strategy focuses on achieving underwriting
profits and providing value to its clients and shareholders through the
utilization of its growing capital base within the insurance and reinsurance
markets. As part of this strategy, the Company acquired CODA in 1993. During
1994 and 1995, the Company diversified its product portfolio from excess
liability insurance and directors and officers liability insurance to
accommodate the needs of its expanding, global client base of multinational
corporations by adding satellite insurance, aviation insurance, excess
property insurance and financial lines products. This diversification added
balance to the risk of the existing portfolio of insurance products and
enhanced the Company's overall profit potential while utilizing its existing
capital base. The Company continued its strategic diversification with the
acquisition in March 1996 of 51 percent of Methuen Group Limited ("Methuen"),
the holding company for MUL, and in July 1996 of Tempest, a leading Bermuda-
based property catastrophe reinsurer. The acquisition of Tempest provided the
Company with a unique opportunity to expand into the property catastrophe
reinsurance business through an established and well known reinsurance
company. Tempest underwrites property catastrophe reinsurance on a worldwide
basis, emphasizing excess layer coverages, and has large aggregate exposures
to man-made and natural disasters. The short-tail nature of the property
catastrophe business and shorter loss payout patterns complement the generally
longer-tail nature of the Company's other product lines.
In November 1996, the Company acquired the remaining 49 percent interest in
Methuen. Also in November 1996, the company acquired Ockham Worldwide Holdings
plc which subsequently changed its name to ACE London Holdings Ltd ("ACE
London"). ACE London owns two Lloyd's managing agencies, ALA and ALU.
In March 1997, the Company, together with two other insurance companies,
formed a managing general agency in Bermuda to provide underwriting services
to the three organizations for political risk insurance coverage. The new
company, Sovereign Risk Insurance Ltd ("Sovereign") issues subscription
policies with the Company assuming 50 percent of each risk underwritten. The
Company currently cedes 10 percent of all risks assumed from Sovereign.
Sovereign offers limits of up to $50 million per project ($100 million per
project after July 1, 1998) and $100 million per country ($250 million with
respect to certain countries).
On January 2, 1998, the Company acquired all of the outstanding capital
stock of ACE USA for aggregate cash consideration of $338 million. ACE USA,
through its insurance subsidiaries, provides specialty commercial property and
umbrella liability coverages in the U.S. In connection with the acquisition,
National Indemnity, a subsidiary of Berkshire Hathaway, provided $750 million
(75 percent quota share of $1 billion) of reinsurance protection to ACE USA
with respect to its loss reserves for the 1996 and prior accident years. The
Company financed this transaction with $250 million of bank debt and the
remainder with available cash.
On September 30, 1997, the Company announced the incorporation of ACE
Insurance Company Europe Limited ("AICE"), as part of the International
Financial Services Centre in Dublin, Ireland. AICE has been granted a license
to write all 18 classes of non-life insurance in all member states of the
European Union.
On March 11, 1998, the Company announced the formation of a joint venture,
ACE Capital Re Limited, with Capital Re Corporation ("Capital Re"). ACE
Capital Re Limited, a Bermuda-domiciled professional
4
<PAGE>
reinsurance company, will write both traditional and custom-designed programs
covering financial guaranty, mortgage guaranty and a broad range of financial
risks. Operations will be underwritten and managed in Bermuda by a joint
venture managing agency, ACE Capital Re Managers Ltd. The Company and Capital
Re each have a 50 percent economic interest in ACE Capital Re Limited and ACE
Capital Re Managers Ltd.
On April 1, 1998, the Company acquired (the "CAT Acquisition") CAT Limited
("CAT"), a privately-held Bermuda-based property catastrophe reinsurance
company, for $711 million in cash, subject to certain adjustments. See "The
CAT Acquisition."
The Company's principal executive offices are located at The ACE Building,
30 Woodbourne Avenue, Hamilton HM 08 Bermuda, and its telephone number is
(441) 295-5200.
THE CAT ACQUISITION
On April 1, 1998, the Company acquired CAT, a privately-held Bermuda-based
property catastrophe reinsurance company, for total consideration of $711
million. Of the total consideration, $624 million was paid by the Company to
CAT's shareholders at closing and $67 million was paid by CAT to the holders
of certain of its equity award units and stock options at closing. In
addition, the Company agreed to pay to CAT's shareholders the increase, if
any, in CAT's net book value from January 1, 1998 to April 1, 1998, subject to
a maximum of $40 million. At closing, the Company paid $20 million, the
estimated increase in such net book value, into an escrow pending
determination of CAT's closing net book value. At December 31, 1997, CAT's net
book value was approximately $474 million (after giving effect to the
distribution of the outstanding capital stock of Enterprise). For the year
ended December 31, 1997, CAT had net premiums written of $136 million and net
income of $106 million.
Prior to consummation of the CAT Acquisition, CAT disposed of its interest
in Enterprise Reinsurance Holdings Corporation ("Enterprise"), a provider of
finite reinsurance, insurance and strategic risk financing, to CAT's
shareholders. ACE received from certain of CAT's shareholders an option to
acquire up to 29 percent of the outstanding capital stock (19.9 percent voting
interest) of Enterprise.
Simultaneously with the closing of the CAT Acquisition, CAT acquired all of
the outstanding capital stock of Hamilton Services Limited, a technology and
support services company whose principal customer is CAT, for approximately
$1.6 million in cash.
Initially, the CAT Acquisition was financed with approximately $385 million
of short-term borrowings under the Company's existing credit facility and from
available cash. A portion of the proceeds from the Offering will be used to
refinance the aforementioned borrowings.
USE OF PROCEEDS
The net proceeds from the sale of the Ordinary Shares offered hereby will be
used to repay $385 million of indebtedness incurred by the Company in
connection with the CAT Acquisition and the remaining net proceeds will be
used for general corporate purposes, which may include acquisitions. The
aforementioned indebtedness was borrowed under the Company's existing
revolving credit agreement and bears interest at a rate based upon the London
Interbank Offered Rate (5.97% as of April 13, 1998).
TAXATION OF SHAREHOLDERS OF THE COMPANY
The following summary of the taxation of shareholders of the Company is
based upon current law. Legislative, judicial or administrative changes may be
forthcoming that could affect this summary.
Statements made below as to Cayman Islands law are based on the opinion of
Maples and Calder, Cayman Islands counsel to the Company. Statements made
below as to Bermuda law are based on the opinion of Conyers
5
<PAGE>
Dill & Pearman, Bermuda counsel to the Company. Statements made below as to
United States law are based upon the opinion of Mayer, Brown & Platt, United
States counsel to the Company.
CAYMAN ISLANDS TAXATION
Dividends paid by the Company are not subject to Cayman Islands withholding
tax.
BERMUDA TAXATION
Currently, there is no Bermuda withholding tax on dividends paid by the
Company.
UNITED STATES TAXATION OF U.S. AND NON-U.S. SHAREHOLDERS
Summary
The following summary is qualified in its entirety by the more detailed
discussions set forth below:
. In any fiscal year in which the gross related person insurance income
("RPII") of any foreign insurance company subsidiary of the Company is
20 percent or more of such insurance company subsidiary's gross
insurance income for such fiscal year, U.S. persons who own Ordinary
Shares on the last day of such subsidiary's fiscal year may be required
to include their pro rata share of such insurance company subsidiary's
RPII, as described below, in their income for their taxable year which
includes the last day of the subsidiary's fiscal year and report such
amount on the U.S. income tax or information returns that they would
normally file for that taxable year. They also would be required to
attach to their returns Internal Revenue Service ("IRS") Form 5471,
which shows the calculation of RPII and certain other information about
the Company. Although no assurances can be given, the Company believes
that RPII will be less than 20 percent of gross insurance income for the
current and future fiscal years.
. IF RPII reporting is required for a particular fiscal year, the Company
will send to each shareholder who owned Ordinary Shares on the last day
of such year a Form 5471 completed with all Company information
(including the amount of RPII) and instructions for completing the
shareholder information. Tax-exempt organizations may be required to
report their share of RPII for any taxable year in which RPII reporting
is required on the information return that such tax-exempt organizations
would normally file for the year that includes the last day of such tax
year and attach to that return Form 5471.
. Gain from the sale or exchange of Ordinary Shares that would otherwise
be capital gain will not be treated as ordinary income pursuant to Code
section 1248 of the U.S. Internal Revenue Code (the "Code"). It is
possible, however, that the IRS might interpret regulations proposed by
the U.S. Treasury Department, or that the Treasury Department might
amend such regulations, to apply section 1248 and the requirement to
file Form 5471 to dispositions of Ordinary Shares. If the IRS or
Treasury Department were to take such action, the Company would notify
shareholders that Section 1248 will apply to dispositions of Ordinary
Shares. Under current law, U.S. persons (including tax-exempt
organizations) who own less than 10 percent of the Ordinary Shares and
sell or exchange Ordinary Shares will not be required to file Form 5471
with respect to such dispositions.
RPII
The following discussion generally is applicable only if the RPII of any of
the Company's foreign insurance company subsidiaries, determined on a gross
basis, is 20 percent or more of that insurance company subsidiary's gross
insurance income for the taxable year. For the Company's most recent fiscal
year ended September 30, 1997, the Company believes gross RPII of each of its
foreign insurance company subsidiaries was below 20 percent for the year.
Although no assurances can be given, the Company anticipates that gross RPII
of each of its foreign insurance company subsidiaries will be less than 20
percent of each such subsidiary's gross insurance income for subsequent years
and will endeavor to take such steps as it determines to be reasonable to
cause its gross RPII to remain below such level.
6
<PAGE>
Classification of the Company as a Controlled Foreign Corporation
Under section 951(a) of the Code, each "United States shareholder" of a
"controlled foreign corporation" ("CFC") must include in its gross income for
United States federal income tax purposes its pro rata share of the CFC's
"subpart F income," even if the subpart F income is not distributed. Under
Code section 951(b), any U.S. corporation, citizen, resident or other U.S.
person who owns, directly or indirectly through foreign persons, or is
considered to own (by application of the rules of constructive ownership set
forth in Code section 958(b), generally applying to family members,
partnerships, estates, trusts or controlled corporations) 10 percent or more
of the total combined voting power of all classes of stock of the foreign
corporation will be considered to be a "United States shareholder." In
general, a foreign corporation is treated as a CFC only if such "United States
shareholders" collectively own more than 50 percent (more than 25 percent for
certain insurance companies) of the total combined voting power or total value
of the corporation's stock for an uninterrupted period of 30 days or more
during any tax year. The Company believes that because of the wide dispersion
of its share ownership and because under its Articles of Association no single
shareholder is permitted to hold as much as 10 percent of its total combined
voting power, it is not a CFC under the foregoing general rules.
RPII Companies
Different definitions of "United States shareholders" and "controlled
foreign corporation" are applicable in the case of a foreign corporation which
earns RPII. RPII is defined in Code section 953(c)(2) as any "insurance
income" attributable to policies of insurance or reinsurance with respect to
which the person (directly or indirectly) insured is a "United States
shareholder" or a "related person" to such a shareholder. The proposed
regulations provide that, in general, "insurance income is income (including
premium and investment income) attributable to the issuing or reinsuring of
any insurance or annuity contract in connection with risks located in a
country . . . other than the country under the laws of which the controlled
foreign corporation is created or organized and which would be taxed under
[the portions of the Code relating to insurance companies] if the income were
the income of a domestic insurance company."
Generally, the term "related person" for this purpose means someone who
controls or is controlled by the U.S. shareholder or someone who is controlled
by the same person or persons which control the U.S. shareholder. Control is
measured by either more than 50 percent in value or more than 50 percent in
voting power of stock applying constructive ownership principles similar to
the rules of section 958 of the Code. A corporation's pension plan is
ordinarily not a "related person" with respect to the corporation unless the
pension plan owns, directly or indirectly through the application of
constructive ownership rules similar to those contained in section 958, more
than 50 percent measured by vote or value, of the stock of the corporation.
For purposes of inclusion of the Company's insurance company subsidiaries'
RPII in the income of United States shareholders, unless an exception applies,
the term "United States shareholder" includes all U.S. persons who
beneficially own any amount (rather than 10 percent or more) of the Company's
stock. An insurance company subsidiary of the Company will be treated as a CFC
if such U.S. persons are treated as owning 25 percent or more of the stock of
the insurance company subsidiary.
In determining the "United States shareholders" of the Company's foreign
insurance company subsidiaries, stock of the Company's foreign insurance
company subsidiaries held indirectly by U.S. persons through the Company or
any other non-U.S. entity is treated as held by United States shareholders.
RPII Exceptions
The special RPII rules do not apply if (A) direct and indirect insureds and
persons related to such insureds, whether or not U.S. persons, are treated as
owning less than 20 percent of the voting power and less than 20 percent of
the value of the stock of the Company's insurance company subsidiaries (which
exception is not anticipated to apply to the Company and its subsidiaries),
(B) the RPII of each of the Company's foreign insurance company subsidiaries,
determined on a gross basis, is less than 20 percent of each such subsidiary's
gross insurance income for the taxable year, (C) a foreign insurance company
subsidiary of the Company elects
7
<PAGE>
to be taxed on its RPII as if the RPII were effectively connected with the
conduct of a United States trade or business, or (D) a foreign insurance
company subsidiary of the Company elects to be treated as a United States
corporation. Where none of these exceptions applies, each United States person
owning or treated as owning stock in the Company (and therefore, indirectly,
in a foreign insurance company subsidiary of the Company) on the last day of
an insurance company subsidiary's fiscal year will be required to include in
its gross income for United States federal income tax purposes its share of
the RPII for the entire taxable year, determined as if all such RPII were
distributed proportionately only to such United States shareholders at that
date, but limited by the insurance company subsidiaries' current-year earnings
and profits and by the U.S. shareholder's share, if any, of prior-year
deficits in earnings and profits.
Computation of RPII
In order to determine how much RPII the Company has earned in each fiscal
year, the Company obtains and relies upon information from its insureds to
determine whether any of the insureds or persons related to such insureds own
shares of the Company and are U.S. persons. The Company currently sends, and
intends to continue to send, a letter after each fiscal year to each person
who was an insured during the year asking the insured to represent whether it
was a U.S. shareholder of the Company or related to a U.S. shareholder during
the year. For any year in which gross RPII is 20 percent or more of a foreign
insurance company subsidiary's gross insurance income for the year, the
Company may also seek information from its shareholders as to whether
beneficial owners of Ordinary Shares at the end of the year are United States
persons so that the RPII may be determined and apportioned among such persons.
The Company will inform all shareholders of RPII per share and U.S.
shareholders are obligated to file a return reporting such amounts. To the
extent the Company is unable to determine whether a beneficial owner of shares
is a U.S. person the Company may assume that such owner is not a U.S. person
for the purpose of allocating RPII, thereby increasing the per share RPII
amount for all U.S. shareholders.
If, as anticipated, RPII of each of the Company's foreign insurance company
subsidiaries is less than 20 percent of gross insurance income for the current
and subsequent fiscal years, U.S. shareholders will not be required to include
RPII in their taxable income for such years. The Company's estimate of its
insurance company subsidiaries' gross insurance income constituting RPII is
based on information provided to the Company by insureds of those insurance
company subsidiaries concerning whether the insureds are "United States
shareholders" or "related persons" thereto. The amount of RPII includible in
the income of a U.S. shareholder is based upon the net RPII income for the
year after deducting related expenses such as losses, loss reserves and
operating expenses.
Apportionment of RPII to U.S. Shareholders
Every U.S. person who owns Ordinary Shares on the last day of any fiscal
year of a foreign insurance company subsidiary in which such insurance company
subsidiary's gross insurance income constituting RPII for that year equals or
exceeds 20 percent of that insurance company subsidiary's gross insurance
income should expect that for such year it will be required to include in
gross income its share of that insurance company subsidiary's RPII for the
entire year, whether or not distributed, even though it may not have owned the
shares for the entire year. A U.S. person who owns Ordinary Shares during such
fiscal year but not on the last day of the fiscal year, which would normally
be September 30, is not required to include in gross income any part of the
Company's insurance company subsidiaries' RPII.
The tax consequences of RPII will not be applicable in any future fiscal
year in which the gross insurance income attributable to U.S. shareholders is
less than 20 percent of the gross insurance income of any of the Company's
insurance subsidiaries. See "Taxation of Shareholders of the Company--United
States Taxation of U.S. and Non-U.S. Shareholders--RPII." The Company expects
that the gross insurance income of its foreign insurance company subsidiaries
attributable to U.S. shareholders for its current and subsequent fiscal years
will be below 20 percent of the gross insurance income of each such insurance
company subsidiary.
8
<PAGE>
Information Reporting
Each U.S. person who is a shareholder of the Company on the last day of a
fiscal year of a foreign insurance company subsidiary in which such foreign
insurance company subsidiary's gross RPII constitutes 20 percent or more of
that foreign insurance company subsidiary's gross insurance income must attach
to the income tax or information return it would normally file for the period
which includes that date a Form 5471 with respect to the Company. This filing
requirement applies if the Company is a CFC for any thirty-day period during
its fiscal year whether or not any net RPII income is required to be reported.
The foreign insurance company subsidiaries of the Company will not be
considered to be CFCs for this purpose and, therefore, Form 5471 will not be
required, for any fiscal year in which each such foreign insurance company
subsidiary's gross RPII constitutes less than 20 percent of its gross
insurance income. U.S. persons who at any time own 10 percent or more of the
shares of the Company may be required in certain circumstances to file Form
5471 regardless of the amount of RPII received by the insurance company
subsidiaries. For any year in which any of the Company's foreign insurance
company subsidiaries' gross RPII constitutes 20 percent or more of their
respective gross insurance incomes, the Company intends to mail to all
shareholders of record, and will make available at the transfer agent with
respect to the Ordinary Shares, Form 5471 (completed with Company information)
for attachment to the returns of shareholders. The amounts of the RPII
inclusions may be subject to adjustment based upon subsequent IRS examination.
A tax-exempt organization will be required to attach Form 5471 to its
information return in the circumstances described above. Failure to file Form
5471 may result in penalties.
Tax-Exempt Shareholders
U.S. tax-exempt shareholders to which RPII is allocated are required to
treat such RPII as unrelated business taxable income within the meaning of
Code section 512, except to the extent that RPII is due to insurance or
reinsurance of that tax-exempt shareholder or its affiliates.
Basis Adjustments
A U.S. shareholder's tax basis in its Ordinary Shares will be increased by
the amount of any RPII that the shareholder includes in income. The
shareholder may exclude from income the amount of any distributions by the
Company to the extent of the RPII included in income for the year in which the
distribution was paid or for any prior year. The U.S. shareholder's tax basis
in its Ordinary Shares will be reduced by the amount of such distributions
that are excluded from income. In general, a U.S. shareholder will not be able
to exclude from income distributions with respect to RPII that a prior
shareholder included in income.
Dispositions of Ordinary Shares
Code section 1248 provides that if a U.S. person owns 10 percent or more of
the voting shares of a corporation that is a CFC, any gain from the sale or
exchange of the shares may be treated as ordinary income to the extent of the
CFC's earnings and profits during the period that the shareholder held the
shares (with certain adjustments). Code section 953(c)(7) generally provides
that section 1248 also will apply to the sale or exchange of shares in a
foreign corporation that earns RPII if the foreign corporation would be taxed
as an insurance company if it were a domestic corporation, regardless of
whether the shareholder is a 10 percent shareholder or whether RPII
constitutes 20 percent or more of the corporation's gross insurance income.
Existing Treasury Department regulations do not address whether Code section
1248 would apply when the foreign corporation (such as the Company) is not a
CFC but the foreign corporation has a subsidiary that is a CFC or that would
be taxed as an insurance company if it were a domestic corporation.
The Company believes, based on the advice of counsel, that Code section 1248
will not apply to dispositions of Ordinary Shares because the Company does not
have any 10 percent shareholders and the Company is not directly engaged in
the insurance business. There can be no assurance, however, that the IRS will
interpret proposed regulations under Code section 953 in this manner or that
the Treasury Department will not amend the proposed regulations under Code
section 953 or other regulations to provide that Code section 1248 will apply
9
<PAGE>
to dispositions of shares in a corporation such as the Company which is
engaged in the insurance business directly or indirectly through its
subsidiaries. If the IRS or Treasury Department were to take such action, the
Company would notify shareholders that Code section 1248 will apply to
dispositions of Ordinary Shares.
A shareholder of the Company who at no time owns 10 percent or more of the
Ordinary Shares is not required to file IRS Form 5471 with respect to a
disposition of Ordinary Shares. A 10 percent U.S. shareholder of the Company
may in certain circumstances be required to report a disposition of Ordinary
Shares by attaching Form 5471 to the U.S. income tax or information return
that it would normally file for the taxable year in which the disposition
occurs.
Foreign Tax Credit
Because U.S. shareholders own a majority of the Company's shares and because
a substantial part of the Company's foreign insurance company subsidiaries'
business includes the insurance of U.S. risks, only a portion of the RPII and
dividends paid by the Company (including any gain from the sale of Ordinary
Shares that is treated as a dividend under Section 1248 of the Code) will be
treated as foreign source income for purposes of computing a shareholder's
U.S. foreign tax credit limitation. It is likely that substantially all of the
RPII and dividends that are foreign source income will constitute either
"passive" or "financial services" income for foreign tax credit limitation
purposes. Thus, it may not be possible for certain U.S. shareholders to
utilize excess foreign tax credits to reduce U.S. tax on such income.
Uncertainty as to Application of RPII
The RPII provisions of the Code have never been interpreted by the courts.
Regulations interpreting the RPII provisions of the Code exist only in
proposed form, having been proposed on April 16, 1991. It is not certain
whether these regulations will be adopted in their proposed form or what
changes or clarifications might ultimately be made thereto or whether any such
changes, as well as any interpretation or application of RPII by the IRS, the
courts or otherwise, might have retroactive effect. The description of RPII
herein is therefore qualified. Accordingly, the meaning of the RPII provisions
and the application thereof to the Company and its subsidiaries is uncertain.
These provisions include the grant of authority to the U.S. Treasury
Department to prescribe "such regulations as may be necessary to carry out the
purpose of this subsection including . . . regulations preventing the
avoidance of this subsection through cross insurance arrangements or
otherwise." In addition, there can be no assurance that the amounts of the
RPII inclusions will not be subject to adjustment based upon subsequent IRS
examination. Each U.S. person who is considering an investment in Ordinary
Shares should consult his tax advisor as to the effects of these
uncertainties.
Passive Foreign Investment Companies
Sections 1291 through 1298 of the Code contain special rules applicable with
respect to foreign corporations that are "passive foreign investment
companies" ("PFICs"). In general, a foreign corporation will be a PFIC if 75
percent or more of its income constitutes "passive income" or 50 percent or
more of its assets produce passive income. If the Company were to be
characterized as a PFIC, its United States shareholders would be subject to a
penalty tax at the time of their sale of (or receipt of an "excess
distribution" with respect to) its shares and a portion of the gain may be
recharacterized as ordinary income. In general, a shareholder receives an
"excess distribution" if the amount of the distribution is more than 125
percent of the average distribution with respect to the stock during the three
preceding taxable years (or shorter period during which the taxpayer held the
stock). In general, the penalty tax is equivalent to an interest charge on
taxes that are deemed due during the period the United States shareholder
owned the shares, computed by assuming that the excess distribution or gain
(in the case of a sale) with respect to the shares was taxed in equal portions
throughout the holder's period of ownership at the highest marginal tax rate
for ordinary income. The interest charge is equal to the applicable rate
imposed on underpayments of U.S. Federal income tax for such period.
10
<PAGE>
The PFIC statutory provisions contain an express exception for income
"derived in the active conduct of an insurance business by a corporation which
is predominantly engaged in an insurance business . . . ." This exception is
intended to ensure that income derived by a bona fide insurance company is not
treated as passive income, except to the extent such income is attributable to
financial reserves in excess of the reasonable needs of the insurance
business. In the Company's view, the Company and its wholly-owned direct and
indirect subsidiaries are predominantly engaged in an insurance business and
do not have financial reserves in excess of the reasonable needs of their
insurance business. The PFIC statutory provisions contain a look-through rule
that states that, for purposes of determining whether a foreign corporation is
a PFIC, such foreign corporation shall be treated as if it received "directly
its proportionate share of the income . . ." and as if it "held its
proportionate share of the assets . . ." of any other corporation in which it
owns at least 25 percent of the stock. Under the look-through rule the Company
would be deemed to own the assets and to have received the income of its
insurance subsidiaries directly for purposes of determining whether the
Company qualifies for the aforementioned insurance exception.
However, no regulations interpreting the substantive PFIC provisions have
yet been issued. Therefore, substantial uncertainty exists with respect to
their application or their possible retroactivity. Each U.S. person who is
considering an investment in Ordinary Shares should consult his tax advisor as
to the effects of these rules.
Other
Dividends paid by the Company to U.S. corporate shareholders will not be
eligible for the dividends received deduction provided by section 243 of the
Code.
Except as discussed below with respect to backup withholding, dividends paid
by the Company will not be subject to a U.S. withholding tax.
Nonresident alien individuals will not be subject to U.S. estate tax with
respect to Ordinary Shares of the Company.
Information reporting to the IRS by paying agents and custodians located in
the U.S. will be required with respect to payments of dividends (if any) on
the Ordinary Shares to U.S. persons or to paying agents or custodians located
in the United States. In addition, a holder of Ordinary Shares may be subject
to backup withholding at the rate of 31 percent with respect to dividends paid
by such persons, unless such holder (a) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact; or
(b) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. The backup withholding tax is
not an additional tax and may be credited against a holder's regular Federal
income tax liability.
Subject to certain exceptions, persons that are not U.S. persons will be
subject to United States Federal income tax on dividend distributions with
respect to, and gain realized from the sale or exchange of, Ordinary Shares
only if such dividends or gains are effectively connected with the conduct of
a trade or business within the United States.
The foregoing discussion (including and subject to the matters and
qualifications set forth in such summary) of certain tax considerations (i)
under "Taxation of Shareholders of the Company--Bermuda Taxation" is based
upon the advice of Conyers Dill & Pearman, Hamilton, Bermuda, (ii) under
"Taxation of Shareholders of the Company--Cayman Islands Taxation" is based
upon the advice of Maples and Calder, George Town, Cayman Islands, British
West Indies, and (iii) under "Taxation of Shareholders of the Company--United
States Taxation of U.S. and Non-U.S. Shareholders" is based upon the advice of
Mayer, Brown & Platt, Chicago, Illinois (the advice of such firms does not
include any factual accounting matters, determinations or conclusions such as
RPII amounts and computations and amounts of components thereof (for example,
amounts or computations of income or expense items or reserves entering into
RPII computations) or facts relating to the Company's business or
11
<PAGE>
activities, all of which have been supplied by the Company). The summary is
based upon current law and is for general information only. The tax treatment
of a holder of Ordinary Shares, or of a person treated as a holder of Ordinary
Shares for United States Federal income, state, local or non-U.S. tax
purposes, may vary depending on the holder's particular tax situation.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could be retroactive and could affect the tax consequences to
holders of Ordinary Shares. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND NON-U.S. TAX
CONSEQUENCES TO THEM OF OWNING THE ORDINARY SHARES.
PLAN OF DISTRIBUTION
The Company may sell Ordinary Shares registered hereunder from time to time
in one or more transactions on or after the date hereof. The aggregate
proceeds to the Company from sales of the Ordinary Shares offered hereby will
be the purchase price of such Ordinary Shares, less any commissions, discounts
or other compensation of the Broker-Dealer (as defined).
Sales of Ordinary Shares by the Company may be made from time to time, as
market conditions permit, by any of the following means, or any combination
thereof, using such broker-dealer or broker-dealers as may enter into
arrangements with the Company from time to time (herein referred to as the
"Broker-Dealer"): (i) ordinary brokerage transactions on the NYSE and
transactions in which the Broker-Dealer solicits purchasers; (ii) block trades
in accordance with the rules of the NYSE in which the Broker-Dealer may
attempt to sell the Ordinary Shares as agent but may position and resell all
or a portion of the block as principal to facilitate the transactions; (iii)
"off-board" secondary distributions, exchange distributions or special
offerings in accordance with the rules of the NYSE in which the Broker-Dealer
may act as principal or agent; (iv) sales to the Broker-Dealer in which such
Broker-Dealer purchases the shares as principal and resells such shares for
its own account pursuant to a Prospectus Supplement; (v) sales "at the market"
or to or through a market maker or into an existing trading market, on an
exchange or otherwise, for such Ordinary Shares; and (vi) sales in other ways
not involving market makers or established trading markets, including direct
sales to institutions or individual purchasers.
The Ordinary Shares are expected to be sold at prices prevailing at the time
of sale, and it is anticipated that the offering prices will not exceed the
last reported sale price for the Ordinary Shares of the Company on the NYSE
immediately prior to the determination thereof. The Broker-Dealer will receive
such brokerage commissions or other compensation as may be negotiated with the
Company immediately prior to the sale. Such commissions or other compensation
are not expected to exceed those customary in the types of transactions
involved. The Broker-Dealer may also receive compensation from purchasers of
the Ordinary Shares which is not expected to exceed that customary in the
types of transactions involved.
In connection with the sale of the Ordinary Shares offered hereby, the
Broker-Dealer may be deemed to be an underwriter within the meaning of the
Securities Act, in which event the brokerage commissions or discounts received
by it may be deemed to be underwriting compensation. To the extent required by
the Securities Act, additional information relating to the specific Ordinary
Shares offered, the price at which such Ordinary Shares are offered and the
particular selling arrangements, if any, made with any Broker-Dealer in
connection therewith (including any applicable commissions or discounts) will
be set forth in an accompanying Prospectus Supplement or, if appropriate, a
post-effective amendment to the Registration Statement of which this
Prospectus is a part. The Company, under arrangements which it may enter into
with the Broker-Dealer, may agree to indemnify the Broker-Dealer against
certain liabilities, including liabilities under the Securities Act or to
contribute to payments that the Broker-Dealer may be required to make in
respect thereof.
LEGAL MATTERS
Certain legal matters with respect to Cayman Islands law and with respect to
the validity of the Ordinary Shares offered hereby will be passed upon for the
Company by Maples and Calder, George Town, Grand Cayman, Cayman Islands,
British West Indies. Certain legal matters with respect to Bermuda law will be
passed
12
<PAGE>
upon for the Company by Conyers Dill & Pearman, Hamilton, Bermuda. Certain
legal matters with respect to United States law will be passed upon for the
Company by Mayer, Brown & Platt, Chicago, Illinois and for any Broker-Dealers
by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The consolidated financial statements as of September 30, 1997 and 1996 and
for each of the fiscal years in the three-year period ended September 30,
1997, incorporated in this Prospectus by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1997 have been so
incorporated herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with the
distribution of the securities registered hereby:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $209,239
NYSE listing fee................................................ 66,500
Accounting fees and expenses.................................... 20,000
Legal fees and expenses......................................... 100,000
Printing fees................................................... 50,000
Miscellaneous................................................... 54,261
--------
Total....................................................... $500,000
========
</TABLE>
All of the above fees, costs and expenses will be paid by the Company and,
other than the SEC registration fee and the NYSE listing fee, all fees and
expenses are estimates.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 100 of the Company's Articles of Association, filed as Exhibit 4.2
to this Registration Statement, contains provisions with respect to
indemnification of the Company's officers and directors. Such provision
provides that the Company shall indemnify, in accordance with and to the full
extent now or hereafter permitted by law, any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, an action by or in the right of
the Company), by reason of his acting as a director, officer, employee or
agent of, or his acting in any other capacity for or on behalf of, the
Company, against any liability or expense actually and reasonably incurred by
such person in respect thereof. The Company may also advance the expenses of
defending any such act, suit or proceeding in accordance with and to the full
extent now or hereafter permitted by law. Such indemnification and advancement
of expenses are not exclusive of any other right to indemnification or
advancement of expenses provided by law or otherwise.
The Companies Law (1995 Revision) of the Cayman Islands does not set out any
specific restrictions on the ability of a company to indemnify officers or
directors. However, the application of basic principles and certain
Commonwealth case law which is likely to be persuasive in the Cayman Islands
would indicate that indemnification is generally permissible except in the
event that there had been fraud or wilful default on the part of the officer
or director or reckless disregard of his duties and obligations to the
company.
Directors and officers of the Company are also provided with indemnification
against certain liabilities pursuant to a directors and officers liability
insurance policy. Coverage is afforded for any loss that the insureds become
legally obligated to pay by reason of any claim or claims first made against
the insureds or any of them during the policy period from any wrongful acts
that are actually or allegedly caused, committed or attempted by the insureds
prior to the end of the policy period. Wrongful acts are defined as any actual
or alleged error, misstatement, misleading statement or act, omission, neglect
or breach of duty by the insureds while acting in their individual or
collective capacities as directors or officers of the Company, or any other
matter claimed against them by reason of their being directors or officers of
the Company. Certain of the Company's directors are provided, by their
employer, with indemnification against certain liabilities incurred as
directors of the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See Exhibit Index included herewith which is incorporated herein by
reference.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the provisions set forth or described in Item 15 of
this Registration Statement, or otherwise, the registrant has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a registrant of expenses
incurred or paid by a director, officer or controlling person of such
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrants will, unless in the opinion
of their counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(A) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(B) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
(C) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (1)(A) and (1)(B) do not apply if
the registration statement is on Form S-3, Form S-8 or Form S-3, and
the information required to be included in a post-effective
II-2
<PAGE>
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrants pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ACE LIMITED
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN HAMILTON, BERMUDA, ON APRIL 14, 1998.
ACE Limited
Christopher Z. Marshall
By: _________________________________
Name: Christopher Z. Marshall
Title: Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON APRIL 14, 1998.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<S> <C>
Brian Duperreault Chairman, President and Chief
___________________________________________ Executive Officer; Director
Brian Duperreault
Christopher Z. Marshall Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Christopher Z. Marshall
* Vice Chairman; Director
___________________________________________
Donald Kramer
* Director
___________________________________________
Michael G. Atieh
* Director
___________________________________________
Bruce L. Crockett
Director
___________________________________________
Jeffrey W. Greenberg
* Director
___________________________________________
Meryl D. Hartzband
Director
___________________________________________
Robert M. Hernandez
* Director
___________________________________________
Peter Menikoff
* Director
___________________________________________
Thomas J. Neff
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<S> <C>
* Director
___________________________________________
Glen M. Renfrew
Director
___________________________________________
Robert Ripp
* Director
___________________________________________
Walter A. Scott
* Director
___________________________________________
Dermot F. Smurfit
Director
___________________________________________
Robert W. Staley
* Director
___________________________________________
Gary M. Stuart
* Director
___________________________________________
Sidney F. Wentz
*By: Christopher Z. Marshall
___________________________________________
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the undersigned as the duly
authorized representative of the registrant in the United States.
Brian Duperreault
-------------------------------------
Date: April 14, 1998 Brian Duperreault
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------- --------------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
2.1 Stock Purchase Agreement, dated as of March 25, 1998 by and
among the Company, CAT and the Selling Shareholders*
4.1 Memorandum of Association of the Company (incorporated by
reference to Exhibit 3.1 to the Registration Statement on Form
S-1 of the Company (No. 33-57206))
4.2 Amended and Restated Articles of Association of the Company
(incorporated by reference to Exhibit 3.2 to the Registration
Statement on Form S-1 of the Company (No. 33-57206))
4.3 Special resolution of the shareholders of the Company,
effective March 2, 1998, amending Article 6 of the Company's
Memorandum of Association and Article 4(a) of the Company's
Amended and Restated Articles of Association*
4.4 Special resolution of the shareholders of the Company,
effective March 2, 1998, amending Article 33 of the Company's
Amended and Restated Articles of Association*
4.5 Specimen certificate representing Ordinary Shares
(incorporated by reference to Exhibit 4.3 to the Registration
Statement on Form S-1 of the Company (No. 33-57206))
5.1 Opinion of Maples and Calder as to the legality of the
Ordinary Shares*
8.1 Opinion of Maples & Calder as to certain Cayman Islands tax
matters*
8.2 Opinion of Mayer, Brown & Platt as to certain U.S. tax
matters*
8.3 Opinion of Conyers Dill & Pearman as to certain Bermuda tax
matters*
23.1 Consent of Coopers & Lybrand L.L.P.*
23.2 Consents of Maples and Calder (included in its opinions filed
as Exhibits 5.1 and 8.1)
23.3 Consent of Mayer, Brown & Platt (included in its opinion filed
as Exhibit 8.2)
23.4 Consent of Conyers Dill & Pearman (included in its opinion
filed as Exhibit 8.3)
24.1 Powers of Attorney*
99.1 Appointment of CT Corporation System as U.S. agent for service
of process (incorporated by reference to Exhibit 99.1 to
Registration Statement on Form S-1 (No. 33-72118))
99.2 Confirmation of appointment of CT Corporation System as U.S.
agent for service of process*
</TABLE>
* Previously filed.
<PAGE>
ACE LIMITED
Ordinary Shares
UNDERWRITING AGREEMENT
----------------------
1. Introductory. ACE Limited, a Cayman Islands company ("Company"),
proposes to issue and sell from time to time 18,975,000 shares of its ordinary
shares (par value $0.041666667) ("Registered Securities"). Particular offerings
of the Registered Securities will be sold pursuant to a Terms Agreement referred
to in Section 3, for resale in accordance with terms of offering determined at
the time of sale.
The Registered Securities involved in any such offering are
hereinafter referred to as the "Offered Securities." The firm or firms which
agree to purchase the Offered Securities are hereinafter referred to as the
"Underwriters" of such securities, and the representative or representatives of
the Underwriters, if any, specified in a Terms Agreement referred to in Section
3 are hereinafter referred to as the "Representatives," provided, however, that
if the Terms Agreement does not specify any representative of the Underwriters,
the term "Representatives", as used in this Agreement (other than in Sections
2(b), 5(c) and 6 and the second sentence of Section 3), shall mean the
Underwriters.
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333-49257) relating to the
Registered Securities, including a form of prospectus, has been filed with the
Securities and Exchange Commission ("Commission") and has become effective. Such
registration statement, as amended at the time of any Terms Agreement referred
to in Section 3, is hereinafter referred to as the "Registration Statement," and
the prospectus included in such Registration Statement, as supplemented as
contemplated by Section 3 to reflect the terms of offering of the Offered
Securities, as first filed with the Commission pursuant to and in accordance
with Rule 424(b) ("Rule 424(b)") under the Securities Act of 1933 ("Act"),
including all material incorporated by reference therein, is hereinafter
referred to as the "Prospectus". No document has been or will be prepared or
distributed in reliance on Rule 434 under the Act.
<PAGE>
(b) On the effective date of the registration statement relating
to the Registered Securities, such registration statement conformed in all
material respects to the requirements of the Act and the rules and regulations
of the Commission ("Rules and Regulations") and did not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the case of the
Prospectus in light of the circumstances under which they were made, not
misleading, and on the date of each Terms Agreement referred to in Section 3,
the Registration Statement and the Prospectus will conform in all material
respects to the requirements of the Act and the Rules and Regulations, and
neither of such documents will include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the case of the Prospectus in light of the
circumstances under which they were made, not misleading, except that the
foregoing does not apply to statements in or omissions from any of such
documents based upon written information furnished to the Company by any
Underwriter through the Representatives, if any, specifically for use therein.
(c) The Company has been duly organized and is subsisting and in
good standing under the laws of the Cayman Islands, with corporate power and
authority to own its properties and conduct its business as described in the
Prospectus; and the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on the business, results of operations or financial condition of the Company and
its subsidiaries taken as a whole (a "Material Adverse Effect").
(d) Each subsidiary of the Company which is a corporation has
been duly incorporated or organized and is an existing corporation in good
standing (to the extent such jurisdiction recognizes such concept) under the
laws of the jurisdiction of its incorporation, with corporate power and
authority to own its properties and conduct its business as described in the
Prospectus; and each such subsidiary of the Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to so qualify would not have a
Material Adverse Effect; all of the issued and outstanding capital stock of
each such subsidiary of the Company has been duly authorized and validly issued
and is fully paid and nonassessable; and all of the issued and outstanding
capital stock of each such subsidiary is owned by the Company, directly or
through subsidiaries, other than ACE Staff Corporate Member Ltd., except for
de minimis shareholdings as required to comply with applicable law, and such
capital stock, is
2
<PAGE>
owned free from liens, encumbrances and defects (except for restrictions or
transferability on the ordinary shares of ACE Insurance (as defined below) and
CODA (as defined below) prior to approval by the Bermuda Monetary Authority).
(e) Each subsidiary of the Company which is a partnership has
been duly formed and is an existing partnership under the laws of the
jurisdiction of its formation, with power and authority to own its properties
and conduct its business as described in the Prospectus; and each such
subsidiary of the Company is duly qualified to do business in good standing in
all other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the failure
to so qualify would not have a Material Adverse Effect; all of the outstanding
equity interests of each such subsidiary of the Company have been duly
authorized and validly issued; and all of the equity interests of each such
subsidiary are owned by the Company, directly or through subsidiaries, free from
liens, encumbrances and defects (other than immaterial amounts necessary to
comply with applicable law).
(f) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized; all outstanding shares
of capital stock of the Company are, and, when the Offered Securities have been
delivered and paid for in accordance with the Terms Agreement on the Closing
Date (as defined below), such Offered Securities will have been, validly issued,
fully paid and nonassessable and will conform to the description thereof
contained in the Prospectus; and the stockholders of the Company have no
preemptive rights with respect to the Securities.
(g) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the Company
to file a registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the Company to
include such securities in the securities registered pursuant to a Registration
Statement or in any securities being registered pursuant to any other
registration statement filed by the Company under the Act.
(h) The Offered Securities have been approved for listing on the
New York Stock Exchange Inc. subject to notice of issuance.
(i) No consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by the Terms Agreement in
connection with the issuance and sale of the Offered Securities by the Company,
except such as have been obtained and made under the Act, such filing of the
Prospectus as has been
3
<PAGE>
made with the Bermuda Registrar of Companies under the Companies Act 1981 of
Bermuda and such as may be required under state securities laws.
(j) Except as disclosed in the Prospectus, under current laws and
regulations of the Cayman Islands and Bermuda and any political subdivision
thereof, all dividends and other distributions declared and payable on the
Offered Securities may be paid by the Company to the holder thereof in United
States dollars and freely transferred out of the Cayman Islands or Bermuda and
all such payments made to holders thereof or therein who are non-residents of
the Cayman Islands or Bermuda will not be subject to income, withholding or
other taxes under laws and regulations of the Cayman Islands or Bermuda or any
political subdivision or taxing authority thereof or therein and will otherwise
be free and clear of any other tax, duty, withholding or deduction in the Cayman
Islands or Bermuda or any political subdivision or taxing authority thereof or
therein and without the necessity of obtaining any governmental authorization in
the Cayman Islands or Bermuda or any political subdivision or taxing authority
thereof or therein.
(k) The execution, delivery and performance of the Terms
Agreement (including the provisions of this Agreement) and the issuance and sale
of the Offered Securities, will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under, (A) any statute, any
rule, regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company or any subsidiary of
the Company or any of their properties, or (B) any agreement or instrument to
which the Company or any such subsidiary is a party or by which the Company or
any such subsidiary is bound or to which any of the properties of the Company or
any such subsidiary is subject, or (C) the organizational documents of the
Company or any such subsidiary, except, in the case of clauses (A) and (B) only,
such breaches, violations, or defaults as would not have a Material Adverse
Effect, and the Company has full power and authority to authorize, issue and
sell the Offered Securities as contemplated by this Agreement.
(l) The Terms Agreement (including the provisions of this
Agreement) has been duly authorized, executed and delivered by the Company.
(m) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate have
a Material Adverse Effect.
4
<PAGE>
(n) Each of A.C.E. Insurance Company, Ltd. ("ACE Insurance"),
Corporate Officers & Directors Assurance Ltd. ("CODA"), CAT Limited ("CAT") and
Tempest Reinsurance Company Limited ("Tempest") (the "Bermuda Insurance
Subsidiaries") is duly registered as an insurer and is subject to regulation and
supervision in Bermuda; each of Westchester Fire Insurance Company, Westchester
Surplus Lines Insurance Company and Industrial Underwriters Insurance Company
(the "U.S. Insurance Subsidiaries" and together with the Bermuda Insurance
Subsidiaries and the U.K. Insurance Subsidiaries, the "Insurance Subsidiaries")
is duly registered as an insurer and subject to regulation and supervision in
New York, Georgia and Texas, respectively; each of the Company and the Insurance
Subsidiaries is duly licensed or admitted as an insurer or an insurance holding
company (as applicable) in each jurisdiction outside its jurisdiction of
organization where it is required to be so licensed to conduct its business as
described in the Prospectus, except for where the failure to be so licensed or
admitted would not have a Material Adverse Effect; each of the Company and the
Insurance Subsidiaries has all other necessary authorizations, approvals,
orders, certificates and permits, of and from, and has made all declarations and
filings with, all insurance authorities, commissions or other insurance
regulatory bodies to conduct their respective businesses as described in the
Prospectus, except for where the failure to have such authorizations, approvals,
orders, certificates and permits, or to make such declarations and filings,
would not have a Material Adverse Effect; all of such authorizations, approvals,
orders, certificates and permits are in full force and effect, except where the
failure to be in full force and effect would not have a Material Adverse Effect;
and neither the Company nor the Insurance Subsidiaries has received any
notification from any insurance authority, commission or other insurance
regulatory body to the effect that any additional authorization, approval,
order, license, certificate or permit from such authority, commission or body is
needed to be obtained by any of the Company or the Insurance Subsidiaries,
except for any authorization, approval, order, license, certificate or permit
from any such authority, commission or body the failure of which to obtain,
singly or in the aggregate, would not have a Material Adverse Effect.
(o) Each of the Company and its Insurance Subsidiaries is in
compliance with all applicable insurance statutes and regulations and has filed
all reports, documents or other information required to be filed under such
statutes and regulations, except where the failure to comply or file would not
have a Material Adverse Effect; and each of the Company and its Insurance
Subsidiaries is in compliance with the insurance laws and regulations of other
jurisdictions which are applicable to the Company and the Insurance Subsidiaries
(as the case may be), except where the failure to comply would not have a
Material Adverse Effect.
(p) Except as set forth in the Registration Statement and the
Prospectus, no authorization, approval or consent of any governmental authority
or agency is required (other than any license as an insurer or insurance holding
company as referred to in paragraph (n) above and other than those which have
already been obtained) under the laws of any jurisdiction in which the Company
or any of its
5
<PAGE>
subsidiaries conduct their respective businesses in connection with the
ownership, directly or indirectly, by the Company of equity interests in any
subsidiary or the repatriation of any amount from or to the Company or any of
the subsidiaries, except to the extent that the failure to obtain such
authorization, approval or consent would not have a Material Adverse Effect.
(q) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties that, if determined adversely
to the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company to perform its obligations under the Terms
Agreement (including the provisions of this Agreement) or which are otherwise
material in the context of the sale of the Offered Securities; and no such
actions, suits or proceedings are, to the Company's knowledge, threatened or
contemplated.
(r) The financial statements included in the Registration
Statement and the Prospectus present fairly the financial position of the
Company and its consolidated subsidiaries as of the dates shown and their
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent basis.
(s) The description of the Company's reserves and reserving
methodology and assumptions described in the Prospectus is accurate and fairly
presents the information set forth therein in all material respects and, since
December 31, 1997, no loss experience has developed which would require or make
it appropriate for the Company to alter or modify such methodology.
(t) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements included in the Prospectus (i) neither the
Company nor any of its subsidiaries has sustained any material loss or material
interference with its business from any action, notice, order or decree from an
insurance regulatory authority and (ii there has been (A) no material adverse
change in case reserves or losses or loss expense or (B) no material adverse
change, nor any development or event involving a prospective material adverse
change, in the financial condition, business, or results of operations of the
Company and its subsidiaries taken as a whole, and (iii) except as disclosed in
or contemplated by the Prospectus, there has been no dividend or distribution of
any kind declared, paid or made by the Company on any class of its capital
stock.
(u) The Company is not and, after giving effect to the offering
and sale of the Offered Securities and the application of the proceeds thereof
as
6
<PAGE>
described in the Prospectus, will not be an "investment company" as defined in
the Investment Company Act of 1940.
3. Purchase, Sale and Delivery of Offered Securities. The obligation
of the Underwriters to purchase the Offered Securities will be evidenced by an
agreement or exchange of other written communications ("Terms Agreement") at the
time the Company determines to sell the Offered Securities. The Terms Agreement
will incorporate by reference the provisions of this Agreement, except as
otherwise provided therein, and will specify the firm or firms which will be
Underwriters, the names of any Representatives, the number of shares to be
purchased by each Underwriter and the purchase price to be paid by the
Underwriters. The Terms Agreement will also specify the time and date of
delivery and payment (such time and date, or such other time not later than
seven full business days thereafter as the Underwriter first named in the Terms
Agreement (the "Lead Underwriter") and the Company agree as the time for payment
and delivery, being herein and in the Terms Agreement referred to as the
"Closing Date"), the place of delivery and payment and any details of the terms
of offering that should be reflected in the prospectus supplement relating to
the offering of the Offered Securities. For purposes of Rule 15c6-1 under the
Securities Exchange Act of 1934, the Closing Date (if later than the otherwise
applicable settlement date) shall be the date for payment of funds and delivery
of securities for all the Offered Securities sold pursuant to the offering. The
obligations of the Underwriters to purchase the Offered Securities will be
several and not joint. It is understood that the Underwriters propose to offer
the Offered Securities for sale as set forth in the Prospectus.
The certificates for the Offered Securities delivered to the
Underwriters on the Closing Date will be in definitive form, in such
denominations and registered in such names as the Lead Underwriter requests.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) The Company will file the Prospectus with the Commission
pursuant to and in accordance with subparagraph (2) (or, if applicable,
subparagraph (5)) of Rule 424(b) not later than the second business day
following the execution and delivery of the Terms Agreement.
(b) The Company will advise the Lead Underwriter promptly of any
proposal to amend or supplement the Registration Statement or the Prospectus
7
<PAGE>
and will afford the Lead Underwriter a reasonable opportunity to review and
comment upon such proposed amendment or supplement; and the Company will also
advise the Lead Underwriter promptly of the filing of any such amendment or
supplement and of the institution by the Commission of any stop order
proceedings in respect of a Registration Statement and will use its reasonable
best efforts to prevent the issuance of any such stop order and to obtain as
soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with sales by
any Underwriter or dealer, any event occurs as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend the Prospectus to comply
with the Act, the Company will promptly notify the Lead Underwriter of such
event and will promptly prepare and file with the Commission, at its own
expense, an amendment or supplement which will correct such statement or
omission or an amendment which will effect such compliance. Neither the Lead
Underwriter's consent to, nor the Underwriters' delivery of, any such amendment
or supplement shall constitute a waiver of any of the conditions set forth in
Section 6.
(d) As soon as practicable, but not later than 16 months, after
the date of each Terms Agreement, the Company will make generally available to
its securityholders an earnings statement covering a period of at least 12
months beginning after the later of (i) the effective date of the registration
statement relating to the Registered Securities, (ii) the effective date of the
most recent post-effective amendment to the Registration Statement to become
effective prior to the date of such Terms Agreement and (iii) the date of the
Company's most recent Annual Report on Form 10-K filed with the Commission prior
to the date of such Terms Agreement, which will satisfy the provisions of
Section 11(a) of the Act.
(e) The Company will furnish to the Representatives copies of the
Registration Statement (two of which will be signed and will include all
exhibits), any related preliminary prospectus, any related preliminary
prospectus supplement, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as the Lead Underwriter requests. The
Prospectus shall be so furnished on or prior to 3:00 P.M., New York time, on the
business day following the later of the execution and delivery of the Terms
Agreement. All other documents shall be so furnished as soon as available. The
Company will pay the expenses of printing and distributing to the Underwriters
all such documents.
8
<PAGE>
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as the Lead Underwriter
designates and will continue such qualifications in effect so long as required
for the distribution provided that the Company shall not be required to qualify
as a foreign corporation or to consent to the service of process under the laws
of any such state (except service of process with respect to the offering and
sale of the Offered Securities) or subject itself to any taxation in respect of
doing business.
(g) During the period of two years after the date of any Terms
Agreement, the Company will furnish to the Representatives and, upon request, to
each of the other Underwriters, as soon as practicable after the end of each
fiscal year, a copy of its annual report to stockholders for such year; and the
Company will furnish to the Representatives as soon as available, a copy of each
report and any definitive proxy statement of the Company filed with the
Commission under the Securities Exchange Act of 1934 or mailed to stockholders.
(h) The Company will pay all expenses incident to the performance
of its obligations under the Terms Agreement (including the provisions of this
Agreement), for any filing fees and other expenses (including fees and
disbursements of counsel) incurred in connection with qualification of the
Offered Securities for sale under the laws of such jurisdictions as the Lead
Underwriter designates and the printing of memoranda relating thereto, for the
filing fee incident to, and the reasonable fees and disbursements of counsel to
the Underwriters in connection with, the review by the National Association of
Securities Dealers, Inc. of the Offered Securities, for any travel expenses of
the Company's officers and employees and any other expenses of the Company in
connection with attending or hosting meetings with prospective purchasers of the
Offered Securities and for expenses incurred in distributing preliminary
prospectuses and the Prospectus (including any amendments and supplements
thereto) to the Underwriters.
(i) The Company will indemnify and hold harmless the Underwriters
against any documentary, stamp or similar issue tax, including any interest and
penalties, on the creation, issue and sale of the Offered Securities and on the
execution and delivery of the Terms Agreement (including the provisions of this
Agreement). All payments to be made by the Company hereunder shall be made
without withholding or deduction for or on account of any present or future
taxes, duties or governmental charges whatsoever unless the Company is compelled
by law to deduct or withhold such taxes, duties or charges. In that event, the
Company shall pay such additional amounts as may be necessary in order that the
net amounts received after such withholding or deduction shall equal the amounts
that would have been received if no withholding or deduction had been made.
9
<PAGE>
(j) For a period of 90 days after the date of the initial public
offering of any Offered Securities, the Company will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, or file with
the Commission a registration statement under the Act relating to, any
additional ordinary shares or securities convertible into or exchangeable or
exercisable for any ordinary shares, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, without the prior written
consent of the Lead Underwriter, other than (x) issuances of ordinary shares,
options, or other securities or rights pursuant to any employee or director
compensation, options, savings, benefit or other plan of the Company, (y) any
issuance upon exercise, conversion or exchange of any securities or obligations
outstanding on the date hereof and (z) any issuances of equity securities as
consideration for an acquisition.
(k) The Company will use its best efforts to provide to
shareholders the information required by shareholders to complete their U.S.
income tax returns in the manner specified in the Prospectus and, to that end,
to (i) send a letter shortly after the end of each fiscal year asking each
corporate policyholder to represent whether the insured or any director or
officer of the insured was a U.S. shareholder of the Company, within the meaning
of Section 953(c)(1)(A) of the Internal Revenue Code of 1986 (the "Code"), or
related to a U.S. shareholder of the Company at any time during the preceding 12
months or to use another method which the Company reasonably believes will
elicit similar information; (ii) if the gross "related person insurance income"
("RPII") of either of the Insurance Subsidiaries for any fiscal year is 20% or
more of such Insurance Subsidiary's gross insurance income within the meaning of
Section 953(c)(3)(B) of the Code, send a letter shortly after the end of such
fiscal year to all record owners (other than The Depository Trust Company
("DTC") and DTC participants) asking them to notify the Company's transfer agent
(on a form attached to the letter) within 30 days of the percentage of shares
held by them that are beneficially owned by U.S. persons, the percentage that
are beneficially owned by non-U.S. persons, and the percentage for which
beneficial ownership is not known; and (iii) if the gross RPII of either of the
Insurance Subsidiaries for any fiscal year is 20% or more of such Insurance
Subsidiary's gross insurance income within the meaning of Section 953(c)(3)(B)
of the Code, (A) prepare IRS Form 5471 (or any successor form) with all
Insurance Subsidiary information and (B) as soon as practicable after the end of
such fiscal year, send copies of Form 5471 and a letter instructing U.S.
shareholders how to complete Form 5471 to all record owners (other than DTC and
DTC participants).
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Offered Securities will
be subject to the accuracy in all material respects of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its obligations hereunder in all material respects and to the
following additional conditions precedent:
(a) On or prior to the date of the Terms Agreement, the
Representatives shall have received a letter, dated the date of delivery thereof
of Coopers & Lybrand L.L.P. confirming that they are independent public
accountants within the meaning of the Act and the applicable published Rules and
Regulations thereunder and stating to the effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statement comply as to
form in all material respects with the applicable accounting requirements
of the Act and the related published Rules and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of interim
financial information as described in Statement of Auditing Standards No.
71, Interim Financial Information, on any unaudited financial statements
included in the Registration Statement;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements of
the Company, inquiries of officials of the Company who have responsibility
for financial and accounting matters and other
10
<PAGE>
specified procedures, nothing came to their attention that caused them to
believe that:
(A) the unaudited financial statements included in the
Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the related
published Rules and Regulations or any material modifications should be
made to such unaudited financial statements for them to be in conformity
with generally accepted accounting principles;
(B) at the date of the latest available balance sheet
read by such accountants, or at a subsequent specified date not more than
three business days prior to the date of the Terms Agreement, there was
any change in the capital stock or any increase in short-term indebtedness
or long-term debt of the Company and its consolidated subsidiaries or, at
the date of the latest available balance sheet read by such accountants,
there was any decrease in consolidated net assets, as compared with
amounts shown on the latest balance sheet included in the Prospectus; or
(C) for the period from the closing date of the latest
income statement included in the Prospectus to the closing date of the
latest available income statement read by such accountants there were any
decreases, as compared with the corresponding period of the previous year,
in consolidated net sales, net operating income or in the total or per
share amounts of consolidated net income, except in all cases set forth in
clauses (B) and (C) above for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are described in
such letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statement (in each case to the
extent that such dollar amounts, percentages and other financial
information are derived from the general accounting records of the Company
and its subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by analysis or
computation) with the results obtained from inquiries, a reading of such
general accounting records and other procedures specified in such letter
and have found such dollar
11
<PAGE>
amounts, percentages and other financial information to be in agreement
with such results, except as otherwise specified in such letter.
All financial statements and schedules included in material
incorporated by reference into the Prospectus shall be deemed included in the
Registration Statements for purposes of this subsection.
(b) The Prospectus shall have been filed with the Commission in
accordance with the Rules and Regulations and Section 5(a) of this Agreement.
Prior to the Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Company or the
Representatives, shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of the Terms
Agreement, there shall not have occurred (i) any change, or any development or
event involving a prospective change, in the financial condition
business or results of operations of the Company or its subsidiaries
which, in the judgment of a majority in interest of the Underwriters including
the Representatives, is material and adverse and makes it impractical or
inadvisable to proceed with completion of the public offering or the sale of and
payment for the Offered Securities; (ii any downgrading in the rating of any
debt securities of the Company by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act), or any
public announcement that any such organization has under surveillance or review
its rating of any debt securities of the Company (other than an announcement
with positive implications of a possible upgrading, and no implication of a
possible downgrading, of such rating); (ii any suspension or limitation of
trading in securities generally on the New York Stock Exchange, or any setting
of minimum prices for trading on such exchange, or any suspension of trading of
any securities of the Company on any exchange or in the over-the-counter market;
(iv any banking moratorium declared by U.S. federal, New York or Bermuda
authorities; or (v) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the judgment
of a majority in interest of the Underwriters including the Representatives, the
effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(d) the Representatives shall have received on the Closing Date a
signed opinion of Maples and Calder, Cayman Islands counsel for the Company,
dated the Closing Date, to the effect that:
12
<PAGE>
(i) the Company has been duly incorporated and is validly
existing and in good standing as an exempted company, under the laws of the
Cayman Islands, and has the corporate power and corporate authority to own,
lease and operate its property, and to conduct its business, as described
in the Registration Statement and the Prospectus;
(ii) the authorized share capital of the Company, as set out
in its Memorandum of Association, conforms as to legal matters to the
description thereof contained in the Registration Statement and the
Prospectus; all of the Company's Ordinary Shares have been duly and validly
authorized and issued by the Company and are registered in the books of the
Company as fully paid; on the basis that the contractual subscription price
of all such Ordinary Shares is fully paid in cash (or equivalent
consideration approved by the Directors), such ordinary Shares issued may
properly be credited as fully paid under Cayman Islands law and, as the
Company has been established on the basis that the liability of its
shareholders is limited to the amount, if any, unpaid on their Shares (see
Clause 5 of the Memorandum of Association), there is no rule of Cayman
Islands law that would impose any further liability on persons holding
Ordinary Shares in the Company, merely by reason of such shareholding; so
far as Cayman Islands law is concerned, the registered holders have good
and valid title to their respective Ordinary Shares on the assumption that
they have not entered into any liens, encumbrances, equities or claims
which could give rise to any equitable interest on the part of any third
party in respect of such Ordinary Shares; and the holders of Ordinary
Shares are not subject to any pre-emptive rights under the laws of the
Cayman Islands or the Company's Memorandum and Articles of Association;
(iii) the Terms Agreement, including the provisions of this
Agreement, have been duly authorized, executed and delivered by the
Company;
(iv) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, the Terms Agreement,
including the provisions of this Agreement, and the consummation by the
Company, of the transactions contemplated by the Terms Agreement, including
the provisions of this Agreement, do not (A) violate any provision of the
Articles of Association of the Company; (B) contravene any provision of any
law, public rule or regulation of the Cayman Islands applicable to the
Company; (C) to
13
<PAGE>
the best of such counsel's knowledge, contravene any existing published
order or decree of the courts of the Cayman Islands by which the Company is
bound or by which its properties or assets may be affected; or (D) require
any consent, approval or authorization or order of, or qualification with
any Cayman Islands governmental agency in connection with the offer and
sale of the Offered Securities;
(v) to the best of such counsel's knowledge, but based only
upon a search of the cause list at the offices of the Grand Courts of the
Cayman Islands, there was no action, suit or proceeding before the courts
of the Cayman Islands at the close of business on a recent date;
(vi) all statements made in the Prospectus with regard to
statutes, regulations, rules, treaties and other laws of the Cayman Islands
(including, but not limited to, insurance, regulatory and tax matters and
the Companies Law (1995 Revision) of the Cayman Islands) and enforcement of
judgments in the Cayman Islands are accurate;
(vii) pursuant to this Agreement, and to the extent that the
laws of the Cayman Islands are relevant, the Company has legally, validly,
effectively and irrevocably submitted to the jurisdiction of the federal
and state courts of the United States having jurisdiction in the State of
New York, County of New York, and has legally, validly and effectively
appointed CT Corporation System as the authorized agent of the Company for
the purposes described in Section 14 of this Agreement assuming this to be
the case as a matter of the applicable federal and state laws;
(viii) the choice of the laws of New York, United States of
America as the governing law of this Agreement is a valid and effective
choice of law and in an action brought before a court of competent
jurisdiction in the Cayman Islands, the laws of New York would, to the
extent specifically pleaded and proved as a fact by expert evidence, be
recognized and applied by such court to all issues concerning the formal
and essential validity of the Agreement and the interpretation thereof,
except that in any such action such court will apply those laws of the
Cayman Islands as such court characterizes as procedural and will not apply
those laws of New York as such court characterizes as procedural;
14
<PAGE>
(ix) although there is no statutory enforcement in the
Cayman Islands of a judgment obtained in New York, the courts of the Cayman
Islands will recognize and enforce a foreign judgment of a court of
competent jurisdiction, based on the principle that a judgment of a
competent foreign court imposes upon the judgment debtor an obligation to
pay the sum for which judgment has been given provided such judgment is
final, for a liquidated sum, not in respect of taxes or a fine or penalty,
and was not obtained in a manner and is not of a kind the enforcement of
which is contrary to the public policy of the Cayman Islands; a Cayman
Islands court may stay proceedings if concurrent proceedings are being
brought elsewhere; for the purposes of enforcement of a judgment granted
against the Company in respect of this Agreement, a court in the Cayman
Islands would recognize the jurisdiction of the applicable federal or state
court to the jurisdiction of which the Company has submitted rendering
such judgment if service of process on the Company is effected pursuant to
and in accordance with the provisions of this Agreement; and
(x) on the basis that the Company carries on its business as
set forth in the Prospectus, there is not requirement that it be licensed
under the Insurance Law, 1979, as amended of the Cayman Islands.
(e) the Representatives shall have received on the Closing Date a
signed opinion of Conyers Dill & Pearman, Bermuda counsel for the Company, dated
the Closing Date, to the effect that:
(i) each of ACE Insurance, CODA, Tempest and CAT (A) is
validly existing under the laws of Bermuda as a company with limited
liability and is in good standing under the laws of Bermuda (meaning that
such company has not failed to make any filing with any Bermuda government
authority or to pay any Bermuda government fee or tax, the failure of which
would make such company immediately liable to be struck off the Register
of Companies and thereby cease to exist under the laws of Bermuda) and (B)
the corporate objects and powers contained in the Memorandum of Association
of each of CODA, Tempest and CAT are sufficient to allow them to carry on
their business and to own, lease and operate its properties as both are
described in the Prospectus;
(ii) based solely upon a certified copy of the Register of
Members for ACE Insurance, CODA, Tempest and CAT
15
<PAGE>
without further inquiry, (a) all of the issued shares in the share capital
of ACE Insurance have been duly and validly authorized and issued and are
fully paid and nonassessable (meaning that, subject to the common law
doctrine of "piercing the corporate veil" and to any agreement to the
contrary between the registered holders and the Company, no further sums
are required to be paid by the holders thereof in connection with the issue
of such shares); and (b) the Company is the registered holder of all the
issued shares of such Company (except for a de minimis number of shares
necessary to comply with applicable law); and (c) based solely upon the
Register of Charges, and without further enquiry, there are no registered
liens, encumbrances, equities or claims in the Register of Charges in
respect of those shares;
(iii) each of ACE Insurance, CODA, CAT and Tempest is duly
registered as an insurer under the Insurance Act 1978 (Bermuda) and the
regulations promulgated thereunder (together, the "Insurance Act") and as
so registered, ACE Insurance, CODA and Tempest each may conduct that
insurance business which it is described in the Prospectus as carrying on;
and, based solely on the Certificates of Compliance and without independent
inquiry, each of ACE Insurance, CODA, Tempest and CAT has filed with the
appropriate Bermuda governmental authority all reports, documents or other
information required to be filed under the Insurance Act;
(iv) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, the Terms Agreement,
including the provisions of this Agreement and the consummation by the
Company of the transactions contemplated by the Terms Agreement, including
the provisions of this Agreement, do not and will not (A) violate any
provision of the Memorandum of Association or Bye-laws of each of ACE
Insurance, CODA, Tempest, and CAT (collectively, the "Bermuda
Subsidiaries"); (B) contravene any provision of any of those laws, rules
and regulations of Bermuda which, in such counsel's experience, are
normally applicable to transactions of the type contemplated by this
Agreement, except that such counsel need not express any opinion in this
paragraph with respect to Bermuda securities laws; (C) based solely upon
the Cause Book and without further inquiry, contravene any judgment, order
or decree by the Bermuda Supreme Court against the Company or the Bermuda
Subsidiaries; (D) based solely upon the Register of Charges and without
further inquiry, conflict with, result in any breach of or constitute a
default (or an event which, with notice or lapse of time, or
16
<PAGE>
both, would constitute a default) under, or give rise to any right to
accelerate the maturity or require the prepayment of any registered charge
recorded in the Register of Charges against the Company or the Bermuda
Subsidiaries; or (E) require any consent, approval or authorization or
order of, or qualification with any Bermuda governmental agency, except
such as have been obtained under the applicable securities laws of Bermuda
in connection with the offer and sale of the Securities (as defined in this
Agreement);
(v) based solely upon the Cause Book and without further
enquiry, there is no action, suit or proceeding now pending before the
Bermuda Supreme Court against the Company, ACE Insurance, Tempest or CODA
or any of their respective properties; and
(vi) all statements (but excluding those statements forming
a part of financial information or accounts) made in the Registration
Statement and Prospectus with respect to statutes, regulations, rules,
treaties and other laws of Bermuda (including, but not limited to,
statements made with respect to the Insurance Act and Bermuda tax matters)
fairly and accurately present the information set forth therein and such
counsel's opinion as to such matters.
(f) the Representatives shall have received on the Closing Date a
signed opinion of Peter N. Mear, Esq., General Counsel of the Company, dated the
Closing Date, to the effect that:
(i) the Company is qualified to do business, and is in good
standing, as a foreign corporation, under the laws of each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or to be in good standing, would not singly or in the aggregate
have a Material Adverse Effect;
(ii) each of the Subsidiaries is qualified to do business in
each jurisdiction in which it owns or leases real property or in which the
conduct of its business requires such qualification, except where the
failure to be so qualified, would not singly or in the aggregate have a
Material Adverse Effect;
(iii) except as set forth in the Registration Statement and
the Prospectus, such counsel does not know of any outstanding (A)
securities or obligations of the Company convertible into or
17
<PAGE>
exchangeable for any shares of capital stock of the Company or any
Subsidiary; (B) rights, warrants or options to acquire or purchase from the
Company any shares of capital stock of the Company or any such convertible
or exchangeable securities or obligations; or (C) obligations or
understandings of the Company to issue or sell any shares of capital stock
of the Company or any Subsidiary, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or obligations; and
(iv) to the best of such counsel's knowledge, and other than
as disclosed in the Prospectus and based solely on a certificate of
officers of the Company, and without independent inquiry, there are no
threatened legal proceedings against the Company and its subsidiaries which
if determined adversely to any such company, would have a Material Adverse
Effect.
(g) the Representatives shall have received on the Closing Date a
signed opinion of Mayer, Brown & Platt, United States counsel for the Company,
dated the Closing Date, to the effect that:
(i) ACE USA is duly incorporated and is validly existing as
corporations in good standing as a corporation under the laws of the State
of Delaware;
(ii) the execution and delivery by the Company of, and the
performance by the Company of its respective obligations under, the Terms
Agreement, including the provisions of this Agreement, and the consummation
by the Company of the transactions contemplated by the Terms Agreement,
including the provisions of this Agreement, do not and will not (A)
contravene any provision of any United States federal or New York State
law, rule and regulation, in each case which, in such counsel's experience,
are normally applicable to transactions of the type contemplated by this
Agreement ("United States Applicable Laws"), except that such counsel need
not express any opinion in this paragraph with respect to United States
federal or state securities laws; (B) contravene any judgment, order or
decree known to such counsel without independent inquiry of any United
States federal or New York State court or governmental agency or body
having jurisdiction over the Company or the Subsidiaries or by which the
Company or the Subsidiaries is bound or by which their properties or assets
may be affected; (C) conflict with, result in any breach of or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or
18
<PAGE>
give rise to any right to accelerate the maturity or require the prepayment
of any indebtedness or the purchase of any capital stock under, or result
in the creation or imposition of any lien, charge or encumbrance upon any
material properties or assets of the Company or its Subsidiaries, pursuant
to the terms of any agreement filed as an exhibit to the Annual Report on
Form 10-K or the certificate of incorporation or bylaws of ACE USA and its
subsidiaries, except for such conflicts, breaches, violations, defaults,
accelerations, repayments, repurchases, liens, charges or encumbrances that
would not singly or in the aggregate have a Material Adverse Effect; or (D)
based upon such counsel's review of the United States Applicable Laws,
require any consent, approval or authorization or order of, or
qualification with any United States federal or state governmental agency,
except such as have been obtained under the Securities Act and such as may
be required under state securities or blue sky laws or state insurance laws
in connection with the offer and sale of the Securities;
(iii) such counsel does not know, after inquiry of Company
officers and based solely on such inquiry, of any action, suit or
proceeding before or by any United States federal or state government,
governmental instrumentality or court now pending or threatened against
or affecting the Company or its subsidiaries of any of their respective
properties that is required to be described in the Registration Statement
or the Prospectus and is not so described or of any contract or other
document that is required to be described in the Registration Statement or
the Prospectus, or to be filed as an exhibit to the Registration Statement,
that is not described or filed, as required;
(iv) the Registration Statement and the Prospectus (except
for financial statements, schedules and other financial, statistical and
actuarial data, included in or excluded from the Registration Statement and
the Prospectus as to which counsel need not opine) comply as to form in all
material respects with the requirements of the Securities Act;
(v) the statements in the Registration Statement and the
Prospectus insofar as they are descriptions of contracts, agreements or the
Articles, or refer to statements of United States federal or New York State
laws or United States federal or New York State legal conclusions, are
accurate and present fairly the information required to be shown;
19
<PAGE>
(vi) the discussion of tax matters set forth under the
heading "--Taxation of Shareholders of the Company--United States Taxation
of U.S. and Non-U.S. Shareholders" in the Prospectus contains the relevant
and material provisions of present United States tax law applicable to the
offering of the Securities and the statements thereunder are true and
correct (subject to the qualifications and assumptions set forth in such
discussion) as of the Closing Date; and
(vii) each of the U.S. Insurance Subsidiaries is duly
registered as an insurer under the Texas Insurance Code, the Georgia
Insurance Code or the Insurance Law of the State of New York (as
applicable) and the regulations promulgated thereunder (collectively, the
"U.S. Insurance Laws") and as so registered, the U.S. Insurance
Subsidiaries each may conduct the insurance business described in the
Prospectus as conducted by them.
Such counsel shall also state that it has been advised by the
Commission that the Registration Statement became effective under the Securities
Act; that any required filings of the Prospectus pursuant to Rule 424 (b) have
been made in the manner and within the time period required by Rule 424(b); and
that, based solely on conversations with the Commission, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for the purpose have been instituted, are pending or, to such
counsel's knowledge, are contemplated under the Securities Act.
Such counsel shall also state that they have examined various
documents and participated in conferences with representatives of the Company
and its accountants and with representatives of the Representatives and their
counsel at which times the contents of the Registration Statement and the
Prospectus and related matters were discussed, and that, although they are not
passing upon and assume no responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus or making any representation that they have independently verified
or checked the accuracy, completeness or fairness of such statements, except as
set forth above, no facts have come to such counsel's attention that cause such
counsel to believe that the Registration Statement, at the time it became
effective and as of the date of the Terms Agreement contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; or
that the Prospectus, as of the date of the Terms Agreement and as of the Closing
Date, contained or contains any untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not mislead-
20
<PAGE>
ing (such counsel need not express a belief with respect to the financial
statements, schedules and other financial data included in or excluded from the
Registration Statement and the Prospectus).
(h) The Representatives shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Underwriters, such opinion or
opinions, dated such Closing Date, with respect to the Registration Statements
and the Prospectus and other related matters as the Representatives may require,
and the Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(i) The Representatives shall have received a certificate, dated
such Closing Date, of any two of the Chairman, President and Chief Executive
Officer; Vice Chairman; Chief Financial Officer; and General Counsel and
Secretary of the Company in which such officers, to the best of their knowledge
after reasonable investigation, shall state that: the representations and
warranties of the Company in this Agreement are true and correct in all material
respects; the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date; no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; and, subsequent to the
date of the most recent financial statements in the Prospectus, there has been
no material adverse change, nor any development or event involving a prospective
material adverse change, in the financial condition, business or results of
operations of the Company and its subsidiaries taken as a whole except as set
forth in or contemplated by the Prospectus or as described in such certificate.
(j) The Representatives shall have received a letter, dated such
Closing Date, of Coopers & Lybrand L.L.P. which meets the requirements of
subsection (a) of this Section, except that the specified date referred to in
such subsection will be a date not more than three days prior to such Closing
Date for the purposes of this subsection.
The Company will furnish the Representatives with such conformed
copies of such opinions, certificates, letters and documents as the
Representatives reasonably request. The Lead Underwriter may in its sole
discretion waive on behalf of the Underwriters compliance with any conditions to
the obligations of the Underwriters hereunder and under the Terms Agreement.
7. Indemnification and Contribution. (a) The Company will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under
21
<PAGE>
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in the Terms Agreement.
(b) Each Underwriter will severally and not jointly indemnify and
hold harmless the Company against any losses, claims, damages or liabilities to
which the Company may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, the Prospectus, or
any amendment or supplement thereto, or any related preliminary prospectus or
preliminary prospectus supplement, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein, and will
reimburse any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by any Underwriter consists of
the information described as such in the Terms Agreement.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from
22
<PAGE>
any liability which it may have to any indemnified party otherwise than under
subsection (a) or (b) above . In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other from the offering
of the Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is
23
<PAGE>
the subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each officer of the Company
who has signed a Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters
default in their obligations to purchase Offered Securities under the Terms
Agreement and the aggregate number of shares of Offered Securities that such
defaulting Underwriter or Underwriters agreed but failed to purchase does not
exceed 10% of the total number of shares of Offered Securities that the
Underwriters are obligated to purchase on the Closing Date, the Lead Underwriter
may make arrangements satisfactory to the Company for the purchase of such
Offered Securities by other persons, including any of the Underwriters, but if
no such arrangements are made by the Closing Date, the non-defaulting
Underwriters shall be obligated severally, in proportion to their respective
commitments under the Terms Agreement (including the provisions of this
Agreement), to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on the Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on the Closing Date and arrangements satisfactory to the Lead
Underwriter and the Company for the purchase of such Offered Securities by other
persons are not made within 36 hours after such default, the Terms Agreement
will terminate without liability on the part of any non-defaulting Underwriter
or the Company, except as provided in Section 9. As used in this Agreement, the
term
24
<PAGE>
"Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability for
its default.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers and of the several Underwriters set
forth in or made pursuant to the Terms Agreement (including the provisions of
this Agreement) will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
any Underwriter, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If the Terms Agreement is terminated
pursuant to Section 8 or if for any reason the purchase of the Offered
Securities by the Underwriters is not consummated, the Company shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
5 and the respective obligations of the Company and the Underwriters pursuant to
Section 7 shall remain in effect, and if any Offered Securities have been
purchased hereunder the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect. If the purchase of the
Offered Securities by the Underwriters is not consummated for any reason other
than solely because of the termination of the Terms Agreement pursuant to
Section 8 or the occurrence of any event specified in clause (iii), (iv) or (v)
of Section 6(c), the Company will reimburse the Underwriters for all out-of-
pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to them at their addresses furnished to the Company in the Terms Agreement, or,
if sent to the Company, will be mailed, delivered or telegraphed and confirmed
to it at 30 Woodbourne Avenue, Hamilton HM 08 Bermuda, Attention: General
Counsel; provided, however, that any notice to an Underwriter pursuant to
Section 7 will be mailed, delivered or telegraphed and confirmed to such
Underwriter.
11. Successors. The Terms Agreement (including the provisions of this
Agreement) will inure to the benefit of and be binding upon the Company and the
Underwriters and their respective successors and the officers and directors and
controlling persons referred to in Section 7, and no other person will have any
right or obligation hereunder.
12. Representation of Underwriters. The Representatives will act for
the several Underwriters in connection with the financing described in the Terms
Agreement, and any action under the Terms Agreement (including the
25
<PAGE>
provisions of this Agreement) taken by the Representatives jointly or by the
Lead Underwriter will be binding upon all the Lead Underwriters.
13. Counterparts. The Terms Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement and the Terms Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, without regard to principles of conflicts of laws.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to the Terms Agreement (including the
provisions of this Agreement) or the transactions contemplated thereby. The
Company irrevocably appoints CT Corporation, as its authorized agent in the
Borough of Manhattan in The City of New York upon which process may be served in
any such suit or proceeding, and agrees that service of process upon such agent,
and written notice of said service to the Company by the person serving the same
to the address provided in Section 10, shall be deemed in every respect
effective service of process upon the Company in any such suit or proceeding.
The Company further agrees to take any and all action as may be necessary to
maintain such designation and appointment of such agent in full force and effect
for a period of seven years from the date of this Agreement.
The obligation of the Company in respect of any sum due to any Underwriter
shall, notwithstanding any judgment in a currency other than United States
dollars, not be discharged until the first business day, following receipt by
such Underwriter of any sum adjudged to be so due in such other currency, on
which (and only to the extent that) such Underwriter may in accordance with
normal banking procedures purchase United States dollars with such other
currency; if the United States dollars so purchased are less than the sum
originally due to such Underwriter hereunder, the Company agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify such Underwriter
against such loss. If the United States dollars so purchased are greater than
the sum originally due to such Underwriter hereunder, such Underwriter agrees to
pay to the Company an amount equal to the excess of the dollars so purchased
over the sum originally due to such Underwriter hereunder.
26
