<PAGE>
As filed with the Securities and Exchange Commission on February 27, 1998
Registration No. 333-38063,-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
POST-EFFECTIVE AMENDMENT NO. 1 TO FORMS F-4 AND S-4*
REGISTRATION STATEMENT
on
Forms F-3 AND S-3*
under
the Securities Act of 1933
----------------------
TERRA NOVA INSURANCE TERRA NOVA (BERMUDA)
(UK) HOLDINGS PLC HOLDINGS LTD.
(Exact name of Issuer (Exact name of Guarantor
as specified in its charter) as specified in its charter)
<TABLE>
<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 jurisdiction of Industrial Identification
incorporation or Classification Code Number) incorporation or Classification Code Number)
organization) Number) organization) Number)
</TABLE>
Terra Nova House Richmond House
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 (Address, including zip code,
and telephone number and telephone number,
including area code, of including area, code, of
Issuer's principal executive offices) Guarantor's principal executive offices
CT Corporation System
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 664-1666
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
JEAN M. WAGGETT
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
TERRA NOVA (BERMUDA) HOLDING LTD.
RICHMOND HOUSE
12 PAR-LA-VILLE ROAD
HAMILTON HM 08, BERMUDA
(441) 292-7731
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time as determined by market conditions, after the effective
date of this Post-Effective Amendment No. 1 to Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
----------------------
THE 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 SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- ----------------------
* The Registration Statement constituted a filing on Form F-4 for the Senior
Notes and on Form S-4 for the Guarantee; this Post-Effective Amendment
constitutes a filing on Form F-3 for the Senior Notes and on Form S-3 for the
Guaranty.
================================================================================
<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment to the Registration Statement contains a
Prospectus Supplement and Prospectus relating to certain market-making
transactions in the $75,000,000 7.2% Senior Notes due 2007 of Terra Nova
Insurance (U.K.) Holdings plc, fully and unconditionally guaranteed by Terra
Nova (Bermuda) Holdings Ltd. In order to register under Rule 415 of the
Securities Act of 1933 those Senior Notes that will be offered and sold in
market-making transactions, additional undertakings required by Item 512(a) of
Regulation S-K have been included in Item 17 of Part II.
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 30,1997)
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
7.2% SENIOR NOTES DUE 2007
GUARANTEED FULLY AND UNCONDITIONALLY BY
TERRA NOVA (BERMUDA) HOLDINGS LTD.
Exchange Offer Completed
The Exchange Offer described in the accompanying Prospectus expired in
accordance with its terms on December 3, 1997. The entire outstanding issue of
$75.0 million principal amount of Old Notes (as defined in the accompanying
Prospectus) was exchanged for the Exchange Notes (as so defined). All references
in this Prospectus Supplement to the "Prospectus" shall mean the accompanying
Prospectus together with this Prospectus Supplement.
Market -Making Transactions
Although the Exchange Notes have been listed on the Luxembourg Stock
Exchange, there is currently no active public market for the Exchange Notes.
Bermuda Holdings has been advised by Donaldson, Lufkin and Jenrette Securities
Corporation ("DLJSC") that it currently intends to make a market for the
Exchange Notes. The accompanying Prospectus, together with this Prospectus
Supplement, is for use by DLJSC in connection with offers and sales of the
Exchange Notes in market-making transactions at negotiated prices related to
prevailing market prices at the time of sale. DLJSC may act as principal or
agent in such transactions. DLJSC is not obligated to make a market for the
Exchange Notes and may discontinue any such market making at any time without
notice. Accordingly, no assurance can be given that an active trading market
will develop for, or as to the liquidity of, the Exchange Notes.
DLJSC has provided financial or other advisory services to the Issuer
and Bermuda Holdings in the past and may do so in the future. In addition,
certain officers of DLJSC are directors of Bermuda Holdings and affiliates of
DLJSC own approximately 11.7% of the outstanding voting shares of Bermuda
Holdings.
Incorporation of Certain Documents by Reference
The following documents filed by Bermuda Holdings with the Securities
and Exchange Commission are incorporated into the Prospectus by reference:
<PAGE>
(1) Bermuda Holdings' Annual Report on Form 10-K for the year ended
December 31, 1996;
(2) Bermuda Holdings' Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997; and
(3) Bermuda Holdings Current Report on Form 8-K, dated August 28, 1997.
Any documents filed by Bermuda Holdings pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, after the
date of this Supplement shall be deemed to be incorporated by reference into the
Prospectus and to be a part thereof.
Any statement contained in a document incorporated or deemed to be
incorporated in the Prospectus, or contained in the Prospectus, shall be deemed
to be modified or superseded for purposes of the Prospectus to the extent that a
statement contained in the Prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in the
Prospectus 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 the Prospectus.
Bermuda Holdings will provide without charge to each person to whom the
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated in the Prospectus by
reference (other than exhibits to such documents unless such exhibits are
specifically incorporated in the Prospectus 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)).
* * * * *
The date of this Prospectus Supplement is February 27, 1998.
S-2
<PAGE>
PROSPECTUS
TERRA NOVA INSURANCE (UK) HOLDINGS PLC
OFFER TO EXCHANGE 7.2% SENIOR NOTES DUE 2007,
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
DECEMBER 3, 1997, 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 $75.0 million
aggregate principal amount of its 7.2% Senior Notes due 2007 (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 7.2% Senior Notes due
2007 (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 August 15, 2007. Interest on the Exchange
Notes will accrue from August 26, 1997, the issue date of the Old Notes, and is
payable semiannually on February 15 and August 15 of each year, commencing on
February 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 $100 million pursuant to the Issuer's 10 3/4% Senior Notes due
2005 (the "1995 Senior Notes") which are fully and unconditionally guaranteed by
a guarantee 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 June 30, 1997
consisted principally of insurance liabilities and aggregated approximately $1.6
billion.
-----------
See "Risk Factors" commencing on page 12 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 April 28, 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 OCTOBER 30, 1997.
<PAGE>
(Cover Page Continued)
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."
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
2
<PAGE>
(Cover Page Continued)
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 Luxembourg Stock Exchange 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, December 3, 1997 (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 August 26, 1997. 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 Luxembourg Stock
Exchange.
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.
3
<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 1995 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, 1996;
(2) Bermuda Holdings' Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997; and
(3) Bermuda Holdings' Current Report on Form 8-K, dated August 28,
1997.
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 NOVEMBER 26, 1997.
4
<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, six 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.
5
<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 and marine 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 the European Market and through branch offices in
Toronto, Canada and Brussels, Belgium. Terra Nova Insurance Company Limited
("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 $331.8 million for the six months ended June 30, 1997, and had
combined shareholders' equity of $422.3 million at June 30, 1997.
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") and, management believes, had
gross written premiums of approximately $26.0 billion in 1995.
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. Management believes that the
Bermuda Market's gross premiums written were approximately $23.4 billion in
1995, up from approximately $13.0 billion in 1990.
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, and (iii)
marine coverage written both on a primary and a reinsurance basis, accounting
for approximately 49.5%, 18.9% and 31.1%, respectively, of the Company's gross
premiums written for 1996. Additionally, of the Company's gross premiums written
for 1996, approximately 66.8% consisted of reinsurance business and
approximately 46.4%, 10.8%, 20.4% and 22.4% were attributable to clients from
the U.S., U.K., 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 27-year existence, except for
1980 and 1992. The combined ratio and operating ratio of the Company's insurance
subsidiaries averaged 101.9% and 77.1%, respectively, for the period from 1993
through 1996. For the six months ended June 30, 1997, the Company had a combined
ratio and operating ratio of 99.4% and 75.8%, respectively. The Company's income
from continuing operations before income taxes, interest expense, depreciation,
amortization and minority interests ("EBITDA") was $97.0 million for 1996 and
$51.2 million for the six months ended June 30, 1997.
At June 30, 1997, approximately 85.1% of the Company's $1.3 billion
investment portfolio consisted of fixed maturity debt securities, 97.6% were
rated "A" or better by Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's") and the remaining 2.4%, although not rated,
were, in the opinion of management, at least the equivalent in quality of "AA"
rated investments. The Company currently has no investments in high yield fixed
income securities, real estate or mortgages.
6
<PAGE>
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 in Paris and
having offices in London, Bermuda, 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 $1.3 billion
conservatively managed investment portfolio as of June 30, 1997, the
Company has been able to generate significant and consistent levels of
investment income that have helped to stabilize profits. Of the $1.3
billion of invested assets at June 30, 1997, $816.5 million were held by
Terra Nova and $451.0 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 average operating ratio of the
Company's insurance subsidiaries over the last four years of 77.1%.
The proceeds from the offering of the Old Notes have and will enable
the Company to further its growth strategy, which includes:
. Capital growth. With an expected total capitalization of $597.3 million
after giving effect to proceeds from the offering of the Old Notes, 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, including the acquisition of Corifrance (as
described below).
. Expected further participation in the Octavian Syndicates. The Company
has provided $293.9 million of the Octavian Syndicates' total
underwriting capacity for the 1997 year of account. Based on the Octavian
Syndicates' recent utilization of capacity, the Company estimates that
such premiums written and included in its 1997 financial statements will
be between $175 and $200 million. 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 seven for the 1997 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 1996 was $25 million.
7
<PAGE>
Organization
The Company and its principal subsidiaries are currently organized as
follows:
----------------
Terra Nova
(Bermuda)
Holdings Ltd.
("Bermuda
Holdings")
----------------
-----------------
Terra Nova
Insurance
(UK) Holdings
plc (the
("Issuer")
-----------------
- ---------------- ------------- ----------------- -------------------
Terra Nova Octvian Terra Nova Terra Nova
Insurance Syndicate Capital Limited (Bermuda)
Company Management ("Terra Nova Insurance Co.
Limited Limited Capital") Ltd. ("Terra Nova
("Terra Nova") ("Octavian") (Bermuda)")
- ---------------- ------------- ----------------- -------------------
- -----------------
Compagnie de
Reassurance
d'lle de France
Corifrance
("Corifrance")
- -----------------
8
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer................... Up to $75.0 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 August 20, 1997, 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
December 3, 1997 (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
9
<PAGE>
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
10
<PAGE>
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.
11
<PAGE>
THE EXCHANGE NOTES
Securities Offered................... Up to $75.0 million principal amount of
7.2% Senior Notes due 2007. The Exchange
Notes will be issued and the Old Notes
were issued under an Indenture dated as
of August 26, 1997 (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........................ August 15, 2007.
Interest............................. Interest on the Exchange Notes will
accrue at the rate of 7.2% per annum and
is payable semi-annually on February 15
and August 15 of each year, commencing
on February 15, 1998. Each Exchange Note
will bear interest from August 26, 1997,
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
August 26, 1997.
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."
12
<PAGE>
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 Luxembourg Stock Exchange.
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
Luxembourg Stock Exchange 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
were used to increase the capital and
surplus of the subsidiaries of the
Issuer and for general corporate
purposes, including the acquisition of
Corifrance. 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
13
<PAGE>
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 February 26, 1998, then the annual interest
rate borne by the Old Notes shall be increased to 7.45%. If the Exchange Offer
is not consummated or a Shelf Registration Statement is not declared effective
by May 26, 1998, then the annual interest rate borne by the Old Notes shall be
increased to 7.7%. 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 7.2%.
14
<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, Terra Nova Capital and Corifrance, and Bermuda Holdings
is a holding company whose primary assets are the capital stock of the Issuer
and Terra Nova (Bermuda). A substantial amount 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). 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. Secretary
of State for Trade and Industry acting through the U.K. Department of Trade and
Industry (the "DTI"), 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 DTI 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 June 30,
1997 consisted principally of insurance liabilities and aggregated $1.6 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 fulfill 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.
15
<PAGE>
Leverage
As of June 30, 1997, and after giving effect to the issuance and sale of
the Senior Notes, the Company had outstanding indebtedness of approximately $175
million and shareholders' equity of approximately $422.3 million.
The 1995 indenture pursuant to which the 1995 Senior Notes were issued,
subject to certain limitations, 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, 1995 and 1996, property catastrophe
reinsurance rates fell from the strong levels of 1993. Management believes, in
light of its experience with the Company's renewals for 1997 business and
because of the absence of a major catastrophic event, that premium rates have
declined in 1997, but that rates and retention levels in the near future are
likely to remain substantially 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 1997.
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. In 1997 management believes that increased competition
will lead generally to a further decline in rates. 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.
16
<PAGE>
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 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. Terra Nova and
Terra Nova (Bermuda) carry 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 DTI to carry on
insurance business (including reinsurance) in the U.K. and is subject to
regulation and supervision in the U.K. by the DTI. 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 DTI powers to supervise,
investigate and intervene in the affairs of U.K. insurance companies. As is
often the practice of the DTI 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 DTI 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 DTI, (ii) requires Terra Nova to give notice
and, in some instances, obtain DTI consent, prior to entering into certain
transactions with connected persons and (iii) limits the annual amount of gross
premiums that may be written by Terra Nova. 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.
17
<PAGE>
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.
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.
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.
18
<PAGE>
Enforcement of Judgments
All of the directors and executive officers of the Issuer, all of the
executive officers of Bermuda Holdings, six 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.
19
<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 and 1996 and the selected Balance Sheet
Data as of December 31, 1996 have been derived from the Company's audited
Consolidated Financial Statements incorporated herein by reference. The
selected Statement of Operations Data for the six months ended June 30, 1997
and the selected Balance Sheet Data as of June 30, 1997 have been derived
from the Company's unaudited condensed consolidated financial statements
incorporated by reference herein. The financial information for the Company
as of June 30, 1997 and for the six-month periods ended June 30, 1996 and
1997 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 June 30, 1996 and 1997 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,
1996 has been derived from the audited annual return made to the DTI. The
data for the six months ended June 30, 1997 has been derived from the
unaudited return made to the DTI. The Selected Statutory Data for Terra Nova
(Bermuda) for the year ended December 31, 1996 has been derived from the
audited statutory financial statements of Terra Nova (Bermuda) and for the
six months ended June 30, 1997 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
----------------------------------- ----------------------------------------------
Six Months
Year Ended December 31, Ending June 30,
---------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Gross premiums written...................... $ 318,999 $ 320,183 $ 359,362 $ 302,658 $ 361,010 $ 262,493 $ 331,759
Net premiums written........................ 225,561 262,019 282,503 246,985 311,166 225,184 278,320
Net premiums earned......................... 221,719 229,510 250,434 251,900 278,756 142,253 174,384
Net investment income....................... 49,052 46,888 51,575 74,478 78,130 38,826 41,063
Realized net capital gains on
sales of investments....................... 30,709 40,533 13,898 9,384 11,750 12,182 7,512
Total revenues.............................. 285,652 314,877 320,722 336,872 378,059 196,611 230,318
Income (loss) from continuing
operations before income
taxes and minority interests............... (49,599)(1) 81,869 50,737 62,433 82,668 45,256 43,700
Income tax expense (benefit)................ (11,411) 27,586 16,458 16,630 17,777 10,142 9,052
Minority interest in income
of consolidated subsidiaries............... -- -- -- 2,552 985 985 --
Income (loss) from continuing
operations................................. (38,188)(1) 54,283 34,279 43,251 63,906 34,129 34,648
Net income (loss)........................... (87,711)(1) 51,634 27,449 43,251 63,906 34,129 34,648
Dividends on the convertible
redeemable preferred shares................ -- -- -- 3,700 1,088 1,088 --
Net income (loss) to common
shareholders............................... (87,711)(1) 51,634 27,449 39,551 62,818 33,041 34,648
Balance Sheet Data (at end of period).......
Total investments and cash.................. $1,290,486 $1,290,364
Total assets................................ 1,867,347 2,001,040
Unpaid losses and loss adjustment expenses.. 1,078,108 1,042,855
Long-term debt.............................. 100,000 100,000
Total shareholders' equity.................. 398,759 422,345
(Continued on following page)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Terra Nova Company
----------------------------------- ----------------------------------------------
Six Months
Year Ended December 31, Ending June 30,
---------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
(Continued from previous page)
Selected Statutory Data (at end of period)(2)
Terra Nova--Capital and surplus.............. $236,206 $253,080
Terra Nova (Bermuda)--Capital and surplus.... 219,374 231,221
Other Data
EBITDA(3).................................... (48,749) 82,564 51,669 72,889 97,032 52,408 51,228
Adjusted EBITDA(4)........................... (79,458) 42,031 37,771 63,505 85,282 40,226 43,716
Loss and loss adjustment expense ratio(5).... 120.10% 71.24% 76.53% 71.10% 64.00% 66.60% 66.70%
Underwriting expense ratio(6)................ 31.07 29.15 30.25 32.71 33.20 31.60 32.70
------- ------ ------ ------ -------- ------ --------
Combined ratio(7)............................ 151.17% 100.39% 106.78% 103.81% 97.20% 98.20% 99.40%
======= ====== ====== ====== ======== ====== ========
Operating ratio(8)........................... 129.05% 79.96% 86.19% 74.24% 69.13% 70.90% 75.80%
======= ====== ====== ====== ======== ====== ========
</TABLE>
(1) The 1992 loss resulted primarily from (i) the unprecedented losses from
prior underwriting years in the LMX marine account, (ii) the frequency and
severity of catastrophe losses (primarily Hurricanes Andrew and Iniki)
experienced in that year, and (iii) large losses in the Company's aviation
account.
(2) Capital and surplus under U.K. and Bermuda law, respectively.
(3) 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.
(4) Adjusted EBITDA is comprised of EBITDA excluding realized gains or losses on
sales of investments.
(5) Loss and loss adjustment expense ratio represents the sum of losses and loss
adjustment expenses as a percentage of net premiums earned.
(6) Underwriting expense ratio represents underwriting expenses as a percentage
of net premiums earned.
(7) Combined ratio represents the sum of the loss and loss adjustment expense
ratio and underwriting expense ratio.
(8) 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
-------------------- -----------------------------
Six Months
Year Ended December 31, Ending June 30,
---------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
NM NM NM 7.07 7.64 8.26 7.92
</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 serviced payments on the Senior Notes have been made. Terra
Nova had no indebtedness through December 21, 1994, the date of its acquisition
by Bermuda Holdings.
21
<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 were used to increase the capital
and surplus of subsidiaries of the Issuer and for general corporate purposes,
including the acquisition of Corifrance.
CAPITALIZATION
The table below summarizes the capitalization of the Company as of June 30,
1997 and as adjusted for the offering of the Senior Notes.
<TABLE>
<CAPTION>
As of June 30, 1997
-----------------------
Actual As Adjusted
(dollars in millions)
<S> <C> <C>
Senior Notes......................................... $ 0.0 $ 75.0
1995 Senior Notes.................................... 100.0 100.0
Stockholders' Equity:
Common Stock........................................ 150.1 150.1
Stock Held in Trust................................. (9.8) (9.8)
Deferred equity compensation........................ 1.9 1.9
Additional paid-in capital.......................... 111.6 111.6
Net unrealized appreciation of equity investments
(net of tax)........................................ 34.8 34.8
Retained earnings.................................... 133.7 133.7
Cumulative translation adjustments................... 0.1 0.1
------ ------
Total Stockholders' Equity........................... 422.3 422.3
------ ------
Total Capitalization................................. $522.3 $597.3
====== ======
</TABLE>
22
<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 August 26, 1997, 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 August 26, 1997 (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 Luxembourg Stock
Exchange.
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
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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 $75.0
million. The Senior Notes will mature on August 15, 2007. Interest on the
Senior Notes accrues at the rate of 7.2% per annum and is payable semi-
annually in arrears in cash on each February 15 and August 15, commencing
February 15, 1998 (each, an "Interest Payment Date"), to holders of record on
the immediately preceding January 31 and July 31, respectively. Each Exchange
Note will bear interest from August 26, 1997, 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.
"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
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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 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.
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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
(v) Bermuda Holdings (or the Surviving Entity if Bermuda Holdings is not
the continuing obligor with respect to the Guarantee under the Indenture)
shall be entitled to all the benefits of the Tax Sharing Agreement.
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.
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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
been entitled to any Additional Amounts had such beneficiary, settlor, member
or beneficial owner been the holder of such Senior Note.
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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
(viii) default in the performance, or breach, of the provisions
described under "--Merger, Consolidation or Sale of Assets."
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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 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;
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(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 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
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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 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.
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"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 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
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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 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.
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"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.
"Tax Sharing Agreement" means the tax sharing agreement dated December 21,
1994 among the Issuer, Terra Nova, Terra Nova Asset Management Limited, Terra
Nova Pension Trustee Limited, Terra Nova Insurance Agency Limited and
Intercontinental Reinsurance Agency Limited.
"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
incurrence of Indebtedness by a Restricted Subsidiary
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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
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or other governmental charges of whatever nature except as may be required by
law. If any such deduction 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
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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.
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.
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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.
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.
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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.
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 August 20, 1997 (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 August 26, 2000 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 February 26, 1998, then the annual interest rate borne by the Old
Notes shall be increased to 7.45%. If the Exchange Offer is not consummated
or a Shelf Registration Statement is not declared effective by May 26, 1998,
then the annual interest rate borne by the Old Notes shall be increased to
7.7%. 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 7.2%.
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 December 3, 1997; 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, $75.0 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,
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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."
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
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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
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-
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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.
Interest on the Exchange Notes
Each Exchange Note will bear interest from August 26, 1997, 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 August 26, 1997.
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
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following one of the procedures described under "--Procedures for Tendering
Old Notes" at any time prior to the Expiration Date.
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
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Bermuda Holdings will make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange 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 April 28, 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."
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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, 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.
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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. The rules relating to UK withholding tax
have been amended by legislation enacted by Finance Act 1996 supported by
regulations laid thereunder. However, as some further regulations have still
to be drafted, the rules set out below may be subject to amendment.
(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 Luxembourg Stock Exchange 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:
(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
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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."
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
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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 Luxembourg Stock Exchange, 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 Luxembourg
Stock Exchange, 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.
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
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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 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.
50
<PAGE>
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 many 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.
51
<PAGE>
EXPERTS
The consolidated financial statements of Bermuda Holdings and its
subsidiaries as of December 31, 1995 and 1996 and for each of the two years in
the period ended December 31, 1996 and the consolidated financial statements of
Terra Nova Insurance Company Limited (the Predecessor) and subsidiaries for the
year ended December 31, 1994, 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.
52
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 15. 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-1
<PAGE>
(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 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
II-2
<PAGE>
(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 June 30, 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 --
II-3
<PAGE>
(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:
"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.
II-4
<PAGE>
(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 June 30, 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.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<S> <C> <C>
* 1.1 -- Registration Rights Agreement, dated August 20, 1997, 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 Issuers' 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 Holding's 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 -- 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.
* 4.3 -- Form of Global Note. Included as Exhibit A to the Indenture filed herewith as Exhibit 4.1.
* 4.4 -- Form of Global Receipt. Included as Exhibit C to the Deposit and Custody Agreement filed
herewith as Exhibit 4.2.
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
* 5.1 -- Opinion of Clifford Chance as to the legality of the Exchange Notes, dated October 16,
1997.
* 5.2 -- Opinion of Conyers, Dill & Pearman as to the legality of the Guarantee, dated October 16,
1997.
* 5.3 -- Opinion of Milbank, Tweed, Hadley & McCloy as to the legality of the Global Receipt, dated
October 16, 1997.
* 8.1 -- Opinion of Clifford Chance as to U.K. tax matters relative to the Exchange Notes, dated
October 16, 1997.
* 8.2 -- Opinion of Conyers, Dill & Pearman as to Bermuda tax matters relative to the Guarantee,
dated October 16, 1997.
* 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 by reference herewith).
* 11.1 -- Statement re computation of per share earnings. (Filed as Exhibit 11.1 to Bermuda
Holdings' quarterly report on Form 10-Q for the quarter ended September 30, 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 -- Consent of Clifford Chance.
** 23.2 -- Consent of Conyers, Dill & Pearman.
** 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>
II-6
EXIT
<PAGE>
* 99.6 -- Form of Exchange Agent Agreement.
* 99.7 -- Form of Paying Agency Agreement.
- --------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
ITEM 17. UNDERTAKINGS
(A) RULE 415 OFFERING.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution it previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by Bermuda Holdings pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-7
<PAGE>
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(B) FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY REFERENCE.
The undersigned Registrants hereby undertake that, for purpose of
determining any liability under the Securities Act of 1933, each filing of
Bermuda Holdings annual report pursuant to Section 13(a) or 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.
(C) REQUEST FOR ACCELERATION OF EFFECTIVE DATE.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have 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 such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(D) UNDERTAKINGS ON BEHALF OF THE DEPOSITARY
(i) 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.
(ii) 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-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this Post-Effective Amendment No. 1 to its Registration Statement on
Form F-4, Registration Number 333-38063, to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Hamilton, Bermuda, on the
27th day of February, 1998.
By: /s/ Jean M. Waggett
---------------------------------------
Jean M. Waggett, as Attorney-in Fact
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
John Riddick* Chairman and Managing Director
(Principal Executive Officer)
William J. Wedlake* Director and Chief Financial Officer
(Principal Financial Officer and Accounting
Officer)
William O. Bailey* Director
John J. Dwyer* Director
Nigel H.J. Rogers* Director
Anthony F. Aldridge* Director
* By the 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-9
<PAGE>
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective 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
February 27, 1998
New York, New York
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Post-Effective Amendment No. 1, to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Hamilton, Bermuda,
on the 27th day of February, 1998.
Terra Nova (Bermuda) Holdings Ltd.
By:/s/ Jean M. Waggett
-----------------------------------------------
Jean M. Waggett, as Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
William O. Bailey* Chairman and Chief Executive Officer
(principal executive officer and accounting
officer)
William J. Wedlake* Chief Financial Officer (principal financial
officer)
John Riddick* Deputy Chairman and Director
John J. Dwyer* Deputy Chairman and Director
Nigel H.J. Rogers* Deputy Chairman and Director
David L. Jaffee* Director
Philip F. Petronis* Director
Allan W. Fulkerson* Director
Hugh P. Lowenstein* Director
Robert S. Fleisher* Director
Mark J. Byrne* Director
Steven 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-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this Post-Effective Amendment No. 1 to the
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 February 27, 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: Vice President
II-12
<PAGE>
Index to Exhibits
-----------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C> <C>
*1.1 -- Registration Rights Agreement, dated August 20, 1997, 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 Issuers' 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 Holding's 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 -- 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.
*4.3 -- Form of Global Note. Included as Exhibit A to the Indenture filed herewith as Exhibit 4.1.
*4.4 -- Form of Global Receipt. Included as Exhibit C to the Deposit and Custody Agreement filed
herewith as Exhibit 4.2.
*5.1 -- Opinion of Clifford Chance as to the legality of the Exchange Notes, dated October 16,
1997.
*5.2 -- Opinion of Conyers, Dill & Pearman as to the legality of the Guarantee, dated October 16,
1997.
*5.3 -- Opinion of Milbank, Tweed, Hadley & McCloy as to the legality of the Global Receipt, dated
October 16, 1997.
*8.1 -- Opinion of Clifford Chance as to U.K. tax matters relative to the Exchange Notes, dated
October 16, 1997.
*8.2 -- Opinion of Conyers, Dill & Pearman as to Bermuda tax matters relative to the Guarantee,
dated October 16, 1997.
</TABLE>
II-13
<PAGE>
<TABLE>
<CAPTION>
<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 by reference herewith).
*11.1 -- Statement re computation of per share earnings. (Filed as Exhibit 11.1 to Bermuda
Holdings' quarterly report on Form 10-Q for the quarter ended September 30, 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 -- Consent of Clifford Chance.
**23.2 -- Consent of Conyers, Dill & Pearman.
**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.
*99.6 -- Form of Exchange Agent Agreement.
*99.7 -- Form of Paying Agency Agreement.
</TABLE>
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
II-14
<PAGE>
Exhibit 23.2
------------
LETTERHEAD OF CONYERS DILL & PEARMAN
February 27, 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, relating to
the exchange of $75,000,000 aggregate principal amount of 7.2% Senior Notes due
2007 of Terra Nova Insurance (UK) Holdings plc, fully and unconditionally
guaranteed on a senior basis by the Company.
We have examined a post-effective amendment No. 1 to the Forms F-4 and S-4
Registration Statement (the "Post-Effective Amendment No. 1") and we consent to
the reference made to us under the captions "Enforceability of Civil
Liabilities", "Risk Factors-Enforcement of Judgments", "Certain Tax
Considerations" and "Legal Matters" in the prospectus contained in the Post-
Effective Amendment No. 1.
Yours faithfully,
/s/ Conyers Dill & Pearman
CONYERS DILL & PEARMAN
<PAGE>
Exhibit 23.3
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LETTERHEAD OF COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in post-effective amendment number
1 to the registration statement on Forms F-4 and S-4 dated February 27, 1998
related to the offering of Senior Notes due 2007 (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 February
26, 1997 included in the annual report on Form 10-K for the year ended December
31, 1996 (the "Form 10-K") of Bermuda Holdings, on our audit of the consolidated
financial statements of Bermuda Holdings and subsidiaries as of December 31,
1995 and 1996 and for each of the two years in the period ended December 31,
1996 and the consolidated financial statements of Terra Nova Insurance Company
Limited (the Predecessor) and subsidiaries for the year ended December 31, 1994,
and of our report dated February 26, 1997 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
February 27, 1998
