<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1998
REGISTRATION NO. 333-53999,-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
AMENDMENT NO. 1
TO
FORMS F-4 AND S-4*
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
<TABLE>
<CAPTION>
TERRA NOVA INSURANCE TERRA NOVA (BERMUDA)
(UK) HOLDINGS PLC HOLDINGS LTD.
(Exact name of Registrant as specified in its charter) (Exact name of Registrant as specified in its charter)
<S> <C> <C> <C> <C> <C>
ENGLAND AND WALES 6331 NOT APPLICABLE BERMUDA 6331 NOT APPLICABLE
(State or other (Primary Standard (I.R.S. Employer (State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.) jurisdiction of Industrial Identification
incorporation or Classification incorporation or Classification No.)
organization) Code Number) organization) Code Number)
NOT APPLICABLE NOT APPLICABLE
(Translation of Registrant's (Translation of Registrant's
name into English) name into English)
------------------------
TERRA NOVA HOUSE RICHMOND HOUSE, 2ND FLOOR
41-43 MINCING LANE 12 PAR-LA-VILLE ROAD
LONDON EC3R 7SP, GREAT BRITAIN HAMILTON, HM 08, BERMUDA
(171) 283-3000 (441) 292-7731
(Address, including zip code, and telephone number, including (Address, including zip code, and telephone number,
area code, of Registrant's principal executive offices) 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,
telephone number, including area code, of agents
-----------------------
Copies of Correspondence to:
JEAN M. WAGGETT EDWARD A. PERELL
SENIOR VICE PRESIDENT, GENERAL COUNSEL DEBEVOISE & PLIMPTON
AND SECRETARY 875 THIRD AVENUE
TERRA NOVA (BERMUDA) HOLDINGS LTD. NEW YORK, NEW YORK 10022
RICHMOND HOUSE, 2ND FLOOR (212) 909-6000
12 PAR-LA-VILLE ROAD
HAMILTON, HM 08, BERMUDA
(441) 292-7731
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
---------------------
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(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. [_]
<TABLE>
<CAPTION>
---------------------
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Title of Each Class of Amount To Be Proposed Maximum Proposed Maximum
Securities to Be Registered(1) Offering Price Per Aggregate Offering Amount of Registration
Registered Unit (1) Price (1) Fee(1)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$100,000,000
7% Senior Notes due 2008 principal amount 100% $100,000,000 $29,500
- -----------------------------------------------------------------------------------------------------------------------------------
Guarantee of 7% Senior
Notes due 2008 N/A N/A N/A (2)
- -----------------------------------------------------------------------------------------------------------------------------------
Global Receipt(3) N/A N/A N/A NONE
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no registration
fee is payable with respect to the Guarantee.
(3) Global Receipt representing Senior Notes issued as a single global note in
bearer form.
__________________________
The Issuer and the Guarantor hereby amend this Registration Statement on
such date or dates as may be necessary to delay its effective date until the
Issuer and the Guarantor shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
- ----------------------
* This Registration Statement constitutes a filing on Form F-4 for the
Exchange Notes and on Form S-4 for the Guarantee.
==============================================================================
<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 JUNE 16, 1998
PROSPECTUS
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
OFFER TO EXCHANGE 7% SENIOR NOTES DUE 2008,
WHICH WILL BE FULLY AND UNCONDITIONALLY
GUARANTEED BY TERRA NOVA (BERMUDA)
HOLDINGS LTD. AND WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OLD NOTES (AS DEFINED BELOW)
----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_____________, 1998, UNLESS EXTENDED. AS DESCRIBED HEREIN, WITHDRAWAL RIGHTS
WITH RESPECT TO THE EXCHANGE OFFER ARE EXPECTED TO EXPIRE AT THE EXPIRATION OF
THE EXCHANGE OFFER.
Terra Nova Insurance (UK) Holdings plc, a public limited company
organized under the laws of England and Wales ("UK Holdings" or the "Issuer"),
hereby offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus (the "Prospectus") and the accompanying
Letter of Transmittal (the "Letter of Transmittal"), to exchange up to $100.0
million aggregate principal amount of its 7% Senior Notes due 2008 (the
"Exchange Notes") which will be fully and unconditionally guaranteed on a senior
basis by Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings"), and which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which this Prospectus is a part,
for an identical principal amount of its issued and outstanding 7% Senior Notes
due 2008 (the "Old Notes"). The Exchange Notes and the Old Notes are
collectively referred to herein as the "Senior Notes." The Old Notes were
originally issued and sold in a transaction that was exempt from registration
under the Securities Act and resold inside the United States to certain
qualified institutional buyers in reliance on, and subject to the restrictions
imposed pursuant to, Rule 144A under the Securities Act ("Rule 144A"). The terms
of the Exchange Notes are identical in all material respects to the terms of the
Old Notes, except that (i) the offer and sale of the Exchange Notes has been
registered under the Securities Act and therefore the Exchange Notes are not
subject to certain restrictions on transfer applicable to the Old Notes, will
not bear legends restricting the transferability thereof and will not be
entitled to registration rights or other rights under the Registration Rights
Agreement (as defined herein), and (ii) the Exchange Notes will not provide for
any increase in the interest rate pursuant to the Registration Rights Agreement,
which rights and provisions will terminate as to all of the Senior Notes upon
the consummation of the Exchange Offer. The Exchange Notes will be issued under
the same Indenture (as defined herein) as the Old Notes, and the Exchange Notes
and the Old Notes will constitute a single series of debt securities under the
Indenture. In the event the Exchange Offer is consummated, any Old Notes which
remain outstanding after consummation of the Exchange Offer and the Exchange
Notes issued in the Exchange Offer will vote together as a single class for
purposes of determining whether holders of a requisite percentage in outstanding
principal amount of Senior Notes have taken certain actions or exercised certain
rights under the Indenture. See "Description of Exchange Notes" and "The
Exchange Offer."
The Exchange Notes will mature on May 15, 2008. Interest on the
Exchange Notes will accrue from May 18, 1998, the issue date of the Old Notes,
and is payable semiannually on November 15 and May 15 of each year, commencing
on November 15, 1998. The Exchange Notes will be redeemable, in whole or in
part, at the option of the Issuer and at any time, at a redemption price equal
to the sum of: (i) the principal amount of the Exchange Notes being redeemed,
plus accrued and unpaid interest thereon to the redemption date, and (ii) the
Make-Whole Amount (as defined under "Description of Exchange Notes--Optional
Redemption"), if any. The Exchange Notes also may be redeemed under
circumstances described under "Description of Exchange Notes--Tax Redemption" at
100% of the principal amount thereof, plus accrued and unpaid interest thereon
to the redemption date. The Exchange Notes will not be subject to any mandatory
sinking fund payment.
The Exchange Notes and the guarantee (the "Guarantee") of the Exchange
Notes by Bermuda Holdings will constitute unsecured senior obligations of the
Issuer and Bermuda Holdings, respectively. The Exchange Notes and the Guarantee
will rank pari passu in right of payment with all other senior indebtedness of
the Issuer and Bermuda Holdings, respectively, including indebtedness of
approximately $75 million pursuant to the Issuer's 7.2% Senior Notes due 2007
(the "1997 Senior Notes") which are fully and unconditionally guaranteed by a
guarantee
<PAGE>
of Bermuda Holdings, as well as any Old Notes not tendered for exchange pursuant
to the Exchange Offer. See "Description of Exchange Notes--General" and "--
Guarantee." As of the date hereof, there is no outstanding indebtedness of
either the Issuer or Bermuda Holdings which will be subordinate to the Exchange
Notes. Because the Issuer and Bermuda Holdings are holding companies, in order
for them to make interest and principal payments on the Exchange Notes, they
will be dependent on the payment of dividends by their respective insurance
company subsidiaries. As a consequence, the Exchange Notes and the Guarantee
will be effectively subordinated to all existing and future liabilities of such
insurance company subsidiaries, which at March 31, 1998 consisted principally of
insurance liabilities and aggregated approximately $2 billion.
____________
SEE "RISK FACTORS" COMMENCING ON PAGE 13 FOR DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF THE OLD NOTES PRIOR TO TENDERING
THEIR OLD NOTES IN THE EXCHANGE OFFER.
____________
UNTIL _________, 1998 (180 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
____________
THE DATE OF THIS PROSPECTUS IS ____________, 1998.
2
<PAGE>
The Issuer is making the Exchange Offer in reliance on the position of
the staff of the Division of Corporation Finance of the Securities and Exchange
Commission (the "Commission") as set forth in certain no-action letters
addressed to third parties in other transactions (including Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), K-III Communications Corporation (available May 14,
1993) and Shearman & Sterling (available July 2, 1993)). However, neither the
Issuer nor Bermuda Holdings has sought its own no-action letter and there can be
no assurance that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the Exchange Offer
as it has in such no-action letters to third parties. Based on these
interpretations by the staff of the Division of Corporation Finance, and subject
to the two immediately following sentences, the Issuer believes that the
Exchange Notes issued pursuant to this Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by a holder thereof
(other than a holder who is a broker-dealer or an "affiliate" of the Issuer or
Bermuda Holdings within the meaning of Rule 405 of the Securities Act) without
further compliance with the registration and prospectus delivery requirements of
the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any Person to
participate, in a distribution (within the meaning of the Securities Act) of
such Exchange Notes. Any holder of Old Notes who is an "affiliate" of the Issuer
or Bermuda Holdings or who intends to participate in the Exchange Offer for the
purpose of distributing Exchange Notes, or any broker-dealer who purchased Old
Notes from the Issuer or Bermuda Holdings to resell pursuant to Rule 144A under
the Securities Act ("Rule 144A") or any other available exception under the
Securities Act, (a) will not be able to rely on the interpretations of the staff
of the Division of Corporation Finance of the Commission set forth in the above-
mentioned interpretive letters, (b) will not be permitted or entitled to tender
such Old Notes in the Exchange Offer and (c) must comply with the registration
and prospectus delivery requirement of the Securities Act in connection with any
sale or other transfer of such Old Notes unless such sale is made pursuant to an
exemption from such requirements. In addition, as described below, if any
broker-dealer holds Old Notes acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Notes for
Exchange Notes, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such
Exchange Notes.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Issuer or Bermuda Holdings, (ii) any Exchange Notes to be
received by it are being acquired in the ordinary course of its business, and
(iii) it has no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Notes for its
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes. A broker-
dealer that acquired Old Notes in a transaction other than as part of its
market-making or other trading activities will not be able to participate in the
Exchange Offer. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the no-action letters referred to above, the Issuer believes that
broker-dealers who acquired Old Notes for their own account as a result of
market-making activities or other trading activities ("Participating Broker-
Dealers"), may fulfill their prospectus delivery requirements with respect to
the Exchange Notes received upon exchange of such Old Notes (other than Old
Notes which represent an unsold allotment from the original sale of the Old
Notes) with a prospectus meeting the requirements of the Securities Act, which
may be a prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such
Exchange Notes. Subject to certain provisions set forth in the Registration
Rights Agreement, the Issuer and Bermuda Holdings have agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such Exchange
Notes for a period ending 180 days after the Expiration Date referred to below
or, if earlier, when all such Exchange Notes have been disposed of by such
Participating Broker-Dealer. See "Plan of Distribution." Any Participating
Broker-Dealer who is an "affiliate" of the Issuer or Bermuda Holdings may not
rely on such no-action letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. See "The Exchange Offer--Resales of the Exchange Notes."
3
<PAGE>
The Exchange Notes will be a new issue of securities for which there
currently is no market and there can be no assurance as to the liquidity of any
markets that may develop for the Exchange Notes or the ability of the holders to
sell their Exchange Notes, as the case may be. Neither the Issuer nor Bermuda
Holdings currently intends to apply for listing of the Exchange Notes on any
securities exchange other than on the New York Stock Exchange, Inc. or for
quotation through the National Association of Securities Dealers Automated
Quotation System.
Any Old Notes not tendered and accepted in the Exchange Offer will
remain outstanding, will continue to accrue interest and will be entitled to all
the same rights and will be subject to the same limitations applicable thereto
under the Indenture (except for those rights which terminate upon consummation
of the Exchange Offer). Following consummation of the Exchange Offer, the
holders of Old Notes will continue to be subject to the existing restrictions
upon transfer thereof, and neither the Issuer nor Bermuda Holdings will have any
further obligation to such holders to provide for registration under the
Securities Act of the Old Notes held by such holders. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered Old Notes could be adversely affected. See "Prospectus Summary--
Certain Consequences of a Failure to Exchange Old Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Old Notes may be tendered for exchange on or prior to 5:00 p.m., New
York City time, ___________, 1998 (such time on such date being hereinafter
called the "Expiration Date"), unless the Exchange Offer is extended by the
Issuer (in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended). Tenders of Old Notes may be
withdrawn at any time on or prior to the Expiration Date. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain events and
conditions and to the terms and provisions of the Registration Rights Agreement.
Old Notes may be tendered in whole or in part in a principal amount of $1,000
and integral multiples thereof. See "The Exchange Offer--Fees and Expenses."
Each Exchange Note will bear interest from the most recent date to which
interest has been paid or duly provided for on the Old Note surrendered in
exchange for such Exchange Note or, if no such interest has been paid or duly
provided for on such Old Note, from May 18, 1998. Holders of the Old Notes whose
Old Notes are accepted for exchange will not receive accrued interest on such
Old Notes.
Any waiver, extension or termination of the Exchange Offer will be
publicly announced by the Issuer or Bermuda Holdings through a release to the
Dow Jones News Service and as otherwise required by applicable law or
regulations.
The Exchange Notes will be represented by one or more global receipts
(each a "Global Receipt") deposited with, or on behalf of, The Depository Trust
Company, as Depositary, and the Exchange Notes are expected to trade in the
Depositary's Same-Day Funds Settlement System. Secondary market trading
activity, if any, for the Exchange Notes will therefore settle in immediately
available funds. See "Description of Depositary Agreement."
The Issuer intends to list the Exchange Notes on the New York Stock
Exchange, Inc.
Neither the Issuer nor Bermuda Holdings will receive any proceeds from
the Exchange Offer. The Issuer and Bermuda Holdings have agreed to pay all
expenses of the Exchange Offer. No dealer manager is being utilized in
connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION.
4
<PAGE>
AVAILABLE INFORMATION
Bermuda Holdings is subject to the periodic reporting and other information
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Issuer is exempt from such requirements, but summary financial
information of the Issuer will be provided in the reports filed by Bermuda
Holdings, as permitted by the rules and regulations of the Commission. Under
current law, for as long as the Senior Notes or Bermuda Holdings' Class A
Ordinary Shares, par value $5.80 per share, are listed on the New York Stock
Exchange, Inc., Bermuda Holdings will be required to file with the Commission
annual, quarterly and current financial information on Forms 10-K, 10-Q and 8-K.
Such reports and other information filed by Bermuda Holdings pursuant to the
Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 and at the Commission's regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, New York 10048, and such
material is contained on the worldwide web site maintained by the Commission at
http:\\www.sec.gov. Copies of such material may also be obtained at prescribed
rates by writing to the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, reports and
other material concerning Bermuda Holdings can be inspected at the offices of
the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
Whether or not required by the Exchange Act or the rules and regulations of
the Commission thereunder, so long as any Senior Notes are outstanding, Bermuda
Holdings has agreed to furnish to the holders of Senior Notes all financial
information that would be required to be contained in a filing with the
Commission on Form 10-K, 10-Q or 8-K if Bermuda Holdings were required to file
such Form, including a "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and, with respect to the annual financial
statements only, a report thereon by Bermuda Holdings' independent public
accountants. In addition, whether or not required by the Exchange Act or the
rules and regulations of the Commission thereunder, Bermuda Holdings will file a
copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to investors who request it in writing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Bermuda Holdings with the Commission are
incorporated into this Prospectus by reference:
(1) Bermuda Holdings' Annual Report on Form 10-K for the year ended
December 31, 1997;
(2) Bermuda Holdings' Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998; and
(3) Bermuda Holdings' Current Report on Form 8-K, dated May 28, 1998.
Any documents filed by Bermuda Holdings pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the Exchange Notes and the Guarantee offered
hereby shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
BERMUDA HOLDINGS WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO THE FOREGOING DOCUMENTS). ANY SUCH REQUEST SHOULD
BE DIRECTED TO JEAN M. WAGGETT, ESQ., TERRA NOVA (BERMUDA) HOLDINGS LTD.,
RICHMOND HOUSE, 2ND FLOOR, 12 PAR-LA-VILLE ROAD, HAMILTON HM 08, BERMUDA
(TELEPHONE: 441-292-7731)). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY __________, 1998.
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES
The Issuer is a public limited company incorporated under the laws of
England and Wales, and Bermuda Holdings is a company incorporated under the laws
of Bermuda. All of the directors and executive officers of the Issuer, all of
the executive officers of Bermuda Holdings, five of the eleven directors of
Bermuda Holdings, and the experts named herein are non-residents of the United
States, and all or a substantial portion of the assets of the Issuer, Bermuda
Holdings and such persons are located outside the United States. It may not be
possible for investors to effect service of process within the United States
upon such persons or to enforce against any of them, the Issuer or Bermuda
Holdings judgments of courts of the United States predicated upon the civil
liability provisions of the federal or state securities laws of the United
States. The Issuer and Bermuda Holdings have been advised by their respective
counsel, Clifford Chance and Conyers, Dill & Pearman, that there is doubt as to
the enforceability in the United Kingdom and in Bermuda, in original actions or
in actions for enforcement of judgments of United States courts, of civil
liabilities predicated solely upon such securities laws.
Bermuda Holdings has been informed by Conyers, Dill & Pearman that the
United States and Bermuda do not have a treaty providing for reciprocal
recognition and enforcement of judgments of U.S. courts in civil and commercial
matters and that a final judgment for the payment of money rendered by any
federal or state court in the United States based on civil liability, whether or
not predicated solely upon the U.S. federal securities laws, would, therefore,
not be automatically enforceable in Bermuda. Bermuda Holdings has also been
advised by Conyers, Dill & Pearman that a final and conclusive judgment obtained
in federal or state courts in the United States under which a sum of money is
payable as compensatory damages (i.e., not being a sum claimed by a revenue
authority for taxes or other charges of a similar nature by a governmental
authority, or in respect of a fine or penalty or multiple or punitive damages)
may be the subject of an action on a debt in the Supreme Court of Bermuda under
the common law doctrine of obligation. Such an action should be successful upon
proof that the sum of money is due and payable, without having to prove the
facts supporting the underlying judgment, as long as: (i) the court that gave
the judgment was competent to hear the action in accordance with private
international law principles as applied by the courts in Bermuda; and (ii) the
judgment was not contrary to public policy in Bermuda, was not obtained by fraud
or in proceedings contrary to the natural justice of Bermuda, and was not based
on an error in Bermuda law. A Bermuda court may impose civil liability on
Bermuda Holdings or its directors or officers in a suit brought in the Supreme
Court of Bermuda against Bermuda Holdings or such persons with respect to a
violation of U.S. federal securities laws, provided that the facts surrounding
such violation constitute or give rise to a cause of action under Bermuda law.
Bermuda Holdings and the Issuer have each appointed CT Corporation System,
New York, New York, as its agent to receive service of process in actions
brought against it, arising out of or in connection with U.S. federal or state
securities laws or out of violations of such laws, in any federal or state court
in the United States relating to the transactions covered by this Prospectus.
CURRENCY
In this Prospectus, references to "U.S. dollars," "$" or "cents" are to
U.S. currency, and references to "pounds," "sterling," "(Pounds)", "pence" or
"p" are to U.K. currency. Bermuda Holdings publishes its consolidated financial
statements in U.S. dollars, which is its functional currency.
2
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The following summary is qualified by the more detailed information and
financial statements and notes thereto appearing elsewhere in this Prospectus or
incorporated herein by reference. Unless the context requires otherwise and
except as provided below, all references in this Prospectus to the "Company"
refer to Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings"), a Bermuda
holding corporation, and all of its direct and indirect subsidiaries, including
its principal subsidiaries, the Issuer, Terra Nova Insurance Company Limited
("Terra Nova"), Terra Nova (Bermuda) Insurance Company Ltd. ("Terra Nova
(Bermuda)"), Compagnie de Reassurance d'Ile de France ("Corifrance"). Octavian
Syndicate Management Limited ("Octavian") and Terra Nova Capital Limited ("Terra
Nova Capital"), through which it conducts substantially all of its operations.
Unless otherwise noted, all financial data and ratios included herein have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP").
COMPANY OVERVIEW
OVERVIEW AND MARKETS
The Company is a specialty property, casualty, marine, aviation and auto
insurance and reinsurance company operating on a worldwide basis through
subsidiaries in the London company market and Lloyd's of London (together the
"London Market"), in the Bermuda Market, in Paris, France and through branch
offices in Toronto, Canada and Brussels, Belgium. Terra Nova, the Company's
predecessor and principal subsidiary, was established in 1969 and is believed by
management to be one of the largest London Market companies (as defined below).
The Company had gross premiums written of $338.2 million for the three months
ended March 31, 1998, and had shareholders' equity of $506.0 million at March
31, 1998.
The London Market is one of the world's largest insurance and reinsurance
marketplaces and attracts business from clients throughout the world who seek
flexible and innovative protection for a wide variety of risks. The London
Market is composed of Lloyd's and companies with underwriting offices in
proximity to Lloyd's ("London Market companies").
The Bermuda Market, comprised of both captive and independent companies, in
recent years has become one of the world's largest insurance and reinsurance
markets in which international business is written.
BUSINESS, PROFITABILITY AND FINANCIAL STRENGTH
The Company's principal lines of business consist of classes of (i) non-
marine property coverage written largely on a reinsurance basis, (ii) non-marine
casualty coverage written both on a primary and a reinsurance basis, (iii)
marine and aviation coverage written both on a primary and a reinsurance basis
and (iv) auto business written largely on a primary basis, accounting for
approximately 38.3%, 18.3%, 33.5%, and 9.9%, respectively, of the Company's
gross premiums written for 1997. Additionally, of the Company's gross premiums
written for 1997, approximately 51.0% consisted of reinsurance business and
approximately 34.5%, 33.5%, and 32.0% were attributable to clients from the
U.S., Europe and the rest of the world, respectively.
The Company and Terra Nova have a demonstrated history of profits, having
been profitable in every year of their combined 28-year existence, except for
1980 and 1992. The weighted average combined and operating ratios of the Company
were 99.4% and 74.4%, respectively, for the period from 1995 through 1997. For
the three months ended March 31, 1998, the Company had a combined and operating
ratio of 99.5% and 82.7%, respectively. The Company's income from continuing
operations before income taxes, interest expense, depreciation, amortization and
minority interests ("EBITDA") was $108.5 million for 1997 and $35.3 million for
the three months ended March 31, 1998.
At March 31, 1998, approximately 94.0% of the Company's $1.5 billion
investment portfolio consisted of fixed maturity debt securities and cash and
cash equivalents, with the balance consisting of equity securities. Of the fixed
maturity debt securities, 89.9% were rated "A" or better by Standard & Poor's
Corporation ("S&P") and Moody's Investors Service, Inc. ("Moody's"). The Company
currently has no investments in high yield fixed income securities, real estate
or mortgages.
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STRATEGY/STRATEGIC INITIATIVES
The Company seeks to enhance its record of profitable growth through its
operating and growth strategies. The key elements of its operating strategy
consist of:
. FLEXIBLE OPERATING STRUCTURE. The Company, with subsidiaries in the London
company market, Lloyd's, the Bermuda Market and the Continental European
Market, and having offices in London, Bermuda, Paris, Toronto and Brussels,
believes that it has a significant competitive advantage through its
presence in many of the principal markets where insurance and reinsurance
business is transacted. By writing business in many of the major
international markets, the Company is able to diversify the risk of its
portfolio geographically and, at the same time, take advantage of
differences in rates and deductibles throughout the world. Having developed
an expertise in writing specific classes of non-marine property, non-marine
casualty and marine businesses which may react differently to varying
market conditions, the Company may shift its mix of business to those lines
where the Company believes the potential for profitable results is greater,
while continuing to maintain a smaller presence in less profitable lines in
anticipation of market improvements.
. LOW OPERATING COSTS. Through an international brokerage system, the Company
has access not only to the London and Bermuda Markets, but also to other
international insurance and reinsurance centers. By using this variable
cost distribution system and operating through a centralized administration
organization in London, the Company is able to minimize its fixed overhead
costs and therefore better control expense levels as market conditions for
writing insurance and reinsurance fluctuate. In addition, with operations
in Bermuda, the Company is able to take advantage of Bermuda's favorable
tax regime.
. SIGNIFICANT LEVELS OF INVESTMENT INCOME. With a $1.5 billion conservatively
managed investment portfolio as of March 31, 1998, the Company has been
able to generate significant and consistent levels of investment income
that have helped to stabilize profits. Of the $1.5 billion of invested
assets at March 31, 1998, $766.5 million were held by Terra Nova and $491.6
million were held by Terra Nova (Bermuda), with the balance held by other
group companies. The impact of investment income on the Company's results
is evidenced by the weighted average operating ratio of the Company over
the last three years of 74.4%.
The key elements of the Company's growth strategy include:
. CAPITAL GROWTH. With an expected pro forma total capitalization as of March
31, 1998 of $669.2 million after giving effect to the offering of the Old
Notes and the Debt Tender (as defined herein), the Company expects to
continue to increase its business writings in selected areas and to pursue
strategic acquisitions which management believes will enhance the Company's
presence in targeted markets or provide products for the group as a whole.
. EXPECTED FURTHER PARTICIPATION IN THE OCTAVIAN SYNDICATES. In 1997 the
Company provided $293.9 million of capacity to Octavian, representing 47%
of the Octavian Syndicates, total underwriting capacity for the 1997 year
of account. This capacity provided the Company with $204.3 million of gross
written premiums for 1997. In 1998, the Company has provided $372.8 million
of capacity to Octavian, representing approximately 60% of the Octavian
Syndicates' total underwriting capacity for the 1998 year of account. Based
on the Octavian Syndicates' recent utilization of capacity, the Company
estimates that this capacity will provide the Company with gross premiums
written of between $260 and $300 million in 1998. The Company expects to
increase the capacity available to the Octavian Syndicates for the 1998
year of account. In addition to providing additional capacity to the
Octavian Syndicates, the Company may increase its involvement in Lloyd's in
the future, through acquiring the rights to manage additional syndicates or
employing additional underwriters. The number of syndicates managed by
Octavian increased to eight for the 1998 year of account.
. GROWTH IN CONTINENTAL EUROPE. On September 8, 1997, the Company acquired
Compagnie de Reassurance d'Ile de France, Corifrance, based in Paris.
Corifrance is a French reinsurance company which transacts business
internationally, although mainly outside the United States. Its premium
volume in 1997 was $24 million, of which $2.4 million was reflected in the
Company's financial statements for the year ended December 31, 1997.
RECENT DEVELOPMENTS
On May 4, 1998, William O. Bailey retired as Chairman, President and Chief
Executive Officer of the Company. On the same day, John J. Dwyer was appointed
Chairman and Nigel H.J. Rogers was appointed Chief Executive Officer of the
Company.
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RELATED TRANSACTION
On April 20, 1998, the Issuer commenced a tender offer to purchase all of its
10 3/4% Senior Notes due 2005 (the "1995 Senior Notes"). Concurrently with the
tender offer, the Issuer commenced a related consent solicitation to eliminate
substantially all of the restrictive covenants relating to the 1995 Senior
Notes. The offer to purchase the outstanding 1995 Senior Notes and the related
consent solicitation are hereafter referred to as the "Debt Tender." As of May
1, 1998, all of the outstanding 1995 Senior Notes had been tendered. At the
closing of the Debt Tender on May 18, 1998, the Issuer purchased all of the
outstanding 1995 Senior Notes.
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5
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________________________________________________________________________________
ORGANIZATION
The Company and its principal subsidiaries are currently organized as
follows:
[CHART APPEARS HERE]
________________________________________________________________________________
6
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THE EXCHANGE OFFER
The Exchange Offer......................... Up to $100.0 million aggregate
principal amount of Exchange Notes
are being offered in exchange for a
like aggregate principal amount of
Old Notes. The Issuer is making the
Exchange Offer in order to satisfy
its obligations under the
Registration Rights Agreement,
dated as of May 18, 1998, by and
among the Issuer, Bermuda Holdings
and the Initial Purchaser (the
"Registration Rights Agreement")
relating to the Old Notes. For a
description of the procedures for
tendering Old Notes, see "The
Exchange Offer--Procedures for
Tendering Old Notes."
Expiration Date............................ 5:00 p.m., New York City time, on
________, 1998 (such time on such
date being hereinafter called the
"Expiration Date") unless the
Exchange Offer is extended by the
Issuer or Bermuda Holdings (in
which case the term "Expiration
Date" shall mean the latest date
and time to which the Exchange
Offer is extended). Any waiver,
extension or termination of the
Exchange Offer will be publicly
announced by the Issuer or Bermuda
Holdings through a release to the
Dow Jones News Service and as
otherwise required by applicable
law or regulations. See "The
Exchange Offer--Terms of the
Exchange Offer; Period for
Tendering Old Notes."
Certain Conditions to the Exchange Offer... The Exchange Offer is subject to
certain conditions. The Issuer
reserves the right, subject to
applicable law, at any time and
from time to time, (i) to delay the
acceptance of the Old Notes for
exchange, (ii) to amend or
terminate the Exchange Offer if
certain specified conditions have
not been satisfied, as set forth
under "The Exchange Offer--Certain
Conditions to the Exchange Offer,"
(iii) to extend the Expiration Date
of the Exchange Offer and retain
all Old Notes tendered pursuant to
the Exchange Offer, subject,
however, to the right of holders of
Old Notes to withdraw their
tendered Old Notes, or (iv) to
amend the terms of the Exchange
Offer in any manner deemed by it to
be advantageous to the holders of
the Old Notes. See "The Exchange
Offer--Terms of the Exchange Offer;
Period for Tendering Old Notes."
Withdrawal Rights.......................... Tenders of Old Notes may be
withdrawn at any time prior to the
Expiration Date by delivering a
written notice of such withdrawal
to the Exchange Agent in conformity
with certain procedures set forth
below under "The Exchange Offer--
Withdrawal Rights."
Procedures for Tendering Old Notes......... Tendering holders of Old Notes must
complete and sign a Letter of
Transmittal in accordance with the
instructions contained herein and
therein and forward the same by
mail, facsimile or hand delivery,
together with any other required
documents, to the Exchange Agent
(as defined below) at the address
set forth herein and effect a
tender of Old Notes pursuant to the
procedures for book-entry transfers
as provided for herein by the
Expiration Date, either with a
timely confirmation of book-entry
transfer (a "Book-Entry
Confirmation") or in compliance
with the specified procedures for
guaranteed delivery of Old Notes.
Certain brokers, dealers,
commercial banks, trust companies
and other nominees may also effect
tenders by book-entry transfer.
Holders of Old Notes in the name of
a broker, dealer, commercial bank,
trust company or other nominee are
urged to contact such person
promptly if they wish to tender Old
Notes pursuant to the Exchange
Offer. See "The Exchange Offer--
Procedures for Tendering Old
Notes." Letters of Transmittal and
Book-Entry Confirmations should not
be sent to the Issuer or Bermuda
Holdings. Such documents should
only be sent to the Exchange Agent.
Questions regarding how to tender
and requests for information should
be directed to the Exchange Agent.
See "The Exchange Offer--Exchange
Agent."
Guaranteed Delivery Procedures............. Holders of Old Notes who wish to
tender their Old Notes and who
cannot deliver Book-Entry
Confirmations, a Letter of
Transmittal or any other document
required by the Letter of
Transmittal to the Exchange Agent
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7
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prior to the Expiration Date, must tender
their Old Notes according to the guaranteed
delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery
Procedures."
Resales of Exchange Notes........ The Issuer is making the Exchange Offer in
reliance on the position of the staff of the
Division Corporation Finance of the
Commission as set forth in certain no-action
letters addressed to third parties in other
transactions (including Exxon Capital
Holdings Corporation (available May 13,
1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), K-III
Communications Corporation (available May 14,
1993) and Shearman & Sterling (available July
2, 1993)). However, neither the Issuer nor
Bermuda Holdings has sought its own no-action
letter and there can be no assurance that the
staff of the Division of Corporation Finance
of the Commission would make a similar
determination with respect to the Exchange
Offer as it has in such interpretive letters
to third parties. Based on these
interpretations by the staff of the Division
of Corporation Finance, and subject to the
two immediately following sentences, the
Issuer believes that Exchange Notes issued
pursuant to this Exchange Offer in exchange
for Old Notes may be offered for resale,
resold and otherwise transferred by a holder
thereof (other than a holder who is a broker-
dealer or an "affiliate" of the Issuer or
Bermuda Holdings within the meaning of Rule
405 of the Securities Act) without further
compliance with the registration and
prospectus delivery requirements of the
Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of
such holder's business and that such holder
is not participating, and has no arrangement
or understanding with any person to
participate, in a distribution (within the
meaning of the Securities Act) of such
Exchange Notes. However, any holder of Old
Notes who is an "affiliate" of the Issuer or
Bermuda Holdings or who intends to
participate in the Exchange Offer for the
purpose of distributing the Exchange Notes,
or any broker-dealer who purchased the Old
Notes from the Issuer or Bermuda Holdings to
resell pursuant to Rule 144A or any other
available exemption under the Securities Act,
(a) will not be able to rely on the
interpretations of the staff of the Division
of Corporation Finance of the Commission set
forth in the above-mentioned interpretive
letters, (b) will not be permitted or
entitled to tender such Old Notes in the
Exchange Offer and (c) must comply with
registration and prospectus delivery
requirements of the Securities Act in
connection with any sale or other transfer of
such Old Notes unless such sale is made
pursuant to an exemption from such
requirements. In addition, as described
below, if any broker-dealer holds Old Notes
acquired for its own account as a result of
market-making or other trading activities and
exchanges such Old Notes for Exchange Notes,
then such broker-dealer must deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resales
of such Exchange Notes.
Each holder of Old Notes who wishes to
exchange Old Notes for Exchange Notes in the
Exchange Offer will be required to represent
that (i) it is not an "affiliate" of the
Issuer or Bermuda Holdings within the meaning
of Rule 405 under the Securities Act, (ii)
any Exchange Notes to be received by it are
being acquired in the ordinary course of its
business, and (iii) it has no arrangement or
understanding with any person to participate
in a distribution (within the meaning of the
Securities Act) of such Exchange Notes. Each
broker-dealer that receives Exchange Notes
for its own account pursuant to the Exchange
Offer must acknowledge that it acquired the
Old Notes for its own account as the result
of market-making activities or other trading
activities and must agree that it will
deliver a prospectus
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8
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meeting the requirements of the
Securities Act in connection with any
resale of such Exchange Notes. A broker-
dealer that acquired Old Notes in a
transaction other than as part of its
market-making or other trading
activities will not be able to
participate in the Exchange Offer. The
Letter of Transmittal states that by so
acknowledging and by delivering a
prospectus, a broker-dealer will not be
deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. Based on the position
taken by the staff of the Division of
Corporation Finance of the Commission in
the no-action letters referred to above,
the Issuer believes that broker-dealers
who acquired Old Notes for their own
accounts as a result of market-making
activities or other trading activities
("Participating Broker-Dealers") may
fulfill their prospectus delivery
requirements with respect to the
Exchange Notes received upon exchange of
such Old Notes with a prospectus meeting
the requirements of the Securities Act,
which may be the prospectus prepared for
an exchange offer so long as it contains
a description of the plan of
distribution with respect to the resale
of such Exchange Notes. Subject to
certain provisions set forth in the
Registration Rights Agreement and the
limitations described below under "The
Exchange Offer--Resale of Exchange
Notes," the Issuer and Bermuda Holdings
have agreed that this Prospectus, as it
may be amended or supplemented from time
to time, may be used by a Participating
Broker-Dealer in connection with resales
of such Exchange Notes for a period
ending 180 days after the Expiration
Date (subject to extension under certain
limited circumstances) or, if earlier,
when all such Exchange Notes have been
disposed of by such Participating
Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-
Dealer who is an "affiliate" of the
Issuer or Bermuda Holdings may not rely
on such no-action letters and must
comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any
resale transaction. See "The Exchange
Offer--Resales of Exchange Notes."
Acceptance of Old Notes for Exchange... Subject to the terms and conditions of
the Exchange Offer, including the
reservation of certain rights by the
Issuer and Bermuda Holdings, the Issuer
will accept for exchange any and all Old
Notes which are properly tendered in the
Exchange Offer, and not withdrawn, prior
to the Expiration Date. Subject to such
terms and conditions, the Exchange Notes
issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange
Offer--Acceptance of Old Notes for
Exchange."
Exchange Agent......................... The exchange agent with respect to the
Exchange Offer is The Chase Manhattan
Bank (the "Exchange Agent"). The address
and telephone and facsimile numbers of
the Exchange Agent are set forth in "The
Exchange Offer--Exchange Agent" and in
the Letter of Transmittal.
Use of Proceeds........................ Neither the Issuer nor Bermuda Holdings
will receive any cash proceeds from the
issuance of the Exchange Notes offered
hereby. See "Use of Proceeds."
Certain United States Federal Income
Tax Considerations................ Holders of Old Notes should review the
information set forth under "Certain Tax
Consequences of the Exchange Offer"
prior to tendering Old Notes in the
Exchange Offer.
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THE EXCHANGE NOTES
Securities Offered..................... Up to $100.0 million principal amount of
7% Senior Notes due 2008. The Exchange
Notes will be issued and the Old Notes
were issued under an Indenture dated as
of May 18, 1998 (the"Indenture") between
the Issuer, Bermuda Holdings and The
Chase Manhattan Bank (the "Trustee").
The Exchange Notes and any Old Notes
which remain outstanding after
consummation of the Exchange Offer will
constitute a single series of debt
securities under the Indenture and,
accordingly, will vote together as a
single class for purposes of determining
whether holders of the requisite
percentage in outstanding principal
amount thereof have taken certain
actions or exercised certain rights
under the Indenture. See "Description of
Exchange Notes--General." The terms of
the Exchange Notes are identical in all
material respects to the terms of the
Old Notes, except that (i) the offer and
sale of the Exchange Notes have been
registered under the Securities Act and
therefore the Exchange Notes are not
subject to certain restrictions on
transfer applicable to the Old Notes,
will not bear legends relating thereto
and will not be entitled to registration
rights or other rights under the
Registration Rights Agreement, and (ii)
the Exchange Notes will not provide for
any increase in the interest rate
thereof, which rights and provision will
terminate as to all of the Senior Notes
upon the consummation of the Exchange
Offer. See "Description of Old Notes"
and "Description of Exchange Notes."
Maturity Date.......................... May 15, 2008.
Interest............................... Interest on the Exchange Notes will
accrue at the rate of 7% per annum
and is payable semi-annually on
November 15 and May 15 of each year,
commencing on November 15, 1998.
Each Exchange Note will bear interest
from May 18, 1998, the issue date for
the Old Notes. Holders of the Old
Notes whose Old Notes are accepted
for exchange will not receive accrued
interest on such Old Notes and will
be deemed to have waived the right to
receive any interest on such Old
Notes accrued, from and after May 18,
1998.
Guarantee.............................. The Exchange Notes will be fully and
unconditionally guaranteed on a
senior basis by Bermuda Holdings.
See "Description of Exchange Notes--
Guarantee."
Ranking................................ The Exchange Notes and the Guarantee
will constitute unsecured senior
obligations of the Issuer and Bermuda
Holdings, respectively, and will rank
pari passu in right of payment with
all other senior indebtedness, if
any, of the Issuer and Bermuda
Holdings, respectively. Because the
Issuer and Bermuda Holdings are
holding companies, the Exchange Notes
and the Guarantee will be effectively
subordinated to all existing and
future liabilities of their
respective insurance company
subsidiaries. See "Risk
Factors--Holding Company Structure;
Dividend Restrictions."
Optional Redemption.................... The Exchange Notes are redeemable at
the option of the Issuer at any time
in whole or in part, at a redemption
price equal to the sum of (i) the
principal amount of the Exchange
Notes being redeemed, plus accrued
and unpaid interest thereon to the
redemption date, and (ii) the
Make-Whole Amount, if any. See
"Description of Exchange
Notes--Optional Redemption."
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Tax Redemption......................... The Exchange Notes are redeemable at
the option of the Issuer, under
certain circumstances, at a price
equal to 100% of the principal amount
thereof, plus accrued and unpaid
interest to the redemption date, in
the event that withholding of taxes
is required by any Relevant
Jurisdiction (as defined herein) with
respect to interest payments to
United States holders of the Exchange
Notes. See "Description of Exchange
Notes--Tax Redemption."
Listing................................ The Issuer intends to list the Exchange
Notes on the New York Stock Exchange,
Inc.
Absence of Market for the Exchange
Notes.................................. The Exchange Notes will be a new issue
of securities for which there currently
is no market and there can be no
assurance as to the liquidity of any
market that may develop for the Exchange
Notes or the ability of the holders to
sell their Exchange Notes, as the case
may be. The Issuer and Bermuda Holdings
currently do not intend to apply for
listing of the Exchange Notes on any
securities exchange other than the New
York Stock Exchange, Inc. or for
quotation through the National
Association of Securities Dealers
Automated Quotation System.
Use of Proceeds........................ Neither the Issuer nor Bermuda Holdings
will receive any cash proceeds from the
issuance of the Exchange Notes offered
hereby. The net proceeds received from
the issuance and sale of the Old Notes,
together with the available cash of the
Issuer, were used to fund the Debt
Tender. See "Use of Proceeds."
Book-Entry; Form....................... The Exchange Notes will initially be
issued as one or more global notes
without coupons in bearer form (the
"Global Note"), which will be deposited
with Chase Manhattan Bank Luxembourg
S.A., as custodian thereof (the
"Custodian"), for the benefit of The
Chase Manhattan Bank, as depositary (the
"Depositary"), pursuant to the
Depositary Agreement (as defined
herein). The Depositary will issue one
or more global receipts representing the
Exchange Notes, which will be delivered
and registered in the name of DTC or its
nominee. Beneficial interests in the
Exchange Notes will be shown on, and
transfers thereof effective only
through, the records maintained in book-
entry form by DTC and its participants.
See "Description of Exchange Notes--
General" and "Description of Depositary
Agreement--General."
CERTAIN CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES
The sale of the Old Notes was not registered under the Securities Act or
any state securities laws and therefore the Old Notes may not be offered, sold
or otherwise transferred, except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain other conditions and restrictions,
including the Issuer's, Bermuda Holdings' and the Trustee's right in certain
cases to require the delivery of opinions of counsel, certifications and other
information prior to any such transfer. Old Notes which remain outstanding after
consummation of the Exchange Offer will continue to bear a legend reflecting
such restrictions on transfer. In addition, upon consummation of the Exchange
Offer, holders of Old Notes which remain outstanding will not be entitled to any
rights to have the resale of such Old Notes registered under the Securities Act
or to any similar rights under the Registration Rights Agreement. Neither the
Issuer nor Bermuda Holdings currently intends to register under the Securities
Act the resale of any Old Notes which remain outstanding after consummation of
the Exchange Offer.
To the extent that Old Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Old Notes could be adversely
affected. In addition, although the Old Notes are eligible for trading in the
Depositary's Same-Day
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11
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Funds Settlement System, to the extent that Old Notes are tendered and accepted
in connection with the Exchange Offer, any trading market for Old Notes which
remain outstanding after the Exchange Offer could be adversely affected.
The Exchange Notes and any Old Notes which remain outstanding after
consummation of the Exchange Offer will constitute a single series of debt
securities under the Indenture and, accordingly, will vote together as a single
class for purposes of determining whether holders of the requisite percentage in
outstanding principal amount thereof have taken certain actions or exercised
certain rights under the Indenture. See "Description of Exchange Notes--
General."
The Old Notes provide that, in the event the Exchange Offer is not
consummated or a Shelf Registration Statement (as defined herein) is not
declared effective on or prior to November 18, 1998, then the annual interest
rate borne by the Old Notes shall be increased to 7.25%. If the Exchange Offer
is not consummated or a Shelf Registration Statement is not declared effective
by February 18, 1999, then the annual interest rate borne by the Old Notes shall
be increased to 7.5%. Upon consummation of the Exchange Offer or the
effectiveness of such Shelf Registration Statement, the interest rate borne by
the Old Notes will return to 7%.
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12
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus the
following should be considered carefully in evaluating an investment in the
Exchange Notes offered hereby.
HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS
The Issuer is a holding company whose primary assets are the capital stock
of Terra Nova, Octavian and Terra Nova Capital, and Bermuda Holdings is a
holding company whose primary assets are the capital stock of the Issuer and
Terra Nova (Bermuda) and a loan that has been extended to Terra Nova SAS, the
direct parent of Corifrance. Accordingly, substantially all of the Issuer's cash
flow is derived from dividends from Terra Nova and substantially all of the
Bermuda Holdings' cash flow is derived from dividends from the Issuer and Terra
Nova (Bermuda) and interest paid on the Terra Nova SAS loan. The payment of
dividends and other payments by Terra Nova and Terra Nova (Bermuda) is subject
to restrictions under U.K. law and Bermuda law, respectively.
Under U.K. company law, Terra Nova may not declare or pay a dividend except
from its distributable profits, which is its accumulated realized profits (so
far as not previously used by distribution or capitalization) less its
accumulated realized losses (so far as not previously written off in a reduction
or reorganization of capital). U.K. insurance company law and regulation require
an insurance company, such as Terra Nova, to maintain a minimum level of
solvency and provide that such a company may only pay a dividend to the extent
that the dividend would not reduce such company's net assets below its minimum
level of solvency. In addition, before Terra Nova may declare or pay any
dividend, it is required to give 14 days' advance notice to the U.K. HM Treasury
- -- Insurance Directorate Department of Trade and Industry (the "Treasury"),
which may direct that no such declaration or payment be made.
Under Bermuda insurance law, Terra Nova (Bermuda) is prohibited from
declaring or paying any dividends during any financial year if it is in breach
of its "minimum solvency margin" or "minimum liquidity ratio" or if the
declaration or payment of such dividends would cause it to fail to meet such
margin or ratio. Furthermore, if Terra Nova (Bermuda) fails to meet its minimum
solvency margin or minimum liquidity ratio on the last day of any financial
year, it will be prohibited, without the approval of the Minister of Finance of
Bermuda (the "Minister"), from declaring or paying any dividends during the next
financial year. In addition, under The Companies Act 1981, a company may not pay
a dividend or make a distribution out of contributed surplus if there are
reasonable grounds for believing that (a) the company is, or would be, after the
payment unable to pay its liabilities as they become due, or (b) the realizable
value of the company's assets would thereby be less than the aggregate of its
liabilities and its issued share capital and share premium accounts.
There can be no assurance as to the exact amount of dividend payments, if
any, which the Treasury will permit Terra Nova to make in the future or as to
what the standards for dividend payments by Terra Nova or Terra Nova (Bermuda)
will be in the future. Moreover, the surplus of each of Terra Nova and Terra
Nova (Bermuda) will be affected by the value of its respective investment
portfolio, which is sensitive to interest rate changes.
Because the Issuer and Bermuda Holdings are holding companies, the Exchange
Notes and the Guarantee are effectively subordinated to all existing and future
liabilities of their respective insurance company subsidiaries which at March
31, 1998 consisted principally of insurance liabilities of an aggregate $2.0
billion calculated in accordance with GAAP.
ABILITY TO SERVICE INTEREST AND PRINCIPAL PAYMENTS ON THE SENIOR NOTES
The Issuer expects to satisfy its interest payment obligations with respect
to the Senior Notes from dividend payments made by Terra Nova as well as capital
subscriptions and other payments from Bermuda Holdings. Similarly, Bermuda
Holdings' ability to satisfy its obligations under the Guarantee or to make
capital subscriptions and other payments to the Issuer is based on dividend
payments by the Issuer or Terra Nova (Bermuda). Neither the Issuer nor Bermuda
Holdings intends to establish a sinking fund with respect to the Senior Notes.
To the extent dividends or other monies received by the Issuer or Bermuda
Holdings are insufficient to make, directly or through the Guarantee, interest
payments on the Senior Notes and principal payments on the Senior Notes at
maturity or upon the occurrence of an Event of Default (as defined herein), the
Company anticipates that it may have to borrow additional funds or sell some of
its assets. There can be no assurance that such actions could be effected on
satisfactory terms, in a timely manner or at all, that they would enable the
Issuer or Bermuda Holdings to make any of the foregoing payments on the Senior
Notes or that any such actions would be permitted under the Indenture.
13
<PAGE>
LEVERAGE
As of March 31, 1998, after adjustment to give effect to the issuance and
sale of the Senior Notes and the Debt Tender, the Company had outstanding
indebtedness of approximately $175 million and shareholders' equity of $494.2
million.
The indenture pursuant to which the 1997 Notes were issued, and the
Indenture (collectively, the "Indentures") permit the Company to incur
additional indebtedness. Management believes that cash flow from operations,
together with other available sources of liquidity, will be adequate to permit
the Issuer to make required payments of principal and interest on its
indebtedness and to fund the working capital requirements of its operating
subsidiaries, although there can be no assurance that this will be the case. To
the extent that cash flow from operations is insufficient to satisfy the
Company's cash requirements, the Company may seek to obtain funds from
additional borrowings, sell a portion of the Company's business, investment
securities or other assets, engage in other transactions, raise additional
equity capital or acquire other businesses that would provide cash flow (in all
such cases to the extent permitted by the Indentures). There can be no assurance
that such actions could be effected on satisfactory terms, in a timely manner or
at all, that they would enable the Issuer or Bermuda Holdings to make any of the
payments due on the Senior Notes or that any such actions would be permitted
under the Indentures.
The Company's leverage could make the Company vulnerable to changes in
general economic conditions and impair the Company's ability to obtain
additional financing for working capital, acquisitions or general corporate
purposes. In addition, as noted above, Bermuda Holdings and the Issuer are
dependent on dividend payments from subsidiaries to meet their obligations,
including obligations under the Senior Notes.
CYCLICALITY OF INSURANCE AND REINSURANCE INDUSTRY; INDUSTRY DEVELOPMENTS
The property, casualty and marine insurance and reinsurance industry has a
history of being highly cyclical. Demand for reinsurance is influenced
significantly by underwriting results of primary property, casualty and marine
insurers and prevailing general economic and market conditions, all of which
affect liability retention decisions of primary insurers and reinsurance premium
rates. The supply of insurance and reinsurance is related directly to prevailing
prices and levels of surplus capacity which, in turn, fluctuate in response to
changes in rates of return on investments being realized in the property,
casualty and marine insurance and reinsurance industry.
As a result of the catastrophe losses suffered during the late 1980s and
the early 1990s and the contraction in reinsurance capacity caused by the
withdrawal of a number of the Company's competitors, property catastrophe
reinsurance rates hardened significantly and retentions increased sharply during
the period 1991 through 1993. In 1994 through 1997, property catastrophe
reinsurance rates fell from the strong levels of 1993. Management believes, in
light of its experience with the Company's renewals for 1998 business that
premium rates can be expected to decline in 1998 in the absence of a major
catastrophe event, but that rates and retention levels in the near future are
likely to remain higher than those experienced in 1992.
Premium rates for U.S. casualty insurance and reinsurance have generally
declined since 1990, primarily because of more predictable forms of coverage,
such as claims made, and the effects of lower inflationary expectations. This
has resulted in more competitive conditions which have continued in 1998.
Since the substantial rate and deductible increases for marine insurance in
the 1992 and 1993 underwriting years, prices generally stabilized in 1994 and
1995 and fell in 1996 and 1997. Management believes that increased competition
will lead generally to a further decline in rates in 1998. Increased deductibles
play an important role in reducing the number of very small claims. In the past,
this business was characterized by large volumes of very small claims, arising
from very low levels of deductibles which had remained unchanged for a number of
years, during which repair costs rose due to inflation and currency
fluctuations.
There can be no assurance that rates and/or underwriting terms and
conditions will not deteriorate further or at other times in the future as a
result of additional capital provided by recent or future market entrants or for
other reasons. Consolidations within the insurance industry may also reduce the
demand for reinsurance, which may adversely affect rates and/or underwriting
terms and conditions.
COMPETITION
The property and casualty insurance and reinsurance industry is highly
competitive. The Company competes for its business in the United States and
internationally with other Lloyd's syndicates, other London Market companies,
other
14
<PAGE>
domestic Bermuda reinsurers, domestic United States insurers and reinsurers and
other international insurers and reinsurers, many of whom are larger and have
greater financial resources than the Company. Additionally, other well-
capitalized insurers and reinsurers could start writing, or increase their
writing of, the classes of business in which the Company is primarily engaged.
Competition in the classes of business which the Company writes is based on
many factors, including the perceived overall financial strength of the insurer
or reinsurer, claims paying ability rating, premiums charged and other terms and
conditions, services provided, reputation and perceived technical ability and
experience of staff. Management of the Company believes that its principal
competitive strengths are its management and operational flexibility, its
expertise in risk assessment and underwriting skills and its relationships with
Lloyd's brokers, other leading brokers and reinsurance intermediaries.
Ratings have become an increasingly important factor in establishing the
competitive position of insurance and reinsurance companies. The Company
carries A, A and A+ claims paying ability ratings by S&P, A.M. Best and Duff &
Phelps, respectively, which is lower than those held by some of its principal
competitors. S&P and Duff & Phelps ratings range from a high "AAA" to a low
"CCC", while A.M. Best ratings range from a high "A++" to a low "C-."
Claims paying ability ratings are based upon a review of publicly available
information and communications between rating agency analysts and the insurance
company's management. Such ratings are the opinion of the rating agency giving
the rating and are not directed toward the protection of investors.
ADEQUACY OF LOSS RESERVES
The Company establishes loss reserves for the ultimate payment of all
losses and loss adjustment expenses (LAE) incurred with respect to its business.
The loss and LAE liabilities consist of two components: case reserves and
incurred but not reported (IBNR) reserves. Case reserves are estimates of future
loss payments with respect to insured events which have been reported to the
insurer. These reports may be made formally by the cedent or informally by other
means, such as evaluation of claims by attorneys. The Company determines case
reserves on a contract by contract basis. The amount reserved is the amount
expected to be ultimately paid and is not discounted or otherwise adjusted for
the time value of money. IBNR reserves are actuarially determined and reflect
(i) the estimated ultimate loss amount which will be paid by the insurer and
(ii) an estimate of possible changes in the value of those claims which have
already been reported to the insurer. The particular method of setting IBNR
reserves depends upon the class of business involved. The specific techniques
involve the use of projections and models based on the Company's or the relevant
market's experience and exposure. IBNR reserves reflect a margin for the
uncertainty involved as determined by sensitivity tests. While management
believes that the Company's reserves for losses and LAE are adequate, there can
be no assurances that the Company's ultimate losses and LAE will not deviate,
perhaps substantially, from the estimates reflected in its financial statements.
If the Company's reserves should prove to be inadequate, the Company will be
required to increase reserves, which could have a material adverse effect on the
Company's financial condition.
REGULATION
Terra Nova is a U.K. insurance company authorized by the Treasury to carry
on insurance business (including reinsurance) in the U.K. and is subject to
regulation and supervision in the U.K. by the Treasury. The Insurance Companies
Act 1982, as amended, imposes on U.K. insurance companies numerous requirements,
including capital, solvency, liquidity and management standards and auditing and
reporting requirements, and further grants to the Treasury powers to supervise,
investigate and intervene in the affairs of U.K. insurance companies. As is
often the practice of the Treasury in connection with a substantial change of
control of a U.K. insurance company, Terra Nova is currently subject to a Notice
of Requirements issued by the Secretary of State for Trade and Industry, the
predecessor to the Treasury, on May 22, 1995 (as modified by notices dated April
3 and 4, 1996) which, among other things, (i) requires 14 days' advance notice
of the declaration or payment of dividends, which declaration or payment may be
limited or prohibited by the Treasury, (ii) requires Terra Nova to give notice
and, in some instances, obtain Treasury consent, prior to entering into certain
transactions with connected persons and (iii) imposes restrictions, subject to
obtaining Treasury consent, on the type of investments which Terra Nova can
make. Each of Terra Nova Capital and Octavian are subject to regulation and
supervision by Lloyd's, including the imposition of capital, solvency and
management standards.
Terra Nova (Bermuda) is a registered Bermuda insurance company and is
subject to regulation and supervision in Bermuda. The Insurance Act 1978, as
amended, imposes on Bermuda insurance companies capital, solvency and liquidity
standards and auditing and reporting requirements.
15
<PAGE>
Neither Terra Nova nor Terra Nova (Bermuda) is registered or licensed as an
insurance company in any jurisdiction in the United States. Nevertheless, each
state of the United States regulates to an extent the sale of insurance by
foreign insurers such as Terra Nova and Terra Nova (Bermuda). The administration
of insurance laws and regulations in the United States is vested in state
agencies that have broad powers and are concerned primarily with the protection
of policyholders. The status of foreign insurance companies within the insurance
regulatory framework in the United States has been subject to increased scrutiny
by the National Association of Insurance Commissioners (the "NAIC"), state
legislatures and insurance regulators, as well as the U.S. Congress.
While it is not possible to predict the future impact of changing law or
regulation on the Company's operations, such changes could have a material
adverse effect on the Company and the insurance industry in general.
TAX MATTERS
The Company believes that neither Terra Nova nor Terra Nova (Bermuda) will
be subject to U.S. tax, other than U.S. excise tax on premiums of Terra Nova
(Bermuda) with respect to risks located in the United States and withholding tax
on certain U.S. source income, because neither engages in a trade or business in
the United States. However, since definitive identification of activities that
constitute being engaged in a U.S. trade or business is not provided by the
Internal Revenue Code (the "Code") or Treasury Regulations or court decisions,
there can be no assurance that the Internal Revenue Service (the "Service") will
not contend that Terra Nova (Bermuda) or Terra Nova is engaged in a U.S. trade
or business.
If Terra Nova (Bermuda) were considered to be engaged in a U.S. trade or
business, it would be subject to U.S. federal income tax at regular corporate
rates on income attributable to its U.S. trade or business, except to the extent
provided by the income tax treaty between the U.S. and Bermuda (the "Bermuda
Treaty"), and might also be subject to a 30% "branch profits" tax. There can be
no assurance that Terra Nova (Bermuda) is entitled, or in the future will be
entitled, to benefits under the Bermuda Treaty. However, if Terra Nova (Bermuda)
were so entitled and were considered to be engaged in a U.S. trade or business,
it would not be subject to U.S. federal income tax at regular corporate rates
except on income attributable to a U.S. permanent establishment. Terra Nova
(Bermuda) might, however, be subject to the U.S. branch profits tax if it were
engaged in a U.S. trade or business, even if it did not have a permanent
establishment in the United States. Although the Company believes that Terra
Nova (Bermuda) does not have a U.S. permanent establishment, there can be no
assurance that the Service will not contend otherwise.
If any subsidiary of UK Holdings were considered to be engaged in a U.S.
trade or business, that entity would be subject to U.S. federal income tax at
regular corporate rates on income attributable to its U.S. trade or business and
might also be subject to branch profits tax, except to the extent provided by
the income tax treaty between the U.S. and U.K. (the "U.K. Treaty"). The Company
believes that the subsidiaries of UK Holdings will be qualified residents of the
U.K. entitled to benefits under the U.K. Treaty and that, accordingly, even if
any of those entities were considered to be engaged in a U.S. trade or business,
it would be subject to U.S. federal income tax at regular corporate rates only
on income attributable to a U.S. permanent establishment and would not be
subject to the branch profits tax. Although the Company believes that none of
the subsidiaries of UK Holdings has a U.S. permanent establishment, there can be
no assurance that the Service will not contend otherwise.
The Issuer also believes that its French subsidiary, Corifrance, will
likely be entitled to the benefits of the Income Tax Convention between the
United States and France, with the result that Corifrance will not be subject to
income tax arising from the conduct of a U.S. trade or business unless such
income is effectively connected with a U.S. permanent establishment of
Corifrance. Corifrance does not believe that it maintains a permanent
establishment in the U.S.
If the Company or any of its subsidiaries were considered to be subject to
U.S. federal income tax in any of the ways described above, the Company's
results of operations could be materially adversely affected.
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
There is no existing market for the Exchange Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Exchange
Notes or the ability of the holders to sell their Exchange Notes, as the case
may be. Future trading prices of the Exchange Notes will depend on many factors
including, among other things, general economic conditions, government
legislation or regulation, prevailing interest rates, the Issuer's and Bermuda
Holdings' operating results, and the market for similar securities.
16
<PAGE>
ENFORCEMENT OF JUDGMENTS
All of the directors and executive officers of the Issuer, all of the
executive officers of Bermuda Holdings, five of the eleven directors of Bermuda
Holdings, and the experts named herein are non-residents of the United States,
and all or a substantial portion of the assets of the Issuer, Bermuda Holdings
and most such persons are located outside the United States. It may not be
possible for investors to effect service of process within the United States
upon such persons or to enforce against any of them, the Issuer or Bermuda
Holdings judgments of courts of the United States predicated upon the civil
liability provisions of the federal or state securities laws of the United
States. The Issuer and Bermuda Holdings have been advised by their respective
counsel, Clifford Chance and Conyers, Dill & Pearman, that there is doubt as to
the enforceability in the United Kingdom and in Bermuda, in original actions or
in actions for enforcement of judgments of United States courts, of civil
liabilities predicated solely upon such securities laws.
INVESTMENT PERFORMANCE
The Company's investment portfolio consists primarily of investment grade
securities with fixed maturities. The market value of the Company's investments
varies depending on economic and market conditions. Absent other factors, the
market values of fixed maturity securities are likely to decline as interest
rates rise. The Company may, from time to time, for business or regulatory
reasons, be required to sell certain of its investments at a time when their
market value is less than the cost of such investments.
17
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial information
with respect to the Company and Terra Nova, its predecessor, for the periods
indicated. This information should be read in conjunction with the Consolidated
Financial Statements of the Company and related notes thereto and "Management's
Discussion and Analysis of Results of Operations and Financial Condition" which
have been incorporated herein by reference.
In respect of Bermuda Holdings, the selected Statement of Operations Data for
the years ended December 31, 1995, 1996 and 1997 and the selected Balance Sheet
Data as of December 31, 1997 have been derived from the Company's audited
Consolidated Financial Statements incorporated herein by reference. The selected
Statement of Operations Data for the three months ended March 31, 1997 and 1998
and the selected Balance Sheet Data as of March 31, 1998 have been derived from
the Company's unaudited condensed consolidated financial statements incorporated
by reference herein. The financial information for the Company as of March 31,
1998 and for the three month periods ended March 31, 1997 and 1998 is unaudited;
however, in management's opinion, it includes all adjustments (consisting of
only normal recurring adjustments) necessary for a fair presentation of results
for such interim periods. The results of operations for the periods ended March
31, 1997 and 1998 are not necessarily indicative of the operating results for
the full year.
The Selected Statutory Data for Terra Nova for the year ended December 31,
1997 and for the three months ended March 31, 1998 have been derived from the
unaudited return made to the U.K. HM Treasury. The Selected Statutory Data for
Terra Nova (Bermuda) for the year ended December 31, 1997 has been derived from
the audited statutory financial statements of Terra Nova (Bermuda) and for the
three months ended March 31, 1998 has been derived from the unaudited financial
statements of Terra Nova (Bermuda). The respective statutory financial
information is prepared in accordance with the applicable statutory accounting
practices which differ from GAAP.
<TABLE>
<CAPTION>
TERRA NOVA COMPANY
--------------------- -------------------------------------------------------------
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Gross premiums written.................. $ 320,183 $ 359,362 $ 302,658 $ 361,010 $ 550,243 $ 227,656 $ 338,237
Net premiums written.................... 262,019 282,503 246,985 311,166 483,545 183,166 281,845
Net premiums earned..................... 229,510 250,434 251,900 278,756 419,069 78,463 134,584
Net investment income................... 46,888 51,575 74,478 78,130 85,130 19,989 22,582
Realized net capital gains on sales
of investments......................... 40,533 13,898 9,384 11,750 15,333 5,930 11,388
Total revenues.......................... 314,877 320,722 336,872 378,059 533,835 108,335 171,917
Income from continuing
operations before income taxes and
minority interests..................... 81,869 50,737 62,433 82,668 91,049 23,482 30,052
Income tax expense ..................... 27,586 16,458 16,630 17,777 17,639 5,338 5,629
Minority interest in income of
consolidated subsidiaries.............. -- -- 2,552 985 -- -- --
Income from continuing
operations............................. 54,283 34,279 43,251 63,906 73,410 18,144 24,423
Net income ............................. 51,634 27,449 43,251 63,906 73,410 18,144 24,423
Dividends on the convertible
redeemable preferred shares............ -- -- 3,700 1,088 -- -- --
Net income to common
shareholders........................... 51,634 27,449 39,551 62,818 73,410 18,144 24,423
BALANCE SHEET DATA (AT END OF PERIOD)...
Total investments and cash.............. $1,475,556 $1,247,538 $1,497,230
Total assets............................ 2,220,134 1,987,536 2,481,639
Unpaid losses and loss adjustment
expenses............................... 1,157,724 1,046,043 1,184,709
Long-term debt.......................... 175,000 100,000 175,000
Total shareholders' equity.............. 481,888 394,926 505,958
</TABLE>
(Continued on following page)
18
<PAGE>
<TABLE>
<CAPTION>
TERRA NOVA COMPANY
-------------------------- ------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1993 1994 1995 1996 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
(Continued from previous page)
SELECTED STATUTORY DATA (AT END OF PERIOD)(1)
Terra Nova--Capital and surplus................. $ 231,674
Terra Nova (Bermuda)--Capital and
surplus........................................ 260,612
OTHER DATA
EBITDA(2)........................................ 82,564 51,669 72,889 97,032 108,508
Adjusted EBITDA(3)............................... 42,031 37,771 63,505 85,282 93,175
Loss and loss adjustment expense ratio(4)........ 71.24% 76.53% 71.10% 64.00% 67.41%
Underwriting expense ratio(5).................... 29.15 30.25 32.71 33.20 30.81
-------- -------- -------- -------- ----------
Combined ratio(6)................................ 100.39% 106.78% 103.81% 97.20% 98.22%
======== ======== ======== ======== ==========
Operating ratio(7)............................... 79.96% 86.19% 74.24% 69.13% 77.91%
======== ======== ======== ======== ==========
<CAPTION>
----------------------
THREE MONTHS
ENDED MARCH 31,
----------------------
1997 1998
<S> <C> <C>
(Continued from previous page)
SELECTED STATUTORY DATA (AT END OF PERIOD)(1)
Terra Nova--Capital and surplus................. $ 237,446
Terra Nova (Bermuda)--Capital and
surplus........................................ 263,567
OTHER DATA
EBITDA(2)........................................ 27,966 35,262
Adjusted EBITDA(3)............................... 22,036 23,874
Loss and loss adjustment expense ratio(4)........ 65.34% 70.74%
Underwriting expense ratio(5).................... 33.92 28.76
-------- --------
Combined ratio(6)................................ 99.26% 99.50%
======== ========
Operating ratio(7)............................... 73.78% 82.72%
======== ========
</TABLE>
(1) Capital and surplus under U.K. and Bermuda law, respectively.
(2) EBITDA consists of earnings before interest, taxes, minority interest,
depreciation and amortization. EBITDA is presented here not as a
measure of operating results, but rather as a measure of the Company's
cash flow and debt service ability, and should not be considered as an
alternative to net earnings and cash flows determined in accordance
with GAAP. Because the Company's ability to obtain dividends from its
insurance subsidiaries may be subject to certain restrictions, EBITDA
is not necessarily indicative of the Company's ability to service its
indebtedness.
(3) Adjusted EBITDA is comprised of EBITDA excluding realized gains or
losses on sales of investments.
(4) Loss and loss adjustment expense ratio represents the sum of losses
and loss adjustment expenses as a percentage of net premiums earned.
(5) Underwriting expense ratio represents underwriting expenses as a
percentage of net premiums earned.
(6) Combined ratio represents the sum of the loss and loss adjustment
expense ratio and underwriting expense ratio.
(7) Operating ratio represents the combined ratio less the ratio of net
investment income to net premiums earned.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges
for Bermuda Holdings and its consolidated subsidiaries for each of the last
five years.
<TABLE>
<CAPTION>
TERRA NOVA COMPANY
--------------------------------------------------------------------------
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
NM NM 7.07 7.64 7.25 7.44 7.75
</TABLE>
In determining the ratio of earnings to fixed charges, earnings are defined
as earnings from continuing operations before income taxes and fixed charges.
Fixed charges consist of the total of interest on all indebtedness, amortization
of deferred debt issuance costs and one-third of operating lease rental expense
deemed representative of the interest factor. The ratio of earnings to fixed
charges has not been adjusted to reflect minority interests because the shares
of capital stock which comprise such minority interests are not entitled to
dividends until debt service payments on the 1997 Senior Notes and the Senior
Notes have been made. Terra Nova had no indebtedness through December 21, 1994,
the date of its acquisition by Bermuda Holdings.
19
<PAGE>
USE OF PROCEEDS
Neither the Issuer nor Bermuda Holdings will receive any cash proceeds from
the issuance of the Exchange Notes offered hereby. The net proceeds received
from the issuance and sale of the Old Notes, together with available cash of the
Issuer, were used to fund the Debt Tender.
CAPITALIZATION
The table below summarizes the capitalization of the Company as of March
31, 1998 and as adjusted for the offering of the Senior Notes and the Debt
Tender, including the estimated costs of $11.8 million, net of tax, relating to
the Debt Tender.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
----------------------
ACTUAL AS ADJUSTED
<S> <C> <C>
(DOLLARS IN MILLIONS)
Senior Notes.................................. $ 0.0 $100.0
1995 Senior Notes............................. 100.0 0.0
1997 Senior Notes............................. 75.0 75.0
Stockholders' Equity:
Common Stock............................... 150.5 150.5
Stock Held in Trust........................ (9.5) (9.5)
Deferred equity compensation............... 4.0 4.0
Additional paid-in capital................. 111.7 111.7
Retained earnings.......................... 193.0 181.2
Accumulated other comprehensive income/(1)/ 56.3 56.3
------ ------
Total Stockholders' Equity.................... 506.0 494.2
------ ------
Total Capitalization.......................... $681.0 $669.2
====== ======
</TABLE>
________________
(1) Following the implementation of SFAS No. 130 "Reporting Comprehensive
Income," accumulated other comprehensive income includes unrealized
appreciation of investments and cumulative translation adjustments,
net of tax.
20
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Old Notes were and the Exchange Notes will be issued pursuant to an
Indenture (the "Indenture"), dated as of May 18, 1998, among the Issuer, Bermuda
Holdings and The Chase Manhattan Bank, as trustee (the "Trustee"). The Indenture
has been filed as an exhibit to the registration statement (the "Registration
Statement") of which this Prospectus forms a part. The Indenture will be
qualified by the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act") upon the effectiveness of the Registration Statement. The terms of the
Exchange Notes will include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act. The Exchange Notes are
subject to all such terms, and holders of Exchange Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture does not purport to be complete
and is qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. The following description of
the terms of the Exchange Notes and the guarantee thereof by Bermuda Holdings
pursuant to the Indenture or pursuant to guarantees endorsed on the Exchange
Notes (both forms of guarantee are hereinafter referred to collectively as the
"Guarantee") sets forth certain terms and provisions of the Exchange Notes and
the Guarantee. The definitions of certain general terms used in the following
summary are set forth below under "--Certain Definitions."
The Exchange Notes will rank senior in right of payment to all subordinated
indebtedness of the Issuer and pari passu in right of payment with all
indebtedness of the Issuer not expressly subordinated or secured. The Exchange
Notes will be fully and unconditionally guaranteed on a senior basis by Bermuda
Holdings, and the obligations of Bermuda Holdings under the Guarantee will rank
senior in right of payment to all subordinated indebtedness of Bermuda Holdings
and pari passu in right of payment with all indebtedness of Bermuda Holdings not
expressly subordinated or secured.
The Exchange Notes and the Old Notes are sometimes referred to as,
collectively, the "Senior Notes" and, individually, a "Senior Note."
The Old Notes and the Exchange Notes will constitute a single series of
debt securities under the Indenture. If the Exchange Offer is consummated,
holders of Old Notes who do not exchange their Old Notes for Exchange Notes will
vote together with the holders of Exchange Notes for all relevant purposes under
the Indenture. In that regard, the Indenture requires that certain actions by
the holders thereunder (including acceleration following an "Event of Default")
must be taken, and certain rights must be exercised, by specified minimum
percentages of the aggregate principal amount of the outstanding debt
securities. In determining whether holders of the requisite percentage and
principal amount have given any notice, consent or waiver or taken any other
action permitted under the Indenture, any Old Notes which remain outstanding
after the Exchange Offer will be aggregated with the Exchange Notes, and the
holders of such Old Notes and Exchange Notes will vote together as a single
series for all such purposes. Accordingly, all references herein to specified
percentages in aggregate principal amount of the outstanding Senior Notes shall
be deemed to mean, at any time after the Exchange Offer is consummated, such
percentage in aggregate principal amount of the Old Notes and Exchange Notes
then outstanding.
The Old Notes were issued and the Exchange Notes will initially be issued
as one or more Global Notes, which Exchange Notes will be deposited with the
Custodian, as custodian thereof for the Depositary, pursuant to the Deposit and
Custody Agreement, dated as of May 18, 1998 (the "Depositary Agreement"), among
the Issuer, Bermuda Holdings, the Custodian and the Depositary. For a
description of the Depositary Agreement, see "Description of Depositary
Agreement." The Depositary will issue one or more Global Receipts representing
the Exchange Notes, each of which the Depositary will deliver to and register in
the name of DTC or its nominee. Unless and until all of the beneficial interests
in the Global Notes ("Book-Entry Interests") are exchanged for Definitive Senior
Notes (as defined herein), the depositary interest to be held by DTC may not be
transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another nominee of DTC or by DTC or any such nominee to a successor of
DTC or a nominee of such successor.
The Issuer intends to list the Exchange Notes on the New York Stock
Exchange, Inc.
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GUARANTEE
Bermuda Holdings will fully and unconditionally guarantee on a senior basis
to each holder of an Exchange Note the due and punctual payment of the principal
of and any premium and interest on such Exchange Note (and any Additional
Amounts (as defined herein) payable by the Issuer or Bermuda Holdings in respect
thereof) when and as the same shall become due and payable, whether at stated
maturity, by declaration of acceleration, call for redemption or otherwise, in
accordance with the terms of the Exchange Notes and the Indenture. Bermuda
Holdings' obligations under the Guarantee will be as if it were a principal
debtor and not merely a surety, and will be absolute and unconditional,
irrespective of, and will be unaffected by, any invalidity, irregularity or
unenforceability of any Exchange Note or the Indenture, any failure to enforce
the provisions of any Exchange Note or the Indenture, any waiver, modification
or indulgence granted to the Issuer with respect thereto, by the holder of any
Exchange Note or the Trustee, or any other circumstances which may otherwise
constitute a legal or equitable discharge of a surety or guarantor, provided,
however, that, notwithstanding the foregoing, no such waiver, modification or
indulgence shall, without the consent of Bermuda Holdings, increase the
principal amount of an Exchange Note or the interest rate thereon or increase
any premium payable upon redemption thereof.
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes are limited in an aggregate principal amount to $100.0
million. The Senior Notes will mature on May 15, 2008. Interest on the Senior
Notes accrues at the rate of 7% per annum and is payable semi-annually in
arrears in cash on each November 15 and May 15, commencing November 15, 1998
(each, an "Interest Payment Date"), to holders of record on the immediately
preceding November 1 and May 1, respectively. Each Exchange Note will bear
interest from May 18, 1998, the issue date of the Old Notes. Holders of the Old
Notes whose Old Notes are accepted for exchange will not receive any accrued
interest on such Old Notes, and will be deemed to have waived the right to
receive any such accrued interest. Interest is to be computed on the basis of a
360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
The Issuer shall have the right to redeem the Senior Notes, in whole or in
part, at any time and from time to time, subject to the receipt of any consent
required under the terms of any Indebtedness of the Issuer which may be
outstanding from time to time, upon not less than 30 nor more than 60 days
notice, at a redemption price equal to the sum of (i) the principal amount of
the Senior Notes being redeemed, plus accrued and unpaid interest thereon to the
redemption date, and (ii) the Make-Whole Amount, if any, with respect to such
Senior Notes.
"Make-Whole Amount" means, in connection with any optional redemption of
any Senior Notes, the excess, if any, of (i) the sum, as determined by a
Quotation Agent (as defined herein) of the present values of the principal
amount of such Senior Notes, together with scheduled payments of interest from
the redemption date to the Stated Maturity of the Senior Notes, in each case
discounted to the redemption date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined herein) over (ii) 100% of the principal amount of the Senior Notes to be
redeemed.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date, calculated on the third
Business Day preceding the redemption date, plus in each case .20%.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term from the redemption date to the Stated Maturity Date of the Senior Notes
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Senior Notes.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Issuer. "Reference Treasury Dealer" means: (i) Donaldson, Lufkin & Jenrette
Securities Corporation and its respective successors; provided, however, that if
the foregoing shall cease to be a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"), the Issuer shall substitute
therefor another Primary Treasury Dealer; and (ii) any other Primary Treasury
Dealer selected by the Indenture Trustee after consultation with the Company.
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"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Quotation Agent obtains fewer than three such Reference Treasury
Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Quotation Agent, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Indenture Trustee by such Quotation Agent at 5:00 p.m., New York
City time, on the third Business Day preceding such redemption date.
"Additional Amounts" means such additional amounts as may be necessary in
order that the amount of distributions then due and payable by the Issuer on the
outstanding Senior Notes shall not be reduced as a result of any additional
taxes, duties or other governmental charges to which the Issuer has become
subject as a result of an event described in "--Tax Redemption."
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Senior Notes to be redeemed
at its registered address. Unless the Issuer defaults in payment of the
redemption price, on and after the redemption date interest ceases to accrue on
such Senior Notes called for redemption.
If the Issuer is required to pay any additional taxes, duties or other
governmental charges as a result of an event described in "--Tax Redemption,"
the Issuer will pay on the Senior Notes the Additional Amounts.
TAX REDEMPTION
The Senior Notes may also be redeemed at the option of the Issuer, in whole
but not in part, upon not less than 30 nor more than 60 days' notice given as
provided in the Indenture, at any time at a redemption price equal to 100% of
the principal amount thereof, together with accrued and unpaid interest to the
date fixed for redemption if (a) the Issuer is required to issue Definitive
Senior Notes (other than upon the request of a holder of Book-Entry Interests
following an Event of Default) after using all reasonable efforts to avoid
having to issue such Definitive Senior Notes and the Issuer is or would be so
required in the absence of any applicable tax treaty on the next succeeding
Interest Payment Date to pay Additional Amounts with respect to any of the
Senior Notes as described under "--Payment of Additional Amounts" or (b) the
Issuer or Bermuda Holdings is or would be so required in the absence of any
applicable tax treaty on the next succeeding Interest Payment Date to pay
Additional Amounts with respect to the Senior Notes as described under "--
Payment of Additional Amounts," and, in either case, the payment of such
Additional Amounts cannot be avoided by the use of any reasonable measures
available to the Issuer.
The Issuer or Bermuda Holdings will also pay, or make available for
payment, to holders of Senior Notes on the redemption date any Additional
Amounts (as described, but subject to the exceptions referred to, under "--
Payment of Additional Amounts") resulting from the payment of such redemption
price.
SELECTION AND NOTICE
For information with respect to the redemption of Book-Entry Interests, see
"Description of Depositary Agreement--Redemption or Repurchase." With respect to
any outstanding Definitive Senior Notes, if less than all of the definitive
registered Senior Notes (the "Definitive Senior Notes") are to be redeemed at
any time, selection of Definitive Senior Notes for redemption will be made by
the Trustee on a pro rata basis, by lot or by such other method as the Trustee
deems fair and appropriate and in compliance with the requirements of such
principal national securities exchange, if any, on which the Senior Notes are
listed or, if the Senior Notes are not so listed, on a pro rata basis, by lot or
by such other method as the Trustee deems fair and appropriate; provided that no
Definitive Senior Notes with a principal amount of $1,000 or less shall be
redeemed in part. With respect to any Definitive Senior Notes, notice of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of Definitive Senior Notes to be
redeemed at its registered address. If any Definitive Senior Note is to be
redeemed in part only, the notice of redemption that relates to such Definitive
Senior Note shall state the portion of the principal amount thereof to
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be redeemed. A new Definitive Senior Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Definitive Senior Note. On and after the redemption
date, interest will cease to accrue on all Senior Notes or portions thereof
called for redemption. The Issuer or Bermuda Holdings will comply with the
Exchange Act and the rules and regulations of the Commission thereunder to the
extent applicable to any such redemption.
LIENS
The Indenture provides that Bermuda Holdings will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien securing Indebtedness (other than Permitted Liens)
on any property or asset now owned or hereafter acquired, or on any income or
profits therefrom or assign or convey any right to receive income therefrom,
unless all payments due under the Indenture and the Senior Notes are secured on
an equal and ratable basis with (or prior to) the obligations so secured until
such time as such obligations are no longer secured by a Lien.
REPORTS
Whether or not required by the Exchange Act, so long as any Senior Notes are
outstanding, Bermuda Holdings will furnish to the holders of Senior Notes all
financial information that would be required to be contained in a filing with
the Commission on Form 10-K, 10-Q or 8-K if Bermuda Holdings were required to
file such form, including a "Management's Discussion and Analysis of Results of
Operations and Financial Condition," and, with respect to the annual financial
statements only, a report thereon by Bermuda Holdings' independent public
accountants. In addition, whether or not required by the Exchange Act, Bermuda
Holdings will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to investors who request it in
writing. See "Available Information."
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that after the Issue Date, Bermuda Holdings will not,
in any transaction, consolidate with or merge with or into any other Person or,
directly or indirectly, sell, or otherwise dispose of all or substantially all
of its assets in one or more related transactions to any Person or group of
affiliated Persons unless, at the time and after giving effect thereto:
(i)(A) Bermuda Holdings shall be the continuing corporation, or (B)
the Person (if other than Bermuda Holdings) formed by such consolidation,
or into which Bermuda Holdings is merged, or the Person that acquires by
sale or other disposition the assets of Bermuda Holdings, substantially as
an entirety (the "Surviving Entity"), is a corporation duly organized and
validly existing under the laws of the United States, the United Kingdom,
Bermuda, the Republic of Ireland, Barbados, the Channel Islands, the Cayman
Islands or any other jurisdiction that is not materially adverse to the
holders of the Senior Notes and shall, in the case of clause (B), expressly
assume, by supplemental indenture, executed and delivered to the Trustee,
in form reasonably satisfactory to the Trustee, all the obligations of
Bermuda Holdings under the Guarantee and the Indenture;
(ii) immediately before and after such transaction, giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such transaction on a pro
forma basis, the Consolidated Net Worth (after giving pro forma effect to
such transaction but not including the effect of any purchase accounting
adjustments or the accrual of deferred tax liabilities resulting from the
transaction) of Bermuda Holdings (or the Surviving Entity if Bermuda
Holdings is not the continuing obligor with respect to the Guarantee under
the Indenture) is at least equal to the Consolidated Net Worth of Bermuda
Holdings immediately before such transaction;
(iv) if any of the property or assets of Bermuda Holdings would
thereupon become subject to any Lien, the outstanding Senior Notes shall be
secured equally and ratably with (or prior to) the obligation or liability
secured by such Lien, unless Bermuda Holdings could create such Lien
without equally and ratably securing the Senior Notes; and
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In connection with any consolidation, merger, transfer or lease contemplated
hereby, Bermuda Holdings shall deliver to the Trustee an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger,
transfer or lease and the supplemental indenture in respect thereto comply with
the provisions described herein and that all conditions precedent provided for
in the Indenture relating to such transaction have been complied with.
Upon any consolidation or merger or any sale, assignment, transfer, lease or
conveyance or other disposition of all or substantially all of the assets of
Bermuda Holdings in accordance with the provisions described in the second
preceding paragraph, the successor Person formed by such consolidation or into
which Bermuda Holdings is merged or to which such sale, assignment, conveyance,
transfer, lease or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of Bermuda Holdings
under the Indenture with the same effect as if such successor Person had been
named as Bermuda Holdings therein. When a successor assumes all the obligations
of its predecessor under the Indenture and the Senior Notes, the predecessor
will be released from those obligations; provided that, in the case of a
transfer by lease, the predecessor corporation shall not be released from the
payment of principal and interest on the Senior Notes.
PAYMENT OF ADDITIONAL AMOUNTS
All payments on the Senior Notes, and all payments pursuant to any Guarantee,
will be made without deduction or withholding, for or on account of any and all
present and future taxes, duties, assessments, or governmental charges of
whatever nature unless the deduction or withholding of such taxes, duties,
assessments or governmental charges is then required by law. If any deduction or
withholding for or on account of any present or future taxes, assessments or
other governmental charges of the U.K., Bermuda or any relevant jurisdiction or
any political subdivision or taxing authority thereof or therein (the "Relevant
Jurisdiction") shall at any time be required in respect of any amounts to be
paid under the Senior Notes or under the Guarantee, the Issuer or Bermuda
Holdings, as applicable, will pay or cause to be paid such additional amounts
("Additional Amounts") as may be necessary in order that the net amounts
received by a holder of a Senior Note after such deduction or withholding shall
be not less than the amounts specified in such Senior Note to which such holder
is entitled; provided, however, that the Issuer or Bermuda Holdings, as
applicable, shall not be required to make any payment of Additional Amounts for
or on account of:
(a) any tax, assessment or other governmental charge which would not
have been imposed but for (i) the existence of any present or former
connection between such holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over, such
holder, if such holder is an estate, nominee, trust, partnership or
corporation), otherwise than merely by the holding of a Senior Note or the
receipt of amounts payable in respect of such Senior Notes, and any
Relevant Jurisdiction or such holder being subject to the jurisdiction of
any Relevant Jurisdiction, including, without limitation, such holder (or
such fiduciary, settlor, beneficiary, member, shareholder or possessor)
being or having been a citizen or resident thereof or being or having been
present or engaged in trade or business therein or having or having had a
permanent establishment therein or (ii) the presentation of the Senior Note
(where presentation is required) for payment on a date more than 30 days
after the date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs later, except
to the extent that the holder would have been entitled to Additional
Amounts had the Senior Notes been presented on the last day of such period
of 30 days;
(b) any tax, assessment, or other governmental charge that is imposed
or withheld by reason of the failure to comply by the holder of the Global
Note or, if different, the beneficial owner of the interest payable on the
Global Note, with a timely request of the Issuer addressed to such holder
or beneficial owner to provide information, documents or other evidence
concerning the nationality, residence, identity or connection with the
taxing jurisdiction of such holder or beneficial owner which is required or
imposed by a statute, treaty, regulation or administrative practice of the
taxing jurisdiction as a precondition to exemption from all or part of such
tax, assessment or governmental charge;
(c) payments in respect of Definitive Senior Notes issued at the
request of the holder (including on or after the occurrence of an Event of
Default); or
(d) any combination of items (a), (b) and (c) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any interest on, any Senior Note to any holder who is a
fiduciary or partnership or other than the sole beneficial owner of such payment
to the extent that a beneficiary or settlor with respect to such fiduciary or
member of such partnership or beneficial owner would not have
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been entitled to any Additional Amounts had such beneficiary, settlor, member or
beneficial owner been the holder of such Senior Note.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default (whatever the reason for such Event of Default and whether or not it
shall be voluntary or involuntary or be effected by the operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) default in the payment of interest on any Senior Note when the same
becomes due and payable and the continuance of such default for a period of
30 days; or
(ii) default in the payment of the principal of (or premium, if any, on)
any Senior Note at its Maturity; or
(iii) default in the performance, or breach, of any covenant or agreement
of the Issuer or Bermuda Holdings under the Indenture (other than the
obligations specified in (i), (ii) and (viii)), and continuance of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuer or Bermuda Holdings, as the case
may be, by the Trustee or to the Issuer or Bermuda Holdings, as the case may
be, and the Trustee by the holders of at least 25% in principal amount of the
outstanding Senior Notes a written notice specifying such default or breach
and stating that such notice is a "Notice of Default"; or
(iv)(A) an event of default shall have occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing any issue of
Indebtedness of Bermuda Holdings or any Restricted Subsidiary for money
borrowed (or the payment of which is guaranteed by Bermuda Holdings or any of
its Restricted Subsidiaries), which issue has an aggregate outstanding
principal amount of not less than $10.0 million, and such default shall have
resulted in such Indebtedness becoming, whether by declaration or otherwise,
due and payable prior to the date on which it would otherwise become due and
payable, or (B) a default in any payment when due at final Stated Maturity of
any such Indebtedness outstanding in an aggregate principal amount of not
less than $10.0 million and, in each case, 10 Business Days shall have
elapsed after such event during which period such event shall not have been
cured or rescinded or such Indebtedness shall not have been satisfied; or
(v) final judgments or orders are rendered against Bermuda Holdings, the
Issuer or any Restricted Subsidiary by a court or regulatory agency of
competent jurisdiction which require the payment in money, either
individually or in an aggregate amount, that is more than $10.0 million
(other than any judgment to the extent a reputable non-affiliated insurance
company has accepted liability) and such judgment or order shall not be
discharged and either (A) any creditor shall have commenced an enforcement
proceeding upon such judgment or order, which enforcement proceeding shall
have remained unstayed for a period of 10 days, or (B) a period of 60 days
during which a stay of enforcement shall not be in effect shall have elapsed
following the date on which any period for appeal has expired; or
(vi) a decree or order is entered (A) for relief in respect of the Issuer,
Bermuda Holdings or any Principal Insurance Subsidiary in an involuntary case
or other bankruptcy proceeding under applicable law, or (B) adjudging the
Issuer, Bermuda Holdings or any Principal Insurance Subsidiary a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment or composition
of or in respect of the Issuer, Bermuda Holdings or any Principal Insurance
Subsidiary under applicable law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary or of any
substantial part of any of their properties, or ordering the winding up or
liquidation of any of their affairs, and any such decree or order remains
unstayed and in effect for a period of 60 consecutive days; or
(vii) the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary
institutes a voluntary case or proceeding under applicable bankruptcy,
insolvency, reorganization or similar law, or any other case or proceedings
to be adjudicated a bankrupt or insolvent, or the Issuer, Bermuda Holdings or
any Principal Insurance Subsidiary files a petition or answer or consent
seeking reorganization or relief under applicable bankruptcy, insolvency,
reorganization or similar law, or consents to the filing of any such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
any of the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary or
of any substantial part of its property, or makes an assignment for the
benefit of creditors, or admits in writing its inability to pay its debts
generally as they become due or takes corporate action in furtherance of any
such action; or
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(viii) default in the performance, or breach, of the provisions described
under "--Merger, Consolidation or Sale of Assets."
If any Event of Default (other than an Event of Default described in (vi) or
(vii) above) occurs and is continuing, the Trustee or the holders of at least
25% in principal amount of the outstanding Senior Notes, by written notice to
the Issuer (and to the Trustee, if such notice is given by the holders), may,
and the Trustee at the request of such holders shall, declare all unpaid
principal of, premium, if any, and accrued interest on all the Senior Notes to
be due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default described in (vi) or (vii) above, all outstanding Senior Notes
will become due and payable without further action or notice. Holders of the
Senior Notes may not enforce the Indenture or the Senior Notes except as
provided in the Indenture. Subject to certain limitations, holders of a majority
in principal amount of the then outstanding Senior Notes may direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from holders of
the Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers (as defined in the Indenture) of the
Trustee determine in good faith that withholding such notice is in the interest
of the holders.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of at
least a majority in aggregate principal amount of the outstanding Senior Notes,
by written notice to the Issuer and the Trustee, may annul such declaration if:
(i) the Issuer or Bermuda Holdings has paid or deposited with the Trustee a sum
sufficient to pay (A) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (B) all overdue interest on all Senior
Notes, (C) the principal of and premium, if any, on any Senior Notes which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Senior Notes and (D) to the extent that payment
of such interest is lawful, interest upon overdue interest at the rate borne by
the Senior Notes; and (ii) all Events of Default, other than the non-payment of
principal of the Senior Notes which have become due solely by such declaration
or acceleration, have been waived as provided in the Indenture or cured. No such
rescission shall affect any subsequent default or impair any right consequent
thereon.
The holders of a majority in aggregate principal amount of the outstanding
Senior Notes by notice to the Trustee may on the behalf of the holders of all of
the Senior Notes waive any existing or past Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, or premium, if any, on the
Senior Notes or in respect of covenants or provisions in the Indenture which
cannot be modified or amended without the consent of the holders of a greater
percentage of the principal amount of, or all of, the outstanding Senior Notes.
The Issuer and Bermuda Holdings are required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and the Issuer is
required, upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee or stockholder of the Issuer, Bermuda Holdings
or any Subsidiary of Bermuda Holdings, as such, shall have any liability for any
obligations of the Issuer or Bermuda Holdings under the Senior Notes, the
Guarantee or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of the Senior Notes
by accepting a Senior Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Senior Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
DEFEASANCE OR COVENANT DEFEASANCE
Under certain conditions, each of the Issuer or Bermuda Holdings may, at its
option and at any time, elect to have the obligations of the Issuer and Bermuda
Holdings discharged with respect to the outstanding Senior Notes and the
Guarantee ("defeasance"). Such defeasance means that the Issuer and Bermuda
Holdings shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Senior Notes and the Guarantee, except for: (i)
the rights of holders of outstanding Senior Notes to receive payments in respect
of the principal of, premium, if any, and
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interest on such Senior Notes when such payments are due, or on the redemption
date, as the case may be; (ii) the Issuer's obligations with respect to the
Senior Notes concerning issuing temporary Senior Notes, registration of Senior
Notes, mutilated, destroyed, lost or stolen Senior Notes and the maintenance of
an office or agency for payment and money for security payments held in trust;
(iii) the rights, powers, trust, duties and immunities of the Trustee, and the
Issuer's and Bermuda Holdings' obligations in connection therewith; (iv) the
defeasance provisions of the Indenture; and (v) the obligations of the Issuer
and Bermuda Holdings to pay any Additional Amounts under the Indenture. In
addition, under certain conditions, the Issuer may, at its option and at any
time, elect to have the obligations of Bermuda Holdings and its Subsidiaries
released with respect to certain covenants that are described in the Indenture
("covenant defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the Senior Notes. In the event covenant defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "--Events of Default and Remedies" will no
longer constitute an Event of Default with respect to the Senior Notes.
In order to exercise either defeasance or covenant defeasance: (i) the Issuer
or Bermuda Holdings must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the Senior Notes, cash in U.S. dollars, U.S.
Government Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Senior Notes; (ii) in the case of defeasance, the Issuer shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that: (a) the Issuer has received from, or
there has been published by, the Internal Revenue Service a ruling; or (b) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the holders of the outstanding Senior
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such defeasance had not occurred; (iii) in the case of covenant
defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee confirming that the
holders of the outstanding Senior Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such covenant defeasance and will
be subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such covenant defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period ending
on the 91st day after the date of deposit; (v) such defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a default
under the Indenture, or any other material agreement or instrument to which
Bermuda Holdings is a party or by which Bermuda Holdings is bound; (vi) the
Issuer shall have delivered to the Trustee an opinion of counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; (vii) the Issuer shall
have delivered to the Trustee an officers' certificate stating that the deposit
was not made by the Issuer or Bermuda Holdings with the intent of preferring the
holders of Senior Notes over the other creditors of the Issuer or Bermuda
Holdings or with the intent of defeating, hindering, delaying or defrauding
creditors of the Issuer or Bermuda Holdings or others; and (viii) the Issuer
shall have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent provided for relating to
either the defeasance or the covenant defeasance, as the case may be, have been
complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
The Indenture provides that the consent of holders of a majority in
outstanding aggregate principal amount of Senior Notes will be required with
respect to amendments which do not affect the payment terms of the Senior Notes
or the amount of Senior Notes whose holders must consent to any amendment or the
relative ranking of the Senior Notes. The latter amendments may only be made
with the consent of each such Senior Note holder.
With the consent of the holders of not less than a majority in principal
amount of the outstanding Senior Notes (including consents obtained in
connection with a tender offer or exchange offer for the Senior Notes), the
Issuer and Bermuda Holdings, each when authorized by a board resolution, and the
Trustee may enter into one or more supplemental indentures for the purpose of
adding any provisions to or changing in any manner the rights of the holders
under the Indenture or of waiving or modifying in any manner the rights of the
holders under the Indenture; provided, however, that no such supplemental
indenture, amendment or waiver shall without the consent of the holder of each
outstanding Senior Note affected thereby: (a) change the Stated Maturity or the
principal of, or any installment of interest on, or change the obligation of the
Issuer or Bermuda Holdings to pay any Additional Amount with respect to, any
Senior Note
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or reduce the principal amount thereof or the rate of interest thereon or any
provisions relating to the redemption price of the Senior Notes or the periods
during which redemption may be effected, or change the coin or currency in which
the principal of any Senior Note or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment after the Stated Maturity thereof (or, in the case of redemption, on or
after the redemption date); or (b) reduce the percentage in principal amount of
the outstanding Senior Notes, the consent of whose holders is required for any
such supplemental indenture or the consent of whose holders is required for any
waiver (of compliance with certain provisions of the Indenture or certain
defaults and their consequences) provided for in the Indenture; or (c) modify
any of the provisions of the Indenture relating to amendments or waivers of
payment or covenant defaults, except to increase any such percentage or to
provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the holder of each Senior Note affected thereby.
Notwithstanding the foregoing, without the consent of any holder of Senior
Notes, the Issuer, Bermuda Holdings and the Trustee may amend or supplement the
Indenture or the Senior Notes: (i) to cure any ambiguity or to correct any
provision in the Indenture which may be defective or inconsistent with any other
provision therein; or (ii) to provide for Definitive Senior Notes in addition to
or in place of Book-Entry Interests; or (iii) to provide for the assumption of
Bermuda Holdings' obligations to holders of the Senior Notes in the case of a
merger or consolidation; or (iv) to secure the Senior Notes pursuant to the
requirements of the provisions described under "--Merger, Consolidation or Sale
of Assets" or "--Liens," or otherwise; or (v) to comply with the requirements of
the Commission in order to maintain the qualification of the Indenture under the
Trust Indenture Act, as contemplated by the Indenture or otherwise; or (vi) to
evidence and provide the acceptance of the appointment of a successor Trustee
thereunder; or (vii) to make any other change that would provide any additional
rights or benefits to the holders or that does not adversely affect the legal
rights of any holder under the Indenture or the Senior Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuer or Bermuda Holdings, to obtain payment
of claims in certain cases or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee is permitted to engage
in other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The holders of a majority in principal amount of the outstanding Senior Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Senior Notes, unless such holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Affiliate" means, with respect to any specified Person: (i) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person (except in cases where substantially
all of the control that would ordinarily be exercisable by virtue of ownership
of stock, other than the election of directors, has been eliminated by
applicable regulatory authorities); or (ii) for the purposes of the provisions
of the Indenture restricting transactions with Affiliates only, any other Person
that owns, directly or indirectly, 10% or more of such Person's Capital Stock or
any officer or director of any Person or other Person or with respect to any
natural Person, any person having a relationship with such Person by blood,
marriage or adoption not more remote than first cousin. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of Voting Stock, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing: (i) the sum of the products of
(A) the number of years (or portion thereof) from the date of determination to
the
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dates of each successive scheduled principal payment of such Indebtedness
multiplied by (B) the amount of such principal payment by (ii) the sum of all
such principal payments.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in The City of New York or London are
authorized or obligated by law, regulation or executive order to close.
"Capital Lease Obligation" of any Person means any obligations of such Person
and its Subsidiaries on a consolidated basis under any capital lease of real or
personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participation, or other equivalent (however designated) of such Person's capital
stock and any rights (other than debt securities convertible into or
exchangeable for capital stock), warrants or options to purchase the foregoing
whether now outstanding or issued after the date hereof.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person and its Restricted Subsidiaries as determined in
accordance with GAAP, consistently applied.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect such
Person or any of its Restricted Subsidiaries against fluctuations in currency
values.
"Default" means any event which is, or after notice or passage of time or both
would be, an Event of Default.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing
buyer.
"Generally Accepted Accounting Principles" or "GAAP" means generally accepted
accounting principles in the United States, consistently applied, as in effect
from time to time.
"Guaranteed Debt" of any Person means, without duplication, all Indebtedness
of any other Person guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through an
agreement: (i) to pay or purchase such Indebtedness or to advance or supply
funds for the payment or purchase of such Indebtedness; (ii) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling such other Person to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss; (iii) to
supply funds to, or in any other manner invest in, such other Person (including
any agreement to pay for property or services to be acquired by such other
Person irrespective of whether such property is received or such services are
rendered); (iv) to maintain working capital or equity capital of such other
Person, or otherwise to maintain the net worth, solvency or other financial
condition of the debtor, or (v) otherwise to assure a creditor of such other
Person against loss; provided that the term "guarantee" shall not include
endorsements for collection or deposit, in either case in the ordinary course of
business, or any obligation or liability of such other Person in respect of
leasehold interests assigned by such other Person to any other Person.
"Indebtedness" means, with respect to any Person, without duplication: (i) all
obligations of such Person for borrowed money or for the deferred purchase price
of property or services, excluding any trade payables and other accrued current
liabilities incurred in the ordinary course of business, if, and to the extent,
any of the foregoing would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP; (ii) all obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments, if, and to
the extent, any of the foregoing would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP; (iii) all obligations
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even if the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), but excluding trade
accounts payable arising in the ordinary course of business; (iv) all Capital
Lease Obligations of such Person; (v) all obligations referred to in (but not
excluded from) clause (i), (ii), (iii) or (iv) above of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such obligations has an existing right, contingent or otherwise, to be
secured by) any Lien, upon or in property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such obligations; (vi) all
Guaranteed Debt of such Person; (vii) all Redeemable Capital Stock issued by
such Person valued at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends; (viii) all obligations under
Currency Agreements or Interest Swap
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Obligations of such Person; (ix) all obligations for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
insurance obligations entered into in the ordinary course of business of such
Person to the extent that such letters of credit are not drawn upon, or if and
to the extent drawn upon, such drawing is reimbursed not later than the 30th
Business Day following a demand for reimbursement following payment on the
letter of credit); and (x) any amendment, supplement, modification, deferral,
renewal, extension or refunding of any liability of the types referred to in
clauses (i) through (ix) above. Indebtedness shall not include obligations under
insurance, reinsurance or retrocession contracts entered into in the ordinary
course of business. For purposes hereof, the "maximum fixed repurchase price" of
any Redeemable Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Redeemable Capital Stock as
if such Redeemable Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the Fair Market Value of such
Redeemable Capital Stock, such Fair Market Value shall be determined in good
faith by the board of directors of the issuer of such Redeemable Capital Stock.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in interest rates.
"Issue Date" means the date on which Senior Notes are originally issued
under the Indenture.
"Lien" means any mortgage, charge, pledge, lien, security interest or
encumbrance of any kind.
"Maturity" when used with respect to any Senior Note means the date on
which the principal of (and premium, if any) and interest on such Senior Note
becomes due and payable as therein provided, whether at Stated Maturity,
redemption date and whether by declaration of acceleration, call for redemption
or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Non-Recourse Indebtedness" means Indebtedness: (i) as to which neither
Bermuda Holdings nor any of its Subsidiaries (other than the Person incurring
such Non-Recourse Indebtedness) (a) provides credit support (including any
undertaking, agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable or (c) constitutes the lender; and (ii) no default
with respect to which (including any rights that the holders thereof may have to
take enforcement action against such Person incurring such Non-Recourse
Indebtedness) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of Bermuda Holdings or any of its Subsidiaries (other
than the Person incurring such Non-Recourse Indebtedness) to declare a default
on such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its Stated Maturity.
"Permitted Liens" means (a) Liens securing Indebtedness pursuant to any
credit agreement or credit facility that is permitted by the terms of the
Indenture to be outstanding; (b) Liens in favor of Bermuda Holdings or any
Restricted Subsidiary; (c) Liens on property of a Person existing at the time
such Person is merged into or consolidated with Bermuda Holdings or any
Restricted Subsidiary of Bermuda Holdings; provided that such Liens were not
incurred in connection with, or in contemplation of, such merger or
consolidation and such Liens do not extend to any assets of Bermuda Holdings or
any of its Restricted Subsidiaries other than the assets of the Person so merged
into or consolidated with Bermuda Holdings or such Restricted Subsidiary; (d)
Liens on property existing at the time of acquisition thereof by Bermuda
Holdings or any Restricted Subsidiary of Bermuda Holdings; provided that such
Liens were not incurred in connection with, or in contemplation of, such
acquisition and do not extend to any assets of Bermuda Holdings or any of its
Restricted Subsidiaries other than the property so acquired; (e) Liens to secure
the performance of statutory obligations, surety or appeal bonds or performance
bonds, or landlords', carriers', warehousemen's, mechanics', suppliers',
materialmen's or other like Liens, in any case incurred in the ordinary course
of business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate process of law, if a reserve or other appropriate
provision, if any, as is required by GAAP shall have been made therefor; (f)
Liens existing on the date of the Indenture; (g) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (h)
Liens with respect to obligations under Currency Agreements or Interest Swap
Obligations and other similar agreements or arrangements designed to protect
Bermuda Holdings or any of its Restricted Subsidiaries against fluctuations in
the value of Investments of Bermuda Holdings and its Restricted Subsidiaries, in
each case to the extent permitted under the Indenture; (i) Liens incurred in the
ordinary course of business of Bermuda Holdings or any Subsidiary of Bermuda
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Holdings with respect to obligations permitted under the Indenture that do not
exceed $10.0 million in principal amount in the aggregate at any one time
outstanding; and (j) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Indebtedness (to the extent permitted under the Indenture) of
Unrestricted Subsidiaries.
"Person" means any individual, corporation, limited or general partnership,
limited liability company, joint venture, association, joint stock company,
trust, fund, unincorporated organization or government or any agency or
political subdivision thereof.
"Principal Insurance Subsidiary" means: (i) the Subsidiaries of Bermuda
Holdings in existence on the Issue Date; (ii) any other insurance company
Subsidiary of Bermuda Holdings that becomes a "significant subsidiary" as
defined in Regulation S-X, as promulgated by the Commission; and (iii) any other
Subsidiary of Bermuda Holdings that may succeed, by merger, consolidation or
otherwise, to all or substantially all of the business of one or more of such
Persons as specified in (i) and (ii) above.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Corporation and its successors.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of principal or of interest thereon, the date specified in such
Indebtedness as the fixed date on which the principal of such Indebtedness or
such installment of principal or of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness expressly subordinated in
right of payment to the Senior Notes.
"Subsidiary" means any Person, a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by Bermuda
Holdings or by one or more other Subsidiaries, or by Bermuda Holdings and one or
more other Subsidiaries.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to
any such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt; provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) is designated an
Unrestricted Subsidiary prior to formation or creation; (b) has total assets at
the time of formation or creation with a fair market value not exceeding $1,000;
(c) has no Indebtedness other than Non-Recourse Indebtedness; (d) is not party
to any agreement, contract, arrangement or understanding with Bermuda Holdings
or any Restricted Subsidiary of Bermuda Holdings unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to
Bermuda Holdings or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of Bermuda Holdings; (e) is a
Person with respect to which neither Bermuda Holdings nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Capital Stock or (y) to maintain or preserve such Person's financial
condition or to cause such Person to achieve any specified levels of operating
results; and (f) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of Bermuda Holdings or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing conditions. If, at
any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
Bermuda Holdings as of such date. The Board of Directors of Bermuda Holdings may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an
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incurrence of Indebtedness by a Restricted Subsidiary of Bermuda Holdings of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if no Default or Event of Default would be in existence
following such designation.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency).
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
principal amount of such Indebtedness into (b) the total of the product obtained
by multiplying (i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including payment at
final maturity, in respect thereof, by (ii) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
"Wholly-Owned Restricted Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly-Owned Subsidiaries of such Person.
DESCRIPTION OF DEPOSITARY AGREEMENT
GENERAL
All Exchange Notes underlying the Book-Entry Interests will be represented
by one or more Global Notes, will be issued in a denomination equal to the
aggregate principal amount of the sum of outstanding Old Notes properly tendered
pursuant to the terms of the Exchange Offer, and will be deposited with the
Custodian pursuant to the terms of the Depositary Agreement.
With respect to such Global Notes issued, the Depositary will issue a
receipt representing a 100% interest in the underlying Global Note (the
"Exchange Global Receipt", and together with global receipts issued in respect
of Old Notes not exchanged pursuant to the Exchange Offer, the "Global
Receipts"), which will be delivered to and registered in the name of DTC or its
nominee.
Ownership of Book-Entry Interests is limited to Persons that have accounts
with DTC ("participants") or Persons that may hold interests through
participants.
Procedures with respect to the ownership of Book-Entry Interests are set
forth below. Unless and until the Book-Entry Interests representing the Exchange
Global Receipts are exchanged for Definitive Senior Notes, the depositary
interest held by DTC may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC
or any such nominee to a successor of DTC or a nominee of such successor.
So long as the Custodian, or its nominee, is the holder of the Global Notes
underlying Book-Entry Interests, the Custodian or such nominee, as the case may
be, will be considered the sole holder of such Exchange Global Note for all
purposes under the Indenture. Except as set forth below under "--Issuance of
Definitive Senior Notes," participants or Persons that may hold Book-Entry
Interests through participants will not be entitled to have Senior Notes
registered in their names, will not receive or be entitled to receive physical
delivery of Definitive Senior Notes and will not be considered the owners or
holders thereof under the Indenture. Accordingly, each Person holding a Book-
Entry Interest must rely on the procedures of the Custodian, the Depositary and
DTC and, in addition, if such Person is not a participant in DTC, on the
procedures of the participant through which such Person owns its interest to
exercise any rights and obligations of a holder under the Indenture. See "--
Action by Holders of Book-Entry Interests."
PAYMENTS ON GLOBAL NOTE
Payment of any amounts in respect of the Global Notes, as long as it is
held by the Custodian, will be made to or by the order of the Custodian, as the
bearer thereof. The Custodian will distribute all such payments received by it
to the Depositary. The Depositary will distribute all such payments received by
it to DTC, or its nominee, which will distribute such payments to its
participants. All such payments will be distributed without deduction or
withholding for any taxes, assessments or other governmental charges of whatever
nature except as may be required by law. If any such deduction
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or withholding is required to be made under the provisions of any applicable law
or regulation, then, except as provided in "Description of Exchange Notes--
Payment of Additional Amounts," such additional amounts will be paid by the
Issuer and Bermuda Holdings to or for the order of the Custodian as may be
necessary in order that the net amounts received by a holder of Book-Entry
Interests after such deduction or withholding shall be not less than the amounts
which such holder would otherwise have received in respect of such Book-Entry
Interests absent such withholding or deduction. DTC, upon receipt of any
payment, will promptly credit participants' accounts with payments in amounts
proportionate to their respective ownership of Book-Entry Interests, as shown on
the records of DTC. The Issuer expects that payments by participants to holders
of Book-Entry Interests held through such participants will be governed by
standing customer instructions and customary practices, as is now the case with
the securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such participants. None of
the Issuer, Bermuda Holdings, the Trustee or any other agent of the Issuer,
Bermuda Holdings or the Trustee will have any responsibility or liability for
any aspect of the records relating to or payments made on account of a
participant's Book-Entry Interests or for maintaining, supervising or reviewing
any records relating to a participant's Book-Entry Interests.
DTC has advised the Issuer as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities of its
participants and to facilitate the clearance and settlement of transactions
among its participants in such securities through electronic book-entry
exchanges in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. DTC participants include
securities brokers and dealers (including the Underwriters), banks, trust
companies, clearing corporations and certain other organizations, some of whom
(and/or their representatives) own DTC. Access to DTC book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of Book-Entry Interests among participants of DTC, DTC is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Issuer, Bermuda Holdings
nor the Trustee will have any responsibility for the performance by DTC of
obligations under the rules and procedure governing their operations.
Upon the issuance by the Depositary of the Exchange Global Receipts to DTC,
DTC will credit, on its book-entry registration and transfer system, the
participants' accounts with the respective interest beneficially owned by such
participants. Ownership of Book-Entry Interests will be shown on, and the
transfer of such interests will be effected only through, records maintained by
DTC (with respect to interests of participants) and on the records of
participants (with respect to interests of Persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to own, transfer or pledge Book-
Entry Interests.
The Issuer understands that under existing industry practices, if either
the Issuer or the Trustee requests any action of holders of Book-Entry Interests
or if a holder of a Book-Entry Interest desires to give or take any action that
a holder of Senior Notes is entitled to give or take under the Indenture, DTC
would authorize the participants holding the relevant Book-Entry Interests to
give or take such action, and such participants would authorize beneficial
owners owning through such participants to give or take such action or would
otherwise act upon the instructions of beneficial owners holding through them.
REDEMPTION OR REPURCHASE
In the event the Global Notes (or portions thereof) are redeemed or
repurchased, the Custodian will deliver all amounts received by it in respect of
the redemption or repurchase to the Depositary. The Depositary will deliver all
amounts received by it in respect of the redemption or repurchase of the Global
Notes to DTC. The redemption or repurchase price paid in connection with the
redemption or repurchase of Book-Entry Interests will be equal to the amount
received by the Depositary in connection with the redemption or repurchase of
the Global Notes (or portions thereof). For any redemptions of the Global Notes
in part, selection of Book-Entry Interests to be redeemed will be made by DTC on
a pro rata basis, by lot or by such other method as DTC deems fair and
appropriate, and in compliance with the requirements of the principal national
securities exchange, if any, on which the Senior Notes are listed, or, if the
Senior Notes are not so listed, on a pro rata basis, by lot or by such method as
DTC shall deem fair and appropriate; provided that no beneficial interests of
$1,000 principal amount at maturity or less shall be redeemed in part.
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TRANSFERS
All transfers of Book-Entry Interests will be recorded in accordance with
the book-entry system maintained by DTC, pursuant to customary procedures
established by DTC and its participants and will be settled in same-day funds.
ISSUANCE OF DEFINITIVE SENIOR NOTES
Holders of Book-Entry Interests will receive Definitive Senior Notes if (i)
DTC notifies the Issuer and the Depositary that it is unwilling or unable to
continue as holder of the Global Receipts or ceases to be a clearing agency
registered under the Exchange Act and, in either case, a successor to DTC
registered as a clearing agency under the Exchange Act is not appointed by the
Issuer within 90 days of such notification, (ii) either the Depositary or the
Custodian, as the case may be, notifies the Trustee and the Issuer that it is
unwilling or unable to continue as Depositary or Custodian, respectively, and a
successor Depositary or Custodian, as the case may be, is not appointed by the
Issuer within 90 days of such notification, or (iii) the Issuer determines that
Definitive Senior Notes shall be issued. Any Definitive Senior Notes issued in
exchange for Book-Entry Interests will be registered in such name or names as
the Custodian shall instruct the Trustee based on the instructions of DTC. It is
expected that such instructions will be based upon directions received by DTC
from participants with respect to ownership of Book-Entry Interests.
In addition to the foregoing, holders of Book-Entry Interests will at any
time on or after the occurrence of an Event of Default be entitled to request
and receive Definitive Senior Notes. Such Definitive Senior Notes will be issued
to and registered in the name of, or as directed by, such holders only upon the
request in writing by the Depositary (based upon the instructions of DTC).
HOLDERS OF BOOK-ENTRY INTERESTS SHOULD BE AWARE THAT, UNDER CURRENT U.K.
TAX LAW, UPON THE ISSUANCE OF DEFINITIVE SENIOR NOTES TO A HOLDER, SUCH HOLDER
WILL BECOME SUBJECT TO U.K. INCOME TAX (CURRENTLY 20%) TO BE WITHHELD ON ANY
PAYMENTS OF INTEREST ON THE SENIOR NOTES AS SET FORTH UNDER "CERTAIN TAX
CONSIDERATIONS--TAXATION OF U.S. HOLDERS OF THE SENIOR NOTES--UNITED KINGDOM."
IF SUCH DEFINITIVE SENIOR NOTES ARE ISSUED PURSUANT TO THE REQUEST OF A HOLDER
OF BOOK-ENTRY INTERESTS FOLLOWING AN EVENT OF DEFAULT, NEITHER THE ISSUER NOR
BERMUDA HOLDINGS WILL BE OBLIGATED TO PAY ANY ADDITIONAL AMOUNTS WITH RESPECT TO
SUCH SENIOR NOTES. However, U.S. holders of Definitive Senior Notes may be
entitled to receive a refund of withheld amounts from the U.K. Inland Revenue in
certain circumstances. See "Certain Tax Considerations--Taxation of U.S. Holders
of the Senior Notes--United Kingdom." In addition, if a holder of Book-Entry
Interests receives Definitive Senior Notes other than pursuant to its request,
such holder will be entitled to receive Additional Amounts with respect to such
Senior Notes. See "Description of Exchange Notes--Payment of Additional
Amounts."
Exchanges of Book-Entry Interests for Definitive Senior Notes shall be made
free of any fees of the Depositary to the holders of Book-Entry Interests;
provided that the Issuer may require the payment of a sum sufficient to pay any
tax, assessment, or other governmental charge.
ACTION BY HOLDERS OF BOOK-ENTRY INTERESTS
As soon as practicable after receipt by the Custodian of notice of any
solicitation of consents or request for a waiver or other action by the holders
of Book-Entry Interests, the Custodian shall direct the Depositary to mail to
DTC a notice containing (a) such information as is contained in such notice, (b)
a statement that at the close of business on a specified record date DTC will be
entitled to instruct the Depositary as to the consent, waiver or other action,
if any, pertaining to the Book-Entry Interests, and (c) a statement as to the
manner in which such instructions may be given. Upon the written request of DTC,
the Depositary shall endeavor insofar as practicable to take such action
regarding the requested consent, waiver or other action in respect of the Book-
Entry Interests in accordance with any instructions set forth in such request.
DTC is expected to follow the procedures described under "--General" above with
respect to soliciting instructions from its participants. Neither the Depositary
nor the Custodian will exercise any discretion in the granting of consents or
waivers or the taking of any other action relating to the Depositary Agreement
or the Indenture.
REPORTS
The Depositary will promptly send to DTC a copy of any notices, reports and
other communications received from the Issuer which are received by the
Custodian as holder of the Global Note.
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THE DEPOSITARY AND CUSTODIAN
The Chase Manhattan Bank is the Depositary for the Global Note. The address
of the Depositary is 450 West 33rd Street, 15th Floor, New York, New York 10001.
Chase Manhattan Bank Luxembourg S.A. will be the Custodian for the Exchange
Global Receipt. The address of the Custodian is 5 rue Plaetis L-2338,
Luxembourg.
ACTION BY DEPOSITARY AND CUSTODIAN
Upon the occurrence of a default with respect to the Global Note, or in
connection with any other right of the holder of the Global Note under the
Indenture or the Depositary Agreement, if requested in writing by DTC in respect
thereof, the Depositary and the Custodian will take any such action as shall be
requested in such notice; provided that the Depositary and the Custodian have
been offered reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by them in complying with such request.
Neither the Depositary nor the Custodian will exercise any discretion in
the taking of any such action.
CHARGES OF DEPOSITARY AND CUSTODIAN
The Issuer and Bermuda Holdings have agreed to pay all charges of the
Depositary and the Custodian under the Depositary Agreement. The Issuer and
Bermuda Holdings have also agreed to indemnify the Depositary and the Custodian
against certain liabilities incurred by it under the Depositary Agreement.
AMENDMENT AND TERMINATION
The Depositary Agreement may be amended by agreement among the Issuer,
Bermuda Holdings, the Custodian and the Depositary. The consent of DTC shall not
be required in connection with any amendment to the Depositary Agreement: (i) to
cure any defect, omission, inconsistency or ambiguity in the Depositary
Agreement; (ii) to add to the covenants and agreements of the Depositary or the
Custodian, the Issuer and Bermuda Holdings; (iii) to effectuate the assignment
of the Depositary's or the Custodian's rights and duties to a qualified
successor; (iv) to comply with the Securities Act, the Exchange Act or the U.S.
Investment Company Act of 1940, as amended; or (v) to modify, alter, amend or
supplement the Depositary Agreement in any other manner that, in the opinion of
counsel acceptable to the Issuer and the Depositary, is not adverse to DTC or
the owners of Book-Entry Interests. Except as set forth above, no amendment that
adversely affects DTC may be made to the Depositary Agreement or the Book-Entry
Interests without the consent of DTC.
The Depositary shall at any time at the direction of the Issuer or Bermuda
Holdings terminate the Depositary Agreement by mailing a notice of such
termination to DTC and requesting, on behalf of the Custodian in accordance with
the Indenture, the issuance of Definitive Senior Notes to the persons and in the
amounts as specified by DTC. Upon the issuance of Definitive Senior Notes in an
aggregate principal amount equal to the aggregate principal amount of Senior
Notes outstanding, the Depositary Agreement shall terminate. The Depositary
Agreement may also be terminated upon the resignation of the Depositary or the
Custodian if no successor depositary or custodian, as the case may be, has been
appointed by the Issuer within 90 days of the notification of such resignation
as set forth under "--Resignation or Removal of Depositary or Custodian" below.
RESIGNATION OR REMOVAL OF DEPOSITARY OR CUSTODIAN
The Depositary or Custodian may at any time resign as Depositary or
Custodian by written notice delivered to each of the Issuer and the Trustee,
such resignation to take effect upon the appointment by the Issuer of a
successor depositary or custodian (approved, in the case of a successor
depositary, by the Trustee and DTC and, in the case of a successor custodian, by
the Depositary, none of which shall unreasonably withhold such approval) and
such successor's acceptance of such appointment. If at the end of 90 days after
delivery of such notice, no successor depositary or custodian has been appointed
and approved, and has accepted such appointment, the resigning Depositary or
Custodian may terminate the Depositary Agreement.
OBLIGATIONS OF DEPOSITARY AND CUSTODIAN
Except with respect to the payment of any amount received by it in respect of
the Global Notes, neither the Depositary nor the Custodian will assume any
obligation or be subject to any liability under the Depositary Agreement, other
than by reason of bad faith or negligence in the performance of its respective
duties under the Depositary Agreement.
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DESCRIPTION OF OLD NOTES
The terms of the Exchange Notes are identical in all material respects to
the terms of the Old Notes, except that (i) the offer and sale of the Exchange
Notes have been registered under the Securities Act and therefore the Exchange
Notes are not subject to certain restrictions on transfer applicable to the Old
Notes, will not contain legends relating thereto and will not be entitled to
registration rights or other rights under the Registration Rights Agreement, and
(ii) the Exchange Notes will not provide for any increase in the interest rate
thereon, which rights and provision will terminate as to all of the Senior Notes
upon the consummation of the Exchange Offer. In addition, the Old Notes and the
Exchange Notes will constitute a single series of debt securities under the
Indenture. See "Description of Exchange Notes--General."
THE EXCHANGE OFFER
The Issuer and Bermuda Holdings entered into the Registration Rights
Agreement dated as of May 18, 1998 (the "Registration Rights Agreement") with
Donaldson, Lufkin & Jenrette Securities Corporation, as Initial Purchaser,
pursuant to which the Issuer and Bermuda Holdings agreed, for the benefit of the
holders of the Old Notes, at the cost of the Issuer and Bermuda Holdings, to use
commercially reasonable efforts to file and cause to become effective a
registration statement with respect to an exchange offer for exchange notes with
terms identical in all material respects to the Old Notes, except as described
under "Description of Old Notes." In the event that applicable interpretations
of the Commission do not permit the Issuer and Bermuda Holdings to effect the
Exchange Offer, or under certain other circumstances, the Issuer and Bermuda
Holdings agreed, for the benefit of the Holders of the Old Notes, at the cost of
the Issuer and Bermuda Holdings, to use commercially reasonable efforts to cause
to become effective a shelf registration statement (the "Shelf Registration
Statement") with respect to resales of the Senior Notes and to keep such
registration statement effective until May 18, 2001 or such earlier time when
the Senior Notes have been sold pursuant to such Shelf Registration Statement.
The Old Notes provide that, in the event the Exchange Offer is not
consummated or a Shelf Registration Statement is not declared effective on or
prior to November 18, 1998, then the annual interest rate borne by the Old Notes
shall be increased to 7.25%. If the Exchange Offer is not consummated or a Shelf
Registration Statement is not declared effective by February 18, 1999, then the
annual interest rate borne by the Old Notes shall be increased to 7.5%. Upon
consummation of the Exchange Offer or the effectiveness of such Shelf
Registration Statement, the interest rate borne by the Old Notes will return to
7%.
The Exchange Offer is not being made to, nor will the Issuer or Bermuda
Holdings accept tenders for exchange from, holders of Old Notes in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of such jurisdiction.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Issuer will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. For each $1,000 principal amount of Old Notes surrendered to
the Issuer pursuant to the Exchange Offer, the Holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note. The Issuer will keep the Exchange Offer open for not less
than 20 business days (or longer if required by applicable law) after the date
notice of the Exchange Offer is mailed to the Holders of the Old Notes. As used
herein, the term "Expiration Date" means 5:00 p.m., New York City time, on
____________, 1998; provided, however, that if the Issuer and Bermuda Holdings,
in their sole discretion, have extended the period of time for which the
Exchange Offer is open, the term "Expiration Date" means the latest time and
date to which the Exchange Offer is extended.
As of the date of this Prospectus, $100.0 million in aggregate principal
amount of the Old Notes were outstanding. The Exchange Offer is not conditioned
upon any minimum principal amount of Old Notes being tendered. This Prospectus,
together with the Letter of Transmittal, is first being sent on or about the
date set forth on the cover page to all holders of Old Notes at the addresses
set forth in the security register with respect to Old Notes maintained by the
Trustee. The Issuer's obligations to accept Old Notes for exchange pursuant to
the Exchange Offer is subject to certain conditions as set forth under "--
Certain Conditions to the Exchange Offer."
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The Issuer and Bermuda Holdings expressly reserve the right, at any time or
from time to time, to extend the period of time during which the Exchange Offer
is open, and thereby delay acceptance of any Old Notes, by giving oral or
written notice of such extension to the Exchange Agent and notice of such
extension to the holders of Old Notes as described below. During any such
extension, all Old Notes previously tendered will be retained by the Issuer or
Bermuda Holdings, subject to the rights of holders of Old Notes to withdraw
their tendered Old Notes as specified in "--Withdrawal Rights." Any Old Notes
not accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Issuer and Bermuda Holdings expressly reserve the right to amend or
terminate the Exchange Offer, and not to accept for exchange any Old Notes not
theretofore accepted for exchange, upon the occurrence of any of the conditions
of the Exchange Offer specified below under "--Certain Conditions to the
Exchange Offer." The Issuer or Bermuda Holdings will give oral or written
notice of any extension, amendment, non-acceptance or termination to the holders
of the Old Notes as promptly as practicable, such notice in the case of any
extension to be issued by means of a press release or other public announcement
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which the
Issuer or Bermuda Holdings may choose to make any public announcement and
subject to applicable law, neither the Issuer nor Bermuda Holdings shall have
any obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for
exchange or are tendered but not accepted in connection with the Exchange Offer
will remain outstanding, will be entitled to the benefits of the Indenture and
continue to accrue interest, but will not be entitled to any further
registration rights under the Registration Rights Agreement. The Issuer and
Bermuda Holdings intend to conduct the Exchange Offer in accordance to the
applicable requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Issuer of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Issuer will constitute a binding
agreement between the tendering holder, the Issuer and Bermuda Holdings upon the
terms and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
nominee and who wishes to tender should contact such registered holder promptly
and instruct such registered holder to tender on his behalf. A holder who wishes
to tender Old Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to the Exchange Agent at the
address set forth below under "Exchange Agent" on or prior to the Expiration
Date. In addition, (i) a timely confirmation of a book-entry transfer (a "Book-
Entry Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at DTC pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (ii) the holder must comply with the guaranteed delivery
procedures described below under "--Guaranteed Delivery Procedures." THE METHOD
OF DELIVERY OF LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE TENDERING HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS
RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR ANY OTHER REQUIRED DOCUMENTS
SHOULD BE SENT TO THE ISSUER OR BERMUDA HOLDINGS. Delivery of all documents must
be made to the Exchange Agent at its address set forth below. Holders may also
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect such tender for such Holders.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered for the account of an Eligible Institution (as
defined below). In the event that signatures on a Letter of Transmittal or a
notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantees must be by a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office or
correspondent in the United States (collectively, "Eligible Institutions"). If a
Book-Entry Confirmation indicates that ownership of the Old Notes is in the name
of a person other than the person signing the Letter of Transmittal, the
Exchange Agent must receive a written instrument or instruments of transfer or
exchange, in satisfactory form as
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determined by the Issuer and Bermuda Holdings in their sole discretion, duly
executed by the owner as evidenced by the Book-Entry Confirmation with the
signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Issuer and Bermuda Holdings in their sole discretion, which determination
shall be final and binding. The Issuer and Bermuda Holdings reserve the absolute
right to reject any and all tenders of any particular Old Notes not properly
tendered or to not accept any particular Old Notes which acceptance might, in
the judgment of the Issuer and Bermuda Holdings or their counsel, be unlawful.
The Issuer and Bermuda Holdings also reserve the absolute right to waive any
defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Issuer and Bermuda Holdings shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with the
tender of Old Notes for exchange must be cured within such reasonable period of
time as the Issuer or Bermuda Holdings shall determine. Neither the Issuer,
Bermuda Holdings, the Exchange Agent nor any other person shall be under any
duty to give notification of any defect or irregularity with respect to any
tender of Old Notes for exchange, nor shall any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the owner as evidenced by the Book-Entry Confirmation, such Letter of
Transmittal must be accompanied by an endorsement or appropriate powers of
attorney, in either case signed exactly as the name or names of the owner as
evidenced by the Book-Entry Confirmation. Signatures on such powers of attorney
must be guaranteed by an Eligible Institution.
If the Letter of Transmittal or powers of attorney are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers or
corporations or others acting in a fiduciary or representative capacity, such
person should so indicate when signing and, unless waived by the Issuer or
Bermuda Holdings, proper evidence satisfactory to the Issuer and Bermuda
Holdings of its authority to so act must be submitted.
By executing, or otherwise becoming bound by, the Letter of Transmittal,
each holder of the Old Notes (other than certain specified holders) will
represent that (i) it is not an affiliate of the Issuer or Bermuda Holdings,
(ii) any Exchange Notes to be received by it were acquired in the ordinary
course of its business, and (iii) it has no arrangement or understanding with
any person to participate in a distribution (within the meaning of the
Securities Act) of the Exchange Notes. If the tendering holder is a broker-
dealer that will receive Exchange Notes for its own account in exchange for Old
Notes that were acquired as a result of market-making activities or other
trading activities, it will be required to acknowledge that it acquired the Old
Notes for its account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus in connection with
any resale of such Exchange Notes. A broker-dealer that acquired Old Notes in a
transaction other than as part of its market-making or other trading activities
will not be able to participate in the Exchange Offer. See "--Resales of the
Exchange Notes."
ACCEPTANCE OF OLD NOTES FOR EXCHANGE
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuer will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the Exchange Notes promptly after acceptance of
the Old Notes. See "--Certain Conditions to the Exchange Offer." For purposes of
the Exchange Offer, the Issuer shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Issuer has given oral or
written notice thereof to the Exchange Agent.
In all cases, issuance of Exchange Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of a timely Book-Entry Confirmation of such Old
Notes into the Exchange Agent's account at DTC, a properly completed and duly
executed Letter of Transmittal and all other required documents. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer or Old Notes are submitted for a greater principal amount
than the holder desires to exchange, such unaccepted or non-exchanged Old Notes
will be credited to an account maintained with DTC as promptly as practicable
after the expiration or termination of the Exchange Offer.
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INTEREST ON THE EXCHANGE NOTES
Each Exchange Note will bear interest from May 18, 1998, the date of
issuance of the Old Notes. Holders of the Old Notes whose Old Notes are accepted
for exchange will not receive accrued interest on such Old Notes from and after
May 18, 1998.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC for purposes of the Exchange Offer promptly after the
date of this Prospectus. Any financial institution that is a participant in
DTC's systems may make book-entry delivery of Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account in accordance with
DTC's Automated Tender Offer Program ("ATOP") procedures for transfer. However,
the exchange for the Old Notes so tendered will only be made after timely
confirmation of such book-entry transfer of Old Notes into the Exchange Agent's
account, and timely receipt by the Exchange Agent of an Agent's Message (as such
term is defined in the next sentence) and any other documents required by the
Letter of Transmittal. The term "Agent's Message" means a message, transmitted
by DTC and received by the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
a participant tendering Old Notes that are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Issuer or Bermuda Holdings may
enforce such agreement against such participant. Although delivery of Old Notes
may be effected through book-entry transfer into the Exchange Agent's account at
DTC, the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees and any other required
documents, must in any case be delivered to and received by the Exchange Agent
at its address set forth under "--Exchange Agent" prior to the Expiration Date,
or the guaranteed delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
GUARANTEED DELIVERY PROCEDURES
If the procedure for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made by or through an
Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Issuer and Bermuda Holdings
(by telegram, telex, facsimile transmission, mail or hand delivery), setting
forth the name and address of the holder of Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, a Book-Entry Confirmation and
any other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent, and (iii) the Book-Entry
Confirmation, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent by the Exchange Date at one of the addresses set
forth below under "--Exchange Agent." Any such notice of withdrawal (which
notice may be by telegram, telex, facsimile transmission or letter) must specify
the name of the person having tendered the Old Notes to be withdrawn, the number
of the account at DTC from which the Old Notes were tendered, the principal
amount of the Old Notes to be withdrawn, and the name and number of the account
at DTC to be credited with the withdrawn Old Notes, and otherwise comply with
the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be
determined by the Issuer and Bermuda Holdings, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Any Old Notes which have been tendered for exchange but which are not exchanged
for any reason will be credited to an account maintained with DTC for the Old
Notes as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Old Notes" at any time prior to the Expiration Date.
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CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, neither the
Issuer nor Bermuda Holdings shall be required to accept for exchange, or to
issue Exchange Notes in exchange for, any Old Notes and may terminate or amend
the Exchange Offer, if at any time before the acceptance of such Old Notes for
exchange or the exchange of the Exchange Notes for such Old Notes, such
acceptance or issuance would violate applicable law or any interpretation of the
Staff of the Commission. Neither the Issuer or Bermuda Holdings has any
obligation, and will not knowingly, permit acceptances of tenders of Old Notes
from Affiliates of the Issuer or Bermuda Holdings or from any other holder or
holders of Old Notes who are not eligible to participate in the Exchange Offer
under applicable law or interpretations thereof by the Commission, or if the
Exchange Notes to be received by such holder or holders of Old Notes in the
Exchange Offer, upon receipt, will not be tradable by such holder without
restriction under the Securities Act and the Exchange Act and without material
restrictions under the blue sky or securities laws of substantially all of the
states of the United States.
The foregoing conditions are for the sole benefit of the Issuer and Bermuda
Holdings and may be asserted by the Issuer and Bermuda Holdings regardless of
the circumstances giving rise to any such condition. The failure by the Issuer
and Bermuda Holdings at any time to exercise the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
In addition, neither the Issuer nor Bermuda Holdings will accept for
exchange any Old Notes tendered, and no Exchange Notes will be issued in
exchange for any such Old Notes, if at such time any stop order shall be
threatened or in effect with respect to the Registration Statement of which this
Prospectus constitutes a part or the qualification of the Indenture under the
Trust Indenture Act.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent, addressed as follows:
Deliver To:
The Chase Manhattan Bank, Exchange Agent
By Mail or By Hand:
The Chase Manhattan Bank
450 West 33rd St.
15th Floor
New York, New York 10001
Attention: Corporate Trust Administration
By Facsimile:
(212) 946-8177
Confirm by Telephone:
(212) 946-3352
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by officers and
regular employees of the Issuer, Bermuda Holdings and their affiliates. No
additional compensation will be paid to any such officers and employees who
engage in soliciting tenders. Neither the Issuer nor Bermuda Holdings will make
any payment to brokers, dealers, or others soliciting acceptances of the
Exchange
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Offer. The Issuer or Bermuda Holdings, however, will pay the Exchange Agent
reasonably customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Issuer and Bermuda Holdings and are estimated in the
aggregate to be $210,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith.
RESALES OF THE EXCHANGE NOTES
Under existing interpretations of the staff of the Division of Corporation
Finance of the Commission contained in several no-action letters to third
parties (including Exxon Capital Holdings Corporation (available May 13, 1988),
Morgan Stanley & Co. Incorporated (available June 5, 1991), K-III Communications
Corporation (available May 14, 1993) and Shearman & Sterling (available July 2,
1993)), the Exchange Notes would in general be freely transferable after the
Exchange Offer without further registration under the Securities Act. However,
any purchaser of Old Notes who is an "affiliate" of the Issuer or Bermuda
Holdings or who intends to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes or any broker-dealer who purchased Old Notes
from the Issuer or Bermuda Holdings to resell pursuant to Rule 144A or any other
available exception under the Securities Act (i) will not be able to rely on the
interpretation of the staff of the Division of Corporation Finance of the
Commission, (ii) will not be able to tender its Old Notes in the Exchange Offer
and (iii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or transfer of the Old Notes
unless such sale or transfer is made pursuant to an exemption from such
requirements.
By executing, or otherwise becoming bound by, the Letter of Transmittal
each holder of the Old Notes (other than certain specified holders) will
represent that (i) it is not an "affiliate" of the Issuer or Bermuda Holdings,
(ii) any Exchange Notes to be received by it were acquired in the ordinary
course of its business and (iii) it has no arrangement or understanding with any
person to participate in the distribution (within the meaning of the Securities
Act) of the Exchange Notes. In addition, in connection with any resales of
Exchange Notes, any Participating Broker-Dealer who acquired the Exchange Notes
for its own account as a result of market-making or other trading activities
must acknowledge that it acquired the Old Notes for its own account as the
result of market-making activities or other trading activities and must agree
that it deliver a prospectus meeting the requirements of the Securities Act. A
broker-dealer that acquired Existing Notes in a transaction other than as part
of its market-making or other trading activities will not be able to participate
in the Exchange Offer. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the no-action letters referred to above, the Issuer believes that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes received upon exchange of such Old Notes
(other than Old Notes which represent an unsold allotment from the original sale
of the Old Notes) with a prospectus meeting the requirements of the Securities
Act, which may be a prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such Exchange Notes. Under the Registration Rights Agreement, the Issuer and
Bermuda Holdings is required to allow Participating Broker-Dealers and other
persons, if any, subject to similar prospectus delivery requirements, to use
this Prospectus as it may be amended or supplemented from time to time, in
connection with the resale of such Exchange Notes.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-Dealer in connection with
resales of Exchange Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Issuer and Bermuda Holdings have agreed that it will make this
Prospectus, as amended or supplemented, available to any Participating Broker-
Dealer for use in connection with any such resale and Participating Broker-
Dealers shall be authorized to deliver this Prospectus for a period not
exceeding 180 days after the Expiration Date. In addition, until _______, 1998
(180 days after the date of this Prospectus), all dealers effecting transactions
in the Exchange Notes may be required to deliver a prospectus.
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Neither the Issuer nor Bermuda Holdings will receive any proceeds from any
sales of the Exchange Notes by Participating Broker-Dealers. Exchange Notes
received by Participating Brokers-Dealers for their own account pursuant to the
Exchange Offer may be sold from time to time, in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Participating Broker-Dealer that resells the Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer. Any broker or dealer
that participates in a distribution of such Exchange Notes may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any omissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The Issuer will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any Participating Broker-Dealer
that requests such documents in the Letter of Transmittal. See "The Exchange
Offer."
CERTAIN TAX CONSIDERATIONS
CERTAIN U.K., U.S. AND BERMUDA TAX CONSIDERATIONS
The following summary of certain U.S., U.K. and Bermuda tax consequences of
the acquisition, ownership and disposition of the Senior Notes by a "U.S.
Holder" (as defined below) is set forth with respect to U.S. federal income tax
matters based upon the opinion of Debevoise & Plimpton, U.S. tax counsel to the
Issuer, with respect to U.K. tax matters based upon the opinion of Clifford
Chance, U.K. tax counsel to the Issuer, and with respect to Bermuda tax matters
based upon the opinion of Conyers, Dill & Pearman, Bermuda tax counsel to the
Issuer. Such firms express no opinion as to, and have not independently
confirmed, any factual or accounting matters, determinations or conclusions
described below. The summary describes certain U.S. federal income, U.K. and
Bermuda tax consequences of the acquisition, ownership and disposition of the
Senior Notes as of the date of this Prospectus. The Summary is for general
information purposes only and does not purport to be a complete analysis of all
tax considerations that may be applicable to U.S. Holders of Senior Notes.
Except where noted, it deals only with Senior Notes beneficially owned as
capital assets by a purchaser that is, for U.S. federal income tax purposes, (1)
a citizen or resident of the United States, (2) a corporation, partnership or
other entity created or organized in, or under the laws of, the United States or
any political subdivision thereof or (3) an estate or trust the income of which
is subject to U.S. federal taxation regardless of its source (a "U.S. Holder")
and does not address the U.K. tax consequences to a holder that is resident (or,
in the case of an individual, who is either resident or ordinarily resident or
both) for U.K. tax purposes in the U.K., that is domiciled under U.K. law in the
U.K. or that carries on business in the U.K. through a branch or agency. It does
not deal with special situations, such as those of securities dealers, banks,
tax-exempt organizations, life insurance companies, persons that hold the Senior
Notes as part of a hedging transaction or straddle or conversion transaction or
persons whose functional currency is not the U.S. dollar. It also does not deal
with state or local taxes, or U.S. federal taxes other than income taxes.
The statements regarding U.S. federal income tax consequences set forth
below are based upon the provisions of the U.S. Internal Revenue Code of 1986,
as amended (the "Code"), and regulations, rulings and judicial decisions
thereunder as of the date of this Prospectus. The statements regarding U.K. and
Bermuda tax laws set forth below are based on those laws as in force on the date
of this Prospectus. Such authorities may be repealed, revoked or modified,
possibly with retroactive effect, in which case tax consequences different from
those discussed below could result. The statements regarding U.S. federal
income, U.K. and Bermuda tax consequences set forth below assume that the Senior
Notes were issued, and transfers thereof and payments thereon have been and will
continue to be made, in accordance with the Indenture and the Depositary
Agreement.
For purposes of the U.K. Treaty (as defined below) and the Code, U.S.
Holders of the Book-Entry Interests will be treated as owners of the Senior
Notes underlying such Book-Entry Interests and, except as noted below, the tax
consequences of owning the Book-Entry Interests will be the same as those
applicable to ownership of the Senior Notes.
PERSONS CONSIDERING THE ACQUISITION, OWNERSHIP OR DISPOSITION OF THE SENIOR
NOTES SHOULD CONSULT THEIR OWN TAX ADVISERS CONCERNING THE U.S. FEDERAL INCOME,
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U.K. AND BERMUDA TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS
WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN
TAXING JURISDICTIONS.
CERTAIN TAX CONSEQUENCES OF THE EXCHANGE OFFER
United States. The exchange of Old Notes for Exchange Notes pursuant to the
Exchange Offer will not result in any federal income tax consequences to
holders. When a holder exchanges an Old Note for an Exchange Note pursuant to
the Exchange Offer, such holder will have the same adjusted basis and holding
period in the Exchange Note as in the Old Note immediately before the Exchange.
United Kingdom. The exchange of Old Notes for Exchange Notes pursuant to the
Exchange Offer will not result in any liability to United Kingdom taxation for
holders of Old Notes who are neither resident nor, in the case of a holder who
is an individual, ordinarily resident in the United Kingdom for the purposes of
United Kingdom taxation, and further who do not carry on a trade, profession or
vocation in the United Kingdom through a branch or agency in the United Kingdom
to which the Old Notes or the Exchange Notes are attributable.
Bermuda. The exchange of Old Notes for Exchange Notes pursuant to the Exchange
Offer will not result in any Bermuda tax consequences.
TAXATION OF U.S. HOLDERS OF THE SENIOR NOTES
Bermuda
Payments under the Guarantee. Under Bermuda law, no withholding or
deduction will be required to be made on account of payments made by Bermuda
Holdings under the Guarantee.
United Kingdom
Payments on the Senior Notes.
(a) The Senior Notes will constitute "quoted Eurobonds" provided they
continue to carry a right to interest and provided that they are and
continue to be in bearer form and quoted on a recognized stock exchange
(the New York Stock Exchange, Inc. is a recognized stock exchange for this
purpose).
(b) Payments of interest on Senior Notes which are and continue to be
quoted Eurobonds and are in global form and are held in a "recognized
clearing system" (DTC is so recognized) may be made without withholding or
deduction for or on account of UK income tax, provided that:
(i) payment is made direct to the recognized clearing system; or
(ii) payment is made to, or at the direction of, a depositary for
the recognized clearing system and the paying agent has obtained a
valid declaration PA 3 from the depositary; or
(iii) the paying agent has obtained a notice from the Inland
Revenue instructing the paying agent to pay the interest with no tax
deducted.
(c) If the Senior Notes are issued in definitive form and are and
continue to be quoted Eurobonds, then payments of interest on the Senior
Notes may be made without such withholding or deduction where:
(i) the person by or through whom the payment is made is not in
the UK; or
(ii) the payment is made by or through a person who is in the UK
and
(aa) the interest is paid on a Senior Note held in a recognized clearing
system as defined for the relevant purpose and one of the conditions set out in
paragraph (b)(i), (ii) and (iii) above is satisfied; or
(bb) a person who is not resident in the UK is beneficially entitled to the
interest and is the beneficial owner of the Senior Note on which the interest is
paid and either:
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(1) the paying agent obtains a valid declaration PA1 from the said
person on the occasion of each payment; or
(2) the paying agent obtains on the occasion of each payment a valid
declaration PA2 from another person who holds the Senior Notes for the non-
resident person and who is entitled to arrange for the interest to be paid
with no UK tax deducted; or
(iii) the paying agent has obtained a notice from the Inland Revenue
instructing the paying agent to pay the interest with no tax deducted.
In other cases, and in particular if either (A) payments on the Senior Notes
are made at a time they are not quoted on a recognized stock exchange or (B)
Definitive Senior Notes in registered form are issued, interest and Additional
Amounts, if any, will be paid after deduction of U.K. income tax at the lower
rate (currently 20%). A U.S. Holder of a Senior Note will normally be eligible
to recover in full any U.K. tax withheld from payments of interest to which such
U.S. Holder is beneficially entitled by making a claim for refund under the
U.S./U.K. Treaty on the appropriate form filed in duplicate with the Internal
Revenue Service Center Director with which such U.S. Holder's last U.S. federal
income tax return was filed. Alternatively, a claim may be made by a U.S. Holder
in advance of a payment of interest. If the claim is accepted by the U.K. Inland
Revenue, they will authorize subsequent payments to that U.S. Holder to be made
without the withholding of U.K. tax. Claims for refund must be made within six
years of the end of the U.K. year of assessment (generally April 5th in each
year) to which the interest related and must be accompanied by the original
statement provided by the Company (or any nominee holding the Senior Notes on
the U.S. Holder's behalf) when the interest payment was made showing the amount
of income tax deducted and when the interest payment was made. Because a claim
for refund is not considered until the U.K. Inland Revenue receives the
appropriate form from the IRS, forms should be sent to the IRS well before the
end of the applicable limitation period,
In the case of Senior Notes which are quoted Eurobonds, a person in the UK
who in the course of a trade or profession:
(i) by means of coupons, warrants or bills of exchange, collects or
secures payment of or receives interest on Senior Notes for a Noteholder;
or
(ii) arranges to collect or secure payment of interest on Senior
Notes for a Noteholder; or
(iii) acts as a custodian of such Notes and receives interest on such
Senior Notes or directs that interest on such Senior Notes be paid to
another person or consents to such payment will be required to withhold UK
income tax at the lower rate (currently 20%), subject to certain
exceptions, including the following:
(a) the Senior Notes are held in a recognized clearing system
and either:
(i) the collecting agent pays or accounts for the
interest directly or indirectly to the recognized clearing
system and where such payment or account is made to, or at the
direction of, a depositary for the recognized clearing system,
the collecting agent holds a valid declaration CA3 from the
depositary; or
(iii) the collecting agent is acting as depositary for the
recognized clearing system in respect of the Senior Notes; or
(b) the person beneficially entitled to the interest beneficially owns
the Senior Notes and is not resident in the UK and the collecting agent
either
(i) holds a valid declaration CA1 from the said person; or
(ii) holds a valid declaration CA2 from a person (other than
the beneficial owner of the Notes) to whom the interest is payable or
who is entitled to arrange for the interest to be collected without
deduction of UK tax and who is not a collecting agent in the UK.
Holders of Senior Notes who request Definitive Senior Notes in registered
form will not be entitled to the payment of any Additional Amounts in respect of
the U.K. tax withheld. In certain other cases in which Senior Notes are
exchanged for Definitive Senior Notes, U.S. Holders of Definitive Senior Notes
will be entitled to the payment of Additional Amounts in respect of the U.K. tax
withheld. See "Description of Senior Notes--Payment of Additional Amounts."
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Under provisions of the U.K. Finance Act 1995, interest on the Senior Notes
received without deduction or withholding will not be subject to U.K. tax by
direct assessment in the hands of a holder of Senior Notes who is not resident
for tax purposes in the U.K. unless that holder carries on a trade, profession
or vocation within the U.K. through a U.K. branch or agency in connection with
which the interest is received or to which the Senior Notes are attributable (in
which case certain exemptions may be available).
Sale or Disposition (including Redemption). A U.S. Holder (not resident or
ordinarily resident in the U.K. and not engaging in business in the U.K. through
a branch or agency) will not be subject to U.K. tax (including withholding tax)
on the sale, redemption (other than redemption at a premium), retirement or
other disposition of a Senior Note. Similarly, such a U.S. Holder will not be
subject to U.K. tax where an interest in the Global Note is exchanged for a
Definitive Senior Note.
For U.K. tax purposes, a disposal of a Senior Note by an individual holder
resident or ordinarily resident for U.K. tax purposes in the U.K. or who carries
on a trade, profession or vocation in the U.K. through a branch or agency to
which the Senior Note is attributable may give rise to a chargeable gain or
allowable loss for the purposes of taxation of capital gains. It should be noted
that, to calculate any gain on a disposal of Senior Notes, sterling values are
compared at acquisition and disposal. Accordingly, a taxable gain can arise on
maturity, for example, even where the amount of foreign currency received is
less than, or the same as, the amount paid for the Senior Notes. A transfer of a
Senior Note by an individual holder resident or ordinarily resident for U.K. tax
purposes in the U.K. or who carries on a trade in the U.K. through a branch or
agency to which the Senior Note is attributable may give rise to a charge to tax
on income in respect of an amount representing interest on the Senior Note which
has accrued since the preceding interest payment date.
In relation to a holder which is a company that is subject to U.K.
corporation tax (other than a company established for charitable purposes only,
authorized unit trusts and approved investment trusts and certain other
categories of company which are not taxable on chargeable gains), the Senior
Notes will be treated on disposal as "qualifying corporate bonds" with the
result that on a disposal of the Senior Notes by such a company, neither
chargeable gains nor allowable losses will arise for the purposes of taxation of
chargeable gains. Holders of Senior Notes who are within the charge to United
Kingdom corporation tax will be charged to tax generally on all profits and
gains (including interest and other accruals or, as the case may be, movements
in value, gains made on disposals and profits attributable to exchange rate
fluctuations) arising from the Senior Notes broadly in accordance with their
statutory accounting treatment. Such profits and gains will be charged to tax as
income in respect of each accounting period to which they are allocated for
accounting purposes. Relief may be available for related expenses and losses on
a similar basis.
U.K. Stamp Duty and Stamp Duty Reserve Tax. No U.K. Stamp Duty or Stamp
Duty Reserve Tax is payable on the issue of the Global Note or on the issue or,
once the Senior Notes are listed on the New York Stock Exchange, Inc. the
transfer by delivery of a Senior Note or on its redemption except that stamp
duty reserve tax (currently at the rate of 0.5%) could be payable on an
agreement to transfer any Senior Note issued after 25 November 1996 unless,
inter alia, the Senior Note is listed on a recognized stock exchange, does not
carry a right of conversion into securities not so listed and the agreement to
transfer the Senior Note is not made in contemplation of, or as part of an
arrangement for, a takeover of the Company.
Although the Issuer intends to list the Exchange Notes on the New York
Stock Exchange, Inc. it is not expected that the Exchange Notes will be listed
on the date of issue. During the period prior to such listing of the Exchange
Notes and the Old Notes, any agreement to transfer the Global Note or Senior
Note or any interest therein may be subject to Stamp Duty Reserve Tax if made
before such Senior Notes are so listed, unless it can be shown that (i) the
amount of interest and Additional Amounts payable on the Senior Notes neither
exceeds a reasonable commercial return on the nominal amount of the capital nor
falls to be determined to any extent by reference to the results of, or any part
of, a business or to the value of any property; (ii) the Senior Notes carry a
right on repayment to an amount which does not exceed the nominal value of the
capital (or if it does, such amount is reasonably comparable with what is
generally repayable (in respect of a similar nominal amount of capital) under
the terms of issue of loan capital listed in the Official List of The London
Stock Exchange); and (iii) the Senior Notes do not carry a right (exercisable
then or later) of conversion into shares or other securities, or to the
acquisition of shares or other securities, including loan capital of the same
description.
U.K. Inheritance Tax. Senior Notes represented by the Global Note that are
not treated as situated in the U.K. and are beneficially owned by an individual
domiciled outside the U.K. will not be subject to U.K. inheritance tax. If a
Senior Note is subject to U.K. inheritance tax and U.S. federal estate tax, the
U.S./U.K. convention for the avoidance of double taxation with respect to estate
and gift taxes may entitle a U.S. Holder to credit or relief in respect of the
U.K. tax.
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United States
Payments on the Senior Notes. For U.S. federal income tax purposes, a U.S.
Holder will include interest and Additional Amounts, if any, payable on the
Senior Notes in income when received or accrued in accordance with the U.S.
Holder's method of accounting. Such interest will constitute "foreign source
income" for foreign tax credit purposes.
Subject to certain limitations, a U.S. Holder would generally be required
to include the full amount of the interest payment (without reduction for the
U.K. withholding tax, if any) and Additional Amounts, if any, and would be
entitled to a credit against its U.S. federal income tax liability, or a
deduction in computing its U.S. federal taxable income, for U.K. taxes withheld
from payments of interest to which such U.S. Holder is beneficially entitled. In
the case of a U.S. Holder entitled to claim a refund of any U.K. tax withheld,
no U.S. foreign tax credit or deduction may be claimed for the amount of U.K.
tax eligible for a refund, whether or not such refund is sought, to the extent
that it is reasonably certain that such U.K. tax will be refunded. If a U.S.
Holder receives a refund of U.K. tax for which a deduction or foreign tax credit
was previously claimed, the U.S. Holder generally must (i) in the case of a
deduction, include the refund in gross income or (ii), in the case of a foreign
tax credit, notify the Service of the receipt of the refund, according to the
requirements of Section 1.905-4T of the Treasury Regulations or any successor
provisions, and the Service will redetermine the U.S. Holder's U.S. federal
income tax liability for the taxable year in which the credit was originally
claimed.
Sale or Disposition (including Redemption). For U.S. federal income tax
purposes, taxable gain or loss generally will be recognized by a U.S. Holder on
the sale, redemption, retirement or other disposition of the Senior Notes
measured by the difference between (1) the sum of (a) any cash and (b) the fair
market value of any property received (except in the case of a cash basis
taxpayer, to the extent the cash or property received is attributable to accrued
interest, which will be taxable as such) and (2) the U.S. Holder's tax basis in
the Senior Notes. Subject to the market discount rules discussed below, any gain
or loss recognized generally will be capital gain or loss. Any such gain
generally will constitute "U.S. source income" for foreign tax credit purposes.
Market Discount. A U.S. Holder (other than a U.S. Holder that makes the
election described below) that purchases a Senior Note at a market discount that
is not de minimis generally will be required to treat any gain realized upon the
disposition of such Senior Note as interest income to the extent of the market
discount accruing during the period such holder held such Senior Note. A U.S.
Holder may also be required to recognize as ordinary income any principal
payments with respect to a Senior Note to the extent such payments do not exceed
the accrued market discount on the Senior Note. For this purpose, market
discount generally equals the excess of the stated redemption price of the
Senior Note over the basis of the Senior Note in the hands of the holder
immediately after its acquisition. However, market discount is deemed not to
exist if the market discount is less than a statutorily defined de minimis
amount equal to 1/4 of 1 percent of the Senior Note's stated redemption price
multiplied by the number of complete years to the Senior Note's maturity after
the holder acquired the Senior Note.
The market discount rules also provide that a U.S. Holder of Senior Notes
that were acquired at a market discount may be required to defer the deduction,
until the Senior Notes are disposed of, of a portion of the interest on any
indebtedness incurred or maintained to acquire or carry the Senior Notes.
A U.S. Holder of a Senior Note acquired at a market discount may elect to
include market discount in income as the discount accrues. In such a case, the
foregoing rules with respect to the recognition of ordinary income on
dispositions and with respect to the deferral of interest deductions on
indebtedness related to such Senior Note would not apply. The current inclusion
election applies to all market discount obligations acquired on or after the
first day of the first taxable year to which the election applies, and may not
be revoked without the consent of the Service.
Amortizable Bond Premium. Generally, if the tax basis of an obligation held
as a capital asset exceeds the amount payable at maturity of the obligation,
such excess may constitute amortizable bond premium that the holder of such
obligation may elect to amortize under the constant interest rate method and
deduct over the period from the holder's acquisition date to the obligation's
maturity date. The amortizable bond premium deduction is treated as a reduction
of interest on the bond instead of as a deduction, except as Treasury
Regulations may otherwise provide. A holder that elects to amortize bond premium
must reduce its tax basis in the related obligation by the amount of the
aggregate deductions allowable for the amortizable bond premium. Any election to
amortize bond premium will apply to all bonds (other than bonds the interest on
which is excludible from gross income) held by the holder at the beginning of
the first taxable year
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to which the election applies or thereafter acquired by the holder. The election
may not be revoked without the consent of the Service.
In the case of an obligation, such as a Senior Note, that may be called at
a premium prior to maturity, an earlier call date is treated as its maturity
date, and the amount of bond premium is determined by treating the amount
payable on such call date as the amount payable at maturity if such a
calculation produces a smaller amortizable bond premium for the period ending on
such call date. If a U.S. Holder of a Senior Note is required to amortize and
deduct bond premium by reference to a call date, the Senior Note will be treated
for this purpose as maturing on such date for the amount payable, and, if not
redeemed on such date, as reissued on such date for the amount so payable. If a
Senior Note purchased at a premium is redeemed pursuant to a call prior to such
early call date or its maturity, a U.S. Holder that has elected to deduct bond
premium may deduct the excess of its adjusted basis in the Senior Note over the
amount received on redemption (or, if greater, the amount payable on maturity)
as an ordinary loss in the taxable year of redemption.
United States Information Reporting and Backup Withholding. In general,
U.S. information reporting requirements will apply to payments of principal,
premium and interest on a Senior Note and on the proceeds of the sale of a
Senior Note before maturity to a non-corporate U.S. Holder, and U.S. "backup
withholding" at a rate of 31% will apply to such payments if the U.S. Holder
fails to provide an accurate taxpayer identification number or to report all
interest and dividends required to be shown on its federal income tax returns.
The amount of any backup withholding from a payment to a U.S. Holder will
be allowed as a credit against such U.S. Holder's U.S. federal income tax
liability and may entitle such U.S. Holder to a refund, provided that the
required information is furnished to the Service.
ERISA CONSIDERATIONS
The Company, the obligor with respect to the Senior Notes, and its
affiliates may be considered a "party in interest" (within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to any employee benefit plans ("Plans") that are subject to ERISA. Any
purchaser proposing to acquire Senior Notes with assets of any Plan should
consult with its counsel. The purchase and/or holding of Senior Notes by a Plan
that is subject to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of Section 4975 of the Code (including
individual retirement arrangements and other plans described in Section
4975(e)(1) of the Code) and with respect to which the Issuer, Bermuda Holdings
or any affiliate is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such Senior Notes are acquired
pursuant to and in accordance with an applicable exemption, such as Prohibited
Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), PTCE 95-60 (an exemption for
transactions involving certain insurance company general accounts) or PTCE 96-23
(an exemption for certain transactions determined by an in-house professional
asset manager).
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Issuer and Bermuda Holdings by Clifford Chance, United Kingdom counsel for
the Issuer and Bermuda Holdings, and by Conyers, Dill & Pearman, Bermuda counsel
for the Issuer and Bermuda Holdings.
EXPERTS
The consolidated financial statements of Bermuda Holdings and its
subsidiaries as of December 31, 1996 and 1997 and for each of the three years in
the period ended December 31, 1997, incorporated by reference in this
Prospectus, have been incorporated herein in reliance upon the report of Coopers
& Lybrand (Hamilton, Bermuda), independent accountants, given on the authority
of that firm as experts in accounting and auditing.
48
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as having been authorized
by the Issuer or Bermuda Holdings. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, any of the Senior Notes in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create an implication
that the information contained herein is correct as of any time subsequent to
its date or that there has been no change in the affairs of the Issuer or
Bermuda Holdings since such date.
_____________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Available Information....................................................... 1
Incorporation of Certain Documents by Reference............................. 1
Enforceability of Civil Liabilities......................................... 2
Currency.................................................................... 2
Prospectus Summary.......................................................... 3
Company Overview............................................................ 3
The Exchange Offer.......................................................... 7
The Exchange Notes.......................................................... 10
Certain Consequences of a Failure to Exchange Old Notes..................... 11
Risk Factors................................................................ 13
Summary Consolidated Financial Data......................................... 18
Ratio of Earnings to Fixed Charges.......................................... 19
Use of Proceeds............................................................. 20
Capitalization.............................................................. 20
Description of Exchange Notes............................................... 21
Description of Depositary Agreement......................................... 33
Description of Old Notes.................................................... 37
The Exchange Offer.......................................................... 37
Plan of Distribution........................................................ 42
Certain Tax Considerations.................................................. 43
Erisa Considerations........................................................ 48
Legal Matters............................................................... 48
Experts..................................................................... 48
</TABLE>
Terra Nova Insurance (UK)
Holdings plc
OFFER TO EXCHANGE 7% SENIOR NOTES DUE
2008, WHICH WILL BE FULLY AND
UNCONDITIONALLY GUARANTEED ON A SENIOR
BASIS BY TERRA NOVA (BERMUDA) HOLDINGS
LTD. AND WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, FOR ANY AND ALL OUTSTANDING
7% SENIOR NOTES DUE 2008
______________
PROSPECTUS
______________
__________, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
THE ISSUER
The Issuer is a public limited company organized under the laws of England
and Wales. Sections 310 and 727 of the Companies Act of 1985, as amended (the
"Companies Act"), and Article 17 of the Issuer's Articles of Association provide
for the indemnification or exemption from liability, under the circumstances set
forth below, of officers and auditors of the Issuer against certain liabilities
in respect of negligence, default, breach of duty or breach of trust in relation
to the Issuer, and for the purchase and maintenance of insurance by the Issuer
on behalf of officers, directors, and auditors of the Issuer against certain
liabilities asserted against, and incurred by, any such officer, director, or
auditor in such capacity. Set forth below is the text of Sections 310 and 727 of
the Companies Act and the text of Article 17 of the Issuer's Articles of
Association.
Section 310 of the Companies Act of 1985, as amended, provides as follows:
"SEC. 310. Provisions exempting officers and auditors from liability.
310(1) This section applies to any provision, whether contained in a
company's articles or in any contract with the company or otherwise, for
exempting any officer of the company or any person (whether an officer or
not) employed by the company as auditor from, or indemnifying him against,
any liability which by virtue of any rule of law would otherwise attach to
him in respect of any negligence, default, breach of duty or breach of
trust of which he may be guilty in relation to the company.
310(2) Except as provided by the following subsection, any such provision
is void.
310(3) This section does not prevent a company --
(a) from purchasing and maintaining for any such officer or auditor
insurance against any such liability, or
(b) from indemnifying any such officer or auditor against any liability
incurred by him --
(i) in defending any proceedings, (whether civil or criminal) in
which judgment is given in his favour or he is acquitted, or
(ii) in connection with any application under section 144(3) or (4)
(acquisition of shares by innocent nominee) or section 727
(general power to grant relief in case of honest and reasonable
conduct) in which relief is granted to him by the court."
Section 727 of the Companies Act 1985 provides:
"(1) If in any proceedings for negligence, default, breach of duty or
breach of trust against an officer of a company or a person employed by a
company as auditor (whether he is or is not an officer of the company) it
appears to the court hearing the case that that officer or person is or may be
liable in respect of the negligence, default, breach of duty or breach of trust,
but that he has acted honestly and reasonably, and that having regard to all the
circumstances of the case (including those connected with his appointment) he
ought fairly to be excused for the negligence, default, breach of duty or breach
of trust, that court may relieve him, either wholly or partly, from his
liability on such terms as it thinks fit.
(2) If any such officer or person as abovementioned has reason to apprehend
that any claim will or might be made against him in respect of any negligence,
default, breach of duty or breach of trust, he may apply to the court for
relief; and the court on the application has the same power to relieve him as
under this section it would have had if it had been a court before which
proceedings against that person for negligence, default, breach of duty or
breach of trust had been brought.
(3) Where a case to which subsection (1) applies is being tried by a judge
with a jury, the judge, after hearing the evidence, may, if he is satisfied that
the defendant or defender ought in pursuance of that subsection to be relieved
either in whole or in part from the liability sought to be enforced against him,
withdraw the case in whole or in part from the
II-1
<PAGE>
jury and forthwith direct judgment to be entered for the defendant or defender
on such terms as to costs or otherwise as the judge may think proper."
Article 17 of the Issuer's Articles of Association provides as follows:
"17.(1) subject to the provisions of and to the extent permitted by the
Statutes, every director, other officer or auditor of the Company
shall be indemnified out of the assets of the Company against any
liability incurred by him in the actual or purported execution or
discharge of his duties or the exercise or purported exercise of
his powers or otherwise in relation to or in connection with his
duties, powers or office, but:
(a) this indemnity shall not apply to any liability to the extent that
it is recovered from any other person; and
(b) the indemnity is subject to such officer or auditor taking all
reasonable steps to effect such recovery, so that the indemnity
shall not apply to the extent that an alternative right of
recovery is capable of being enforced.
17.(2) Regulation 188 of Table A shall not apply."
As of December 31, 1997, Bermuda Holdings had purchased primary directors
and officers liability insurance from New Hampshire Insurance Company (Europe)
in the amount of (Pounds)12.5 million, with excess cover of (Pounds)7.5 million
provided by Executive Risk Insurance Company and further excess cover of
(Pounds)5 million provided by ACE Insurance Company, covering directors and
officers of Bermuda Holdings and its subsidiaries including those of the Issuer.
BERMUDA HOLDINGS
Bermuda Holdings is a company organized under the Laws of Bermuda. Sections
98 and 98A of the Companies Act of 1981 of Bermuda and Article 28 of the Bye-
Laws of Bermuda Holdings provide for the indemnification, except under
circumstances set forth below, of directors, officers or auditors of Bermuda
Holdings from losses or liabilities occurring in connection with their execution
of their duties or supposed duties in such capacities, and for the purchase and
maintenance of insurance by Bermuda Holdings on behalf of its directors and
officers against any liabilities asserted against such directors or officers by
virtue of a violation of their duties in such capacities. Set forth below is the
text of Sections 98 and 98A of the Companies Act of 1981 of Bermuda and the text
of Article 28 of the Bye-Laws of Bermuda Holdings.
Section 98 of the Companies Act of 1981 of Bermuda provides:
"(1) Subject to subsection (2), a company may in its bye-laws or in any
contract or arrangement between the company and any officer, or any person
employed by the company as auditor, exempt such officer or person from, or
indemnify him in respect of, any loss arising or liability attaching to him
by virtue of any rule of law in respect of any negligence, default, breach
of duty or breach of trust of which the officer or person may be guilty in
relation to the company or any subsidiary thereof.
(2) Any provision, whether contained in the bye-laws of a company or in
any contract or arrangement between the company and any officer, or any
person employed by the company as auditor, exempting such officer or person
from, or indemnifying him against any liability which by virtue of any rule
of law would otherwise attach to him in respect of any fraud or dishonesty
of which he may be guilty in relation to the company shall be void.
Provided that --
(a) nothing in this section shall operate to deprive any person of any
exemption or right to be indemnified in respect of anything done or
omitted to be done by him while any such provision was in force; and
(b) notwithstanding anything in this section, a company may, in
pursuance of any such provision as aforesaid indemnify any such officer
or auditor against any liability incurred by him in defending any
proceedings, whether civil or criminal in which judgment is given in his
favor or in which he is acquitted or when relief is granted to him by the
Court under section 281."
Section 98A of the Companies Act 1981 of Bermuda provides as follows:
II-2
<PAGE>
"98A A company may purchase and maintain insurance for the benefit of any
officer of the company against any liability incurred by him under
paragraph (b) of subsection (1) of Section 97 in his capacity as an officer
of the Company or indemnifying such an officer in respect of any loss
arising or liability attaching to him by virtue of any rule of law in
respect of any negligence, default, breach of duty or breach of trust of
which the officer may be guilty in relation to the company or any
subsidiary thereof and nothing in this Act shall make void or voidable any
such policy."
(Section 97(1)(b), referenced in Section 98A, provides that every officer of a
company in exercising his powers and discharging his duties shall "exercise the
care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.")
Article 28 of the Bye-Laws of Bermuda Holdings provides as follows:
"(a) The Directors, Secretary and other Officers for the time being of the
Company and the liquidator or trustees (if any) for the time being acting
in relation to any of the affairs of the Company and every one of them, and
their heirs, executors and administrators, shall be indemnified and secured
harmless out of the assets of the Company from and against all actions,
costs, charges, losses, damages and expenses which they or any of them,
their heirs, executors or administrators, shall or may incur or sustain by
or by reason of any act done, concurred in or omitted in or about the
execution of their duty, or supposed duty, or in their respective offices
or trusts, and none of them shall be answerable for the acts, receipts,
neglects or defaults of the others of them or for joining in any receipts
for the sake of conformity, or for the acts of or the solvency or honesty
of any bankers or other persons with whom any moneys or effects belonging
to the Company shall or may be lodged or deposited for safe custody, or for
insufficiency or deficiency of any security upon which any moneys of or
belonging to the Company shall be placed out on or invested, or for any
other loss, misfortune or damage which may happen in the execution of their
respective offices or trusts, or in relation thereto, PROVIDED THAT this
indemnity shall not extend to any matter in respect of any wilful
negligence, wilful default, fraud or dishonesty which may attach to any of
said persons.
(b) Every Director and Officer of the Company shall be indemnified out of
the funds of the Company against all liabilities incurred by him as such
Director or Officer of the Company in defending any proceedings, whether
civil or criminal, in which judgment is given in his favor, or in which he
is acquitted, or in connection with any application under the Companies
Acts in which relief from liability is granted to him by the court. Such
funds shall be advanced to such Director or Officer on his incurring
liability prior to judgment provided that should he be found guilty of a
criminal or other offense for which he cannot by law be indemnified he
shall reimburse the Company the funds advanced."
As of December 31, 1997, Bermuda Holdings had purchased primary directors
and officers liability insurance from New Hampshire Insurance Company (Europe)
in the amount of (Pounds)12.5 million, with excess cover of (Pounds)7.5
million provided by Executive Risk Insurance Company and further excess cover of
(Pounds)5 million provided by ACE Insurance Company.
II-3
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C>
1.1 -- Registration Rights Agreement, dated August 20, 1997, among
the Issuer, Bermuda Holdings and the Initial Purchaser.**
1.2 -- Registration Rights Agreement, dated May 18, 1998, among the
Issuer, Bermuda Holdings and the Initial Purchaser.*
3.1 -- Copy of Memorandum and Articles of Association of the Issuer
dated November 1, 1994 (filed as Exhibit 3.1 to the Issuer's
Registration Statement on Form F-1, Registration No. 33-93358-
01, and incorporated herein by reference).
3.2 -- Certificate of Incorporation and Memorandum of Association of
Bermuda Holdings dated November 29, 1993 (filed as Exhibit
3.2 to Bermuda Holdings' Registration Statement on Form S-1,
Registration No. 33-93358, and incorporated herein by
reference).
3.3 -- Amended and Restated Bye-Laws of Bermuda Holdings dated March
25, 1996 (filed as Exhibit 3.2 to Bermuda Holdings'
Registration Statement on Form S-1, Registration No. 333-
1726, and incorporated herein by reference).
4.1 -- Indenture, dated August 26, 1997, among the Issuer, Bermuda
Holdings, and The Chase Manhattan Bank, as Trustee.**
4.2 -- Indenture, dated May 18, 1998, among the Issuer, Bermuda
Holdings and The Chase Manhattan Bank, as Trustee.*
4.3 -- Deposit and Custody Agreement, dated August 26, 1997, among
the Issuer, Bermuda Holdings, Chase Manhattan Bank
Luxembourg, S.A. as Custodian, and The Chase Manhattan Bank,
as Depositary.**
4.4 -- Deposit and Custody Agreement, dated May 18, 1998, among the
Issuer, Bermuda Holdings, Chase Manhattan Bank Luxembourg
S.A. as Custodian, and the The Chase Manhattan Bank, as
Depositary.
4.5 -- Form of Global Note. Included as Exhibit A to the Indenture
previously filed as Exhibit 4.2.*
4.6 -- Form of Global Receipt. Included as Exhibit C to the Deposit
and Custody Agreement filed herewith as Exhibit 4.4.
5.1 -- Opinion of Clifford Chance as to the legality of the Exchange
Notes.
5.2 -- Opinion of Conyers, Dill & Pearman as to the legality of the
Guarantee.
5.3 -- Opinion of Milbank, Tweed, Hadley & McCloy as to the legality
of the Global Receipt.
8.1 -- Opinion of Clifford Chance as to U.K. tax matters relative to
the Exchange Notes.
8.2 -- Opinion of Conyers, Dill & Pearman as to Bermuda tax matters
relative to the Guarantee.
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
10.1 -- DTI Notice of Requirements (filed as Exhibit 10.23 of the Issuer's
Registration Statement on Form S-1, Registration No. 33-93358, and
incorporated herein by reference).
11.1 -- Statement re computation of per share earnings (filed as Exhibit 11.1 to
Bermuda Holdings' Annual Report on Form 10-K for the year ended December 31,
1997, Commission File Number 001-13834, and incorporated herein by
reference).
12.1 -- Statement Re Computation of Ratios.
21.1 -- Subsidiaries of the Issuer and Bermuda Holdings.**
23.1 -- Consents of Clifford Chance (included in Exhibits 5.1 and 8.1).
23.2 -- Consents of Conyers, Dill & Pearman (included in Exhibits 5.2 and 8.2).
23.3 -- Consent of Coopers & Lybrand.
24.1 -- Power of Attorney of the Officers and Directors of the Issuer.*
24.2 -- Power of Attorney of the Officers and Directors of Bermuda Holdings.*
25.1 -- Statement of Eligibility of Trustee on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Record Holders.
99.4 -- Form of Letter to Beneficial Holders.
99.5 -- Form of Instruction from Owner.
</TABLE>
* Previously filed.
** Incorporated by reference to the Issuer's Registration Statement on
Form F-4/S-4 (Registration No. 333-38063) filed with the
Commission.
(B) FINANCIAL STATEMENT SCHEDULES.
Financial statement schedules of the registrants for which provision is
made in the applicable accounting regulations of the Commission are not
required, are inapplicable or have been disclosed in the notes to the financial
statements and therefore have been omitted.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 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 and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by
II-5
<PAGE>
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question 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 undertakes (i) to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b) or 11 of Form F-4 and Form S-4, within one business
day of receipt of such request, and to send the incorporated documents by first
class-mail or other equally prompt means; and (ii) to arrange or provide for a
facility in the U.S. for the purpose of responding to such requests. The
undertaking in subparagraph (i) above includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(e) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(f) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (e) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes 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.
(g) The Depositary hereby undertakes to make available at the principal
office of the Depositary in the United States, for inspection by holders of the
Receipt, any reports and communications received from the issuer of the
deposited security which are both (1) received by the Depositary as the holder
of the deposited security, and (2) made generally available to the holders of
the underlying security by the Issuer.
(h) If the amounts of fees charged are not disclosed in the prospectus,
the Depositary undertakes to prepare a separate document stating the amount of
any fee charged and describing the service for which it is charged and to
deliver promptly a copy of such fee schedule without charge to anyone upon
request. The Depositary undertakes to notify each registered holder of a
Receipt thirty days before any change in the fee schedule.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this Amendment No. 1 to the Registration Statement on Form S-4, to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Hamilton, Bermuda, on June 16, 1998.
TERRA NOVA (BERMUDA)
HOLDINGS LTD.
By /s/ Jean M. Waggett
--------------------------------
Jean M. Waggett, as Attorney-in-Fact
June 16, 1998
Pursuant to the requirements of this Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
John J. Dwyer* Chairman and Director
Nigel H.J. Rogers* Chief Executive Officer
(Principal Executive and
Accounting Officer) and Director
William J. Wedlake* Chief Financial Officer
(Principal Financial Officer)
John Riddick* Deputy Chairman and Director
David L. Jaffe* Director
Philip F. Petronis* Director
Allan W. Fulkerson* Director
Robert S. Fleischer* Director
Steven J. Gilbert* Director
</TABLE>
* By power of attorney authorizing Jean M. Waggett to execute the Registration
Statement and amendments and/or post-effective amendments and supplements
thereto on behalf of Terra Nova (Bermuda) Holdings Ltd. and its directors and
officers.
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this Amendment No. 1 to the Registration Statement on Form F-4, to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Hamilton, Bermuda, on June 16, 1998.
TERRA NOVA (BERMUDA)
HOLDINGS LTD.
By /s/ Jean M. Waggett
------------------------------------
Jean M. Waggett, as Attorney-in-Fact
June 16, 1998
Pursuant to the requirements of this Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
John Riddick* Chairman and Managing Director
(Principal Executive Officer)
William J. Wedlake* Chief Financial Officer
(Principal Financial Officer
and Accounting Officer)
John J. Dwyer* Director
Nigel H. J. Rogers* Director
</TABLE>
* By power of attorney authorizing Jean M. Waggett to execute the Registration
Statement and amendments and/or post-effective amendments and supplements
thereto on behalf of Terra Nova Insurance (UK) Holdings plc and its directors
and officers.
II-8
<PAGE>
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement on Forms S-4 and F-4 has been
signed below by the undersigned as the duly authorized representative of the
Issuer and Bermuda Holdings in the United States.
By: /s/ Jean M. Waggett
--------------------
Jean M. Waggett
New York, New York
June 16, 1998
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this Registration Statement to be signed
solely with respect to the disclosure and undertakings made in response to the
requirements of Parts I and II to the Form F-6 on its behalf by the undersigned,
thereto duly authorized, in the City of New York, State of New York on June 16,
1998.
Legal entity created by the agreement for the issuance of a
Global Receipt representing Senior Notes of Terra Nova
Insurance (UK) Holdings plc
By: The Chase Manhattan Bank, as Depositary
By: /s/ David G. Safer
---------------------------------------------
Name: David G. Safer
Title: Senior Trust Officer
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION OF DOCUMENT PAGE
- -------- ----------------------- ----
<S> <C>
1.1 -- Registration Rights Agreement, dated August 20, 1997, among
the Issuer, Bermuda Holdings and the Initial Purchaser.**
1.2 -- Registration Rights Agreement, dated May 18, 1998, among the
Issuer, Bermuda Holdings and the Initial Purchaser.*
3.1 -- Copy of Memorandum and Articles of Association of the Issuer
dated November 1, 1994 (filed as Exhibit 3.1 to the Issuer's
Registration Statement on Form F-1, Registration No. 33-93358-
01, and incorporated herein by reference).
3.2 -- Certificate of Incorporation and Memorandum of Association of
Bermuda Holdings dated November 29, 1993 (filed as Exhibit
3.2 to Bermuda Holdings' Registration Statement on Form S-1,
Registration No. 33-93358, and incorporated herein by
reference).
3.3 -- Amended and Restated Bye-Laws of Bermuda Holdings dated March
25, 1996 (filed as Exhibit 3.2 to Bermuda Holdings'
Registration Statement on Form S-1, Registration No. 333-
1726, and incorporated herein by reference).
4.1 -- Indenture, dated August 26, 1997, among the Issuer, Bermuda
Holdings, and The Chase Manhattan Bank, as Trustee.**
4.2 -- Indenture, dated May 18, 1998, among the Issuer, Bermuda
Holdings and The Chase Manhattan Bank, as Trustee.*
4.3 -- Deposit and Custody Agreement, dated August 26, 1997, among
the Issuer, Bermuda Holdings, Chase Manhattan Bank
Luxembourg, S.A. as Custodian, and The Chase Manhattan Bank,
as Depositary.**
4.4 -- Deposit and Custody Agreement, dated May 18, 1998, among the
Issuer, Bermuda Holdings, Chase Manhattan Bank Luxembourg
S.A. as Custodian, and the The Chase Manhattan Bank, as
Depositary.
4.5 -- Form of Global Note. Included as Exhibit A to the Indenture
previously filed as Exhibit 4.2.*
4.6 -- Form of Global Receipt. Included as Exhibit C to the Deposit
and Custody Agreement filed herewith as Exhibit 4.4.
5.1 -- Opinion of Clifford Chance as to the legality of the Exchange
Notes.
5.2 -- Opinion of Conyers, Dill & Pearman as to the legality of the
Guarantee.
5.3 -- Opinion of Milbank, Tweed, Hadley & McCloy as to the legality
of the Global Receipt.
8.1 -- Opinion of Clifford Chance as to U.K. tax matters relative to
the Exchange Notes.
8.2 -- Opinion of Conyers, Dill & Pearman as to Bermuda tax matters
relative to the Guarantee.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.1 -- DTI Notice of Requirements (filed as Exhibit 10.23 of the Issuer's
Registration Statement on Form S-1, Registration No. 33-93358, and
incorporated herein by reference).
11.1 -- Statement re computation of per share earnings (filed as Exhibit 11.1 to
Bermuda Holdings' Annual Report on Form 10-K for the year ended December 31,
1997, Commission File Number 001-13834, and incorporated herein by
reference).
12.1 -- Statement Re Computation of Ratios.
21.1 -- Subsidiaries of the Issuer and Bermuda Holdings.**
23.1 -- Consents of Clifford Chance (included in Exhibits 5.1 and 8.1).
23.2 -- Consents of Conyers, Dill & Pearman (included in Exhibits 5.2 and 8.2).
23.3 -- Consent of Coopers & Lybrand.
24.1 -- Power of Attorney of the Officers and Directors of the Issuer.*
24.2 -- Power of Attorney of the Officers and Directors of Bermuda Holdings.*
25.1 -- Statement of Eligibility of Trustee on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Record Holders.
99.4 -- Form of Letter to Beneficial Holders.
99.5 -- Form of Instruction from Owner.
</TABLE>
* Previously filed.
** Incorporated by reference to the Issuer's Registration Statement on
Form F-4/S-4 (Registration No. 333-38063) filed with the
Commission.
<PAGE>
EXHIBIT 4.4
DEPOSIT AND CUSTODY AGREEMENT
Deposit and Custody Agreement, dated as of May 18, 1998, among The
Chase Manhattan Bank, as depositary (the "Depositary"), Chase Manhattan Bank
Luxembourg S.A., as custodian (the "Custodian"), The Chase Manhattan Bank, as
trustee (the "Trustee"), Terra Nova Insurance (UK) Holdings plc (the "Issuer")
and Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings").
ARTICLE I
Definitions
SECTION 1.01. Definitions. For all purposes of this Agreement,
-----------
except as otherwise provided herein, the following terms have the following
meanings:
"Beneficial Owner" shall mean any person holding any Book-Entry
Interest other than the Holder; it being understood that the term "Beneficial
Owner" shall not include any agent or financial intermediary holding an interest
in a Global Note solely to the extent such interest is held for or on behalf of
any Beneficial Owner.
"Book-Entry Interest" shall mean any beneficial interest in a Global
Note.
"Corporate Trust Office" shall mean the principal office of the
Depositary at which at any particular time its corporate trust business shall be
administered, which office at the date of original execution of this Deposit and
Custody Agreement is located at 450 West 33rd Street, 15th Floor, New York, New
York 10001.
"Definitive Senior Notes" shall mean any Senior Notes issued under the
Indenture, substantially in the form of Exhibit C to the Indenture.
"Deposit and Custody Agreement" shall mean this Agreement, as the same
may be amended from time to time in accordance with the provisions hereof.
"DTC" shall mean The Depository Trust Company.
<PAGE>
"Exchange Act" shall mean the United States Securities and Exchange
Act of 1934, as from time to time amended.
"Exchange Note Global Receipt" means the global receipt representing
beneficial ownership of 100% of the principal amount of the Exchange Notes
substantially in the form of Exhibit C to the Agreement.
"Global Notes" shall mean, collectively, the Regulation S Global Note
and the Restricted Global Note (as defined in the Indenture), each in bearer
form, substantially in the form of Exhibits A and B to the Indenture and the
global note in bearer form representing the Exchange Notes (as defined in the
Indenture).
"Global Receipts" shall mean, collectively, the Restricted Global
Receipt, the Regulation S Global Receipt (each as defined in the Indenture), and
the Exchange Note Global Receipt.
"Holder" shall mean the person in whose name a Global Receipt is
registered on the Register and shall initially be Cede & Co. as the nominee of
DTC or such other nominee as DTC shall designate.
"Indenture" shall mean the Indenture, dated as of May 18, 1998, among
the Issuer, Bermuda Holdings, as Guarantor of the Senior Notes, and the Trustee,
as trustee.
"Letter of Representations" shall mean the Letter of Representations
to DTC dated May 15, 1998 from the Issuer and the Depositary.
"Register" shall mean the Register maintained by the Depositary
hereunder in which any permitted transfer of a Global Receipt shall be
registered.
"Securities Act" shall mean the United States Securities Act of 1933,
as from time to time amended.
"Senior Notes" shall mean the 7% Senior Notes due 2008 of the Issuer,
issued under the Indenture.
SECTION 1.02. Other Terms. Terms which are not otherwise defined
-----------
herein have the meanings given to them in the Indenture.
2
<PAGE>
ARTICLE II
Form of Receipt, Deposit of Global Notes,
Execution and Delivery, Transfer and
Exchange for Definitive Notes
SECTION 2.01. Deposit of Global Notes. The Custodian hereby agrees
-----------------------
to accept custody of the Global Notes from the Trustee as instructed by the
Issuer and to act as custodian thereof on behalf of the Depositary in accordance
with the terms of this Deposit and Custody Agreement. The Custodian agrees to
hold the Global Notes at such place or places as the Depositary shall determine
with the consent of the Issuer.
SECTION 2.02. Execution and Delivery of Global Receipt. (a) Upon
-------------------------------- -------
deposit of each Global Note with the Custodian, the Depositary shall execute and
deliver to DTC a Global Receipt registered in the name of DTC's nominee, Cede &
Co. Such Global Receipt shall represent beneficial ownership of 100% of the
principal amount from time to time of the underlying Global Note. No person
shall be required to account to the Depositary or the Custodian for the proceeds
of the sale of interests in a Global Receipt representing a Global Note.
(b) Upon deposit of the global note representing the Exchange Notes
(as defined in the Indenture), the Depository shall execute and deliver to DTC
the Exchange Note Global Receipt upon surrender by DTC to the Depository of the
Restricted Global Receipt and the Regulation S Global Receipt for cancellation
(if the underlying Global Notes have all been exchanged for Exchange Notes) or
appropriate adjustment to reflect the remaining principal amount of the
underlying Global Notes (if less than all of the underlying Global Notes have
been so exchanged).
(c) Each Global Receipt shall bear the following legend:
UNLESS THIS GLOBAL RECEIPT IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION, TO THE DEPOSITARY UNDER THE DEPOSIT AND CUSTODY
AGREEMENT DATED AS OF MAY 18, 1998 AMONG THE CHASE MANHATTAN
BANK, AS DEPOSITARY, CHASE MANHATTAN BANK LUXEMBOURG S.A.,
AS CUS-
3
<PAGE>
TODIAN, THE CHASE MANHATTAN BANK, AS TRUSTEE, TERRA NOVA
INSURANCE (UK) HOLDINGS PLC, AND TERRA NOVA (BERMUDA)
HOLDINGS LTD FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY GLOBAL RECEIPT ISSUED IS REGISTERED IN THE
NAME CEDE & CO., OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY,
AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
(d) The Restricted Global Receipt shall bear the following legend:
THIS GLOBAL RECEIPT HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING ITS INTEREST IN THIS GLOBAL RECEIPT
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL
OR OTHERWISE TRANSFER ITS INTEREST IN THIS GLOBAL RECEIPT
EXCEPT, (A) TO BERMUDA HOLDINGS OR ANY SUBSIDIARY THEREOF,
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN
4
<PAGE>
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, OR (D)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM ITS INTEREST IN THIS GLOBAL RECEIPT IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF ITS INTEREST IN
THIS GLOBAL RECEIPT WITHIN THE TIME PERIOD REFERRED TO
ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
IN THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THE CERTIFICATE ON THE REVERSE THEREOF
TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF AN INTEREST IN
THIS GLOBAL RECEIPT IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(e) Each Global Receipt may be endorsed with or have incorporated in
the text thereof such other legends or recitals or changes not inconsistent with
the provisions of this Deposit and Custody Agreement and the Indenture as may be
required by the Depositary or DTC or required to comply with any applicable law
or regulations or with the rules and regulations of any securities exchange upon
which the Senior Notes or interests in such Global Receipt may be listed or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which such Global Receipt is subject by reason of
the date or manner of issuance of the underlying Global Note or otherwise.
(f) Neither the Holder nor any Beneficial Owner shall be entitled to
any benefits under this Deposit and Custody Agreement nor shall any Global
Receipt be valid or obligatory for any purpose, unless such Global Receipt shall
have been executed by the Depositary by the manual or facsimile signature of a
duly authorized signatory of the Depositary. If the Global Receipt bears the
facsimile signature of a
5
<PAGE>
duly authorized signatory of the Depositary who was at any time a proper
signatory of the Depositary, it shall bind the Depositary, notwithstanding that
such signatory has ceased to hold such office prior to the execution and
delivery of such Global Receipt by the Depositary.
(g) It shall be a condition of Global Receipts, and every successive
Holder or Beneficial Owner by holding or beneficially owning a Global Receipt
shall be deemed to have consented and agreed, that title to such Global Receipt,
when properly endorsed or accompanied by proper instruments of transfer, is
transferable by delivery with the same effect as in the case of a negotiable
instrument; provided, however, that the Depositary, notwithstanding any notice
to the contrary, may treat the Holder as the absolute owner thereof for the
purpose of determining the person entitled to payments on such Global Receipt
under the Deposit and Custody Agreement or to any notices provided for in the
Deposit and Custody Agreement and for all other purposes.
SECTION 2.03. Book-entry System. (a) DTC has accepted the Global
-----------------
Receipts for entry into its book-entry settlement system. Each Beneficial Owner
must rely upon the procedures of DTC and institutions having accounts with DTC
to exercise or be entitled to any rights of a Holder. So long as the Global
Receipts are traded through DTC's book-entry system, ownership of Book-Entry
Interests shall be shown in, and the transfer of such ownership shall be
effected only through, records maintained by (i) DTC or its nominees or (ii)
institutions that have accounts with DTC.
(b) The Global Receipts shall be issuable to DTC or its nominee. No
Beneficial Owner shall be entitled to receive a Global Receipt, and such
Beneficial Owner's interest in such Global Note shall be shown only in
accordance with the procedures of DTC as set forth above.
SECTION 2.04. Transfer of Global Receipts. The Depositary shall
---------------------------
maintain the Register in which any permitted transfer of a Global Receipt shall
be registered. The person in whose name a Global Receipt is registered on the
Register shall be the "Holder" of such Global Receipt for the purposes of this
Deposit and Custody Agreement. So long as a Global Receipt is registered in the
name of DTC or its nominee, the Depositary shall treat DTC as the absolute owner
thereof for all purposes whatsoever and shall not be bound or affected by any
notice to the contrary, other than an order of a court having jurisdiction over
the Depositary. The Depositary shall not recognize any transfer, exchange or
payment in respect of a Global Receipt except in accordance with this Section
2.04 and the legend set forth in Section 2.01 hereof. The Depositary shall not
recognize any transfers of a Global Receipt except to
6
<PAGE>
a successor of DTC which is (i) a clearing agency registered under the Exchange
Act and (ii) approved by the Issuer, or to another nominee of DTC.
Transfers of a Global Receipt may be registered on the books of the
Depositary by the Holder in person or its duly authorized attorney upon
surrender of such Global Receipt to the Depositary at its Corporate Trust Office
accompanied by proper instruments of transfer and duly stamped as may be
required by applicable law, provided that such Global Receipt may only be
transferred in accordance with the terms hereof.
Transfers of interest between the Restricted Global Receipt and the
Regulation S Global Receipt may only take place under circumstances where the
Trustee would be entitled to register transfers between the Restricted Global
Note and the Regulation S Global Note as set forth in Section 2.12 of the
Indenture.
SECTION 2.05. Issuance of Definitive Notes In Respect of the Senior
-----------------------------------------------------
Notes. (a) If an Event of Default (as defined in the Indenture) has occurred
- -----
and is continuing, upon receipt by the Depositary at its Corporate Trust Office
of written instructions from the Holder requesting the issuance of Definitive
Senior Notes in respect of a portion of a Global Note, the Depositary shall, on
behalf of the Custodian, request in accordance with Section 2.6 of the Indenture
that the Issuer issue, and the Trustee authenticate, Definitive Senior Notes in
the amounts and registered in the names specified in the request.
(b) The Depositary and the Custodian acknowledge that if at any time
(i) DTC notifies the Issuer and the Depositary that it is unwilling or unable to
continue as Holder or if at any time it ceases to be a clearing agency
registered under the Exchange Act, and in either case a successor Holder
registered as a clearing agency under the Exchange Act is not appointed by the
Issuer within 90 days of such notification, or (ii) the Custodian or the
Depositary, as the case may be, notifies the Trustee and the Issuer in
accordance with Section 4.06 hereof that it is unwilling or unable to continue
as Custodian or Depositary, as the case may be, and no successor Custodian or
Depositary, as the case may be, is appointed by the Issuer within 90 days of
such notification or (iii) the Issuer determines Definitive Senior Notes shall
be issued, then the Issuer shall issue, and the Trustee shall authenticate,
Definitive Senior Notes registered in the name or names of such person or
persons as the Depositary shall instruct the Trustee on behalf of the Custodian.
The Depositary agrees to promptly provide such information to the Trustee as is
provided to the Depositary by the Holder.
7
<PAGE>
(c) The Depositary agrees to promptly notify the Custodian and the
Trustee of any request by the Holder for the issuance of Definitive Senior
Notes. The Custodian agrees that in connection with any request for the
issuance of Definitive Senior Notes as contemplated by this Section 2.05, upon
notice by the Depositary, it will promptly surrender the Global Note underlying
such Holder's Global Receipt to the Trustee who shall cause an adjustment to be
made to such Global Note such that the aggregate principal amount of such Global
Note shall be reduced by the principal amount of the Definitive Senior Notes
issued pursuant to such request and shall thereafter return such Global Note (as
so adjusted) to the Custodian. Upon the issuance of Definitive Senior Notes as
set forth above, such Global Receipt shall automatically represent beneficial
ownership of 100% of the underlying Global Note, as adjusted to reflect the
reduction in aggregate principal amount; provided, however, that DTC, in its
discretion (a) may request that the Depository issue a new Global Receipt or (b)
may make an appropriate notation on such Global Receipt indicating the date and
amount of such reduction in principal. The Depositary and the Custodian
acknowledge and agree that in the event that Definitive Senior Notes are issued
in respect of 100% of the outstanding principal amount of the Senior Notes,
underlying Global Note and Global Receipt shall be automatically cancelled and
the Custodian agrees to surrender such Global Note to the Trustee.
(d) Exchanges of Book-Entry Interests for Definitive Senior Notes
pursuant to this Section 2.05 shall be made free of any fees of the Depositary
to the Holder.
SECTION 2.06. Transfer of Global Note. The Custodian agrees to hold
-----------------------
the Global Notes in custody for the benefit of the Depositary, the Holder and
the Beneficial Owners. The Custodian agrees that it will not transfer or lend a
Global Note or any interest therein except that the Custodian may transfer a
Global Note to a successor custodian which is a branch of a United States bank
located outside of the United States and outside of the United Kingdom which has
been approved by the Issuer and the Depositary. The Custodian shall surrender a
Global Note to the Trustee (i) if it notifies the Trustee and the Issuer under
Section 4.06 hereof that it desires to resign as Custodian and no successor
custodian has been appointed by the Issuer (which appointment is subject to the
approval of the Depositary, which shall not unreasonably withhold such approval)
within 90 days of such notification or (ii) if the Depositary notifies the
Trustee and the Issuer under Section 4.06 hereof that it desires to resign as
Depositary and no successor depositary has been appointed by the Issuer (which
appointment is subject to the approval of the Trustee, which shall not
unreasonably withhold such approval) within 90 days of such notification. In
the case of clauses (i) and (ii) of the preceding sentence, the Depositary
agrees that after either of such 90 day
8
<PAGE>
periods it will, on behalf of the Custodian, promptly notify the Trustee and
request the Issuer to issue, and the Trustee to authenticate, Definitive Senior
Notes in the names and denominations as the Holder shall specify in accordance
with Section 2.6 of the Indenture, and the Custodian agrees that in such event
it will promptly surrender the Global Notes to the Trustee in connection with
such exchange and that such Global Notes will be cancelled upon issuance of such
Definitive Senior Notes.
SECTION 2.07. Replacement of Global Receipts; Mutilated, Destroyed,
-----------------------------------------------------
Lost or Stolen Global Receipt. In case a Global Receipt shall be mutilated,
- -----------------------------
destroyed, lost or stolen, the Depositary shall execute and deliver a new Global
Receipt of like tenor, in exchange and substitution for such mutilated Global
Receipt upon cancellation thereof, or in lieu of and in substitution for the
destroyed or lost or stolen Global Receipt, upon the Holder thereof filing with
the Depositary (a) a request for such execution and delivery before the
Depositary has notice that such Global Receipt has been acquired by a bona fide
---- ----
purchaser and (b) a sufficient indemnity bond, and satisfying any other
reasonable requirements imposed by the Depositary.
All expenses and charges associated with procuring such indemnity and
with the preparation, execution and delivery of a new Global Receipt shall be
borne by the Holder.
ARTICLE III
The Global Notes
SECTION 3.01. Payments in Respect of the Global Note. (a) For so
--------------------------------------
long as the Custodian shall hold the Global Notes, the Custodian will direct the
Issuer to make all payments in respect of the Global Notes to the Trustee, on
behalf of the Custodian. The Custodian and the Depositary hereby direct that,
for so long as the Custodian shall hold the Global Notes, whenever the Trustee
(or paying agent under the Indenture) shall receive any payment of principal,
premium or interest in respect of such Global Notes (including any Additional
Amounts, as defined in the Indenture), whether in connection with any
redemption, repurchase, declaration of acceleration or otherwise, the Trustee or
paying agent shall, on behalf of the Custodian and the Depositary, promptly make
such payments directly to the Holder on or before the payment date for such
Global Receipt. The payment date for the Global Receipt for the payment of
principal of and any premium and interest shall be the same date as the payment
date for the underlying Global Note. So long as DTC or its nominee is the
Holder, such payments shall be made in accordance with the Letter of
Representations.
9
<PAGE>
(b) If at any time the Custodian or the Depositary shall receive any
payment of principal, premium or interest in respect of a Global Note (including
any Additional Amounts), the Custodian or the Depositary shall promptly make
such payments to the Holder of the Global Receipt representing such Global Note.
(c) The Depositary or the Custodian will forward to the Issuer or its
agent such information from its records as the Issuer may reasonably request to
enable the Issuer or its agent to file necessary reports with governmental
agencies, and either the Depositary or the Custodian or its agent may (but shall
not be required to) file any such reports necessary to obtain benefits under any
applicable tax treaties for the Holder or the Beneficial Owners.
SECTION 3.02. Redemption or Repurchase. In the event that the Issuer
------------------------
exercises any right of redemption with respect to, or the Issuer or Bermuda
Holdings exercises any right to repurchase, a Global Note in whole or in part,
as the case may be, the Custodian, upon notice by the Depositary, will promptly
surrender such Global Note to the Trustee who shall cause an adjustment to be
made to such Global Note such that the aggregate principal amount of such Global
Note shall be reduced by the amount of such redemption or repurchase, as the
case may be, and shall thereafter return such Global Note (as so adjusted) to
the Custodian and thenceforth the Global Receipt representing such Global Note
shall automatically represent beneficial ownership of 100% of the Global Note,
as adjusted to reflect the reduction in aggregate principal amount; provided,
however, that DTC, in its discretion, (a) may request that the Depository issue
a new Global Receipt or (b) may make an appropriate notation on such Global
Receipt indicating the date and amount of such reduction in principal.
SECTION 3.03. Record Date. Whenever any payment is to be made in
-----------
respect of a Global Note, or the Custodian shall receive notice of any action to
be taken by the holder of a Global Note or whenever the Depositary otherwise
deems it appropriate in respect of any other matter, the Depositary shall fix a
record date for the determination of the Holder who shall be entitled to receive
such payment or to take such action or to act in respect of any such matter;
provided, however, that the Custodian agrees to forward promptly to the
Depositary any such payments or notices, as the case may be, received by it.
Subject to the provisions of this Deposit and Custody Agreement, only the Holder
who is registered on the Register at the close of business on such record date
shall be entitled to receive any such payment, to give instructions as to such
action or to act in respect of any such matter. The Depositary, to the extent
practicable, shall, not less than 15 days prior to such record date, provide the
Holder with written notice of such record date.
10
<PAGE>
SECTION 3.04. Action in Respect of Global Note. As soon as
--------------------------------
practicable after receipt by the Custodian of notice of any solicitation of
consents or request for a waiver or other action by the holder of a Global Note
pursuant to the Indenture, the Custodian shall direct the Depositary to mail to
the Holder a notice containing (a) such information as is contained in such
notice, (b) a statement that the Holder at the close of business on a specified
record date (established in accordance with Section 3.03 hereof) will be
entitled to instruct the Depositary as to the consent, waiver or other action,
if any, pertaining to such Global Note and (c) a statement as to the manner in
which such instructions may be given. Upon the written request of the Holder,
received on or before the date established by the Depositary for such purpose,
the Depositary shall cause the Custodian to endeavor insofar as practicable and
permitted under the provisions of or governing such Global Note to take such
action regarding the requested consent, waiver or other action in respect of
such Global Note in accordance with any instructions set forth in such request.
Neither the Depositary nor the Custodian shall itself exercise any discretion in
the granting of consents, waivers or taking other such action in respect of a
Global Note.
SECTION 3.05. Changes Affecting Global Note. Upon any
-----------------------------
recapitalization, reorganization, merger or consolidation or sale of assets
affecting Bermuda Holdings or the Issuer or to which Bermuda Holdings or the
Issuer is a party, any securities which shall be received by the Custodian in
exchange for or in conversion of or in respect of a Global Note shall be treated
as a new Global Note under this Deposit and Custody Agreement and the Global
Receipt representing such Global Note shall thenceforth represent beneficial
ownership of 100% of the principal amount of such new Global Note so received;
provided, however, that DTC, in its discretion, (a) may request the Depositary
to issue and authenticate a new Global Receipt or (b) may make an appropriate
notation on such Global Receipt indicating the date and amount of such reduction
in principal.
SECTION 3.06. Surrender of Global Receipt. In the event of the
---------------------------
redemption or repurchase in full of all the Senior Notes represented by a Global
Note, or the exchange of all the Senior Notes so represented for Definitive
Senior Notes, in each case as referred to in this Deposit and Custody Agreement,
then the Global Receipt representing such Global Note shall become void and the
Holder shall surrender such Global Receipt to the Depositary for cancellation.
SECTION 3.07. Reports. The Depositary shall make available for
-------
inspection by the Holder at the Depositary's Corporate Trust Office any notices,
reports and other communications received from the Issuer which are received by
the Custodian as holder of the Global Notes. The Depositary shall send promptly
to the
11
<PAGE>
Holder copies of such notices, reports and other communications furnished by the
Issuer and received by the Custodian, as holder of the Global Notes.
ARTICLE IV
The Custodian and the Depositary
SECTION 4.01. Prevention or Delay in Performance by the Custodian and
-------------------------------------------------------
the Depositary. Neither the Custodian nor the Depositary shall incur any
- --------------
liability to any Holder, any Beneficial Owner or any other person hereunder or
in connection herewith if (i) by reason of any provision of any present or
future law or regulation, of any governmental or regulatory authority or
securities exchange, or by any reason of any act of God or war or other
circumstance beyond the control of the Custodian or the Depositary, the
Custodian or the Depositary shall be prevented or forbidden from doing or
performing any act or thing which the terms of this Deposit and Custody
Agreement provide shall be done or performed, (ii) by reason of any non-
performance or delay, caused as aforesaid, in the performance of any act or
thing which the terms of this Deposit and Custody Agreement provide shall or may
be done or performed, and (iii) by reason of any exercise of or failure to
exercise, in good faith any discretion provided for in this Deposit and Custody
Agreement. Should the Custodian or the Depositary receive any payment in
respect of a Global Note and be unable pursuant to the foregoing to distribute
such payment to the Holder due to any reason described in this Section 4.01, the
Depositary or the Custodian, as the case may be, shall, if practicable, promptly
return such payment to the Issuer, and provide written notice of the reason for
the inability to distribute such payment.
SECTION 4.02. Compliance with Letter of Representations. The
-----------------------------------------
Depositary agrees to use its best efforts to comply with all of the provisions
pertaining to it set forth in the Letter of Representations so long as DTC or
its nominee is the Holder.
SECTION 4.03. Event of Default or Default. Upon the occurrence of an
---------------------------
Event of Default or a Default (as defined in the Indenture) in respect of a
Global Note, or in connection with any other right of the Holder under the
Indenture or this Agreement, if requested in writing by the Holder, the
Custodian and the Depositary shall take such action as shall be requested in
such notice in respect of such Global Note, provided the Custodian and the
Depositary shall not be required to take any such action unless the Holder shall
have offered to the Custodian and the Depositary reasonable security or
indemnity against the costs, expenses and liabilities which might
12
<PAGE>
be incurred by it in compliance with such request. Neither the Depositary nor
the Custodian shall itself exercise any discretion in the taking of action in
respect of a Global Note.
SECTION 4.04. Charges of Custodian and Depositary. The Issuer and
-----------------------------------
Bermuda Holdings agree to promptly pay to the Custodian and the Depositary such
compensation as shall be agreed upon from time to time by the Issuer and Bermuda
Holdings, on the one hand, and the Custodian and Depositary, respectively, on
the other hand, for all services rendered by the Custodian and the Depositary,
respectively, and to reimburse the Custodian and the Depositary for reasonable
out of pocket expenses incurred in connection with the preparation and delivery
of this Deposit and Custody Agreement and the performance of their respective
duties hereunder (including the reasonable fees and expenses of their respective
counsel). The obligations of the Issuer and Bermuda Holdings under this Section
4.04 shall survive the termination of this Deposit and Custody Agreement.
Neither the Depositary nor the Custodian shall be responsible for: (1) taxes and
other government charges and (2) such registration fees as may from time to time
be in effect, in each case for the registration of transfers of interest in a
Global Receipt.
SECTION 4.05. Duties and Liabilities of Custodian and Depositary.
--------------------------------------------------
Neither the Custodian nor the Depositary shall be liable under this Deposit and
Custody Agreement, other than by reason of bad faith or negligence in the
performance of such duties as are set forth in or arise pursuant to this Deposit
and Custody Agreement. Neither the Custodian nor the Depositary shall be liable
for any damages resulting from the transfer or delivery of a Global Note in
accordance with the terms of this Deposit and Custody Agreement. Neither the
Custodian nor the Depositary shall be liable for any action or inaction by it
done in good faith in reliance upon the advice of its accountants or legal
counsel. The Custodian and the Depositary may request and rely and shall be
protected in acting in reliance upon any written notice, request, direction or
other document believed by it to be genuine and to have been signed or presented
by the proper party or parties.
SECTION 4.06. Resignation or Removal of Depositary or Custodian. (a)
-------------------------------------------------
The Depositary may at any time resign as Depositary hereunder by written notice
of its election so to do delivered to the Trustee and the Issuer, such
resignation to take effect upon the appointment by the Issuer of a successor
depositary (which appointment is subject to the approval of the Trustee, which
shall not unreasonably withhold such approval) and its acceptance of such
appointment as hereinafter provided. If at the end of 90 days after delivery of
such notice, no successor depositary has been appointed or accepted such
appointment, the Depositary may terminate this Deposit and Custody
13
<PAGE>
Agreement provided that such termination shall not be effective unless and until
Definitive Senior Notes shall have been issued in accordance with Section 2.05.
(b) The Custodian may at any time resign as Custodian hereunder by
written notice of its election so to do delivered to the Depositary, the Trustee
and the Issuer, such resignation to take effect upon the appointment by the
issuer of a successor custodian (which appointment is subject to approval by the
Depositary) and its acceptance of such appointment as hereinafter provided and
the transfer of each Global Note as set forth in Section 2.06. If at the end of
90 days after delivery of such notice, no successor custodian has been appointed
or accepted such appointment, the Custodian may request in accordance with
Section 2.05 that Definitive Senior Notes be issued and upon the issuance of
such Definitive Senior Notes, may terminate this Deposit and Custody Agreement.
(c) In the event that the Issuer determines that it would become
obligated to pay any amount in respect of any deduction or withholding for any
taxes or other governmental charges under Section 4.08, the Depositary or the
Custodian may be removed by the Issuer by written notice of such removal
effective upon the appointment of a successor depositary or successor custodian,
as the case may be, and its acceptance of such appointment as herein provided.
(d) Every successor depositary or successor custodian shall execute
and deliver to its predecessor, the Issuer and, in the case of a successor
custodian, the Depositary, and in the case of a successor depositary, the
Custodian, an instrument in writing accepting its appointment hereunder, and
thereupon such successor depositary or successor custodian, without any further
act or deed, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor.
(e) Any corporation into or with which the Depositary or the
Custodian, as the case may be, may be merged or consolidated shall be the
successor of the Depositary or the Custodian, as the case may be, without the
execution or filing of any document or of any further act.
SECTION 4.07. Obligations of the Depositary and the Custodian.
-----------------------------------------------
Neither the Depositary nor the Custodian makes any representation or warranty
and neither shall at any time have any responsibility for, or liability or
obligation in respect of, the legality, validity, binding effect, adequacy or
enforceability of the Global Notes, the performance and observance by the Issuer
or Bermuda Holdings of its obligations under the Global Notes or the
recoverability of any sum of interest, arrears
14
<PAGE>
of interest, premium or principal due or to become due from the Issuer or
Bermuda Holdings in respect of the Global Notes.
Neither the Depositary nor the Custodian shall at any time have any
responsibility for, or obligation or liability in respect of, the financial
condition, credit worthiness, affairs, status or nature of the Issuer or
Bermuda Holdings.
Neither the Depositary nor the Custodian shall at any time be liable
for any act, default or omission of the Issuer or Bermuda Holdings under or in
respect of the Global Notes.
Payments in respect of the Global Receipts will only be made to the
extent of any amounts actually received by or on behalf of the Depositary in
respect of the underlying Global Note.
Neither the Depositary nor the Custodian shall be required to give
notice to the Issuer or Bermuda Holdings or the Holder that a Global Note is
repayable or that any Default or Event of Default in relation to the Global
Notes has occurred pursuant to Article 4 of the Indenture or take any
proceedings to enforce payment under the Indenture, except as expressly provided
otherwise in this Deposit and Custody Agreement.
Neither the Depositary nor the Custodian shall be under any obligation
to exercise in favor of the Holder any rights of set-off or of bankers' lien or
of counterclaims that may arise out of any other transaction between the Issuer,
Bermuda Holdings, the Depositary or the Custodian.
Neither the Depositary nor the Custodian shall be under any obligation
to appear in, prosecute or defend any action, suit or other proceeding in
respect of either a Global Note or in respect of a Global Receipt, or take any
other action or omit to take any action under this Deposit and Custody
Agreement, which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished as
often as may be required.
Neither the Depositary nor the Custodian shall be liable for any acts
or omissions made by a successor depositary or a successor custodian, as the
case may be, whether in connection with a previous act or omission of the
Depositary or the Custodian, as the case may be, or in connection with a matter
arising wholly after the removal or resignation of the Depositary or the
Custodian, as the case may be,
15
<PAGE>
provided that the Depositary or the Custodian, as the case may be, exercised its
good faith and reasonable care while it acted as Depositary or Custodian.
Neither the Depositary nor the Custodian shall have any liability for
the calculation, timing or appropriateness of any interest, arrears of interest,
principal, premium, if any, or other payment or distribution to be made in
connection with the Global Notes, and the Issuer shall have sole liability
therefor, provided that the Depositary and the Custodian shall each be liable
for its own negligence or bad faith in connection with the foregoing.
Neither the Depositary nor the Custodian shall be under any liability
for interest on, or any obligation to invest or segregate, any monies at any
time received by each of them pursuant to the terms and conditions of this
Deposit and Custody Agreement.
Each of the Depositary and the Custodian may own and deal in any class
of securities of the Issuer and its affiliates and in interests in the Global
Receipts.
Each of the Depositary and the Custodian may enter into other dealings
with the Issuer and its affiliates of any nature whatsoever.
Subject to the approval of the Issuer, the Custodian may appoint a
sub-custodian to hold any or all of the Global Notes on its behalf.
SECTION 4.08. Taxes. If any tax or other governmental charge shall
-----
be required to be deducted or withheld from the distribution in respect of a
Global Receipt by the Custodian to the Depositary or the Depositary to the
Holder of any payments of principal of and any premium and interest on the
underlying Global Note, each of the Issuer and Bermuda Holdings agrees that it
shall pay or cause to be paid such additional amounts as may be necessary in
order that the net amounts distributed to the Holder, after such deduction or
withholding, shall equal the amounts which were paid on such Global Note. The
Issuer shall promptly notify in writing the Depositary and the Custodian should
any deduction or withholding be required on behalf of the Issuer from the
distribution in respect of the Global Receipt representing such Global Note.
Neither the Depositary nor the Custodian shall be deemed to have any notice of
any required deduction or withholding prior to the receipt of such notice.
SECTION 4.09. Indemnification. (a) The Issuer and Bermuda Holdings
---------------
shall indemnify the Custodian and the Depositary, and any of their respective
agents, officers, directors or employees for, and hold them harmless against any
16
<PAGE>
Liability (as defined below) incurred (including the reasonable fees, expenses
and disbursements of its counsel), other than liability or expense resulting
from its or their own negligence or bad faith, arising out of or in connection
with the acceptance, administration and performance of their respective powers
and duties hereunder. Without limiting the generality of the foregoing, except
as provided herein, neither the Custodian nor the Depositary shall have any duty
or responsibility for and shall not be deemed to have been negligent with
respect to, and the Issuer shall indemnify and hold harmless the Custodian and
the Depositary against, any claim (i) that a Global Note is not genuine or (ii)
that disclosure with respect to applicable laws was not made in connection with
the offering of the Senior Notes. Notwithstanding any provisions of this
Deposit and Custody Agreement to the contrary, the obligations of the Issuer to
indemnify the Custodian and the Depositary under this Section 4.09 shall survive
the termination of this Deposit and Custody Agreement.
(b) In case any claim shall be made or action brought against the
Custodian or the Depositary for any reason for which indemnity may be sought
against the Issuer or Bermuda Holdings as provided above, the Custodian or the
Depositary shall promptly notify the Issuer and Bermuda Holdings in writing
setting forth the particulars of such claim or action and the Issuer or Bermuda
Holdings may assume the defense thereof. In the event that the Issuer or
Bermuda Holdings assumes the defense, the Custodian and the Depositary shall
have the right to retain separate counsel in any such action but shall bear the
fees and expenses of such counsel unless (i) the Issuer or Bermuda Holdings
shall have specifically authorized the retaining of such counsel at its expense
or (ii) the parties to such suit include the Custodian or the Depositary and the
Issuer or Bermuda Holdings, and the Custodian or the Depositary, as the case may
be, has been advised in writing by such counsel that one or more legal defenses
may be available to it which may not be available to the Issuer or Bermuda
Holdings. Each of the Custodian and the Depositary agrees to give all
assistance reasonably required in connection with the conduct of any such claim
or action, including permitting proceedings to be brought in its name. The
Custodian and the Depositary shall not compromise or settle any claim or action
hereunder or in connection with the Global Notes or the Global Receipts without
the prior written consent of the Issuer.
(c) As used in this Section 4.09, the term "Liability" shall include
any losses, claims, damages, expenses (including without limitation the
Custodian's or the Depositary's respective reasonable costs and expenses in
defending itself against any losses, claims or investigations of any nature
whatsoever) or other liabilities, joint or several, arising for any reason under
this Deposit and Custody Agreement.
17
<PAGE>
(d) The obligations of the Issuer and Bermuda Holdings under this
Section 4.09 shall be in addition to any liability which either may otherwise
have and shall extend, upon the same terms and conditions, to each officer,
director, employee and agent of the Custodian or the Depositary and to each
person, if any, who controls the Custodian or the Depositary.
(e) The obligations set forth in Section 4.04 and this Section 4.09
shall survive the termination of this Deposit and Custody Agreement.
ARTICLE V
Amendment and Termination
SECTION 5.01. Amendment. (a) Subject to the provisions of this
---------
Section 5.01, this Deposit and Custody Agreement and the form of Global Receipt
may be amended with the written approval of the parties hereto in writing.
(b) The consent of the Holder shall not be required in connection with
any amendment (i) to cure any formal defect, omission, inconsistency or
ambiguity in this Deposit and Custody Agreement, (ii) to add to the covenants
and agreements of the Custodian, the Depositary, the Issuer or Bermuda Holdings,
(iii) to effectuate the assignment of the Custodian's or the Depositary's rights
and duties hereunder to a qualified successor as provided herein, (iv) to comply
with the Securities Act, the Exchange Act or the U.S. Investment Company Act of
1940, as from time to time amended, or (v) to modify, alter, amend or supplement
this Deposit and Custody Agreement in any other respect not inconsistent
herewith which, in the opinion of counsel acceptable to the Issuer and the
Depositary, is not adverse to the Holder. Except for the amendments made
pursuant to clauses (i) through (v) above, no amendment which adversely affects
the Holder may be made to this Deposit and Custody Agreement or the form of
Global Receipt without the consent of the Holder.
SECTION 5.02. Termination. The Depositary shall at any time at the
-----------
direction of the Issuer or Bermuda Holdings terminate this Deposit and Custody
Agreement by mailing a notice of such termination to the Holder and requesting,
on behalf of the Custodian in accordance with Section 2.6 of the Indenture, that
the Issuer issue, and the Trustee authenticate, Definitive Senior Notes to the
persons and in the amounts as specified by the Holder. Upon the issuance of
such Definitive Senior Notes, in an aggregate principal amount equal to the
aggregate principal amount of Senior Notes outstanding, this Deposit and Custody
Agreement shall terminate.
18
<PAGE>
ARTICLE VI
Miscellaneous
SECTION 6.01. Governing Laws. This Deposit and Custody Agreement and
--------------
the Global Receipts shall be governed by the laws of the State of New York,
without regard to the conflict of laws provisions therein.
SECTION 6.02. Assignment. The rights and obligations of the parties
----------
to this Deposit and Custody Agreement may not be assigned except that the
Depositary or the Custodian shall assign its rights and procure assumption of
its obligations hereunder to and by a successor depositary or successor
custodian, as the case may be, appointed in accordance with the terms hereof.
SECTION 6.03. Counterparts. This Deposit and Custody Agreement may
------------
be executed in any number of counterparts by the parties hereto on separate
counterparts, each of which, when so executed and delivered, shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.
SECTION 6.04. Severability. In case any one or more of the
------------
provisions contained in this Deposit and Custody Agreement or in a Global
Receipt should be or become invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein or therein shall in no way be affected, prejudiced or disturbed thereby.
SECTION 6.05. Notices. Notices hereunder shall be mailed or
-------
delivered as follows:
To the Depositary:
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trust Administration
Telephone No.: 212-946-3352
Telecopy No.: 212-946-8177
19
<PAGE>
To the Custodian:
Chase Manhattan Bank Luxembourg S.A.
5 rue Plaetis
L-2338, Luxembourg
Attention: Corporate Trust Department
Telephone No.: 011-352-46-268-5223
Telecopy No.: 011-352-46-268-5380
To the Issuer:
Terra Nova Insurance (UK) Holdings plc
Terra Nova House
41-43 Mincing Lane
London EC3R 7SP Great Britain
Attention: Secretary
Telephone No.: 011-44-171-283-3000
Telecopy No.: 011-44-171-283-1749
To Bermuda Holdings:
Terra Nova (Bermuda) Holdings Ltd.
Richmond House, 2nd Floor
12 Par-La-Ville Road
Hamilton HM 08, Bermuda
Attention: Secretary
Telephone No.: 809-292-7731
Telecopy No.: 809-292-7572
20
<PAGE>
To the Trustee:
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trust Administration
Telephone No.: 212-946-3352
Telecopy No.: 212-946-8177
or as to each party at such other address as shall be designated by such party
in a written notice to the other parties. Any communication so addressed and
mailed or delivered to the Depositary, the Custodian, the Trustee, Bermuda
Holdings or the Issuer shall be deemed to be given when received.
SECTION 6.06. Section Headings. The section headings in this Deposit
----------------
and Custody Agreement are for convenience of reference only and shall not be
deemed to alter or affect any provision hereof.
SECTION 6.07. Third Party Beneficiaries. This Deposit and Custody
-------------------------
Agreement is for the exclusive benefit of the parties hereto and shall not be
deemed to give any legal or equitable right, remedy or claim whatsoever to any
other person; provided, however, that the Holder and any Beneficial Owner shall
be intended third party beneficiaries of this Deposit and Custody Agreement.
21
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
THE CHASE MANHATTAN BANK,
as Depositary
By: /s/ David G. Safer
------------------------------
Name: David G. Safer
Title: Senior Trust Officer
CHASE MANHATTAN BANK LUXEMBOURG S.A.,
as Custodian
By: /s/ David G. Safer
------------------------------
Name: David G. Safer
Title: Senior Trust Officer
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
By: /s/ Jean M. Waggett
------------------------------
Name: Jean M. Waggett
Title: Secretary
TERRA NOVA (BERMUDA) HOLDINGS LTD.
By: /s/ Jean M. Waggett
------------------------------
Name: Jean M. Waggett
Title: Secretary
22
<PAGE>
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ David G. Safer
------------------------------
Name: David G. Safer
Title: Senior Trust Officer
23
<PAGE>
Exhibit A
---------
[FORM OF RESTRICTED GLOBAL RECEIPT]
UNLESS THIS GLOBAL RECEIPT IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE DEPOSITARY UNDER THE
DEPOSIT AND CUSTODY AGREEMENT DATED AS OF MAY 18, 1998 AMONG THE CHASE MANHATTAN
BANK AS DEPOSITARY, CHASE MANHATTAN BANK LUXEMBOURG S.A., AS CUSTODIAN, THE
CHASE MANHATTAN BANK AS TRUSTEE, TERRA NOVA INSURANCE (UK) HOLDINGS PLC, AND
TERRA NOVA (BERMUDA) HOLDINGS LTD FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY GLOBAL RECEIPT ISSUED IS REGISTERED IN THE NAME CEDE & CO., OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
THIS GLOBAL RECEIPT HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A
U.S. PERSON AND IS ACQUIRING ITS INTEREST IN THIS GLOBAL RECEIPT IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER ITS INTEREST IN THIS GLOBAL
RECEIPT EXCEPT, (A) TO BERMUDA HOLDINGS OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
<PAGE>
SECURITIES ACT, OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM ITS
INTEREST IN THIS GLOBAL RECEIPT IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF AN INTEREST IN THIS GLOBAL RECEIPT IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
THE CHASE MANHATTAN BANK, AS DEPOSITARY
GLOBAL RECEIPT
representing
___% SENIOR NOTES DUE 2008
CUSIP NO.
of
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
(Incorporated under the laws of England)
Guaranteed by
TERRA NOVA (BERMUDA) HOLDINGS LTD.
(Incorporated under the laws of Bermuda)
THE CHASE MANHATTAN BANK, a New York banking corporation, as
depositary (the "Depositary"), hereby certifies that Cede & Co., as the nominee
of The Depository Trust Company, is the registered owner of this Global Receipt
representing a 100% interest in a global note in bearer form representing
$100,000,000 (less the principal amount, if any, of any outstanding Regulation S
Global Note (as defined in the Indenture) and any Definitive Senior Notes
evidencing such Notes, as reflected in the records of the Trustee) aggregate
principal amount of ___% Senior Notes due 2008 (the "Senior Notes") of Terra
Nova Insurance (UK) Holdings plc (the "Company"), which Senior Notes are fully
and unconditionally guaranteed by Terra Nova (Bermuda) Holdings Ltd. (the
"Guarantor"). The Senior Notes were issued
2
<PAGE>
pursuant to an Indenture (the "Indenture"), dated as of May 18, 1998, among the
Company, the Guarantor and The Chase Manhattan Bank, as Trustee.
THE CHASE MANHATTAN BANK,
as Depositary
By:_______________________________
Authorized Signatory
The address of the Depositary's office is 450 West 33rd Street, 15th
Floor, New York, New York 10001.
<PAGE>
Exhibit B
---------
[FORM OF REGULATION S GLOBAL RECEIPT]
UNLESS THIS GLOBAL RECEIPT IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE DEPOSITARY UNDER THE
DEPOSIT AND CUSTODY AGREEMENT DATED AS OF MAY 18, 1998 AMONG THE CHASE MANHATTAN
BANK, AS DEPOSITARY, CHASE MANHATTAN BANK LUXEMBOURG S.A., AS CUSTODIAN, THE
CHASE MANHATTAN BANK, AS TRUSTEE, TERRA NOVA INSURANCE (UK) HOLDINGS PLC, AND
TERRA NOVA (BERMUDA) HOLDINGS LTD FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY GLOBAL RECEIPT ISSUED IS REGISTERED IN THE NAME CEDE & CO., OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
THE CHASE MANHATTAN BANK, AS DEPOSITARY
GLOBAL RECEIPT
representing
___% SENIOR NOTES DUE 2008
CUSIP NO.
of
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
(Incorporated under the laws of England)
<PAGE>
Guaranteed by
TERRA NOVA (BERMUDA) HOLDINGS LTD.
(Incorporated under the laws of Bermuda)
THE CHASE MANHATTAN BANK, a New York banking corporation, as
depositary (the "Depositary"), hereby certifies that Cede & Co., as the nominee
of The Depository Trust Company, is the registered owner of this Global Receipt
representing a 100% interest in a global note in bearer form representing
$100,000,000 (less the principal amount, if any, of any outstanding Restricted
Global Note (as defined in the Indenture) and any Definitive Senior Notes
evidencing such Notes, as reflected in the records of the Trustee) aggregate
principal amount of ___% Senior Notes due 2008 (the "Senior Notes") of Terra
Nova Insurance (UK) Holdings plc (the "Company"), which Senior Notes are fully
and unconditionally guaranteed by Terra Nova (Bermuda) Holdings Ltd. (the
"Guarantor"). The Senior Notes were issued pursuant to an Indenture (the
"Indenture"), dated as of May 18, 1998, among the Company, the Guarantor and The
Chase Manhattan Bank, as Trustee.
THE CHASE MANHATTAN BANK,
as Depositary
By:_____________________________
Authorized Signatory
The address of the Depositary's office is 450 West 33rd Street, 15th
Floor, New York, New York 10001.
2
<PAGE>
Exhibit C
---------
[FORM OF EXCHANGE NOTE GLOBAL RECEIPT]
UNLESS THIS GLOBAL RECEIPT IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE DEPOSITARY UNDER THE
DEPOSIT AND CUSTODY AGREEMENT DATED AS OF MAY 18, 1998 AMONG THE CHASE MANHATTAN
BANK, AS DEPOSITARY, CHASE MANHATTAN BANK LUXEMBOURG S.A., AS CUSTODIAN, THE
CHASE MANHATTAN BANK, AS TRUSTEE, TERRA NOVA INSURANCE (UK) HOLDINGS PLC, AND
TERRA NOVA (BERMUDA) HOLDINGS LTD FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY GLOBAL RECEIPT ISSUED IS REGISTERED IN THE NAME CEDE & CO., OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
THE CHASE MANHATTAN BANK, AS DEPOSITARY
GLOBAL RECEIPT
representing
___% SENIOR NOTES DUE 2008
of
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
(Incorporated under the laws of England)
<PAGE>
Guaranteed by
TERRA NOVA (BERMUDA) HOLDINGS LTD.
(Incorporated under the laws of Bermuda)
THE CHASE MANHATTAN BANK, a New York banking corporation, as
depositary (the "Depositary"), hereby certifies that Cede & Co., as the nominee
of The Depository Trust Company, is the registered owner of this Global Receipt
representing a 100% interest in a global note in bearer form representing
$[_______]* aggregate principal amount of ___% Senior Notes due 2008 (the
"Senior Notes") of Terra Nova Insurance (UK) Holdings plc (the "Company"), which
Senior Notes are fully and unconditionally guaranteed by Terra Nova (Bermuda)
Holdings Ltd. (the "Guarantor"). The Senior Notes were issued pursuant to an
Indenture (the "Indenture"), dated as of May 18, 1998, among the Company, the
Guarantor and The Chase Manhattan Bank, as Trustee.
THE CHASE MANHATTAN BANK,
as Depositary
By:_____________________________
Authorized Signatory
The address of the Depositary's office is 450 West 33rd Street, 15th
Floor, New York, New York 10001.
______________________________
* Include aggregate principal amount of Exchange Notes.
2
<PAGE>
Exhibit 5.1
[Letterhead of Clifford Chance]
12 June 1998
Terra Nova Insurance (UK) Holdings plc
Terra Nova House
Mincing Lane
London EC3R 7AP (the "Issuer")
Dear Sirs
We are rendering this opinion to you in connection with an exchange offer
registration statement (on forms F-4 and S-4) which has been filed with the
Securities and Exchange Commission ("SEC") on 29 May 1998 (the "REGISTRATION
STATEMENT") which relates to an offer to exchange up to US$100 million aggregate
principal amount of its 7% Senior Notes due 2008 (the "EXCHANGE NOTES") for an
identical principal amount of its issued and outstanding 7% Senior Notes due
2008 (the "OLD NOTES"). The Exchange Notes were constituted by an indenture
dated 18 May 1998 (the "INDENTURE") between The Chase Manhattan Bank, as
Trustee, the Issuer and Terra Nova (Bermuda) Holdings Ltd.
We have examined copies of:
(a) the Memorandum and Articles of Association of the Issuer confirmed by the
secretary of the Issuer as being those now in force;
(b) copy resolutions of the board of directors of the Issuer passed on 15
April 1998;
(c) a draft dated 1 May 1998 of the Indenture; and
<PAGE>
(d) a copy of the Registration Statement and a draft of the prospectus (the
"PROSPECTUS") dated 29 May 1998 the final form of which is to be issued
shortly in respect of the Exchange Notes.
Our opinion is confined solely to the laws of England.
The Indenture and the Exchange Notes are expressed to be governed by the laws of
New York. We have made no investigation of such laws and do not express or
imply any opinions on such laws. In addition, we have assumed that, so far as
the laws of New York are concerned, the Indenture and the Exchange Notes will
constitute legal, valid and binding obligations of the Issuer and that such laws
do not qualify or affect our opinion as set out below.
We have also assumed that:
(i) in so far as any obligation falls to be performed in any jurisdiction
outside England, its performance will not be illegal or ineffective by
virtue of the laws of that jurisdiction;
(ii) all signatures on the executed documents which, or copies of which, we
have examined are genuine;
(ii) each of the parties to the Indenture, other than the Issuer, is able
lawfully to enter into such instrument;
(iv) the execution and delivery of the Indenture has been or, when such
instrument is executed and delivered, will have been duly authorised,
executed and delivered by each of the parties thereto (other than the
Issuer);
(v) that the Indenture has been and the Exchange Notes will be executed before
issue of the Exchange Notes in or substantially in the form examined by us
and in accordance with the procedures specified in the Board Resolutions;
(vi) the Memorandum and Articles of Association of the Issuer which we have
examined are those now in force and the Resolutions which we have examined
were passed at a meeting duly convened and held;
(vii) the issue of the Exchange Notes will not cause any limit on borrowings to
which the Issuer is subject to be exceeded;
2
<PAGE>
(viii) on the basis of the foregoing, and having regard to such legal
considerations as we deem relevant and subject as set out below, we are
of the opinion that:
1. Subject to paragraph 2, the Issuer is duly incorporated and validly existing
as a public company with limited liability (having re-registered as a public
limited company under the Companies Act 1985 on 8 June 1995) under the laws
of England.
2. We have on 12 June 1998 made a search of the Companies Registry in London
which revealed no order or resolution for the winding-up of the Issuer and no
order of appointment of a receiver or administrator with respect to the
Issuer. However, the search would not reveal whether or not a winding-up
petition has been presented. Furthermore, it is possible that notice of a
winding up order made or resolution passed or a receiver or administrator
appointed may not have been filed at the Companies Registry immediately. We
have also on 12 June 1998 made enquiry of the Companies Court which has
informed us that it has on its central index no record of the presentation of
any winding-up petition in respect of the Issuer. We are assuming that there
has been no change in the position since the searches were made.
3. The Issuer has all requisite corporate power to enter into the Indenture and
to issue the Exchange Notes and to perform its obligations thereunder, the
Indenture and the Exchange Notes (in the form of the global note) have been
duly authorised, executed and delivered by the Issuer in accordance with the
laws of England and the Memorandum and Articles of Association of the Issuer,
and there is no reason, so far as English law is concerned, why the
Indenture, the Exchange Notes and the Definitive Senior Notes (if and when
they have been executed, authenticated and delivered as provided in the
Indenture) will not constitute, legal, valid and binding obligations of the
Issuer.
The opinions expressed in paragraphs 1 to 3 inclusive above are subject to the
following:
(a) a search at the Companies Registry is not capable of revealing whether or
not a winding-up petition or a petition for the making of an administration
order has been presented;
(b) notice of a winding-up order or resolution, notice of an administration
order and notice of the appointment of a receiver may not be filed at the
Companies Registry immediately and there may be a delay in the relevant
notice appearing on the file of the company concerned;
3
<PAGE>
(c) Nothing in this opinion shall be taken as implying that an English court
would exercise jurisdiction in any proceedings relating to the Indenture or
the Exchange Notes (including the global note), or accordingly that any
remedy would be available in England for the enforcement of obligations
arising under the Indenture or the Exchange Notes (including the global
note). However, in our opinion, if an English court were to accept
jurisdiction it is highly likely that the English courts would give effect
to the choice of New York law as the governing law of the Indenture and the
Exchange Notes.
(d) There could be circumstances in which an English court would not treat as
conclusive those certificates and determinations which the Indenture and the
Exchange Notes state are to be so treated (for example, where a discretion
is vested in any Person or a person may determine a matter in its opinion,
if the discretion is not exercised reasonably or if the opinion is not based
on reasonable grounds).
(e) Our opinion as regards the binding nature and enforceability of the
obligations of the Issuer under the Exchange Notes and the Indenture are
subject to all limitations arising from bankruptcy, insolvency, liquidation,
reorganisation, moratorium or similar laws affecting the rights of creditors
generally.
(f) Any provision in the Indenture which involves an indemnity for the costs of
litigation is subject to the discretion of any English court (where
relevant) to decide whether and to what extent a party to litigation should
be awarded the costs incurred by it in connection with the litigation.
(g) Except as expressly mentioned in this opinion, we have not investigated or
verified the truth or accuracy of the information contained in the
Registration Statement or Prospectus nor have we been responsible for
ensuring that no material information has been omitted therefrom.
This opinion shall be construed in accordance with English law. We express no
opinion as to any agreement, instrument or other document other than as
specified in this letter. We hereby consent to the filing of this opinion with
the SEC with and as part of the Registration Statement and to the use of our
name therein and in the Prospectus contained in the Registration Statement. In
giving this consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
of the United States.
4
<PAGE>
The above consent is given on the basis that our name is not used in any
subsequent Registration Statement (or the Prospectus contained in it) except in
an amendment or supplement to such Registration Statement, including post-
effective amendments.
This opinion is given solely for the purposes of filing the Registration
Statement and for the information of the persons to whom it is addressed and may
not be relied upon for any other purpose or by any other person.
Yours faithfully
/s/ Clifford Chance
CLIFFORD CHANCE
5
<PAGE>
EXHIBIT 5.2
[Letterhead of Conyers, Dill & Pearman]
June, 12 1998
Terra Nova (Bermuda) Holdings Ltd.
Richmond House
12 Par-la-Ville Road
Hamilton
Bermuda
Terra Nova Insurance (UK) Holdings PLC
Terra Nova House
41-43 Mincing Lane
London EC3R 7SP
Great Britain
Dear Sirs,
RE: TERRA NOVA (BERMUDA) HOLDINGS LTD. (THE "COMPANY")
EXCHANGE OFFER OF US$100,000,000 7% SENIOR NOTES DUE 2008
We have acted as special legal counsel to Terra Nova (Bermuda) Holdings Ltd., a
Bermuda corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission of a Registration Statement
on Forms F-4 and S-4 under the Securities Act of 1933, as amended (the
"Registration Statement"), related to the
<PAGE>
Terra Nova (Bermuda) Holdings Ltd. and
Terra Nova Insurance (UK) Holdings PLC,
Page 2
June 12, 1998
exchange of $100,000,000 aggregate principal amount of 7% Senior Notes due 2008
of Terra Nova Insurance (UK) Holdings plc (the "Issuer"), fully and
unconditionally guaranteed on a senior basis by the Company.
For the purposes of giving this opinion, we have examined the following
documents:
(i) a copy of an indenture dated as of 18th May, 1998 among the Issuer,
the Company and The Chase Manhattan Bank, as trustee (the "Indenture")
(ii) the form of guarantee set out in Exhibit D of the Indenture (the
"Guarantee") to be endorsed on the global note to be issued pursuant
to the Indenture.
The Indenture and the Guarantee are herein sometimes collectively referred to as
the "Documents".
We have also reviewed and relied upon the memorandum of association and the bye-
laws of the Company, minutes of a meeting of the Executive Committee of the
Board of Directors of the Company held on 13th April, 1998 certified by the
General Counsel of the Company on 11th May, 1998, and such other documents and
made such enquiries as to questions of law as we have deemed necessary in order
to render the opinions set forth below.
We have assumed:
(i) the genuineness and authenticity of all signatures and the conformity to
the originals of all copies (whether or not certified) of all documents
examined by us and the authenticity and completeness of the originals from
which such copies were taken;
(ii) the capacity, power and authority of each of the parties to the Documents,
other than the Company, to enter into and perform its respective
obligations under the Documents;
(iii) the due execution and delivery of the Indenture by each of the parties
thereto, other than the Company;
(iv) the correctness, accuracy and completeness of all factual representations
made in the Documents and other documents reviewed by us;
<PAGE>
Terra Nova (Bermuda) Holdings Ltd. and
Terra Nova Insurance (UK) Holdings PLC,
Page 3
June 12, 1998
(v) that there is no provision of the law of any jurisdiction, other than
Bermuda, which would have any implication in relation to the opinions
expressed herein;
(vi) the validity and binding effect under the laws of the State of New York
(the "Foreign Laws") of the Documents which are expressed to be subject to
such Foreign Laws in accordance with their respective terms; and
(vii) the validity under the Foreign Laws of the submission by the Company
pursuant to the Documents to the non-exclusive jurisdiction of any State
or federal court sitting in the City of New York (the "Foreign Courts").
The obligations of the Company under the Documents:
(i) will be subject to the laws from time to time in effect relating to
bankruptcy, insolvency, liquidation, possessory liens, rights of set off,
reorganization, amalgamation, moratorium or any other laws or legal
procedures, whether of a similar nature or otherwise, generally affecting
the rights of creditors;
(ii) will be subject to statutory limitation of the time within which
proceedings may be brought;
(iii) will be subject to general principles of equity and, as such, specific
performance and injunctive relief, being equitable remedies, may not be
available; and
(iv) may not be given effect to by a Bermuda court, whether or not it was
applying the Foreign Laws, if and to the extent they constitute the
payment of an amount which is in the nature of a penalty and not in the
nature of liquidated damages.
We have made no investigation of and express no opinion in relation to the laws
of any jurisdiction other than Bermuda. This opinion is to be governed by and
construed in accordance with the laws of Bermuda and is limited to and is given
on the basis of the current law and practice in Bermuda. This opinion is issued
solely for your benefit and is not to be relied upon by any other person, firm
or entity or in respect of any other matter.
On the basis of and subject to the foregoing, we are of the opinion that the
Indenture has been duly executed and delivered by or on behalf of the Company,
and constitutes the valid and binding obligations of the Company enforceable in
accordance with the terms thereof
<PAGE>
Terra Nova (Bermuda) Holdings Ltd. and
Terra Nova Insurance (UK) Holdings PLC,
Page 4
June 12, 1998
and that when duly executed and delivered by or on behalf of the Company the
Guarantee will constitute the valid and binding obligations of the Company
enforceable in accordance with the terms thereof.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Yours faithfully,
/s/ Conyers Dill & Pearman
CONYERS DILL & PEARMAN
<PAGE>
EXHIBIT 5.3
[Letterhead of Milbank, Tweed, Hadley & MCCloy]
June 15, 1998
The Chase Manhattan Bank,
as Depositary
450 West 33rd Street
15th Floor
New York, New York 10001
Re: Exchange Note Global Receipt representing Senior
Notes of Terra Nova Insurance (UK) Holdings plc
------------------------------------------------
Gentlemen:
We refer to the registration statement to be filed on Form F-4/S-4
under the Securities Act of 1933, as amended (the "Registration Statement")
relating to issuance of Global Receipts representing Senior Notes of Terra Nova
Insurance (UK) Holdings plc (the "Issuer") guaranteed by Terra Nova (Bermuda)
Holdings Ltd. ("Bermuda Holdings") for which you act as Depositary. Terms used
as defined, but not otherwise defined herein, have the meanings given to them in
the Deposit and Custody Agreement dated as of May 18, 1998 among the Issuer,
Bermuda Holdings, The Chase Manhattan Bank, as trustee, The Chase Manhattan
Bank, as depositary and Chase Manhattan Bank Luxembourg S.A., as custodian (the
"Deposit and Custody Agreement").
We are of the opinion that when the Exchange Note Global Receipt has
been duly executed, issued and delivered in accordance with the Deposit and
Custody Agreement, the Exchange Note Global Receipt will be legally issued and
the Exchange Note Global Receipt will entitle the holder thereof to the rights
specified in the Exchange Note Global Receipt and in the Deposit and Custody
Agreement.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of New York, and we are expressing no opinion
as to the effect of the laws of any other jurisdiction. The foregoing opinion
is also subject to the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other
<PAGE>
2
similar laws of general applicability relating to or affecting the rights of
creditors generally, and enforceability may be limited by general principles of
equity (regardless of whether considered in a proceeding in equity or at law),
including without limitation (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy, (b) concepts of
materiality, reasonableness, good faith and fair dealing and (c) possible
judicial action giving effect to foreign governmental actions or foreign laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Act.
Very truly yours,
/s/ Milbank, Tweed, Hadley & McCloy
RWM/DWJ
<PAGE>
EXHIBIT 8.1
[Letterhead of Clifford Chance]
June 15, 1998
Terra Nova Insurance (UK) Holdings plc
Terra Nova House
Mincing Lane
London EC3R 7AP (the "ISSUER")
Dear Sirs:
We are rendering this opinion to you in connection with an exchange
offer registration statement (on Forms S-4 and F-4) which has been filed with
the Securities and Exchange Commission ("SEC") on 29 May 1998 (the "REGISTRATION
STATEMENT") which relates to an offer to exchange up to US$100 million aggregate
principal amount of its issued and outstanding 7% Senior Notes due 2008 (the
"OLD NOTES") for an identical principal amount of 7% Senior Notes due 2008 (the
"EXCHANGE NOTES"). The Exchange Notes were constituted by an indenture dated 18
May 1998 (the "INDENTURE") between The Chase Manhattan Bank, as Trustee, the
Issuer and Terra Nova (Bermuda) Holdings Ltd.
We have examined copies of:
(a) the Memorandum and Articles of Association of the Issuer confirmed
by the secretary of the Issuer as being those now in force;
(b) copy resolutions of the board of directors of the Issuer passed on
15 April 1998;
(c) a draft dated 1 May 1998 of the Indenture; and
(d) a copy of the Registration Statement and a draft of the prospectus
(the "PROSPECTUS") dated 15 June 1998 the final form of which is to be
issued shortly in respect of the Exchange Notes.
<PAGE>
Our opinion is confined solely to the tax laws of the United Kingdom
and the practice of the United Kingdom Inland Revenue as in force at the date of
this opinion and is confined to the matters discussed herein.
We have also assumed that:
(i) the Memorandum and Articles of Association of the Issuer, Terra
Nova, Octavian and Terra Nova Capital which we have examined are those now in
force;
(ii) the amount of interest and Additional Amounts payable on the
Senior Notes neither exceeds a reasonable commercial return on the nominal
amount of the capital nor falls to be determined to any extent by reference to
the results of, or any part of, a business or to the value of any property;
(iii) the Senior Notes carry a right on repayment to an amount which
does not exceed the nominal value of the capital (or if it does, such amount is
reasonably comparable with what is generally repayable (in respect of a similar
nominal amount of capital) under the terms of issue of loan capital issued in
the Official List of The London Stock Exchange);
(iv) the Senior Notes do not carry a right (exercisable now or later)
of conversion into shares or other securities, or to the acquisition of shares
or other securities, including loan capital of the same description;
(v) any transfer of, or agreement to transfer, the rights of a holder
of Senior Notes in respect of Senior Notes held in a clearing system does not
amount to the transfer of, or an agreement to transfer, either
(a) an interest in such Notes; or
(b) rights against such clearing system;
in each case falling short of full ownership of the relevant Senior Notes.
Whilst this point is not entirely free from doubt, we are not aware of the
United Kingdom Inland Revenue seeking to charge stamp duty or stamp duty reserve
tax on the basis that the legal position was as set out in (a) or (b) above.
Moreover certain published correspondence with the Inland Revenue suggests that
the Inland Revenue consider that this would not be a basis on which tax could be
charged.
2
<PAGE>
OPINION
On the basis of the foregoing, we are of the opinion that the
discussion of tax matters set forth under the headings "Certain Tax
Considerations - Certain UK, US and Bermuda Tax Considerations" and "Certain Tax
Considerations - Certain Tax Consequences of the Exchange Offer - United
Kingdom" and "Certain Tax Considerations - Taxation of US Holders of the Senior
Notes - United Kingdom" in the Prospectus, insofar as such discussions relate to
the tax laws of the United Kingdom, fairly summarise (albeit that they do not
provide a complete analysis of) the tax laws of the United Kingdom (subject to
the qualifications and assumptions set forth in such discussion).
This opinion shall be construed in accordance with English law. We
express no opinion as to any agreement, instrument or other document other than
as specified in this letter. We hereby consent to the filing of this opinion
with the SEC with and as part of the Registration Statement and to the use of
our name therein and in the Prospectus contained in the Registration Statement.
In giving this consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
of the United States.
The above consent is given on the basis that our name is not used in
any subsequent Registration Statement (or the Prospectus contained in it) except
in an amendment or supplement to such Registration Statement, including post-
effective amendments.
This opinion is given solely for the purposes of filing the
Registration Statement and for the information of the persons to whom it is
addressed and may not be relied upon for any other purpose or by any other
person.
Yours faithfully
/s/ Clifford Chance
CLIFFORD CHANCE
3
<PAGE>
EXHIBIT 8.2
[Letterhead of Conyers, Dill & Pearman]
June 12, 1998
Terra Nova (Bermuda) Holdings Ltd.
Richmond House
12 Par-la-Ville Road
Hamilton
Bermuda
Dear Sirs,
RE: REGISTRATION STATEMENT ON FORMS F-4 AND S-4
We have acted as special legal counsel to Terra Nova (Bermuda) Holdings Ltd., a
Bermuda corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission of a Registration Statement
on Forms F-4 and S-4 under the Securities Act of 1933, as amended (the
"Registration Statement"), related to the exchange of US$100,000,000 aggregate
principal amount of 7% Senior Notes due 2008 of Terra Nova Insurance (UK)
Holdings plc, fully and unconditionally guaranteed on a senior basis by the
Company.
As such counsel, we have examined originals, or copies certified or otherwise
identified to our satisfaction, of the Registration Statements, the Memorandum
of Association and Bye-Laws of the Company as well as resolutions of the
Company's Board of Directors. We have also examined originals, or copies
certified to our satisfaction, of such corporate records of the Company and
other instruments, certificates of appropriate public officials and certificates
of officers and representatives of the Company and other documents as we have
deemed
<PAGE>
Terra Nova (Bermuda) Holdings Ltd.
Page 2
June 12, 1998
necessary as a basis for the opinions hereinafter expressed. In such
examination, we have assumed the authenticity of all documents submitted to us
as originals, the conformity with the originals of all documents submitted to us
as copies, the genuineness of all signatures and the legal capacity of natural
persons.
On the basis of the foregoing, we are of the opinion that the discussions set
forth in the prospectus contained in the Registration Statement under the
headings "Certain Tax Considerations - Certain U.K., U.S. and Bermuda Tax
Considerations", "Certain Tax Considerations - Certain Tax Consequences of the
Exchange Offer - Bermuda" and "Certain Tax Considerations - Taxation of U.S.
Holders of the Senior Notes - Bermuda" accurately reflect our opinion as to such
matters.
We are members of the bar of Bermuda and we have made no investigation of and
express no opinion in relation to the laws of any jurisdiction other than
Bermuda. This opinion is to be governed by and construed in accordance with the
laws of Bermuda and is limited to and is given on the basis of the current law
and practice in Bermuda.
We consent to the filing of this opinion as an exhibit to the Registration
Statement. We also consent to the reference made to us under the captions
"Enforceability of Civil Liabilities", "Risk Factors - Enforcement of Judgments"
and "Certain Tax Considerations" in the prospectus contained in the Registration
Statement.
Yours faithfully,
/s/ Conyers Dill & Pearman
CONYERS DILL & PEARMAN
<PAGE>
EXHIBIT 12.1
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31, 3 months to March 31,
--------------------------------------------------------------- --------------------------
1993 1994 1995 1996 1997 1997 1998
--------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
Interest portion of rental expense (1) 678 900 752 1,266 1,366 341 374
--------------------------------------------------------------- --------------------------
Amortisation of deferred debt issuance
costs 118 438 503 121 156
--------------------------------------------------------------- --------------------------
Interest on indebtedness 221 9,411 10,750 12,710 3,186 3,922
--------------------------------------------------------------- --------------------------
678 1,121 10,281 12,454 14,579 3,648 4,452
=============================================================== ==========================
Earnings before tax, discontinued 81,869 50,737 62,433 82,668 91,049 23,482 30,052
operations and minority interests
--------------------------------------------------------------- --------------------------
Fixed Charges 678 1,121 10,281 12,454 14,579 3,648 4,452
--------------------------------------------------------------- --------------------------
Earnings from continuing operations 82,547 51,858 72,714 95,122 105,628 27,130 34,504
before income taxes and fixed charges
=============================================================== ==========================
Ratio of earnings to fixed charges N/M N/M 7.07 7.64 7.25 7.44 7.75
</TABLE>
(1) Represents 1/3 of rental expense which the Company's management believes to
be representative of the interest portion.
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement on
Forms F-4 and S-4 dated June 15, 1998 related to the offering of Senior Notes
due 2008 (the "Exchange Notes") by Terra Nova Insurance (UK) Holdings plc fully
and unconditionally guaranteed by Terra Nova (Bermuda) Holdings Ltd. ("Bermuda
Holdings"), of our report dated March 6, 1998 included in the annual report on
Form 10-K for the year ended December 31, 1997 (the "Form 10-K") of Bermuda
Holdings, on our audit of the consolidated financial statements of Bermuda
Holdings and subsidiaries as of December 31, 1996 and 1997 and for each of the
three years in the period ended December 31, 1997, and of our report dated March
6, 1998 included in the Form 10-K of Bermuda Holdings, on the financial
statement schedules listed in Item 14 therein. We also consent to the reference
to our firm under the caption "Experts".
/s/ Coopers & Lybrand
COOPERS & LYBRAND
Hamilton, Bermuda
June 15, 1998
<PAGE>
EXHIBIT 25.1
___________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
________________________________________
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
____________________________________________
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
(Exact name of obligor as specified in its charter)
ENGLAND AND WALES NOT APPLICABLE
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
TERRA NOVA HOUSE
41-43 MINCING LANE
LONDON EC3R 7SP, GREAT BRITAIN
(44-1-71) 283-3000
(Address of principal executive offices) (Zip Code)
________________________________________
7.0% SENIOR NOTES DUE 2008
(Title of the indenture securities)
___________________________________________
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 29 th day of May, 1998.
THE CHASE MANHATTAN BANK
By /s/ David G. Safer
--------------------
/s/ David G. Safer
- 3 -
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1998, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin.......................................... $ 12,037
Interest-bearing balances.................................. 4,054
Securities:..................................................
Held to maturity securities.................................. 2,340
Available for sale securities................................ 50,134
Federal funds sold and securities purchased under
agreements to resell....................................... 24,982
Loans and lease financing receivables:
Loans and leases, net of unearned income.......... $127,958
Less: Allowance for loan and lease losses......... 2,797
Less: Allocated transfer risk reserve............. 0
--------
Loans and leases, net of unearned income,
allowance, and reserve..................................... 125,161
Trading Assets............................................... 61,820
Premises and fixed assets (including capitalized
leases).................................................... 2,961
Other real estate owned...................................... 347
Investments in unconsolidated subsidiaries and
associated companies....................................... 242
Customers' liability to this bank on acceptances
outstanding................................................ 1,380
Intangible assets............................................ 1,549
Other assets................................................. 11,727
--------
TOTAL ASSETS................................................. $298,734
========
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
LIABILITIES
Deposits
In domestic offices........................................ $ 96,682
Noninterest-bearing.......................$38,074
Interest-bearing.......................... 58,608
-------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's.................................... 72,630
Noninterest-bearing.......................$ 3,289
Interest-bearing.......................... 69,341
Federal funds purchased and securities sold under agree-
ments to repurchase......................................... 42,735
Demand notes issued to the U.S. Treasury..................... 872
Trading liabilities.......................................... 45,545
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less.............. 4,454
With a remaining maturity of more than one year
through three years....................................... 231
With a remaining maturity of more than three years......... 106
Bank's liability on acceptances executed and outstanding..... 1,380
Subordinated notes and debentures............................ 5,708
Other liabilities............................................ 11,295
TOTAL LIABILITIES............................................ 281,638
--------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................ 0
Common stock................................................. 1,211
Surplus (exclude all surplus related to preferred stock)..... 10,291
Undivided profits and capital reserves....................... 5,579
Net unrealized holding gains (losses)
on available-for-sale securities............................ (1)
Cumulative foreign currency translation adjustments.......... 16
TOTAL EQUITY CAPITAL......................................... 17,096
--------
TOTAL LIABILITIES AND EQUITY CAPITAL......................... $298,734
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
OFFER TO EXCHANGE ITS 7% SENIOR NOTES DUE 2008
("EXCHANGE NOTES"), FULLY AND UNCONDITIONALLY GUARANTEED BY
TERRA NOVA (BERMUDA) HOLDINGS LTD.
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING 7% SENIOR NOTES DUE 2008 ("OLD NOTES"),
PURSUANT TO THE PROSPECTUS DATED_______, 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _____, 1998,
OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED (SUCH
DATE AND TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE
EXPIRATION DATE.
- --------------------------------------------------------------------------------
To: The Chase Manhattan Bank, Exchange Agent
<TABLE>
<S> <C> <C>
By Hand or Overnight Delivery: Facsimile Transmissions: By Registered Or Certified Mail:
(Eligible Institutions Only)
The Chase Manhattan Bank The Chase Manhattan Bank
450 W. 33rd St. (212) 946-8177 450 W. 33rd St.
15th Floor 15th Floor
New York, New York 10001 To Confirm by Telephone New York, New York 10001
or for Information Call:
Attention: Corporate Trust Attention: Corporate Trust
Administration (212) 946-3352 Administration
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER
THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
The undersigned acknowledges that he, she or it has received and
reviewed the Prospectus, dated _____, 1998 (the "Prospectus"), of Terra Nova
Insurance (UK) Holdings plc, a public limited company organized under the laws
of England and Wales ("the Issuer"), and this Letter of Transmittal (the "Letter
of Transmittal"), which together constitute the Issuer's offer (the "Exchange
Offer") to exchange up to $100,000,000 aggregate principal amount of its
Exchange Notes, which are fully and unconditionally guaranteed by Terra Nova
(Bermuda) Holdings Ltd. ("Bermuda Holdings") and which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for a like
principal amount of its issued and outstanding 7% Senior Notes due 2008 (the
"Old Notes"). The Exchange Notes and the Old Notes are collectively referred to
as the "Senior Notes." Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This Letter of Transmittal is to be completed by holders of Old Notes
who wish to tender their Old Notes pursuant to the Tender Offer. In addition,
either (i) a timely confirmation of a book-entry transfer of Old Notes (a "Book-
Entry Confirmation") into an account maintained by the Exchange Agent at DTC
pursuant to the procedures set forth in "The Exchange Offer--Book-Entry
Transfer" in the Prospectus, must be received by the Exchange Agent prior to the
Expiration Date, or (ii) the holder must comply with the guaranteed delivery
procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" in
the Prospectus. Delivery of this Letter of Transmittal and any other required
documents should be made to the Exchange Agent. Delivery of documents to DTC
does not constitute delivery to the Exchange Agent.
Holders who cannot deliver the documents required hereby to the
Exchange Agent on or prior to the Expiration Date must tender their Old Notes
according to the guaranteed delivery procedure set forth in the Prospectus under
the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 1. Any financial institution that is a participant in DTC's systems
can execute the tender through the DTC Automated Tender Offer Program ("ATOP"),
for which the transaction will be eligible. DTC participants should transmit
their acceptance to DTC, which
<PAGE>
will verify the acceptance and execute a book-entry delivery to the Exchange
Agent's account at DTC. DTC will then send an Agent's Message to the Exchange
Agent for its acceptance. DTC participants may also accept the Exchange Offer by
submitting a notice of guaranteed delivery through ATOP. SEE INSTRUCTION 1.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The undersigned will be deemed to have tendered a beneficial interest
in the Old Notes in exchange for a beneficial interest in Exchange Notes
represented by one or more fully registered global receipts, which will be
deposited with, or on behalf of, DTC and registered in the name of Cede & Co.,
its nominee. Beneficial interests in such registered global receipts will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. See "Description of Exchange Notes--
General" and "Description of Depositary Agreement" as set forth in the
Prospectus.
In order to participate in the Exchange Offer, the undersigned
must complete the appropriate boxes below and sign this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the Exchange
Offer.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
List below the Old Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the principal amount of such
Old Notes should be listed on a separate signed schedule affixed thereto.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Description of Old Notes
- ------------------------------------------------------------------------------------
<S> <C>
DTC Participant and DTC Participant's Principal Amount
DTC Account Number in which of Old Notes
Old Notes are Held Tendered*
- ------------------------------------------------------------------------------------
------------------------
------------------------
-----------------------------------------------------------------------------------
* The beneficial owner will be deemed to have tendered a beneficial interest in the
Old Notes in exchange for a beneficial interest in Exchange Notes represented by
one or more fully registered global receipts, which will be deposited with, or
on behalf of, The Depositary Trust Company and registered in the name of Cede &
Co., its nominee.
- -----------------------------------------------------------------------------------
</TABLE>
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution _________________________________________________
DTC Account Number ____________________________________________________________
Transaction Code Number _______________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) __________________________________________________
Window Ticket Number (if any) _________________________________________________
Date of Execution of Notice of Guaranteed Delivery ____________________________
2
<PAGE>
Name of Eligible Institution that Guaranteed Delivery __________________________
Name of Tendering Institution __________________________________________________
DTC Account Number _____________________________________________________________
Transaction Code Number ________________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[_] CHECK HERE IF YOU (I) ARE A BROKER-DEALER, (II) WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS MADE THERETO, (III) WILL RECEIVE EXCHANGE NOTES FOR YOUR OWN
ACCOUNT IN EXCHANGE FOR OLD NOTES THAT WERE ACQUIRED AS A RESULT OF MARKET
MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-
DEALER") AND (IV) ACKNOWLEDGE THAT YOU WILL DELIVER THE PROSPECTUS IN
CONNECTION WITH ANY RESALE OF SUCH NEW NOTES (BY SO ACKNOWLEDGING AND
DELIVERING THE PROSPECTUS, YOU WILL NOT, HOWEVER, BE DEEMED TO ADMIT THAT
YOU ARE AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
Name ___________________________________________________________________________
Address ________________________________________________________________________
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to conditions of the Exchange Offer described
herein and in the Prospectus, the undersigned hereby tenders to the Issuer the
aggregate principal amount of Old Notes indicated above. Subject to, and
effective upon, the acceptance for exchange of Old Notes tendered herewith in
accordance with the terms and conditions of the Exchange Offer (including, if
the Exchange Offer is extended or amended, the terms and conditions of any such
extension or amendment), the undersigned hereby sells, assigns and transfers to,
or upon the order of, the Exchange Agent, as agent of the Issuer, all right,
title and interest in and to such Old Notes as are being tendered hereby, and
irrevocably constitutes and appoints the Exchange Agent as the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that the
Exchange Agent is also acting as agent of the Issuer in connection with the
Exchange Offer) to cause the Old Notes tendered hereby to be transferred and
exchanged.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD NOTES
TENDERED HEREBY AND TO ACQUIRE THE EXCHANGE NOTES ISSUABLE UPON THE EXCHANGE OF
SUCH TENDERED OLD NOTES, AND THAT THE ISSUER WILL ACQUIRE GOOD AND UNENCUMBERED
TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND
ENCUMBRANCES AND NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES WHEN THE SAME ARE
ACCEPTED BY THE EXCHANGE AGENT, AS AGENT FOR THE ISSUER. THE UNDERSIGNED WILL,
UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE ISSUER,
BERMUDA HOLDINGS OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE
THE EXCHANGE, SALE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY.
THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The undersigned acknowledges that the Issuer is making the Exchange Offer in
reliance on the position of the staff of the Division of Corporation Finance of
the Securities and Exchange Commission (the "Commission") as set forth in
certain no-action letters addressed to third parties in other transactions
(including Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley & Co. Incorporated (available June 5, 1991), K-III Communications
Corporation (available May 14, 1993) and Shearman & Sterling (available July 2,
1993)). However, neither the Issuer nor Bermuda Holdings has sought its own no-
action letter and there can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such no-action letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance, and subject to the two immediately following sentences, the
Issuer believes that the Exchange Notes issued pursuant to this Exchange Offer
in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a holder who is a broker-dealer or
an "affiliate" of the Issuer or Bermuda Holdings within the meaning of Rule 405
of the Securities Act) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any Person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Notes. Any holder of Old Notes who is an
"affiliate" of the Issuer or Bermuda Holdings or who intends to participate in
the Exchange Offer for the purpose of distributing Exchange Notes, or any
broker-dealer who purchased Old Notes from the Issuer or Bermuda Holdings to
resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exception under the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the
4
<PAGE>
above-mentioned interpretive letters, (b) will not be permitted or entitled to
tender such Old Notes in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirement of the Securities Act in
connection with any sale or other transfer of such Old Notes unless such sale is
made pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Old Notes acquired for its own account as a
result of market-making or other trading activities and exchanges such Old Notes
for Exchange Notes, then such broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
Exchange Notes.
By exchanging Old Notes for Exchange Notes, the undersigned hereby
represents and agrees that (i) it is not an "affiliate" of the Issuer or Bermuda
Holdings, (ii) any Exchange Notes to be received by it are being acquired in the
ordinary course of its business, and (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Notes. A holder of Old Notes
which is a broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer represents and agrees that such Old Notes were
acquired by such broker-dealer for its own account as a result of market-making
or other trading activities and it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes (provided that, by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act). A broker-dealer that
acquired Existing Notes in a transaction other than as part of its market-making
or other trading activities will not be able to participate in the Exchange
Offer.
By acceptance of the Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby acknowledges and agrees
that, upon receipt of notice by the Issuer or Bermuda Holdings of the happening
of any event which makes any statement in the Prospectus untrue in any material
respect or which requires the making of any changes in the Prospectus in order
to make the statements therein not misleading (which notice the Issuer or
Bermuda Holdings agrees to deliver promptly to such broker-dealer), such broker-
dealer will suspend use of the Prospectus until the Issuer or Bermuda Holdings
has amended or supplemented the Prospectus to correct such misstatement or
omission and has furnished copies of the amended or supplemented prospectus to
such broker-dealer.
The undersigned understands that interest on the Exchange Notes will accrue
at the rate of 7% per annum and is payable semi-annually on November 15 and May
15 of each year, commencing on November 15, 1998. Each Exchange Note will bear
interest from May 18, 1998, the issue date for the Old Notes. Holders of the Old
Notes whose Old Notes are accepted for exchange will not receive accrued
interest on such Old Notes, and will be deemed to have waived the right to
receive any interest on such Old Notes accrued from and after May 18, 1998.
The undersigned recognizes that the holder of Old Notes, when tendering
such Old Notes, will be deemed to have tendered its beneficial ownership in such
Old Notes in exchange for a beneficial interest in one or more fully registered
global receipts, which will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., its nominee. Beneficial interests in such
registered global receipts will be shown on, and transfers thereof will effected
only through, records maintained by DTC and its participants. See "Description
of the Exchange Notes--General" and "Description of Depositary Agreement" in the
Prospectus.
All authority conferred or agreed to be conferred in this Letter of
Transmittal and every obligation of the undersigned hereunder shall be binding
upon the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated under "The Exchange Offer--Withdrawal Rights" in the Prospectus
and in this Letter of Transmittal, this tender is irrevocable.
The undersigned understands that tenders of the Old Notes pursuant to any one
of the procedures described under "The Exchange Offer--Procedures for Tendering
Old Notes" in the Prospectus and in the
5
<PAGE>
instructions hereto will constitute a binding agreement between the undersigned,
the Issuer and Bermuda Holdings in accordance with the terms and subject to the
conditions of the Exchange Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus under "The Exchange Offer--Certain Conditions to the Exchange
Offer," the Issuer and Bermuda Holdings may not be required to accept for
exchange any of the Old Notes tendered.
THE UNDERSIGNED, BY SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED
THE OLD NOTES AS SET FORTH ABOVE.
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS
LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH A CONFIRMATION OF
BOOK-ENTRY TRANSFER OF SUCH OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
6
<PAGE>
- --------------------------------------------------------------------------------
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2 AND 5)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
(COMPLETE ACCOMPANYING INTERNAL REVENUE SERVICE FORM W-9)
Must be signed by holder(s) exactly as name(s) appear(s) on a security
position listing, or by any person(s) authorized to become the holder(s) by
endorsements and documents transmitted herewith. If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary or representative capacity, please
set forth the signer's full title. See Instruction 5.
________________________________________________________________________________
(Signature(s) of Holder(s))
Date_____________________________________, 1998
Name(s)_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity:_______________________________________________________________________
(Include Full Title)
Address:________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:_________________________________________________
________________________________________________________________________________
(Tax Identification or Social Security Number(s))
SIGNATURE GUARANTEE
(SEE INSTRUCTIONS 2 AND 5)
- --------------------------------------------------------------------------------
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES: GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by all
holders who wish to tender their Old Notes pursuant to the Exchange Offer.
Timely confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC (a "Book-Entry Confirmation), as well as this Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at one of its
addresses set forth herein on or prior to the Expiration Date. Old Notes may be
tendered in whole or in part in the principal amount of $1,000 and integral
multiples of $1,000.
Holders who wish to tender their Old Notes and who cannot complete the
procedures for delivery by book-entry transfer on a timely basis may tender
their Old Notes by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. Pursuant to
such procedures: (a) such tender must be made by or through an Eligible
Institution (as defined below); (b) a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form made available by the Issuer and Bermuda Holdings,
setting forth the name and address of the holder of Old Notes and the amount of
Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, a Book-Entry
Confirmation and any other documents required by this Letter of Transmittal will
be deposited by the Eligible Institution with the Exchange Agent prior to the
Expiration Date; and (c) the Book-Entry Confirmation representing all tendered
Old Notes, in proper form for transfer, together with a Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be deposited by the Eligible Institution with the Exchange
Agent within five NYSE trading days after the date of execution of such Notice
of Guaranteed Delivery, all as provided in "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus.
The Notice of Guaranteed Delivery must be delivered by hand or transmitted
by telegram, telex, facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such notice. For
Old Notes to be properly tendered pursuant to the guaranteed delivery procedure,
the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to
the Expiration Date. As used herein and in the Prospectus, "Eligible
Institution" means a firm which is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office or correspondent in the
United States.
THE METHOD OF DELIVERY OF OLD NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER.
IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OTHER
REQUIRED DOCUMENTS SHOULD BE SENT TO THE ISSUER OR BERMUDA HOLDINGS.
The Issuer will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if Old Notes are tendered for the account of a firm that
is an Eligible Institution. In all other cases, an Eligible Institution must
guarantee the signature(s) on this Letter of Transmittal. See Instruction 5.
8
<PAGE>
3. INADEQUATE SPACE. If the space provided above is inadequate, any
required information should be listed on a separate signed schedule which is
attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Old Notes may be tendered in
whole or in part. Tenders of Old Notes will be accepted only in the principal
amount of $1,000 and integral multiples thereof. Except as otherwise provided
herein, tenders of Old Notes may be withdrawn at any time prior to the
Expiration Date. In order for withdrawal to be effective on or prior to that
time, a written notice of withdrawal must be timely received by the Exchange
Agent at one of its addresses set forth above or in the Prospectus prior to the
Expiration Date. Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, the number of the account
at DTC from which the Old Notes were tendered, the principal amount of the Old
Notes to be withdrawn, and the name and number of the account at DTC to be
credited with the withdrawn Old Notes, and otherwise comply with the procedures
of such facility. Old Notes properly withdrawn will not be deemed validly
tendered for purposes of the Exchange Offer, but may be retendered at any time
prior to the Expiration Date by following one of the procedures described in the
Prospectus under "The Exchange Offer--Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Issuer and Bermuda
Holdings, whose determination shall be final and binding on all parties. Any
Old Notes which have been tendered for exchange but which are not exchanged for
any reason will be credited to an account maintained with DTC for the Old Notes
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the owner(s) as evidenced by a Book-
Entry Confirmation of the Old Notes tendered hereby, the signature(s) must
correspond exactly with the name(s) as they appear in the Book-Entry
Confirmation without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If this Letter of Transmittal or any other required documents or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and,
unless waived by the Issuer or Bermuda Holdings, proper evidence satisfactory to
the Issuer or Bermuda Holdings of such persons' authority to so act must be
submitted.
If this Letter of Transmittal is signed by a person other than the owner
as evidenced by a Book-Entry Confirmation, such Letter of Transmittal must be
accompanied by an endorsement or appropriate powers of attorney, in satisfactory
form as determined by the Issuer or Bermuda Holdings in their sole discretion
and executed by the owner as evidenced by such Book-Entry Confirmation, in
either case signed exactly as the name or names of such owner appears on the
Book-Entry Confirmation. Signatures on such powers of attorney must be
guaranteed by an Eligible Institution.
6. IRREGULARITIES. The Issuer and Bermuda Holdings will determine, in
their sole discretion, all questions as to the form, validity, eligibility
(including time of receipt) and acceptance for exchange of any tender of Old
Notes, which determination shall be final and binding. The Issuer and Bermuda
Holdings reserve the absolute right to reject any and all tenders of any
particular Old Notes not properly tendered or to not accept any particular Old
Notes which acceptance might, in the judgment of the Issuer and Bermuda Holdings
or their counsel, be unlawful. Neither the Issuer or Bermuda Holdings has any
obligation, and will not knowingly, permit acceptances of tenders of Old Notes
from affiliates of the Issuer or Bermuda Holdings or from any other holder or
holders of Old Notes who are not eligible to participate in the Exchange Offer
under applicable law or interpretations thereof by the Commission, or if the
Exchange Notes to be received by such holder or holders
9
<PAGE>
of Old Notes in the Exchange Offer, upon receipt, will not be tradable by such
holder without restriction under the Securities Act and the Exchange Act and
without material restrictions under the blue sky or securities laws of
substantially all of the states of the United States. The Issuer and Bermuda
Holdings also reserve the absolute right, in their sole discretion, to waive any
defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Issuer and Bermuda Holdings shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with the
tender of Old Notes for exchange must be cured within such reasonable period of
time as the Issuer or Bermuda Holdings shall determine. Neither the Issuer,
Bermuda Holdings, the Exchange Agent nor any other person shall be under any
duty to give notification of any defect or irregularity with respect to any
tender of Old Notes for exchange, nor shall any of them incur any liability for
failure to give such notification.
7. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
8. BACKUP FEDERAL INCOME TAX WITHHOLDING AND INTERNAL REVENUE SERVICE FORM
W-9. Under the federal income tax laws, payments that may be made by the Issuer
on account of Exchange Notes issued pursuant to the Exchange Offer may be
subject to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Internal Revenue
Service Form W-9 (the "IRS Form W-9") included in this Letter of Transmittal and
either (a) provide the correct taxpayer identification number ("TIN") and
certify, under penalties of perjury, that the TIN provided is correct and that
(i) the holder has not been notified by the Internal Revenue Service (the "IRS")
that the holder is subject to backup withholding as a result of failure to
report all interest or dividends or (ii) the IRS has notified the holder that
the holder is no longer subject to backup withholding; or (b) provide an
adequate basis for exemption. If the tendering holder has not been issued a TIN
and has applied for one, or intends to apply for one in the near future, such
holder should write "Applied For" in the space provided for the TIN in Part I of
the IRS Form W-9, sign and date the IRS Form W-9 and sign the Certificate of
Payee Awaiting Taxpayer Identification Number. If "Applied For" is written in
Part I, the Issuer (or the Exchange Agent with respect to the Exchange Notes or
a broker or custodian) shall retain 31% of the payments made to the holder
during the sixty (60) day period following the date of the IRS Form W-9. If the
holder furnishes the Issuer (or the Exchange Agent with respect to the Exchange
Notes or a broker or custodian) with its TIN within sixty (60) days after the
date of the IRS Form W-9, the Issuer (or the Exchange Agent with respect to the
Exchange Notes or such broker or custodian, as the case may be) shall remit such
amounts retained during the sixty (60) day period to such holder and no further
amounts shall be retained or withheld from payments made to such holder
thereafter. If, however, the holder has not provided the Issuer (or the
Exchange Agent with respect to the Exchange Notes or such broker or custodian,
as the case may be) with its TIN within such sixty (60) day period, the Issuer
(or the Exchange Agent with respect to the Exchange Notes or such broker or
custodian, as the case may be) shall remit such previously retained amounts to
the IRS as backup withholding. In general, if a holder is an individual, the
taxpayer identification number is the Social Security number of such individual.
If the Exchange Agent or the Issuer is not provided with the correct TIN, the
holder may be subject to a $50 penalty imposed by the IRS. Certain holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. In order
for a foreign individual to qualify as an exempt recipient, such holder must
submit a statement (generally, IRS Form W-8), signed under penalties of perjury,
attesting to that individual's exempt status. Such statements can be obtained
from the Exchange Agent. For further information concerning backup withholding
and instructions for completing the IRS Form W-9 (including how to obtain a
taxpayer identification number if you do not have one and how to complete the
IRS
10
<PAGE>
Form W-9 if Old Notes are registered in more than one name), consult the
enclosed instructions to the IRS Form W-9.
Failure to complete the IRS Form W-9 will not, by itself, cause Old Notes
to be deemed invalidly tendered, but may require the Issuer or the Exchange
Agent with respect to the Exchange Notes, broker or custodian to withhold 31% of
the amount of any payments made on account of the Exchange Notes. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the IRS.
9. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF),
OR AN AGENT'S MESSAGE IN LIEU THEREOF, AND ALL OTHER REQUIRED
DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT
ON OR PRIOR TO THE EXPIRATION DATE.
11
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
7% SENIOR NOTES DUE 2008
OF
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Exchange Offer (as defined below) if, with respect to
the 7% Senior Notes due 2008 (the "Old Notes") of the Issuer (as defined below),
the procedures for book-entry transfer cannot be completed on a timely basis.
This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission, overnight courier, telex, telegram or mail to The Chase Manhattan
Bank (the "Exchange Agent"). See "The Exchange Offer -- Guaranteed Delivery
Procedures" in the Prospectus dated ________, 1998 (which, together with the
related Letter of Transmittal, constitutes the "Exchange Offer") of Terra Nova
Insurance (UK) Holdings plc, a public limited company organized under the laws
of England and Wales (the "Issuer").
The Exchange Agent for the Exchange Offer is:
THE CHASE MANHATTAN BANK
<TABLE>
<CAPTION>
By Hand or Overnight Delivery: Facsimile Transmissions: By Registered Or Certified Mail:
(Eligible Institutions Only)
<S> <C> <C>
The Chase Manhattan Bank The Chase Manhattan Bank
450 W. 33rd St. (212) 946-8177 450 W. 33rd St.
15th Floor 15th Floor
New York, New York 10001 To Confirm by Telephone New York, New York 10001
or for Information Call:
Attention: Corporate Trust Attention: Corporate Trust
Administration (212) 946-3352 Administration
</TABLE>
<PAGE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA A
FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED ON THE LETTER
OF TRANSMITTAL.
2
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Not to be used for Signature Guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States, hereby guarantees to deliver to the Exchange
Agent, at one of its addresses set forth above, confirmation of the book-entry
transfer of such Old Notes to the Exchange Agent's account at the Depository
Trfust Company ("DTC"), pursuant to the procedures for book-entry transfer set
forth in the Prospectus, in either case together with one or more properly
completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and
any other documents required by such Letter of Transmittal, within five New York
Stock Exchange trading days after the date of execution of this Notice of
Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and all other documents required by the Letter of Transmittal to,
and a Book-Entry Confirmation must be received by, the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
Name of Firm:_______________________ ____________________________________
(Authorized Signature)
Address:____________________________ Title:______________________________
Name:_______________________________
____________________________________ (Please type or print)
(Zip Code)
Area Code and Telephone Number: Date:
____________________________________ ____________________________________
NOTE: ACTUAL SURRENDER OF OLD NOTES MUST BE MADE BY A PROPERLY COMPLETED AND
FULLY EXECUTED LETTER OF TRANSMITTAL, ANY OTHER REQUIRED DOCUMENTS REQUIRED
THEREBY AND A BOOK-ENTRY CONFIRMATION BEING RECEIVED BY, THE EXCHANGE AGENT.
3
<PAGE>
EXHIBIT 99.3
OFFER TO EXCHANGE
FOR ANY AND ALL OUTSTANDING
(REGISTERED UNDER THE SECURITIES ACT OF 1933)
7% SENIOR NOTES DUE 2008
OF
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
To the Depository Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer
by Terra Nova Insurance (UK) Holdings plc, a public limited company organized
under the laws of England and Wales (the "Issuer"), to exchange its 7% Senior
Notes due 2008 (the "Exchange Notes"), fully and unconditionally guaranteed on a
senior basis by Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings"),
pursuant to an offering registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of its issued and
outstanding 7% Senior Notes due 2008 (the "Old Notes") upon the terms and
subject to the conditions set forth in the Issuer's Prospectus, dated _______,
1998, and the related Letter of Transmittal (which together constitute the
"Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated ______, 1998;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Book-Entry Transfer Participant from Owner; and
5. Letter which may be sent to your clients for whose account you hold
Old Notes in your name or in the name of your nominee, to accompany
the instruction form referred to above, for obtaining such client's
instruction with regard to the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE
EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _______, 1998
UNLESS EXTENDED.
<PAGE>
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Issuer and Bermuda Holdings that (i) the holder is not an
"affiliate" of the Issuer or of Bermuda Holdings, (ii) any Exchange Notes to be
received by it are being acquired in the ordinary course of its business, and
(iii) the holder has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
Exchange Notes. If the tendering holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes, you will represent
on behalf of such broker-dealer that the Old Notes to be exchanged for the
Exchange Notes were acquired by it as a result of market-making activities or
other trading activities, and acknowledge on behalf of such broker-dealer that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. A broker-dealer that
acquired Old Notes in a transaction other than as part of its market-making or
other trading activities will not be able to participate in the Exchange Offer.
By acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes, such broker-dealer is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The enclosed Instruction to Book-Entry Transfer Participant from Owner
contains an authorization by the beneficial owners of the Old Notes for you to
make the foregoing representations.
The Issuer will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The Issuer
will pay or cause to be paid any transfer taxes payable on the transfer of Old
Notes to it, except as otherwise provided in Instruction 9 of the enclosed
Letter of Transmittal.
2
<PAGE>
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
THE CHASE MANHATTAN BANK
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF THE ISSUER, BERMUDA HOLDINGS OR THE CHASE MANHATTAN BANK OR AUTHORIZE
YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH
THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS
CONTAINED THEREIN.
3
<PAGE>
EXHIBIT 99.4
OFFER TO EXCHANGE
7% SENIOR NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
7% SENIOR NOTES DUE 2008
OF
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
To Our Clients:
We are enclosing herewith a Prospectus, dated ______, 1998, of Terra Nova
Insurance (UK) Holdings plc, a public limited company organized under the laws
of England and Wales (the "Issuer"), and a related Letter of Transmittal (which
together constitute the "Exchange Offer") relating to the offer by the Issuer to
exchange its 7% Senior Notes due 2008 (the "Exchange Notes"), fully and
unconditionally guaranteed on a senior basis by Terra Nova (Bermuda) Holdings
Ltd. ("Bermuda Holdings"), pursuant to an offering registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like principal
amount of its issued and outstanding 7% Senior Notes due 2008 (the "Old Notes")
upon the terms and subject to the conditions set forth in the Exchange Offer.
We are also enclosing herewith a letter of instruction to participant, relating
to the Exchange Offer (the "Letter of Instruction").
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON____________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
We are the participant in the book-entry transfer facility of Old Notes
held by us for your account. A tender of such Old Notes can be made only by us
as the participant in the book-entry transfer facility and pursuant to your
instructions as provided in the Letter of Instruction. The Letter of
Transmittal is furnished to you for your information only and cannot be used by
you to tender Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account pursuant to the terms and conditions of
the Exchange Offer by returning the Letter of Instruction to us prior to the
Expiration Date. We also
<PAGE>
request that you confirm that we may on your behalf make the representations
contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Issuer and Bermuda Holdings that (i) the holder is not an
"affiliate" of the Issuer or of Bermuda Holdings, (ii) any Exchange Notes to be
received by the holder are being acquired in the ordinary course of its
business, and (iii) the holder has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. If the tendering holder is a broker-dealer that
will receive Exchange Notes for its own account in exchange for Old Notes, we
will represent on behalf of such broker-dealer that the Old Notes to be
exchanged for the Exchange Notes were acquired by it as a result of market-
making activities or other trading activities, and acknowledge on behalf of such
broker-dealer that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes. A broker-
dealer that acquired Old Notes in a transaction other than as part of its
market-making or other trading activities will not be able to participate in the
Exchange Offer. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes, such broker-dealer is not deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
Very truly yours,
2
<PAGE>
EXHIBIT 99.5
INSTRUCTION TO
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM OWNER
OF
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
7% SENIOR NOTES DUE 2008
TO PARTICIPANT OF THE BOOK-ENTRY TRANSFER FACILITY:
The undersigned hereby acknowledges receipt of the Prospectus dated______,
1998 (the "Prospectus") of Terra Nova Insurance (UK) Holdings plc, a public
limited company organized under the laws of England and Wales (the "Issuer"),
and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Issuer's offer (the "Exchange Offer"). Capitalized
terms used but not defined herein have the meaning as ascribed to them in the
Prospectus.
This will instruct you, the book-entry transfer facility participant, as to
the action to be taken by you relating to the Exchange Offer with respect to the
Old Notes held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (fill in amount):
$_____________ of the 7% Senior Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Old Notes held by you for the account of the
undersigned (insert principal amount of Old Notes to be tendered, if any):
$_____________ of the 7% Senior Notes due 2008.
[_] NOT to TENDER any Old Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf
<PAGE>
of the undersigned (and the undersigned, by its signature below, hereby makes to
you), the representations and warranties contained in the Letter of Transmittal
that are to be made with respect to the undersigned as a beneficial owner,
including but not limited to the representations, that (i) the holder is not an
"affiliate" of the Issuer or of Bermuda Holdings, (ii) any Exchange Notes to be
received by the holder are being acquired in the ordinary course of its
business, and (iii) the holder has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Old Notes, it
represents that such Old Notes were acquired as a result of market-making
activities or other trading activities, and it acknowledges that it will deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of such Exchange Notes. A broker-dealer that acquired Old Notes in a
transaction other than as part of its market-making or other trading activities
will not be able to participate in the Exchange Offer. By acknowledging that it
will deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes, such
broker-dealer is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act of 1933, as amended.
SIGN HERE
Name of beneficial owner(s):
Signature(s):
Name(s) (please print):
Address:
Telephone Number:
Taxpayer Identification or Social Security Number:
Date:
2
