S-4: Registration of securities issued in business combination transactions
Published on July 3, 1997
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON July 3, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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(1) Estimated solely for the purpose of computing the registration fee.
(2) No separate consideration will be received for the New Junior Subordinated
Debentures of the Company distributed upon any liquidation of the Trust.
(3) No separate consideration will be received for the RenaissanceRe Holdings
Ltd. Guarantee.
(4) This Registration Statement (as the same may be amended from time to time)
is deemed to cover rights of holders of New Capital Securities of
RenaissanceRe Capital Trust under an Amended and Restated Declaration of
Trust, the rights of holders of New Junior Subordinated Debentures under
an Indenture, the rights of the holders of the New Capital Securities
under a New Guarantee and certain back-up undertakings, as described
herein.
(5) Such amount represents the liquidation amount of the New Capital
Securities to be exchanged hereunder and the principal amount of the New
Junior Subordinated Debentures that may be distributed to holders of such
Capital Securities upon any liquidation of the Trust.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED JULY 3, 1997
RENAISSANCERE CAPITAL TRUST
OFFER TO EXCHANGE ITS
8.54% SERIES B CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FOR ANY AND ALL OF ITS OUTSTANDING
8.54% SERIES A CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) FULLY AND
UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
RENAISSANCERE HOLDINGS LTD.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
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RenaissanceRe Capital Trust, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"), hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus (as the same may be
amended or supplemented from time to time, the "Prospectus") and in the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $100,000,000 aggregate Liquidation Amount of its
8.54% Series B Capital Securities (the "New Capital Securities") which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to the Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like Liquidation Amount of its outstanding
8.54% Series A Capital Securities (the "Old Capital Securities"), of which
$100,000,000 aggregate Liquidation Amount is outstanding. Pursuant to the
Exchange Offer, RenaissanceRe Holdings Ltd., a Bermuda company and sponsor of
the Trust (the "Company"), is also offering to exchange (i) its guarantee of
payments of cash distributions and payments on liquidation of the Trust or
redemption of the Old Capital Securities (the "Old Guarantee") for a like
guarantee in respect of the New Capital Securities (the "New Guarantee") and
(ii) all of its 8.54% Junior Subordinated Deferrable Interest Debentures, Series
A due March 1, 2027 (the "Old Junior Subordinated Debentures") for a like
aggregate principal amount of its 8.54% Junior Subordinated Deferrable Interest
Debentures, Series B due March 1, 2027 (the "New Junior Subordinated
Debentures"), which New Guarantee and New Junior Subordinated Debentures also
have been registered under the Securities Act. The Old Capital Securities, the
Old Guarantee and the Old Junior Subordinated Debentures are collectively
referred to herein as the "Old Securities" and the New Capital Securities, the
New Guarantee and the New Junior Subordinated Debentures are collectively
referred to herein as the "New Securities."
The terms of the New Securities are identical in all material respects to
the respective terms of the Old Securities, except that (i) the New Securities
have been registered under the Securities Act and therefore will not be subject
to certain restrictions on transfer applicable to the Old Securities, (ii) the
New Capital Securities will not contain the $100,000 minimum Liquidation Amount
transfer restriction, (iii) the New Capital Securities will not provide for any
increase in the Distribution (as defined herein) rate thereon, (iv) the New
Junior Subordinated Debentures will not contain the $100,000 minimum principal
amount transfer restriction and (v) the New Junior Subordinated Debentures will
not provide for any increase in the interest rate thereon. See "Description of
New Securities" and "Description of Old Capital Securities" herein. The New
Capital Securities are being offered for exchange in order to satisfy certain
obligations of the Company and the Trust under a registration rights agreement,
dated as of March 7, 1997 (the "Registration Rights Agreement"), among the
Company, the Trust and the Initial Purchasers (as defined herein). In the event
that the Exchange Offer is consummated, any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer and the New Capital
Securities issued in the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Trust Agreement (as defined herein).
(Continued on the following page)
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Old Capital Securities on ______, 1997.
SEE "RISK FACTORS" COMMENCING ON PAGE 19 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD CAPITAL SECURITIES IN
THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _________ __, 1997.
The New Capital Securities and the Old Capital Securities represent beneficial
interests in the assets of the Trust. The Company is the owner of all of the
beneficial interests represented by common securities of the Trust (the "Common
Securities"). The Bank of New York is the Property Trustee of the Trust. The
Trust exists for the exclusive purpose of issuing the Trust Securities,
investing the proceeds thereof in the Junior Subordinated Debentures (as defined
herein) and engaging in only those other activities incidental thereto. The
Junior Subordinated Debentures will mature on March 1, 2027 (the "Stated
Maturity Date"). The Capital Securities will have a preference over the Common
Securities under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise. See "Description of New
Securities--Description of New Capital Securities--Subordination of Common
Securities."
As more fully described herein, the Company has entered into several
contractual undertakings which, the Company believes, taken together,
guarantee to the holders of the Capital Securities a full and unconditional
right to enforce the payment of the distributions with respect to the Capital
Securities, the payment of the redemption price upon redemption of the Capital
Securities and the payment of the Liquidation Amount with respect to the Capital
Securities upon liquidation of the Trust. See "Risk Factors--Rights Under the
Guarantee; Direct Action For Payment." Those contractual arrangements include
the Company's obligations under (i) the Guarantee, (ii) the Trust Agreement,
(iii) the Junior Subordinated Debentures and (iv) the Indenture. As used herein,
(i) the "Indenture" means the Indenture, dated as of March 7, 1997, as amended
and supplemented from time to time, between the Company and The Bank of New
York, as Debenture Trustee (the "Debenture Trustee"), (ii) the "Trust Agreement"
means the Amended and Restated Declaration of Trust relating to the Trust, dated
as of March 7, 1997, among the Company, as Sponsor, The Bank of New York as
Property Trustee (the "Property Trustee"), The Bank of New York (Delaware), as
Delaware Trustee (the "Delaware Trustee"), and the Administrative Trustees named
therein (collectively, with the Property Trustee and the Delaware Trustee, the
"Issuer Trustees"). In addition, as the context may require, unless otherwise
expressly stated, (i) the term "Capital Securities" includes the Old Capital
Securities and the New Capital Securities, (ii) the term "Trust Securities"
includes the Capital Securities and the Common Securities, (iii) the term
"Junior Subordinated Debentures" includes the Old Junior Subordinated Debentures
and the New Junior Subordinated Debentures and (iv) the term "Guarantee"
includes the Old Guarantee and the New Guarantee.
Holders of the New Capital Securities will be entitled to receive cumulative
cash distributions arising from the payment of interest on the Junior
Subordinated Debentures accruing from March 7, 1997 and payable semi-annually in
arrears on March 1 and September 1 of each year, commencing September 1, 1997,
at the annual rate of 8.54% of the Liquidation Amount of $1,000 per New Capital
Security ("Distributions"). So long as no Debenture Event of Default (as defined
herein) shall have occurred and be continuing, the Company will have the right
to defer payments of interest on the Junior Subordinated Debentures at any time
and from time to time for a period not exceeding ten consecutive semi-annual
periods with respect to each deferral period (each, an "Extension Period"),
provided that (i) no Extension Period may extend beyond the Stated Maturity Date
(as defined herein), (ii) any Extension Period will terminate as to all Junior
Subordinated Debentures upon an acceleration thereof (subject to reinstatement,
upon cure or waiver as provided in the Indenture) and (iii) any Extension Period
will terminate as to any Junior Subordinated Debenture to be redeemed on the
applicable Redemption Date. See "Description of New Securities--Description of
Junior Subordinated Debentures--Debenture Events of Default." Upon the
termination of any such Extension Period and the payment of all amounts then
due, the Company may elect to begin a new Extension Period, subject to the
requirements set forth in the Indenture. If and for so long as interest payments
on the Junior Subordinated Debentures are so deferred, Distributions on the
Trust Securities will also be deferred and the Company will not be permitted,
subject to certain exceptions described herein, to declare or pay any cash
distributions with respect to the Company's capital shares or to make any
payment with respect to debt securities of the Company that rank pari passu with
or junior to the Junior Subordinated Debentures. During an Extension Period,
interest on the Junior Subordinated Debentures will continue to accrue (and the
amount of Distributions to which holders of the Trust Securities are entitled
will accumulate) at the rate of 8.54% per annum, compounded semi-annually, and
holders of Trust Securities will be required to accrue interest income for
United States federal income tax purposes. See "Description of New Securities
- --Description of New Junior Subordinated Debentures--Option to Extend
Interest Payment Date" and "Certain United States Federal Income Tax
Considerations--Interest Income and Original Issue Discount."
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Through the Guarantee, the Trust Agreement, the Junior Subordinated Debentures
and the Indenture, taken together, the Company has guaranteed or will guarantee,
as the case may be, fully, irrevocably and unconditionally, all of the Trust's
obligations under the Capital Securities. See "Relationship Among the New
Capital Securities, the Trust Agreement, the New Junior Subordinated Debentures
and the New Guarantee--Full and Unconditional Guarantee." The Old Guarantee
guarantees, and the New Guarantee will guarantee, payments of Distributions and
payments on liquidation or redemption of the Capital Securities, but in each
case only to the extent that the Trust holds funds on hand legally available
therefor and has failed to make such payments, as described herein. See
"Description of New Securities--Description of New Guarantee." If the Company
fails to make a required payment on the Junior Subordinated Debentures, the
Trust will not have sufficient funds to make the related payments, including
Distributions, on the Capital Securities. The Guarantee will not cover any such
payment when the Trust does not have sufficient funds on hand legally available
therefor. In such event, a holder of Capital Securities may institute a legal
proceeding directly against the Company to enforce its rights in respect of such
payment. See "Description of New Securities--Description of New Junior
Subordinated Debentures--Enforcement of Certain Rights By Holders of New
Capital Securities." The obligations of the Company under the Guarantee and the
Junior Subordinated Debentures will be subordinate and junior in right of
payment to all Senior Indebtedness (as defined in "Description of New Securities
- --Description of New Junior Subordinated Debentures--Subordination"), which
aggregated approximately $53.0 million as of May 30, 1997.
The Trust Securities will be subject to mandatory redemption in a Like Amount
(as defined herein), (i) in whole but not in part, on the Stated Maturity Date
upon repayment of the Junior Subordinated Debentures at a redemption price equal
to the principal amount of, plus accrued and unpaid interest on, the Junior
Subordinated Debentures (the "Maturity Redemption Price"), (ii) in whole but not
in part, at any time prior to March 1, 2007, contemporaneously with the optional
prepayment of the Junior Subordinated Debentures, upon the occurrence and
continuation of a Special Event (as defined herein) at a redemption price equal
to the Special Event Prepayment Price (as defined below), and (iii) in whole or
in part, on or after March 1, 2007, contemporaneously with the optional
prepayment by the Company of the Junior Subordinated Debentures, at a redemption
price equal to the Optional Prepayment Price (as defined below). Any of the
Maturity Redemption Price, the Special Event Redemption Price and the Optional
Redemption Price may be referred to herein as the "Redemption Price." See
"Description of New Securities--Description of New Capital Securities--
Redemption."
The Junior Subordinated Debentures will be prepayable prior to the Stated
Maturity Date at the option of the Company (i) on or after March 1, 2007, in
whole or in part, at a prepayment price (the "Optional Prepayment Price") equal
to 104.270% of the principal amount, plus accrued interest thereon, declining
ratably on each March 1 thereafter to 100% on or after March 1, 2017, plus
accrued interest thereon to the date of prepayment, or (ii) at any time prior to
March 1, 2007, in whole but not in part, upon the occurrence and continuation of
a Special Event, at a prepayment price (the "Special Event Prepayment Price")
equal to the greater of (a) 100% of the principal amount thereof or (b) the sum,
as determined by a Quotation Agent (as defined herein), of the present values of
the principal amount and premium payable as part of the prepayment price with
respect to an optional prepayment of such Junior Subordinated Debentures on
March 1, 2007, together with scheduled payments of interest accruing from the
prepayment date to March 1, 2007, in each case, discounted to the prepayment
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) plus, in either case,
accrued and unpaid interest thereon to the date of prepayment. Either of the
Optional Prepayment Price or the Special Event Prepayment Price may be referred
to herein as the "Prepayment Price." See "Description of New Securities--
Description of New Junior Subordinated Debentures--Optional Prepayment" and
"--Special Event Prepayment."
The Company will have the right at any time to dissolve the Trust and cause a
Like Amount of the Junior Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust, subject to the
rights of creditors and the Company having received an opinion of counsel to the
effect that such distribution would not be a taxable event to holders of Capital
Securities. Unless the Junior Subordinated Debentures are distributed to the
holders of the Trust Securities, in the event of a liquidation of the Trust as
described herein, after satisfaction of liabilities to creditors of the Trust as
required by applicable law, the holders of the Capital Securities generally will
be entitled to receive a Liquidation Amount of $1,000 per Capital Security plus
accumulated and unpaid Distributions thereon to the date of payment. See
"Description of New Securities--Description of New Capital Securities--
Liquidation of the Trust and Distribution of Junior Subordinated Debentures."
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The Trust is making the Exchange Offer of the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance
(the "Staff") of the Securities and Exchange Commission (the "Commission") as
set forth in certain interpretive letters addressed to third parties in other
transactions. However, neither the Company nor the Trust has sought its own
interpretive letter and there can be no assurance that the Staff 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, and subject to the two immediately following sentences, the Company and
the Trust believe that New Capital Securities issued pursuant to this Exchange
Offer in exchange for Old Capital Securities may be offered for resale, resold
and otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Capital
Securities 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 New Capital Securities. However, any holder of Old
Capital Securities who is an "affiliate" of the Company (within the meaning of
Rule 405 under the Securities Act) or the Trust or who intends to participate in
the Exchange Offer for the purpose of distributing New Capital Securities, or
any broker-dealer who purchased Old Capital Securities from the Trust to resell
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption under the Securities Act, (a) will not be able to rely on
the interpretations of the Staff set forth in the above-mentioned interpretive
letters, (b) will not be permitted or entitled to tender such Old Capital
Securities in the Exchange Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Old Capital Securities unless such sale is made
pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Old Capital Securities acquired for its own
account as a result of market-making or other trading activities and exchanges
such Old Capital Securities for New Capital Securities, then such broker-dealer
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an affiliate of the Company or the Trust, (ii) any
New Capital Securities to be received by it are being acquired in the ordinary
course of its business, (iii) it has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such New Capital Securities and (iv) if such holder is not a broker-
dealer, such holder is not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities Act) of such New Capital
Securities. In addition, the Company and the Trust may require such holder, as a
condition to such holder's eligibility to participate in the Exchange Offer, to
furnish to the Company and the Trust (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) on behalf of whom such holder holds the Capital Securities to be
exchanged in the Exchange Offer. Each broker-dealer that receives New Capital
Securities for its own account pursuant to the Exchange Offer must acknowledge
that it acquired the Old Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Capital Securities. 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
Commission in the interpretive letters referred to above, the Company and the
Trust believe that broker-dealers who acquired Old Capital Securities 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 New Capital Securities received upon
exchange of such Old Capital Securities (other than Old Capital Securities which
represent an unsold allotment from the original sale of the Old Capital
Securities) 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 New Capital Securities. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Capital
Securities received in exchange for Old Capital Securities where such
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Old Capital Securities were acquired by such Participating Broker-Dealer for its
own account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the Company
and the Trust 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 New Capital Securities for a period of not more
than 180 days after the Expiration Date (as defined herein) (subject to
extension under certain limited circumstances described below) or, if earlier,
when all such New Capital Securities have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." However, a Participating Broker-
Dealer who intends to use this Prospectus in connection with the resale of New
Capital Securities received in exchange for Old Capital Securities pursuant to
the Exchange Offer must notify the Company or the Trust, or cause the Company or
the Trust to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided for
that purpose in the Letter of Transmittal or may be delivered to the Exchange
Agent at one of the addresses set forth herein under "The Exchange Offer--
Exchange Agent." Any Participating Broker-Dealer who is an affiliate of the
Company or the Trust may not rely on such interpretive letters and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. See "The Exchange Offer--Resales of
New Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal, that, upon receipt of notice from the
Company or the Trust of the occurrence of any event or the discovery of any fact
which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable) pursuant to
this Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Company or the Trust has given notice that the sale of the New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Company or the Trust
gives such notice to suspend the sale of the New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable), it shall
extend the 180 day period referred to above during which Participating Broker-
Dealers are entitled to use this Prospectus in connection with the resale of New
Capital Securities by the number of days during the period from and including
the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the New Capital
Securities or to and including the date on which the Company or the Trust has
given notice that the sale of New Capital Securities (or the New Guarantee or
the New Junior Subordinated Debentures, as applicable) may be resumed, as the
case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Capital Securities. The New Capital Securities
will be a new issue of securities for which there currently is no market.
Although the Initial Purchasers have informed the Company and the Trust that
they each currently intend to make a market in the New Capital Securities, they
are not obligated to do so, and any such market making may be discontinued at
any time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the New Capital Securities. The
Company and the Trust do not intend to apply for listing of the New Capital
Securities on any securities exchange or for inclusion of the Capital Securities
on any automated quotation system.
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Trust Agreement
(except for those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, the holders of Old Capital
Securities will continue to be subject to all of the existing restrictions upon
transfer thereof and neither the Company nor the Trust will have any further
obligation to such holders (other than under certain limited circumstances) to
provide for registration under the Securities Act
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of the Old Capital Securities held by them. To the extent that Old Capital
Securities are tendered and accepted in the Exchange Offer, a holder's ability
to sell untendered Old Capital Securities following the consummation of the
Exchange Offer could be adversely affected. See "Risk Factors--Consequences of
a Failure to Exchange Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00 p.m.,
New York City time, on , 1997 (such time on such date being hereinafter
called the "Expiration Date"), unless the Exchange Offer is extended by the
Company or the Trust (in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is extended). Tenders of Old
Capital Securities may be withdrawn at any time on or prior to the Expiration
Date. The Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Old Capital Securities being tendered for exchange. However, the Exchange
Offer is subject to certain events and conditions which may be waived by the
Company or the Trust and to the terms and provisions of the Registration Rights
Agreement. Old Capital Securities may be tendered in whole or in part having an
aggregate Liquidation Amount of not less than $100,000 (100 Capital Securities)
or any integral multiple of $1,000 Liquidation Amount (one Capital Security) in
excess thereof. The Company will pay all fees, expenses, debts and obligations
(other than the Trust Securities) related to the Trust and the offering and
exchange of the Capital Securities and will pay, directly or indirectly, all
ongoing costs, expenses and liabilities of the Trust. See "The Exchange Offer--
Fees and Expenses." Holders of the Old Capital Securities whose Old Capital
Securities are accepted for exchange will not receive Distributions on such Old
Capital Securities and will be deemed to have waived the right to receive any
Distributions on such Old Capital Securities accumulated from and after March 7,
1997. See "The Exchange Offer--Distributions on New Capital Securities."
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. No dealer-manager is
being used in connection with this Exchange Offer. See "Use of Proceeds" and
"Plan of Distribution."
The permission of the Bermuda Monetary Authority ("BMA") has been obtained for
the issue of the Junior Subordinated Debentures. Approvals or permissions
received from the BMA do not constitute a guarantee by the BMA as to the
performance of the issue or creditworthiness of the Company. Furthermore, in
giving such approvals or permissions, the BMA shall not be liable for the
performance or default of the issue for the correctness of any opinions or
statements expressed. In addition, a copy of this Prospectus has been delivered
to the Registrar of Companies in Bermuda for filing pursuant to the Companies
Act 1981 of Bermuda. In accepting this Prospectus for filing, the Registrar of
Companies in Bermuda accepts no responsibility for the financial soundness of
any proposal or for the correctness of any of the statements made or opinions
expressed with regard to them.
NO EMPLOYEE BENEFIT PLAN OR OTHER PLAN OR INDIVIDUAL RETIREMENT ACCOUNT
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") (EACH, A "PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE
"PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN ASSET
ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD
THE CAPITAL SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASE AND HOLDING
IS COVERED BY THE EXEMPTIVE RELIEF PROVIDED BY U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-
14 OR ANOTHER APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE AND HOLDING
AND, IN THE CASE OF ANY PURCHASER OR HOLDER RELYING ON ANY EXEMPTION OTHER THAN
PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14, SUCH PURCHASER HAS COMPLIED WITH ANY
REQUEST BY THE COMPANY OR THE TRUST FOR AN OPINION OF
6
COUNSEL OR OTHER EVIDENCE WITH RESPECT TO THE APPLICABILITY OF SUCH EXEMPTION.
ANY PURCHASER OR HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL
BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND/OR HOLDING THEREOF THAT EITHER
(A) THE PURCHASER AND HOLDER ARE NOT PLANS OR PLAN ASSET ENTITIES AND ARE NOT
PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR (B)
THE PURCHASE AND HOLDING OF THE CAPITAL SECURITIES IS COVERED BY THE EXEMPTIVE
RELIEF PROVIDED BY PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE
EXEMPTION. PROSPECTIVE PURCHASERS MUST CAREFULLY CONSIDER THE RESTRICTIONS ON
PURCHASE SET FORTH IN "NOTICE TO INVESTORS" AND "CERTAIN ERISA CONSIDERATIONS."
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE EXCHANGE
OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE TRUST. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR ANYONE TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION.
___________
TABLE OF CONTENTS
7
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center,
14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Such information may also be accessed electronically by means of the
Commission's home page on the Internet (http://www.sec.gov.). In addition, such
reports, proxy statements and other information concerning the Company may be
inspected at the offices of The New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005, on which the common shares of the Company (the "Common
Shares") are listed.
No separate financial statements of the Trust have been included herein. The
Company and the Trust do not consider that such financial statements would be
material to holders of the Capital Securities because the Trust is a newly
formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Junior Subordinated Debentures, and
selling the Trust Securities and engaging in incidental activities. See
"RenaissanceRe Capital Trust" and "Description of New Securities." In addition,
the Company does not expect that the Trust will file reports, proxy statements
and other information under the Exchange Act with the Commission.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Company and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and
reference is hereby made to the Registration Statement and to the exhibits and
schedules relating thereto for further information with respect to the Company,
the Trust and the New Capital Securities. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
ENFORCEABILITY OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
The Company is organized pursuant to the laws of Bermuda. In addition, certain
of the directors and officers of the Company, as well as certain of the experts
named herein, reside outside the United States, and all or a substantial portion
of their assets and the assets of the Company are located outside the United
States. As a result, it may be difficult for investors to effect service of
process within the United States upon such persons or to realize against them in
courts of the United States upon judgments of courts of the United States
predicated upon civil liabilities under the United States federal securities
laws.
The Company has been advised by its Bermuda counsel, Conyers, Dill & Pearman,
that the United States and Bermuda do not currently have a treaty providing for
reciprocal recognition and enforcement of judgments in civil and commercial
matters and that there is doubt (a) whether a final judgment for the payment of
money rendered by a federal or state court in the United States based on civil
liability, whether or not predicated solely upon the civil liability provisions
of the United States federal securities laws, would be enforceable in Bermuda
against the Company or the Company's officers and directors and (b) whether an
action could be brought in Bermuda against the Company or the Company's officers
and directors in the first instance on the basis of liability predicated solely
upon the provisions of the United States federal securities laws. A Bermuda
court may, however, impose civil liability on the Company or its directors or
officers in a suit brought in the Supreme Court of Bermuda against the Company
or such persons, provided that the facts alleged constitute or give rise to a
cause of action under Bermuda law. Certain remedies available under the laws of
U.S. jurisdictions, including certain remedies
8
under the United States federal securities laws, would not be allowed in Bermuda
courts as contrary to public policy.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE, WITHOUT CHARGE,
UPON REQUEST FROM THE PERSON SPECIFIED BELOW. IN ORDER TO INSURE TIMELY DELIVERY
OF SUCH DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS
PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE OFFER.
The following documents filed by the Company with the Commission (Exchange Act
File No. 34-0-26512) are incorporated into this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1996 (the "1996 Form 10-K");
2. The information which appears under the captions "Executive Officer
and Director Compensation," "Security Ownership of Certain Beneficial
Owners, Management and Directors" and "Certain Relationships and Related
Transactions" in the Company's Proxy Statement on Schedule 14A relating
to the Annual General Meeting of Shareholders to be held on May 8, 1997;
3. The Company's Quarterly Report on Form 10-Q/A for the Quarter Ended
March 31, 1997 (the "March 1997 10-Q"); and
4. The Company's Current Reports on Form 8-K filed with the Commission
on January 7, 1997, February 20, 1997, March 19, 1997 and May 23, 1997.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the New Securities offered hereby pursuant to the
Exchange Offer shall be deemed to be incorporated by reference into this
Prospectus and to be a part of this Prospectus from the date of filing of such
document. Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document. The Company will provide
without charge to any person to whom a copy of this Prospectus is delivered, on
the written or oral request of such person, a copy of any or all of the
foregoing documents incorporated by reference herein (other than exhibits not
specifically incorporated by reference into the texts of such documents).
Requests for such documents should be directed to: RenaissanceRe Holdings Ltd.,
Renaissance House, 8-12 East Broadway, Pembroke HM 19 Bermuda, telephone (441)
295-4513, Attention: Secretary.
9
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information (including financial
information) included elsewhere in this Prospectus, or incorporated by reference
herein. Unless the context requires otherwise, references herein to "the
Company" are to RenaissanceRe Holdings Ltd. and its subsidiaries. This
Prospectus contains forward-looking statements which involve certain material
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in such forward-looking statements. The words
"believes," "anticipated," "expects" and similar expressions are intended to
identify forward-looking statements. See "RenaissanceRe Holdings Ltd." and "Risk
Factors--Volatility of Financial Results."
RENAISSANCERE HOLDINGS LTD.
RenaissanceRe Holdings Ltd. is a Bermuda company with its registered and
principal executive offices located at Renaissance House, 8-12 East Broadway,
Pembroke HM 19 Bermuda, telephone (441) 295-4513. The Company was formed in June
1993 and is the parent of Renaissance Reinsurance Ltd., a Bermuda company and a
wholly-owned subsidiary ("Renaissance Reinsurance"), and Glencoe Insurance Ltd.,
a Bermuda company and a majority-owned subsidiary ("Glencoe"). The Company was
founded by Warburg, Pincus Investors, L.P. ("WPI"), GE Investment Private
Placement Partners I, Limited Partnership ("GEIPPI"), Trustees of General
Electric Pension Trust ("GEPT") and United States Fidelity and Guaranty Company
("USF&G") (collectively, the "Founding Institutional Investors"). As of June 30,
1997, WPI, USF&G and certain affiliates of GEPT and GEIPPI owned an aggregate of
approximately 56.5% of the Company's outstanding equity.
The Company's principal business is property catastrophe reinsurance, written
on a worldwide basis through Renaissance Reinsurance. Based on gross premiums
written, the Company is the largest Bermuda-based provider of property
catastrophe reinsurance and one of the largest providers of this coverage in the
world. The Company provides property catastrophe reinsurance coverage to
insurance companies and other reinsurers primarily on an excess of loss basis.
Excess of loss catastrophe coverage generally provides coverage for claims
arising from large natural catastrophes such as earthquakes and hurricanes in
excess of a specified loss. The Company is also exposed to claims arising from
other natural and man-made catastrophes such as winter storms, freezes, floods,
fires and tornadoes in connection with the coverages it provides.
The Company's principal operating objective is to utilize its capital
efficiently by focusing on the writing of property catastrophe insurance and
reinsurance contracts with superior risk/return characteristics, while
maintaining a low cost operating structure in the favorable regulatory and tax
environment of Bermuda. The Company's primary underwriting goal is to construct
a portfolio of insurance and reinsurance contracts that maximizes the return on
shareholders' equity subject to prudent risk constraints. The Company seeks to
moderate the volatility inherent in the property catastrophe market through the
use of contract terms, portfolio selection methodology, diversification criteria
and probability analyses its risks through a variety of means, including the use
of contract terms, portfolio selection methodology, diversification criteria and
probability analyses. While property catastrophe reinsurance represented
approximately 95% of the Company's gross premiums written in each of 1996, 1995
and 1994 and continues to be the Company's primary focus, the Company may seek
to take advantage of perceived opportunities in both insurance and other
reinsurance markets.
For the years ended December 31, 1996, 1995 and 1994, the Company achieved
returns on average shareholders' equity of 30.2%, 43.3% and 44.1%, respectively,
and combined ratios of 51.3%, 52.0% and 61.6%, respectively. For the quarter
ended March 31, 1997, the Company achieved an annualized return on average
shareholders' equity of 23.0% and a combined ratio of 47.5%. The Company
achieved these results despite the occurrence of several major catastrophes in
1996 and 1995 (which, according to industry trade sources, had the fifth and
third highest level of U.S. property catastrophe insured losses on record,
respectively) and the occurrence in January 1994 of the Northridge, California
earthquake, the second largest insured catastrophe loss in U.S. history. The
major catastrophes which occurred in 1996 were Hurricane Fran in September,
which produced an estimated 1.6 billion in insurance industry losses, the
Northeastern United States winter storms in January, and the Northwestern United
States floods in December. The major catastrophes which occurred in 1995 were
Hurricanes Luis, Marilyn and Opal. At March 31, 1997, the Company had total
assets of $962.0 million and total shareholders' equity of $540.3 million. There
can be no assurance that the Company will achieve similar results in the future.
See "Risk Factors--Volatility of Financial Results" and "RenaissanceRe Holdings
Ltd."
10
STRATEGY
The principal components of the Company's business strategy are to:
. Focus on the property catastrophe reinsurance business.
. Build a superior portfolio of property catastrophe reinsurance by
utilizing proprietary modeling capabilities.
. Utilize the Company's capital base efficiently while maintaining
prudent risk levels in the Company's reinsurance portfolio.
. Capitalize on the experience and skill of management.
. Build and maintain long-term relationships with brokers and clients.
. Maintain a low cost structure.
RENAISSANCERE CAPITAL TRUST
The Trust is a statutory business trust formed under the laws of the State of
Delaware pursuant to (i) the Trust Agreement executed by the Company, as
Sponsor, The Bank of New York, as Property Trustee, and The Bank of New York
(Delaware), as Delaware Trustee and the three individual Administrative Trustees
named therein, who are employees or officers of or affiliated with the Company,
and (ii) the filing of a certificate of trust with the Secretary of State of
Delaware on February 25, 1997. The Trust's business and affairs are conducted by
the Property Trustee, the Delaware Trustee and the three individual
Administrative Trustees. The Trust exists for the exclusive purposes of (i)
issuing and selling the Trust Securities, (ii) investing the proceeds from the
sale thereof in the Junior Subordinated Debentures issued by the Company and
(iii) engaging in only those other activities incidental thereto. Accordingly,
the Junior Subordinated Debentures are the sole assets of the Trust, and
payments under the Junior Subordinated Debentures are the sole revenues of the
Trust. All of the Common Securities are owned by the Company. The Capital
Securities have a preference over the Common Securities under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise. See "Description of Capital Securities--
Subordination of Common Securities."
THE EXCHANGE OFFER
The Exchange Offer........... Up to $100,000,000 aggregate Liquidation Amount of
New Capital Securities are being offered in
exchange for a like aggregate Liquidation Amount
of Old Capital Securities. Old Capital Securities
may be tendered for exchange in whole or in part
in a Liquidation Amount of $100,000 (100 Capital
Securities) or any integral multiple of $1,000
(one Capital Security) in excess thereof. The
Company and the Trust are making the Exchange
Offer in order to satisfy their obligations under
the Registration Rights Agreement relating to the
Old Capital Securities. For a description of the
procedures for tendering Old Capital Securities,
see "The Exchange Offer--Procedures for
Tendering Old Capital Securities."
11
Expiration Date............. 5:00 p.m., New York City time, on, 1997, unless
the Exchange Offer is extended by _________ the
Company or the Trust (in which case the Expiration
Date will be the latest date and time to which the
Exchange Offer is extended). See "The Exchange
Offer--Terms of the Exchange Offer."
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain
conditions, which may be waived by the Company and
the Trust in their sole discretion. The
Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Old Capital Securities being
tendered. See "The Exchange Offer--Conditions to
the Exchange Offer."
Offer....................... The Company and the Trust reserve the right in
their sole and reasonable discretion, subject to
applicable law, at any time and from time to time,
(i) to delay the acceptance of the Old Capital
Securities for exchange, (ii) to terminate the
Exchange Offer if certain specified conditions have
not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Old
Capital Securities tendered pursuant to the
Exchange Offer, subject, however, to the right of
holders of Old Capital Securities to withdraw their
tendered Old Capital Securities, or (iv) to waive
any condition or otherwise amend the terms of the
Exchange Offer in any respect. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights........... Tenders of Old Capital Securities may be withdrawn
at any time on or prior to the Expiration Date by
delivering a written notice of such withdrawal to
the Exchange Agent in conformity with certain
procedures set forth below under "The Exchange
Offer--Withdrawal Rights."
Procedures for Tendering
Old Capital Securities..... Tendering holders of Old Capital Securities must
complete and sign a Letter of Transmittal in
accordance with the instructions contained therein
and forward the same by mail, facsimile or hand
delivery, together with any other required
documents, to the Exchange Agent, either with the
Old Capital Securities to be tendered or in
compliance with the specified procedures for
guaranteed delivery of Old Capital Securities.
Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by an Agent's Message (defined herein) in
case of book-entry delivery to the Exchange Agent
prior to the Expiration Date. Holders of Old
Capital Securities registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee are urged to contact such person
promptly if they wish to tender Old Capital
Securities pursuant to the Exchange Offer. See "The
12
Exchange Offer--Procedures for Tendering Old
Capital Securities."
Letters of Transmittal and certificates representing
Old Capital Securities should not be sent to the
Company or the Trust. Such documents should only be
sent to the Exchange Agent.
Resales of New Capital
Securities................ The Company and the Trust are making the Exchange
Offer in reliance on the position of the Staff as
set forth in certain interpretive letters addressed
to third parties in other transactions. However,
neither the Company nor the Trust has sought its own
interpretive letter and there can be no assurance
that the Staff would make a similar determination
with respect to the Exchange Offer as it has in such
prior interpretive letters to third parties. Based
on these interpretations by the Staff, and subject
to the two immediately following sentences, the
Company and the Trust believe that New Capital
Securities issued pursuant to the Exchange Offer in
exchange for Old Capital Securities may be offered
for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-
dealer) without further compliance with the
registration and prospectus delivery requirements of
the Securities Act, provided that such New Capital
Securities 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 New Capital Securities. However, any
holder of Old Capital Securities who is an
"affiliate" of the Company or the Trust or who
intends to participate in the Exchange Offer for the
purpose of distributing the New Capital Securities,
or any broker-dealer who purchased the Old Capital
Securities from the Trust 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 set forth in the above-
mentioned interpretive letters, (b) will not be
permitted or entitled to tender such Old Capital
Securities in the Exchange Offer and (c) must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with any sale or other transfer of such Old Capital
Securities unless such sale is made pursuant to an
exemption from such requirements. In addition, as
described below, if any broker-dealer holds Old
Capital Securities acquired for its own account as a
result of market-making or other trading activities
and exchanges such Old Capital Securities for New
Capital Securities in the Exchange Offer, then such
broker-
13
dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection
with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to
exchange Old Capital Securities for New Capital
Securities in the Exchange Offer will be required to
represent that (i) it is not an affiliate of the
Company or the Trust, (ii) any New Capital
Securities to be received by it are being acquired
in the ordinary course of its business, (iii) it has
no arrangement or understanding with any person to
participate in a distribution (within the meaning of
the Securities Act) of such New Capital Securities,
and (iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the
Securities Act) of such New Capital Securities. Each
broker-dealer that receives New Capital Securities
for its own account pursuant to the Exchange Offer
must acknowledge that it acquired the Old Capital
Securities for its own account as the result of
market-making activities or other trading activities
and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale of such New Capital
Securities. 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 in the interpretive letters referred to above,
the Company and the Trust believe that Participating
Broker-Dealers who acquired Old Capital Securities
for their own accounts as a result of market-making
activities or other trading activities may fulfill
their prospectus delivery requirements with respect
to the New Capital Securities received upon exchange
of such Old Capital Securities (other than Old
Capital Securities which represent an unsold
allotment from the original sale of the Old Capital
Securities) 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 New
Capital Securities. Accordingly, 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 New Capital Securities
received in exchange for Old Capital Securities
where such Old Capital Securities were acquired by
such Participating Broker-Dealer for its own account
as a result of market-making or other trading
activities. Subject to certain provisions set forth
in the Registration Rights Agreement and to the
limitations described below
14
under "The Exchange Offer--Resales of New Capital
Securities," the Company and the Trust 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 New Capital Securities for a period
of not more than 180 days after the Expiration Date
(subject to extension under certain limited
circumstances) or, if earlier, when all such New
Capital Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer who
is an affiliate of the Company or the Trust may not
rely on such interpretive letters and must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with any resale transaction. See "The Exchange
Offer--Resales of New Capital Securities."
Exchange Agent............. The exchange agent with respect to the Exchange
Offer is The Bank of New York (the "Exchange
Agent"). The addresses 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 Company nor the Trust will receive any
cash proceeds from the issuance of the New Capital
Securities offered hereby. See "Use of Proceeds."
Certain United States
Federal Income Tax
Considerations; ERISA
Considerations............ Holders of Old Capital Securities should review the
information set forth under "Certain United States
Federal Income Tax Considerations" and "ERISA
Considerations" prior to tendering Old Capital
Securities in the Exchange Offer.
THE NEW CAPITAL SECURITIES
Securities Offered......... Up to $100,000,000 aggregate Liquidation Amount of
the Trust's New Capital Securities (Liquidation
Amount $1,000 per New Capital Security) which are
being registered under the Securities Act pursuant
to the Registration Statement. The New Capital
Securities will be issued and the Old Capital
Securities were issued under the Trust Agreement.
The New Capital Securities and any Old Capital
Securities which remain outstanding after
consummation of the Exchange Offer will vote
together as a single class for purposes of
determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof
have taken certain actions or exercised certain
rights under the Trust Agreement. See "Description
of New Securities--Description of
15
New Capital Securities--Voting Rights; Amendment
of the Trust Agreement." The terms of the New
Capital Securities are identical in all material
respects to the terms of the Old Capital Securities,
except that the New Capital Securities have been
registered under the Securities Act and will not be
subject to the $100,000 minimum Liquidation Amount
transfer restriction and certain other restrictions
on transfer applicable to the Old Capital Securities
and will not provide for any increase in the
Distribution rate thereon. See "The Exchange Offer
--Purpose of the Exchange Offer," "Description of
New Securities" and "Description of Old Securities."
Distribution Dates......... March 1 and September 1 of each year, commencing
September 1, 1997.
Extension Periods.......... Distributions on the New Capital Securities will be
deferred for the duration of any Extension Period
elected by the Company with respect to the payment
of interest on the New Junior Subordinated
Debentures. No Extension Period will exceed ten
consecutive semi-annual periods or extend beyond the
Stated Maturity Date, a Redemption Date or the date
of acceleration upon a Debenture Event of Default.
No interest shall be due and payable during an
Extension Period, except at the end thereof. Except
as described herein, there is no limitation on the
number of times the Company may elect to begin an
Extension Period. See "Description of New
Securities--Description of New Junior Subordinated
Debentures--Option to Extend Interest Payment Date"
and "Certain United States Federal Income Tax
Considerations--Interest Income and Original Issue
Discount."
Ranking.................... The New Capital Securities will rank pari passu, and
payments thereon will be made pro rata, with the Old
Capital Securities and the Common Securities except
as described under "Description of New Securities
--Description of New Capital Securities-
Subordination of Common Securities." The New Junior
Subordinated Debentures will rank pari passu with
the Old Junior Subordinated Debentures and all other
junior subordinated debentures to be issued by the
Company (if any) (collectively, with the Old Junior
Subordinated Debentures, the "Other Debentures") and
sold (if at all) to other trusts to be established
by the Company (if any), in each case similar to the
Trust (the "Other Trusts"), and will be unsecured
and subordinate and junior in right of payment to
all Senior Indebtedness to the extent and in the
manner set forth in the Indenture. At April 30,
1997, the amount of outstanding Senior Indebtedness
was
16
approximately $53.0 million. See "Description of New
Securities--Description of New Junior Subordinated
Debentures." The New Guarantee will rank pari passu
with the Old Guarantee and all other guarantees (if
any) issued by the Company with respect to capital
securities or preferred securities (if any) to be
issued by Other Trusts (collectively, with the Old
Guarantee, the "Other Guarantees") and will
constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of
payment to all Senior Indebtedness to the extent and
in the manner set forth in the Guarantee Agreement.
See "Description of New Securities--Description of
New Guarantee."
Redemption................. The Trust Securities are subject to mandatory
redemption in a Like Amount, (i) in whole
but not in part, on the Stated Maturity Date upon
repayment of the Junior Subordinated Debentures,
(ii) in whole but not in part, at any time prior to
March 1, 2007, contemporaneously with the optional
prepayment of the Junior Subordinated Debentures by
the Company upon the occurrence and continuation of
a Special Event and (iii) in whole or in part, at
any time on or after March 1, 2007 contemporaneously
with the optional prepayment by the Company of the
Junior Subordinated Debentures, in each case at the
applicable Redemption Price. See "Description of New
Securities--Description of New Capital Securities
--Redemption."
Rating..................... The New Capital Securities are expected to be rated
"baa3" by Moody's Investors Service, Inc.
("Moody's") and "BBB" by Standard & Poor's Ratings
Services ("S&P").
Absence of Market for the
New Capital Securities.... The New Capital Securities will be a new issue of
securities for which there currently is no market.
Although Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Brothers, Inc., the initial
purchasers of the Old Capital Securities (the
"Initial Purchasers"), have informed the Company and
the Trust that they each currently intend to make a
market in the New Capital Securities, they are not
obligated to do so, and any such market making may
be discontinued at any time without notice.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the New
Capital Securities. The Trust and the Company do not
intend to apply for listing of the New Capital
Securities on any securities exchange or for
inclusion of the New Capital Securities on any
automated quotation system. See "Plan of
Distribution."
17
RISK FACTORS
Holders of Old Capital Securities should consider carefully, in addition to
the other information contained or incorporated by reference in this Prospectus,
the factors set forth below the caption "Risk Factors" before tendering their
Old Capital Securities for New Capital Securities in the Exchange Offer.
18
RISK FACTORS
Holders of Old Capital Securities should consider carefully, in addition to
the other information contained or incorporated by reference in this Prospectus,
the following factors before tendering Old Capital Securities for New capital
Securities in the Exchange Offer. The risk factors set forth below (other than
"Consequences of a Failure to Exchange Old Capital Securities "and "Absence of
Public Market") are generally applicable to the Old Capital Securities as well
as the New Capital Securities.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES; HOLDING COMPANY STRUCTURE
The obligations of the Company under the Guarantee issued by it for the
benefit of the holders of Capital Securities, as well as under the Junior
Subordinated Debentures, will be unsecured and rank subordinate and junior in
right of payment to all Senior Indebtedness of the Company. In addition, in the
case of a bankruptcy or insolvency proceeding, the Company's obligations under
the Junior Subordinated Debentures and the Guarantee will also rank subordinate
and junior in right of payment to all liabilities (other than Other Debentures
and Other Guarantees) of the Company. At May 31, 1997, the aggregate principal
amount of outstanding Senior Indebtedness was approximately $53.0 million. None
of the Indenture, the Guarantee or the Trust Agreement places any limitation on
the amount of secured or unsecured debt, including Senior Indebtedness that may
be incurred by the Company or by any subsidiary of the Company. The Company
expects from time to time to incur additional Senior Indebtedness. See
"Description of New Securities--Description of New Guarantee--Status of the
Guarantee" and "Description of New Securities--Description of New Junior
Subordinated Debentures--Subordination."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Company making payments on the Junior Subordinated
Debentures as and when required. As a holding company, the Company's ability to
meet debt service obligations and pay operating expenses depends on receipt of
sufficient funds from its direct and indirect subsidiaries. The inability of the
Company's subsidiaries to pay dividends to the Company in an amount sufficient
to meet debt service obligations and pay operating expenses would have a
material adverse effect on the Company and the ability of the Company to meet
its obligations under the Junior Subordinated Debentures. The payment of
dividends by the Company's insurance subsidiaries without prior regulatory
approval is subject to restrictions set forth in applicable laws and
regulations, including without limitation the insurance laws and regulations of
Bermuda, the jurisdiction of domicile of the Company's subsidiaries. As of
May 1, 1997, the Company's subsidiaries had sufficient capital and earnings to
pay approximately $189.0 million of dividends to the Company during 1997 without
prior regulatory approval. Approximately $136.1 million was available for the
payment of dividends to the Company as of May 1, 1997. As of December 31, 1996,
the Company's insurance subsidiaries had paid approximately $135.6 million of
dividends to the Company for the year ended 1996. See "RenaissanceRe Holdings
Ltd.--Regulation."
Because the Company is a holding company, the right of the Company to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Capital Securities to benefit indirectly from such distribution),
is subject to the prior claims of creditors of that subsidiary, except to the
extent that the Company may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of Junior Subordinated Debentures should look only to
the assets of the Company for payments on the Junior Subordinated Debentures.
See "Description of New Securities--Description of New Junior Subordinated
Debentures--Subordination."
RIGHTS UNDER THE GUARANTEE; DIRECT ACTION FOR PAYMENT
The Bank of New York will act as Guarantee Trustee and will hold the Guarantee
for the benefit of the holders of the Capital Securities. The Bank of New York
also acts as Property Trustee and as Debenture Trustee under the Indenture. The
Bank of New York (Delaware) acts as Delaware Trustee under the Trust Agreement.
The Guarantee will guarantee to the holders of the Capital Securities the
following payments, to the extent not paid by
19
the Trust: (i) any accumulated and unpaid Distributions required to be paid on
the Capital Securities, to the extent that the Trust has funds on hand legally
available therefor at such time, (ii) the applicable Redemption Price with
respect to any Capital Securities called for redemption, to the extent that the
Trust has funds on hand legally available therefor at such time, and (iii) upon
a voluntary or involuntary termination and liquidation of the Trust (unless the
Junior Subordinated Debentures are distributed to holders of the Capital
Securities), the lesser of (a) the aggregate of the Liquidation Amount and all
accumulated and unpaid Distributions to the date of payment, to the extent that
the Trust has funds on hand legally available therefor at such time and (b) the
amount of assets of the Trust remaining available for distribution to holders of
the Capital Securities upon a termination and liquidation of the Trust. The
holders of a majority in Liquidation Amount of the Capital Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust power conferred upon the Guarantee Trustee. Any
holder of the Capital Securities may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. If the Company defaults on its obligation to pay amounts
payable under the Junior Subordinated Debentures, the Trust will not have
sufficient funds for the payment of Distributions or amounts payable on
redemption of the Capital Securities or otherwise, and, in such event, holders
of the Capital Securities will not be able to rely upon the Guarantee for
payment of such amounts. Instead, in the event a Debenture Event of Default
shall have occurred and be continuing and such event is attributable to the
failure of the Company to pay principal of (or premium, if any) or interest on
the Junior Subordinated Debentures on the date on which such payment is due and
payable, then a holder of Capital Securities may institute a legal proceeding
directly against the Company for enforcement of payment to such holder of the
principal of (and premium, if any) and interest, as applicable, on such Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Capital Securities of such holder (a "Direct Action").
Notwithstanding any payments made to a holder of Capital Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of (and premium, if any) and interest on the Junior
Subordinated Debentures, and the Company shall be subrogated to the rights of
the holder of such Capital Securities with respect to payments on the Capital
Securities to the extent of any payments made by the Company to such holder in
any Direct Action. Except as described herein, holders of Capital Securities
will not be able to exercise directly any other remedy available to the holders
of the Junior Subordinated Debentures or to assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures--Enforcement of Certain Rights by Holders of Capital
Securities," "Description of Junior Subordinated Debentures--Debenture Events of
Default" and "Description of Guarantee." The Trust Agreement provides that each
holder of Capital Securities by acceptance thereof agrees to the provisions of
the Indenture.
ABSENCE OF PUBLIC MARKET
The Old Capital Securities were issued to, and the Company, to the best of its
knowledge and information, believes such securities are currently owned by, a
relatively small number of beneficial owners. The Old Capital Securities have
not been registered under the Securities Act and are subject to restrictions on
transferability until they are exchanged for the New Capital Securities in the
Exchange Offer. Although the New Capital Securities may be resold or otherwise
transferred by the holders (who are not affiliates of the Company or the Trust)
thereof without compliance with the registration requirements under the
Securities Act, they will constitute a new issue of securities with no
established trading market. Old Capital Securities may be transferred by the
holders thereof only in blocks having a minimum Liquidation Amount of $100,000
(100 Old Capital Securities) and integral multiples of $1,000 in excess thereof.
New Capital Securities may be transferred by the holders thereof in blocks
having a Liquidation Amount of $1,000 (one New Capital Security) or integral
multiples thereof. The Company and the Trust have been advised by the Initial
Purchasers that the Initial Purchasers presently intend to make a market in the
New Capital Securities. However, the Initial Purchasers are not obligated to do
so and any market-making activity with respect to the New Capital Securities may
be discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. Accordingly, no
assurance can be given that an active public or other market will develop for
the New Capital Securities or the Old Capital Securities or as to the liquidity
of or the trading market for the New Capital Securities or the Old Capital
Securities. If an active public or other market does not develop, the market
price and liquidity of the New Capital Securities may be adversely affected. The
20
preceding considerations would apply to holders of Junior Subordinated
Debentures in the event the Junior Subordinated Debentures are distributed by
the Trust to the holders of Capital Securities.
If a public or other trading market develops for the New Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the Company's financial results and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the New Capital Securities may trade at prices higher
or lower than their liquidation amounts.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
So long as no Debenture Event of Default (as defined under "Description of New
Securities--Description of New Junior Subordinated Debentures--Debenture Events
of Default") shall have occurred and be continuing, the Company will have the
right under the Indenture to defer payments of interest on the Junior
Subordinated Debentures at any time or from time to time (under certain
conditions) for a period not exceeding ten consecutive semi-annual periods with
respect to each Extension Period, provided that (i) no Extension Period may
extend beyond the Stated Maturity Date and (ii) any Extension Period will
terminate as to all Junior Subordinated Debentures upon an acceleration thereof
(subject to reinstatement, upon cure or waiver as provided in the Indenture) and
(iii) any Extension Period will terminate as to any Junior Subordinated
Debenture to be redeemed on the applicable Redemption Date. See "Description of
New Securities--Description of New Junior Subordinated Debentures--Debenture
Events of Default." As a consequence of any such deferral, semi-annual
Distributions on the Capital Securities by the Trust will be deferred (and the
amount of Distributions to which holders of the Capital Securities are entitled
will accumulate additional Distributions thereon at the rate of 8.54% per annum,
compounded semi-annually), from the relevant payment date for such Distributions
during any such Extension Period. No interest shall be due and payable during an
Extension Period, except at the end thereof.
Prior to the termination of any such Extension Period, the Company may further
extend such Extension Period, provided that such extension does not cause such
Extension Period to exceed ten consecutive semi-annual periods or to extend
beyond the Stated Maturity Date. Upon the termination of any Extension Period
and the payment of all interest then accrued and unpaid on the Junior
Subordinated Debentures (together with interest thereon at the annual rate of
8.54%, compounded semi-annually, to the extent permitted by applicable law), the
Company may elect to begin a new Extension Period, subject to the above
requirements. Except as described herein, there is no limitation on the number
of times that the Company may elect to begin an Extension Period. See
"Description of New Securities--Description of New Capital Securities--
Distributions" and "Description of New Securities--Description of New Junior
Subordinated Debentures--Option to Extend Interest Payment Date."
Should the Company exercise its right to defer payments of interest on the
Junior Subordinated Debentures, each holder of Trust Securities will be required
to accrue income (as original issue discount ("OID")) in respect of the deferred
stated interest allocable to its Trust Securities for United States federal
income tax purposes, which will be allocated but not distributed to holders of
Trust Securities. As a result, each such holder of Capital Securities will
recognize income for United States federal income tax purposes in advance of the
receipt of cash and will not receive the cash related to such income from the
Trust if the holder disposes of the Capital Securities prior to the record date
for the payment of Distributions thereafter. See "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount" and "--Sales of
Capital Securities."
Should the Company elect to exercise its right to defer payments of interest
on the Junior Subordinated Debentures in the future, the market price of the
Capital Securities is likely to be affected. A holder that disposes of its
Capital Securities during an Extension Period, therefore, might not receive the
same return on its investment as a holder that continues to hold its Capital
Securities. In addition, merely as a result of the existence of the Company's
right to defer payments of interest on the Junior Subordinated Debentures, the
market price of the Capital Securities may be more volatile than the market
prices of other securities that are not subject to such deferrals.
21
Although the Company has the right to exercise its option to defer payments of
interest on the Junior Subordinated Debentures, the Company has no current
intention to do so.
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION
Upon the occurrence and continuation of a Tax Event or an Investment Company
Event (each as defined below, a "Special Event"), the Company will have the
right, subject to the rights of creditors, to prepay the Junior Subordinated
Debentures in whole (but not in part) within 90 days following the occurrence of
such Special Event and cause a mandatory redemption of the Trust Securities at
the Special Event Redemption Price. See "Description of New Securities--
Description of New Capital Securities--Redemption" and "--Liquidation of the
Trust and Distribution of the Junior Subordinated Debentures."
The Company will have the right at any time to dissolve the Trust and, subject
to the rights of creditors, cause a Like Amount of Junior Subordinated
Debentures to be distributed to the holders of the Trust Securities in
liquidation of the Trust, subject to the Company having received an opinion of
counsel to the effect that such distribution would not be a taxable event to the
holders of Trust Securities. Under current United States federal income tax law,
a distribution of Junior Subordinated Debentures upon the dissolution of the
Trust would not be a taxable event to holders of the Capital Securities. Upon
the occurrence of a Special Event, however, a dissolution of the Trust in which
holders of the Capital Securities receive cash would be a taxable event to such
holders. See "Certain Federal Income Tax Consequences--Distribution of Junior
Subordinated Debentures to Securityholders."
See "--Possible Tax Law Changes Affecting the Capital Securities" for a
discussion of certain legislative proposals that, if adopted, could give rise to
a Tax Event, which may permit the Company to cause a redemption of the Capital
Securities prior to March 1, 2007.
POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
On February 6, 1997, as part of President Clinton's Budget Proposal for Fiscal
Year 1998, the Treasury Department proposed legislation (the "Proposed
Legislation") which, among other things, would generally treat as equity for
United States federal income tax purposes instruments with a maximum term of
more than 15 years that are not shown as indebtedness on the separate balance
sheet of the issuer. The Proposed Legislation would be effective generally for
instruments issued on or after the date of first committee action. If the
Proposed Legislation were enacted, with the effective date provision contained
in such Proposed Legislation, such legislation would not apply to the Junior
Subordinated Debentures. There can be no assurances, however, that the effective
date guidance contained in the Proposed Legislation will be incorporated into
any enacted legislation or that other legislation enacted after the date hereof
will not otherwise adversely affect the tax treatment of the Capital Securities.
Any such legislative, administrative or judicial changes could give rise to a
Tax Event, which may permit the Company to cause a redemption of the Trust
Securities at the Special Event Redemption Price by electing to prepay the
Junior Subordinated Debentures at the Special Event Prepayment Price. See
"Description of New Securities--Description of New Capital Securities--
Redemption" and "Description of New Securities--Description of New Junior
Subordinated Debentures--Special Event Prepayment." See also "Certain Federal
Income Tax Consequences--Proposed Tax Legislation."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures distributed to the holders of Capital Securities
if a termination of the Trust were to occur. Accordingly, the Capital Securities
or the Junior Subordinated Debentures may trade at a discount from the price
that the investor paid to purchase the Capital Securities offered hereby.
Because holders of Capital Securities may receive Junior Subordinated Debentures
in liquidation of the Trust and because Distributions are otherwise limited to
payments on the Junior Subordinated Debentures, prospective purchasers of
Capital Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the
22
information regarding the Junior Subordinated Debentures contained herein. See
"Description of New Securities--Description of New Junior Subordinated
Debentures."
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
Based on interpretations by the Staff of the Commission, the Company believes
that New Capital Securities issued pursuant to the Exchange Offer in exchange
for Old Capital Securities may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act, (ii) the Initial
Purchasers to the extent they acquired Old Capital Securities directly from the
Company solely in order to resell pursuant to Rule 144A of the Securities Act or
any other available exemption under the Securities Act or (iii) a broker-dealer
(which may include the Initial Purchasers) who acquired Old Capital Securities
as a result of market-making or other trading activities) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Capital Securities 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 New Capital Securities. Each broker-dealer that receives New Capital
Securities for its own account as a result of market-making activities or other
trading activities pursuant to the Exchange Offer must acknowledge that it
acquired the Old Capital Securities as the result of such 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. See "Plan
of Distribution." Any holder that cannot rely upon such interpretations must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction unless such
sale is made pursuant to an exemption from such requirements.
The Old Capital Securities have not been registered under the Securities Act
or any state securities laws and therefore may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Old Capital
Securities which remain outstanding after the consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon the consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions). The Company and the Trust do not intend to register under
the Securities Act any Old Capital Securities which remain outstanding after the
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable). To the extent that Old Capital Securities are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered or tendered but not
accepted Old Capital Securities could be adversely affected.
The New Capital Securities and any Old Capital Securities which remain
outstanding after the consummation of the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Trust Agreement. See "Description of New
Securities -- Description of New Capital Securities -- Voting Rights; Amendment
of the Trust Agreement."
The Registration Rights Agreement provides, among other things, that, if a
registration statement relating to the Exchange Offer (the "Exchange Offer
Registration Statement") has not been filed by August 4, 1997 and declared
effective by September 3, 1997, the Distribution rate borne by the Old Capital
Securities commencing on after either of such dates will increase by 0.25% per
annum until the Exchange Offer Registration Statement is filed or effective, as
the case may be. In addition, if the Company has not consummated the Exchange
Offer on or prior to the 45th day after the date on which the Exchange Offer
Registration Statement is declared effective, and such event continues for a
period exceeding 30 consecutive days or 90 days in any 360-day period, then the
Distribution rate borne by the Old Capital Securities will increase by 0.25%
commencing on the day after any such event, until the Exchange Offer is
consummated. Upon consummation of the Exchange Offer, holders of Old
23
Capital Securities will not be entitled to any increase in the Distribution rate
thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Description of Old Capital
Securities."
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities, the dissolution,
termination or liquidation of the Trust, and the exercise of the Trust's rights
as holder of Junior Subordinated Debentures. Holders of Capital Securities will
not be entitled to vote to appoint, remove or replace the Property Trustee or
the Delaware Trustee, and such voting rights are vested exclusively in the
holder of the Common Securities except upon the occurrence of certain events
described herein. The Property Trustee, the Administrative Trustees and the
Company may amend the Trust Agreement without the consent of holders of Capital
Securities to ensure that the Trust will be classified for United States federal
income tax purposes as a grantor trust, provided that such action does not have
a material adverse effect on the interests of such holders. See "Description of
New Securities--Description of New Capital Securities--Voting Rights;
Amendment of the Trust Agreement" and "--Removal of Issuer Trustees."
EXCHANGE OFFER PROCEDURES
Issuance of the New Capital Securities in exchange for Old Capital Securities
pursuant to the Exchange Offer will be made only after a timely receipt by the
Exchange Agent on behalf of the Trust of such Old Capital Securities, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of the Old Capital Securities desiring to tender
such Old Capital Securities in exchange for New Capital Securities in the
Exchange Offer should allow sufficient time to ensure timely delivery. Neither
the Company nor the Trust is under any duty to give notification of defects or
irregularities with respect to the tenders of Old Capital Securities for
exchange.
VOLATILITY OF FINANCIAL RESULTS
Because the Company primarily underwrites property catastrophe reinsurance and
has large aggregate exposure to man-made and natural disasters, the Company's
operating results have historically been, and are expected to continue to be,
largely affected by relatively few events of high magnitude. ATTACHMENT POINTS
(the amount of loss above which excess of loss reinsurance becomes operative) of
the policies written by the Company generally require insured industry losses in
excess of several hundred million dollars for the Company to experience
significant claims, although the Company is also exposed to smaller insured
events. The occurrence of claims from catastrophic events is likely to result in
substantial volatility in the Company's financial results for any fiscal quarter
or year and could have a material adverse effect on the Company's financial
condition or results of operations and its ability to write new business and,
accordingly, to fulfill its obligations under the Junior Subordinated Debentures
and the Guarantees. The Company expects that increases in the values and
concentrations of insured property and the effects of inflation will increase
the severity of such occurrences per year in the future. See "RenaissanceRe
Holdings Ltd.--Reinsurance Products."
The Company's property catastrophe reinsurance contracts cover unpredictable
events such as earthquakes, hurricanes, winter storms, freezes, floods, fires,
tornadoes and other man-made or natural disasters. The Company seeks to
diversify its reinsurance portfolio to moderate the volatility described in the
preceding paragraph. The principal means of diversification employed by the
Company are by type of reinsurance, geographic coverage, attachment point and
limit per program. The Company utilizes REMS(C), a proprietary, computer-based
pricing and exposure management system to simulate 40,000 years of catastrophe
activity to obtain a probability distribution of potential outcomes for its
entire portfolio. See "RenaissanceRe Holdings Ltd.--Underwriting." Nonetheless,
a single event or a series of events could exceed the Company's estimates,
either of which could have a material effect on the Company's financial
condition or results of operations and, accordingly, the ability of the Company
to fulfill its obligations under the Junior Subordinated Debentures and the
Guarantees. See "RenaissanceRe Holdings Ltd.--Reinsurance Products."
24
SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS
The Company is a Bermuda company and certain of its officers and directors are
residents of various jurisdictions outside the United States. All or a
substantial portion of the assets of such officers and directors and of the
Company are or may be located in jurisdictions outside the United States.
Although the Company has irrevocably agreed that it may be served with process
in New York, New York with respect to actions based on offers and sales of the
securities offered hereby, it could be difficult for holders of Capital
Securities or Junior Subordinated Debentures, if applicable, to effect service
of process within the United States on directors and officers of the Company who
reside outside the United States or to recover against the Company or such
directors and officers on judgments of United States courts predicated upon
civil liabilities under the United States federal securities laws. See
"Enforceability of Civil Liabilities under United States Federal Securities
Laws."
RENAISSANCERE HOLDINGS LTD.
GENERAL
RenaissanceRe Holdings Ltd. was formed in June 1993 and is the parent of
Renaissance Reinsurance and Glencoe. The Company was founded by WPI, GEIPPI,
GEPT and USF&G. As of June 30, 1997, WPI, USF&G, PT Investments, Inc. ("PTI")
and GE Investment Private Placement Partners I - Insurance, Limited Partnership
("GE Insurance") owned approximately 26.2%, 11.6%, 15.5% and 3.2%,
respectively, of the Company's outstanding equity, representing approximately
29.7%, 13.2%, 6.5% and 1.2%, respectively, of the Company's outstanding voting
power.
The Company's principal business is property catastrophe reinsurance, written
on a worldwide basis through Renaissance Reinsurance. Based on property
catastrophe gross premiums written, the Company is the largest Bermuda-based
provider of property catastrophe reinsurance and one of the largest providers of
this coverage in the world. The Company provides property catastrophe
reinsurance coverage to insurance companies and other reinsurers primarily on an
excess of loss basis. Excess of loss catastrophe coverage generally provides
coverage for claims arising from large natural catastrophes, such as earthquakes
and hurricanes, in excess of a specified loss. The Company is also exposed to
claims arising from other natural and manmade catastrophes such as winter
storms, freezes, floods, fires and tornadoes in connection with the coverages it
provides.
The Company's principal operating objective is to utilize its capital
efficiently by focusing on the writing of property catastrophe reinsurance and
other insurance and reinsurance coverages with superior risk/return
characteristics, while maintaining a low cost operating structure in the
favorable regulatory and tax environment of Bermuda. The Company's primary
underwriting goal is to construct a portfolio of insurance and reinsurance
contracts that maximizes the return on shareholders' equity subject to prudent
risk constraints. The Company seeks to moderate the volatility inherent in the
property catastrophe reinsurance market through the use of contract terms,
portfolio selection methodology, diversification criteria and probability
analyses. While property catastrophe reinsurance represented approximately 95%
of the Company's gross premiums written in each of 1996, 1995 and 1994 and
continues to be the Company's primary focus, the Company may seek to take
advantage of perceived opportunities in both insurance and other reinsurance
markets.
For the years ended December 31, 1996, 1995 and 1994, the Company achieved
returns on average shareholders' equity of 30.2%, 43.3% and 44.1%, respectively,
and combined ratios of 51.3%, 52.0% and 61.6%, respectively. For the quarter
ended March 31, 1997, the Company achieved an annualized return on average
equity of 23.0% and a combined ratio of 47.5%. The Company achieved these
results despite the occurrence of several major catastrophes in 1996 and 1995
(which, according to industry trade sources, had the fifth and third highest
level of U.S. property catastrophe insured losses on record, respectively) and
the occurrence in January 1994 of the Northridge, California earthquake, the
second largest insured catastrophe loss in U.S. history. The major catastrophes
occurring in 1996 were Hurricane Fran in September, which produced an estimated
$1.6 billion of insurance industry losses, the Northeastern United States winter
storms in January and the Northwestern United States floods in December. The
major catastrophes which occurred in 1995 were Hurricanes Luis, Marilyn and
Opal. At March 31, 1997, the Company had total assets of $962.0 million and
shareholders' equity of $540.3 million. There can be no assurance that the
Company will achieve similar results in the future. See "Risk Factors--
Volatility of Financial Results."
25
RATINGS
Renaissance Reinsurance has been assigned an "A" claims-paying ability rating
from S&P and A.M. Best Company, Inc. ("A.M. Best") and Glencoe has been assigned
an "A-" claims-paying ability rating from A.M. Best, representing independent
opinions of the financial strength and ability of Renaissance Reinsurance and
Glencoe to meet their respective obligations to their policyholders. Such
ratings may not reflect the considerations applicable to an investment in the
Company or the Trust.
The "A" range ("A+," "A" and "A-") is the third highest of four ratings
ranges within what S&P considers the "secure" category. Insurance companies
assigned a claims-paying ability rating in the "A" range are believed by S&P to
provide good financial security, but their capacity to meet policyholder
obligations is somewhat susceptible to adverse economic and underwriting
conditions.
"A (Excellent)" and "A- (Excellent)" are the third and fourth highest of A.M.
Best's fifteen ratings designations. Insurance companies assigned an "A" or "A-"
rating by A.M. Best are companies which, in A.M. Best's opinion, have
demonstrated excellent overall performance when compared to the standards
established by A.M. Best and have a strong ability to meet their obligations to
policyholders over a long period of time.
STRATEGY
The principal components of the Company's business strategy are to:
. Focus on the property catastrophe reinsurance business. The Company's
primary focus is property catastrophe reinsurance, which represented
approximately 95% of the Company's gross premiums written in each of
1994, 1995 and 1996. While the Company's management ("Management")
intends to maintain the Company's primary focus on property catastrophe
reinsurance for the foreseeable future, the Company may seek to take
advantage of perceived market opportunities in both insurance and other
reinsurance markets.
Build a superior portfolio of property catastrophe reinsurance by
utilizing proprietary modeling capabilities. The Company assesses
underwriting decisions on the basis of the expected incremental return on
equity of each new reinsurance contract in relation to the Company's
overall portfolio of reinsurance contracts. To facilitate this,
the Company has developed REMS(C), a proprietary, computer-based pricing
and exposure management system. The Company utilizes REMS(C) to assess
property catastrophe risks, price treaties and limit aggregate exposure.
The Company combines the analyses generated by REMS(C) with its own
knowledge of the client submitting the proposed program to assess the
premium offered against the risk of loss that such program presents. See
"--Underwriting."
. Utilize the Company's capital base efficiently while maintaining
prudent risk levels in the Company's reinsurance portfolio. The Company
manages its risks through a variety of means, including the use of
contract terms, portfolio selection methodology, diversification criteria
and probability analyses. By using such measures and by employing its
proprietary modeling capabilities, the Company attempts to construct a
portfolio of reinsurance contracts which maximizes the use of its capital
while optimizing the risk-reward characteristics of its portfolio. The
Company relies less on traditional ratios, such as net premiums written
to surplus, because the Company believes that such statistics do not
adequately reflect the risk in the property catastrophe reinsurance
business. Management believes the level of net premiums written relative
to surplus does not reflect the composition of a reinsurer's attachment
points, aggregate limits, geographic diversification, and other material
elements of the risk exposures embodied in a reinsurer's book of
business.
Capitalize on the experience and skill of management. The Company's
senior management team has extensive experience in the reinsurance and/or
insurance industries, with an average of approximately 20
26
years of experience for each of the five senior executives of the
Company. See "Management." Additionally, senior management is supported
by an officer group, each with an average of approximately ten years of
experience in the reinsurance and/or insurance industries.
. Build and maintain long-term relationships with brokers and clients.
The Company markets its reinsurance products worldwide exclusively
through reinsurance brokers. The Company believes that its existing
portfolio of reinsurance business is a valuable asset given the renewal
practices of the reinsurance industry. The Company believes that it has
established a reputation with its brokers and clients for prompt response
on underwriting submissions, for fast claims payments and for the
development of customized reinsurance programs. See"--Marketing."
. Maintain a low cost structure. Management believes that as a result of
its ability to maintain a small staff and by basing operations in the
favorable regulatory and tax environment of Bermuda, the Company is able
to maintain low operating costs relative to its capital base and net
premiums earned. As of June 30, 1997, the Company had 31 employees.
INDUSTRY TRENDS
The high level of worldwide property catastrophe losses in terms of both
frequency and severity from 1987 to 1993 had a significant effect on the results
of property insurers and property catastrophe reinsurers and on the worldwide
property catastrophe reinsurance market, causing some property catastrophe
reinsurers and certain underwriting syndicates at Lloyd's of London to withdraw
from the market or reduce their underwriting commitments while also causing a
substantial increase in market demand, particularly in the United States, Japan
and the United Kingdom. In particular, these events included Hurricane Hugo
(U.S.--1989), Hurricane Andrew (U.S.--1992), Typhoon Mireille (No. 19) (Japan--
1991) and Winter Storm Daria (90A) (Northern Europe--1990).
The increase in demand for property catastrophe reinsurance was attributable
to several factors. The significant property catastrophe losses occurring during
1987 through 1993 caused many insurers and reinsurers to reexamine their
assumptions regarding their need for reinsurance protection from catastrophe
exposures. In addition, rating agencies, such as S&P, and regulators increased
their scrutiny of insurers and reinsurers with respect to their catastrophe
exposure. For example, Typhoon Mireille (No. 19) resulted in greater scrutiny by
the Ministry of Finance of Japan of insurers and reinsurers with respect to
catastrophe exposure, thereby increasing demand for property catastrophe
reinsurance in Japan. In addition, A.M. Best began to require completion of a
catastrophe loss analysis questionnaire dealing with expected claims resulting
from potential catastrophic events. Finally, a general increase in insured
property values in catastrophe-exposed areas contributed to increased demand for
property catastrophe insurance and reinsurance. This supply/demand imbalance
caused a significant increase in prevailing premium rates for property
catastrophe reinsurance worldwide in 1993.
In response to this imbalance, approximately $4.0 billion of capital entered
the Bermuda-based property catastrophe reinsurance market in 1992 and 1993. The
Bermuda property catastrophe reinsurance market has subsequently grown markedly,
having aggregate capital of approximately $5.5 billion at March 31, 1997, and
accounting for approximately 25% to 35% of the worldwide property catastrophe
gross premiums written in 1996, according to industry trade reports. The
increased property catastrophe reinsurance capacity represented by the Bermuda
market helped balance supply and demand in the property catastrophe reinsurance
market and, as a result thereof, premium rates and other terms of trade in the
property catastrophe reinsurance market stabilized in 1994-1995. In 1996,
according to industry trade sources, worldwide price levels decreased by an
average of 10% to 15%. Based on reinsurance treaty renewals received by the
Company in the first quarter of 1997 and publicly available industry trade data,
indications are that price levels will decline at a similar pace in 1997. In
particular, rates have declined significantly in areas outside the United
States, where there has been favorable loss experience, while in the United
States, where the level of property catastrophe losses has generally been higher
than in international markets in recent years, rates have decreased to a lesser
degree. However, current premium rates and retention levels have remained, and
Management believes are likely to remain, higher than those that existed in
1992.
27
REINSURANCE PRODUCTS
The Company's property catastrophe reinsurance contracts are generally "all
risk" in nature. The Company's most significant exposure is to losses from
earthquakes and hurricanes, although the Company is also exposed to claims
arising from other natural and man-made catastrophes, such as winter storms,
freezes, floods, fires and tornadoes in connection with the coverages it
provides. The Company's predominant exposure under such coverage is to property
damage. However, other risks, including business interruption and other non-
property losses, may also be covered under the property reinsurance contract
when arising from a covered peril. In accordance with market practice, the
Company's property reinsurance contracts generally exclude certain risks such as
war, nuclear contamination or radiation.
Catastrophic events of significant magnitude have historically been relatively
infrequent, although the property catastrophe reinsurance market experienced a
high level of worldwide catastrophe losses in terms of both frequency and
severity during the period from 1987 to 1996 as compared to prior years.
However, because of the wide range of the possible catastrophic events to which
the Company is exposed, and because of the potential for multiple events to
occur in the same time period, the Company's business is volatile, and its
results of operations will reflect such volatility. Further, the Company's
financial condition may be impacted by this volatility over time or at any point
in time. The effects of claims from one or a number of severe catastrophic
events could have a material adverse effect on the Company. The Company expects
that increases in the values and concentrations of insured property and the
effects of inflation will increase the severity of such occurrences per year in
the future. See "Risk Factors--Volatility of Financial Results."
The Company seeks to moderate the volatility described in the preceding
paragraph through the use of contract terms, portfolio selection methodology,
and probability analyses.
Type of Reinsurance
The following table sets forth the Company's gross premiums written and number
of programs written by type of reinsurance.
28
Geographic Diversification
The Company seeks to diversify its exposure across geographic zones. The
Company writes the majority of its business within the United States because the
returns obtained relative to the risks involved are currently most attractive in
the United States and because it is able to obtain the most detailed
underwriting information on U.S. risks. Within the United States, the Company's
zones of highest exposure are Southern California, Northern California,
metropolitan New York, New Madrid (Midwestern United States) and Southern
Florida.
UNDERWRITING
The Company's primary underwriting goal is to construct a portfolio of
reinsurance and insurance contracts that maximizes the return on shareholders'
equity subject to prudent risk constraints.
Management assesses underwriting decisions on the basis of the expected
incremental return on equity of each new reinsurance contract in relation to the
Company's overall portfolio of reinsurance contracts. To facilitate this,
Management has developed REMS(C), a proprietary, computer-based pricing and
exposure management system. Management utilizes REMS(C) to assess property
catastrophe risks, price treaties and limit aggregate exposure. REMS(C) was
developed with consulting assistance from Tillinghast, an actuarial consulting
unit of Towers, Perrin, Forster & Crosby, Inc. ("Tillinghast"), and Applied
Insurance Research Inc., the developer of the CATMAP/TM/ system. REMS(C) has
analytic and modeling capabilities that assist the Company's underwriters in
assessing the catastrophe exposure risk and return of each incremental
reinsurance contract in relation to the Company's overall portfolio of
reinsurance contracts. The Company has licensed and integrated into REMS(C) six
commercially available catastrophe computer models in addition to the Company's
base model. The Company uses these models to validate and stress test its base
REMS(C) results. In addition, the Company stress tests its exposures and
potential future results by increasing the frequency and severity of
catastrophic events above the levels embedded in the models purchased from the
outside consultants. Management combines the analyses generated by REMS(C) with
its own knowledge of the client submitting the proposed program to assess the
premium offered against the risk of loss which such program presents.
REMS(C) provides more precise exposure information than is generally analyzed
currently throughout the property catastrophe reinsurance industry. REMS(C)
combines computer-generated, statistical simulations that estimate catastrophic
event probabilities with exposure and coverage information on each client's
reinsurance contract to produce expected claims for reinsurance programs
submitted to the Company. REMS(C) then uses simulation techniques to generate
40,000 years of catastrophic event activity, including events causing in excess
of $250 billion in insured industry losses. From this 40,000 year simulation,
the Company is able to obtain expected claims, expected profits and a
probability distribution of potential outcomes for each program in its portfolio
and for its total portfolio.
Management believes that REMS(C) provides the Company's underwriters with
several competitive advantages which are not generally available. These include
(i) the ability to simulate 40,000 years of catastrophic event activity compared
to a much smaller sample in generally available models, allowing the Company to
analyze its exposure to a greater number and combination of potential events,
(ii) the ability to analyze the incremental impact of an individual reinsurance
contract on the Company's overall portfolio, and (iii) the ability to collect
detailed data from a wide variety of sources which allows the Company to measure
geographic exposure at a detailed level.
For its property catastrophe reinsurance business, the Company has developed
underwriting guidelines that limit the amount of exposure it will underwrite
directly for any one cedent, the exposure to claims from any single catastrophic
event and the exposure to losses from a series of catastrophic events. The
Company also attempts to distribute its exposure across a range of attachment
points.
As part of its pricing and underwriting process, the Company also assesses a
variety of factors, including the reputation of the proposed cedent and the
likelihood of establishing a long-term relationship with the cedent; the
geographic area in which the cedent does business and its market share;
historical loss data for the cedent and, where available, for the industry as a
whole in the relevant regions, in order to compare the cedent's historical
catastrophe loss experience to industry averages; the cedent's pricing
strategies; and the perceived financial strength of the cedent.
29
MARKETING
The Company markets its reinsurance products worldwide exclusively through
reinsurance brokers. The Company focuses its marketing efforts on targeted
brokers and insurance and reinsurance companies, placing primary emphasis on
existing clients. Management believes that its existing portfolio of business is
a valuable asset given the renewal nature of the reinsurance industry and,
therefore, attempts to continually strengthen relationships with its existing
brokers and clients. The Company also targets prospects that are deemed likely
to enhance the risk/return composition of its portfolio, that are capable of
supplying detailed and accurate underwriting data and that potentially add
further diversification to the Company's book of business.
Management believes that primary insurers' and brokers' willingness to use a
particular reinsurer is based not just on pricing terms, but on the financial
security of the reinsurer, its claim paying ability ratings, perceptions of the
quality of a reinsurer's service, the reinsurer's willingness to design
customized programs, its long-term stability and its commitment to provide
reinsurance capacity. Management believes that the Company has established a
reputation with its brokers and clients for prompt response on underwriting
submissions and for fast claims payments. Since the Company selectively writes
large lines on a limited number of property catastrophe reinsurance contracts,
it can establish reinsurance terms and conditions on these contracts that are
attractive in its judgment, make large commitments to the most attractive
programs and provide superior client responsiveness. In addition, the Company
acts as sole reinsurer on certain property catastrophe reinsurance contracts,
which allows the Company to take advantage of its ability to develop customized
reinsurance programs. Management believes that such customized programs help the
Company to develop long-term relationships with brokers and clients.
Subsidiaries and affiliates of Marsh & McLennan, Incorporated, E.W. Blanch
Co., Inc., Greig Fester Limited, Alexander Howden Reinsurance Brokers Ltd. and
Bates Turner, Inc. (a GE Capital Services company, and affilliate of PTI and GE
Insurance) accounted for approximately 15.2%, 14.9%, 11.5%, 10.1% and 6.8%,
respectively, of the Company's gross premiums written in 1996. During 1996, the
Company issued authorization for coverage on programs submitted by 65 brokers
worldwide. The Company received approximately 1,584 program submissions during
1996. The Company is highly selective and, from such submissions, the Company
issued authorizations for coverage for only 434 programs, or 27.4% of the
program submissions received.
INVESTMENTS
The Company's strategy is to maximize its underwriting profitability and fully
deploy its capital through its underwriting activities; consequently, the
Company has established an investment policy which it considers to be
conservative. The Company's investment guidelines, which are established by
Management and approved by the Company's Board of Directors, stress
diversification of risk, preservation of capital and market liquidity.
Notwithstanding the foregoing, the Company's investments are subject to market-
wide risks and fluctuations, as well as to risks inherent in particular
securities. The primary objective of the portfolio, as set forth in such
guidelines, is to maximize investment returns consistent with these policies. To
achieve this objective, the Company's current fixed income investment guidelines
call for an average credit quality of AA and a target duration of two years.
During 1996, the Company developed a multi-currency asset/liability
optimization model in conjunction with Tillinghast and Falcon Asset Management
to integrate asset, liability and capital decisions. As a result of the analysis
generated by this model, the Company determined that it could diversify its
investment portfolio by investing in common stocks with only a minimal increase
in overall risk. The analysis demonstrated that the benefits of this
diversification would substantially offset the volatility inherent in equity
investments, and would therefore not require significant amounts of additional
capital to support the Company's underwriting activities. During 1997, the
Company intends to allocate $50.0 million of its fixed maturity portfolio to
equity securities. During the first quarter of 1997, the Company invested $23.5
million in equity securities.
30
COMPETITION
The property catastrophe reinsurance industry is highly competitive and is
undergoing a variety of challenging developments, including a marked trend
toward greater consolidation. The Company competes, and will continue to
compete, with major U.S. and non-U.S. property catastrophe insurers, reinsurers,
and certain underwriting syndicates. Many of these competitors have greater
financial, marketing and management resources than the Company. In addition, new
companies may enter the property catastrophe reinsurance market or existing
reinsurers may deploy additional capital in the property catastrophe reinsurance
market. The Company cannot predict what effect any of these developments may
have on the Company and its business.
Competition in the types of reinsurance business that the Company underwrites
is based on many factors, including premium charges and other terms and
conditions offered, services provided, speed of claims payment, ratings assigned
by independent rating agencies, the perceived financial strength and the
experience of the reinsurer in the line of reinsurance to be written. The number
of jurisdictions in which a reinsurer is licensed or authorized to do business
is also a factor. Some of the reinsurers who have entered the Bermuda and
London-based reinsurance markets have or could have greater financial, marketing
or managerial resources than the Company. Ultimately, increasing competition
could affect the Company's ability to attract business on terms having the
potential to yield an attractive return on equity.
Management is also aware of many potential initiatives by capital market
participants to produce alternative products that may compete with the existing
catastrophe reinsurance markets. Management is unable to predict the extent to
which the foregoing new, proposed or potential initiatives may affect the demand
for the Company's products or the risks which may be available for the Company
to consider underwriting.
GLENCOE
Glencoe operates as a Bermuda-domiciled company and has been approved to do
business in the United States on an excess and surplus lines basis in 23 states.
Glencoe will also consider underwriting submissions from insureds located in
other jurisdictions where it has been approved with respect to exposures for
which it has underwriting expertise. Glencoe seeks to employ in the primary
insurance market the modeling, underwriting, customer service and capital
management approaches that Renaissance Reinsurance employs with respect to its
reinsurance policies.
REGULATION
The Company, Renaissance Reinsurance and Glencoe are subject to regulation
under the insurance statutes and state insurance authorities of various
jurisdictions, including Bermuda, where they are each domiciled. The premium
rates and policy terms of reinsurance agreements generally are not subject to
governmental regulations. The regulation and supervision to which the Company is
subject relate primarily to the standards of solvency that must be met and
maintained, licensing requirements for reinsurers, the nature of and limitations
on investments, restrictions on the size of risks which may be insured, deposits
of securities for the benefit of a reinsured, methods of accounting, periodic
examinations of the financial condition and affairs of reinsurers, the form and
content of reports of financial condition required to be filed, reserves for
losses, holding company registration and change of control and affiliate
transaction limitations. In general, such regulation is for the protection of
the reinsureds and, ultimately, their policyholders, rather than investors.
From time to time various regulatory and legislative changes have been
proposed in the insurance industry, some of which could have a material effect
on reinsurers. The Company is unable to predict what effect, if any, realization
of any of the foregoing developments may have on its operations and financial
condition in the future.
31
Bermuda
The Insurance Act 1978, as amended, and Related Regulations. The Insurance Act
1978 of Bermuda, amendments thereto and related regulations impose on Bermuda
insurance companies solvency and liquidity standards and auditing and reporting
requirements and grant to the Bermuda Minister of Finance powers to supervise,
investigate and intervene in the affairs of insurance companies.
United States and Other
Renaissance Reinsurance is not admitted to do business in any jurisdiction
except Bermuda. The insurance laws of each state of the United States and of
many other countries regulate the sale of insurance and reinsurance within their
jurisdictions by alien insurers, such as Renaissance Reinsurance, which are not
admitted to do business within such jurisdiction. With some exceptions, such
sale of insurance or reinsurance within a jurisdiction where the insurer is not
admitted to do business is prohibited. Renaissance Reinsurance does not intend
to maintain an office or to solicit, advertise, settle claims or conduct other
insurance activities in any jurisdiction other than Bermuda where the conduct of
such activities would require that Renaissance Reinsurance be so admitted.
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. For further information regarding the Company
reference is made to such reports, proxy statements and other information which
are available as described under "Available Information" and "Incorporation of
Certain Documents by Reference."
RECENT EVENTS
On June 27, 1997, the Company completed a public offering (the "Offering")
wherein WPI, USF&G, PTI and GE Insurance (the "Selling Shareholders") sold an
aggregate of 3,000,000 of the Company's common shares to the public, at a price
to the public of $38.00 per share. Concurrently therewith, the Selling
Shareholders sold to the Company for cancellation an aggregate of 700,000 common
shares, at a purchase price per share of $36.29, constituting the public
offering price per share, less the underwriting discount per share (the "Company
Purchase"), and sold to James N. Stanard, an executive officer of the Company,
an aggregate of 100,000 common shares at a purchase price per share of $38.00.
As of June 30, 1997, the Selling Shareholders owned approximately 56.5% of the
Company's outstanding equity, representing approximately 50.6% of the Company's
outstanding voting power.
32
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected financial data and other financial
information of the Company as of March 31, 1997 and December 31, 1996, 1995,
1994 and 1993, and for the quarter ended March 31, 1997, years ended December
31, 1996, 1995, 1994 and the period June 7, 1993 (date of incorporation)
through December 31, 1993. The balance sheet data as of December 31, 1996,
1995, 1994 and 1993 and the statement of income data for the years ended
December 31, 1996, 1995 and 1994 and for the period June 7, 1993 through
December 31, 1993 were derived from the Company's audited Consolidated
Financial Statements which have been audited by Ernst & Young, the Company's
independent auditors. The balance sheet data as of March 31, 1997 and the
statement of income data for the period January 1, 1997 through March 31, 1997
were derived from the unaudited interim financial statements of the Company.
The unaudited interim financial statements include all adjustments consisting
of normal recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and results of operations for that
period. The results of operations for any interim period are not necessarily
indicative of results for the full fiscal year. The selected financial data
should be read in conjunction with the Consolidated Financial Statements of
the Company and related Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 1996 10-K
and the March 1997 10-Q incorporated herein by reference and all other
information appearing elsewhere in this Prospectus. See "Available
Information" and "Documents Incorporated by Reference."
33
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(1) Net income per share was calculated by dividing net income available to
common shareholders by the number of weighted average Common Shares and
Common Share equivalents outstanding. Common Share equivalents are
calculated on the basis of the treasury stock method.
(2) Return on average shareholders' equity for a period of less than a full
year is calculated by annualizing the net income available to common
shareholders for such period and dividing it by beginning shareholders'
equity plus one-half such annualized net income.
(3) This item reflects $100.0 million aggregate liquidation amount of the
Capital Securities issued by a subsidiary trust. The sole assets of the
trust are $103.1 million aggregate principal amount of 8.54% Junior
Subordinated Debentures due March 1, 2027 issued by the Company.
(4) Book value per Common Share was computed by dividing total shareholders'
equity by the number of outstanding Common Shares. After giving effect to
the purchase for cancellation by the Company of 700,000 Common Shares in the
Company Purchase and the payment by the Company of the expenses of the
Offering, which expenses are estimated at $700,000, Common Shares
outstanding, total shareholders' equity and book value per share as of March
31, 1997, as adjusted, would have been 22,177,000, $514.2 million and
$23.19, respectively.
34
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements. Payments under the Junior Subordinated
Debentures will be the sole revenues of the Trust. Future consolidated financial
statements of the Company will include (i) the presentation of the Capital
Securities as a separate line item on its balance sheet as "Company-obligated
mandatorily redeemable capital securities of a subsidiary trust holding solely
Junior Subordinated Debentures of the Company", (ii) a footnote to the Company's
financial statements indicating that the sole assets of the Trust are
$100,000,000 aggregate principal amount of 8.54% Junior Subordinated Debentures
due March 1, 2027 and (iii) an audited footnote to the Company's financial
statements that (a) the Trust is wholly owned by the Company, (b) its sole
assets are the $100,000,000 aggregate principal amount of 8.54% Junior
Subordinated Debentures due March 1, 2027 issued by the Company and (c) that the
Guarantee, when taken together with the Company's obligations under the Trust
Agreement, the Junior Subordinated Debentures and the Indenture, including its
obligations to pay costs, expenses, debts and liabilities of the Trust (other
than with respect to the Trust Securities), provide a full and unconditional
guarantee of the Trust's obligations under the Capital Securities. The Company
will record Distributions payable on the Capital Securities as an expense in its
consolidated statement of earnings.
USE OF PROCEEDS
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. In consideration for
issuing the New Capital Securities in exchange for the Old Capital Securities as
described in this Prospectus, the Trust will receive Old Capital Securities in
like Liquidation Amount. The Old Capital Securities surrendered in exchange for
the New Capital Securities will be retired and canceled.
The proceeds to the Trust from the offering of the Old Capital Securities
(without giving effect to expenses of the offering payable by the Company) were
$100,000,000. All of the proceeds from the sale of the Old Capital Securities
were invested by the Trust in the Old Junior Subordinated Debentures. The
Company used the net proceeds from the sale of the Old Junior Subordinated
Debentures to repay outstanding amounts under the Company's revolving credit
facility.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of the
Company for the respective periods indicated:
- ----------------------
* The Company had no fixed charges for the period June 7, 1993 (date of
incorporation) through December 31, 1993.
The ratios of earnings to fixed charges have been computed based on the
Company's continuing operations by dividing total earnings available for fixed
charges, excluding capitalized interest, by total fixed charges. Fixed charges
consist of interest, expense on debt, dividends on preferred shares and that
portion of rent expense which is deemed to be an appropriate interest factor.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of March 31, 1997, pro forma as adjusted for the purchase for cancellation by
the Company on June 27, 1997 of 700,000 common shares in the Company Purchase
and pro forma as adjusted for the consummation of the Exchange Offer. The
following data should be read in conjunction
35
with the financial information included in the Company's March 1997 10-Q, which
is incorporated herein by reference. See "Incorporation of Certain Documents by
Reference."
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(1) This item reflects the Old Capital Securities. The Trust is a subsidiary of
the Company and used the proceeds from the sale of the Old Capital
Securities, for which the New Capital Securities are hereby being offered,
to purchase $100,000,000 aggregate principal amount of 8.54% Junior
Subordinated Debentures due March 1, 2027 issued by the Company. The Junior
Subordinated Debentures are the sole assets of the Trust.
MANAGEMENT
The table below sets forth the names, ages and titles of the persons who were
directors of the Company and executive officers of the Company as of April 30,
1997.
James N. Stanard has served as Chairman of the Board, President and Chief
Executive Officer since the Company's formation in June 1993. From 1991 through
June 1993, Mr. Stanard served as Executive Vice President of
36
United States Fidelity & Guaranty Company and was a member of a three-person
Office of the President. As Executive Vice President of USF&G, he was
responsible for USF&G's underwriting, claims and ceded reinsurance. From October
1983 to 1991, Mr. Stanard was an Executive Vice President of F&G Re, Inc.,
USF&G's start-up reinsurance subsidiary ("F&G Re"). Mr. Stanard was one of two
senior officers primarily responsible for the formation of F&G Re, where he was
responsible for the underwriting, pricing and marketing activities of F&G Re
during its first seven years of operation. As Executive Vice President of F&G
Re, Mr. Stanard was personally involved in the design of pricing procedures,
contract terms and analytical underwriting tools for all types of treaty
reinsurance, including both U.S. and international property catastrophe
reinsurance.
Neill A. Currie has served as Senior Vice President of the Company since its
formation in June 1993. Mr. Currie served as a director of the Company from
August 1994 through August 1995. From November 1992 through May 1993, Mr. Currie
served as Chief Executive Officer of G.J. Sullivan Co.-Atlanta, a private
reinsurance broker. From 1982 through 1992, Mr. Currie served as Senior Vice
President at R/I and G.L. Hodson, predecessors to Willis Faber.
David A. Eklund has served as Senior Vice President of the Company since
February 1996. Mr. Eklund served as Vice President-Underwriting of the Company
from September 1993 until February 1996. From November 1989 through September
1993, Mr. Eklund held various positions in casualty underwriting at Old Republic
International Reinsurance Group, Inc., where he was responsible for casualty
treaty underwriting and marketing. From March 1988 to November 1989, Mr. Eklund
held various positions in catastrophe reinsurance at Berkshire Hathaway Inc.,
where he was responsible for underwriting and marketing finite risk and property
catastrophe reinsurance.
Keith S. Hynes has served as Senior Vice President and Chief Financial Officer
of the Company since June 1994. Mr. Hynes was employed by Hartford Steam Boiler
Inspection & Insurance Co. ("Hartford Steam") from January 1983 to January 1994.
From April 1992 to January 1994, he served as Hartford Steam's Senior Vice
President and Chief Financial Officer. From November 1986 to April 1992, Mr.
Hynes worked in Hartford Steam's Underwriting Department, advancing to Senior
Vice President and Chief Underwriting Officer, where he managed Hartford Steam's
underwriting and ceded reinsurance activities, from April 1990 to April 1992.
From January 1983 to November 1986, Mr. Hynes was Hartford Steam's Chief
Investment Officer. Mr. Hynes held several investment management positions with
Aetna Insurance Company from June 1978 to January 1983.
William I. Riker was appointed Senior Vice President of the Company in March
1995 and served as Vice President-Underwriting of the Company from November 1993
until such time. From March 1993 through October 1993, Mr. Riker served as Vice
President of Applied Insurance Research, Inc. Prior to that, Mr. Riker held the
position of Senior Vice President, Director of Underwriting at American Royal
Reinsurance Company ("American Royal"). Mr. Riker was responsible for developing
various analytical underwriting tools while holding various positions at
American Royal from 1984 through 1993.
Arthur S. Bahr has served as a director of the Company since its formation in
June 1993. Mr. Bahr served as Director and Executive Vice President-Equities of
General Electric Investment Corporation ("GEIC"), a subsidiary of General
Electric Company and registered investment adviser, from 1987 until December
1993. Mr. Bahr served GEIC in various senior investment positions since 1978 and
was a Trustee of General Electric Pension Trust from 1976 until December 1993.
Mr. Bahr served as Director and Executive Vice President of GE Investment
Management Incorporated, a subsidiary of General Electric Company and a
registered investment adviser, from 1988 until his retirement in December 1993.
From December 1993 until December 1995, Mr. Bahr served as a consultant to GEIC.
Thomas A. Cooper has served as a director of the Company since August 7, 1996.
From August 1993 until August 1996 Mr. Cooper served as Chairman and Chief
Executive Officer of TAC Bancshares, Inc. and as Chairman and Chief Executive
Officer of Chase Federal Bank FSB. From June 1992 until July 1993, Mr. Cooper
served as principal of TAC Associates, a financial investment company. From
April 1990 until May 1992 Mr. Cooper served as Chairman and Chief Executive
Officer of Goldome FSB. From 1986 to April 1990, Mr. Cooper served as Chairman
and Chief Executive Officer of Investment Services of America, one of the
largest full service
37
securities brokerage and investment companies in the United States. Prior
thereto, Mr. Cooper served as President of Bank of America from February 1983 to
April 1986. From 1980 to 1982 Mr. Cooper served as Vice Chairman of Mellon Bank.
From 1978 to 1982, Mr. Cooper was President of Girard Bank in Philadelphia.
Edmund B. Greene has served as a director of the Company since its formation
in June 1993. Mr. Greene has served as Deputy Treasurer-Insurance of General
Electric Company since March 1995. Prior to that, Mr. Greene was Manager-
Corporate Insurance Operation of General Electric Company since 1985, and
previously served in various financial management assignments since 1962.
Gerald L. Igou has served as a director of the Company since its formation in
June 1993. Mr. Igou has served as a Vice President-Investment Analyst for GEIC
since September 1993. He is a Certified Financial Analyst and has served GEIC in
the capacities of investment analyst and sector portfolio manager since 1968.
Prior to joining General Electric, Mr. Igou was an analyst with the Wall Street
firms of Smith Barney Inc. and Dean Witter & Co.
Kewsong Lee has served as a director of the Company since December 1994. Mr.
Lee has served as a Member and Managing Director of E.M. Warburg, Pincus & Co.
LLC ("EMW LLC") and a general partner of Warburg, Pincus & Co. ("WP") since
January 1, 1997. Mr. Lee served as a Vice President of Warburg, Pincus Ventures,
Inc. ("WPV") from January 1995 to December 1996, and an associate at E.M.
Warburg, Pincus & Co., Inc. ("EMW") from 1992 until December 1994. Prior to
joining EMW, Mr. Lee was a consultant at McKinsey & Company, Inc., a management
consulting company, from 1990 to 1992. Mr. Lee is a director of Knoll, Inc. and
several privately held companies.
John M. Lummis has served as a director of the Company since July 1993. Mr.
Lummis has served as Vice President-Business Development of USF&G Corporation
since 1994 and served as Vice President and Group General Counsel for USF&G
Corporation from 1991 until 1995. USF&G Corporation is the parent company of
USF&G. From 1982 until 1991, Mr. Lummis was engaged in the private practice of
law with the law firm of Shearman & Sterling.
Howard H. Newman has served as a director of the Company since its formation
in June 1993. Mr. Newman has served as a Member and Managing Director of EMW LLC
(and its predecessor) and a general partner of WP since 1987. Mr. Newman is a
director of ADVO, Inc., Newfield Exploration Company, Cox Insurance Holdings
Plc, Comcast UK Cable Partners Limited and several privately held companies.
Scott E. Pardee has served as a director of the Company since February 1997.
Mr. Pardee served as Chairman of Yamaichi International (America), Inc., a
financial services company, from 1989 to 1994. Mr. Pardee previously served as
Executive Vice President and a member of the Board of Directors of Discount
Corporation of New York, a primary dealer in U.S. government securities, and as
Senior Vice President and Manager of the Federal Reserve Bank of New York.
John C. Sweeney has served as a director of the Company since December 1996.
Mr. Sweeney has served as Senior Vice President and Chief Investment Officer of
USF&G since 1992, and as Chairman of Falcon Asset Management since 1992. Prior
thereto, Mr. Sweeney served as Principal and Practice Director of Towers Perrin
Consulting Services from 1985 to 1992, and as Chief Investment Officer of
McM/Occidental Peninsular Insurance Companies from 1981 to 1984. Mr. Sweeney
also serves as a Director of USF&G Pacholder Fund, Inc.
David A. Tanner has served as a director of the Company since December 1996.
Mr. Tanner has served as a Member and Managing Director of EMW LLC (and its
predecessor) and a general partner of WP since January 1, 1993. Mr. Tanner
served as a Vice President of EMW from January 1, 1991 to 1993. Mr. Tanner is a
director of Golden Books Family Entertainment, Inc., the New York Venture
Capital Forum and several privately held companies. Mr. Tanner previously served
as a director of the Company from December 1994 through May 1996.
38
RENAISSANCERE CAPITAL TRUST
The Trust is a statutory business trust formed under Delaware law pursuant to
(i) the Trust Agreement executed by the Company, as Sponsor, The Bank of New
York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee,
and the three Administrative Trustees named therein, and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on February 25, 1997.
The Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) investing the proceeds from the sale thereof in the Junior
Subordinated Debentures and (iii) engaging in only those other activities
incidental thereto (such as registering the transfer of the Trust Securities).
Accordingly, the Junior Subordinated Debentures will be the sole assets of the
Trust, and payments under the Junior Subordinated Debentures will be the sole
revenues of the Trust. All of the Common Securities are owned by the Company.
The Common Securities will rank pari passu, and payments will be made thereon
pro rata, with the Capital Securities, except that upon the occurrence and
continuance of an event of default under the Trust Agreement (an "Event of
Default") resulting from a Debenture Event of Default, the rights of the Company
as holder of the Common Securities to payments in respect of Distributions and
payments upon liquidation, redemption or otherwise will be subordinated to the
rights of the holders of the Capital Securities. See "Description of New
Securities--Description of New Capital Securities--Subordination of Common
Securities." The Company has acquired Common Securities in a Liquidation Amount
equal to at least 3% of the total capital of the Trust. The Trust has a term of
41 years, but may terminate earlier as provided in the Trust Agreement. The
Trust's business and affairs are conducted by its trustees, each appointed by
the Company as holder of the Common Securities. The trustees for the Trust are
The Bank of New York, as the Property Trustee (the "Property Trustee"), The Bank
of New York (Delaware), as the Delaware Trustee (the "Delaware Trustee"), and
three individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with the Company (collectively, the "Trustees"). The
Bank of New York, as Property Trustee, presently acts as sole indenture trustee
under the Trust Agreement. The Bank of New York also presently acts as indenture
trustee under the Guarantee and the Indenture. See "Description of New
Securities--Description of New Junior Subordinated Debentures" and "--
Description of New Guarantee." The holder of the Common Securities of the
Trust or, if an Event of Default under the Trust Agreement has occurred and is
continuing, the holders of a majority in Liquidation Amount of the Capital
Securities are entitled to appoint, remove or replace the Property Trustee
and/or the Delaware Trustee. In no event will the holders of the Capital
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights are vested exclusively in the holder
of the Common Securities. The duties and obligations of each Trustee are
governed by the Trust Agreement. The Company, as issuer of the Junior
Subordinated Debentures, will pay all fees, expenses, debts and obligations
(other than the Trust Securities) related to the Trust and the offering and
exchange of the Capital Securities and will pay, directly or indirectly, all
ongoing costs, expenses and liabilities of the Trust. The address for notices to
the Trust is c/o The Bank of New York, 101 Barclay Street-21W, Corporate Trust
Department, New York, New York 10286, with a copy to RenaissanceRe Holdings
Ltd., Renaissance House, 8-12 East Broadway, Pembroke HM 19 Bermuda.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Capital Securities, the Company and the
Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Company and the Trust agreed to file, and to
use their reasonable efforts to cause to become effective, with the Commission a
registration statement with respect to the exchange of the Old Capital
Securities for capital securities with terms substantially identical to the
terms of the Old Capital Securities. A copy of the Registration Rights Agreement
has been filed as an Exhibit to the Registration Statement of which this
Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of the
Company and the Trust under the Registration Rights Agreement. The form and
terms of the New Capital Securities are the same as the form and terms of the
Old Capital Securities except that the New Capital Securities have been
registered under the Securities Act and will not be subject to the $100,000
minimum Liquidation Amount transfer restriction and
39
certain other restrictions on transfer applicable to the Old Capital Securities
and will not provide for any increase in the Distribution rate thereon. In that
regard, the Old Capital Securities provide, among other things, that, if the
Exchange Offer Registration Statement has not been filed by August 4, 1997 and
declared effective by September 3, 1997, the Distribution rate borne by the Old
Capital Securities commencing on the day after either of such dates will
increase by 0.25% per annum until the Exchange Offer Registration Statement is
filed or declared effective, as the case may be. In addition, if the Company has
not consummated the Exchange Offer on or prior to the 45th day after the date on
which the Exchange Offer Registration Statement is declared effective, and such
event continues for a period exceeding 30 consecutive days or 90 days in any 36
day period, then the Distribution rate borne by the Old Capital Securities will
increase by 0.25% commencing on the day after any such event, until the Exchange
Offer is consummated. Upon consummation of the Exchange Offer, holders of Old
Capital Securities will not be entitled to any increase in the Distribution rate
thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Risk Factors--Consequences
of a Failure to Exchange Old Capital Securities" and "Description of Old
Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders for
exchange from, holders of Old Capital Securities in any jurisdiction in which
the Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Old Capital Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Capital Securities are held of record by The Depository Trust Company
("DTC") who desires to deliver such Old Capital Securities by book-entry
transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange as soon as
practicable after the date hereof, the Old Guarantee for the New Guarantee and
the Old Junior Subordinated Debentures, in an amount corresponding to the Old
Capital Securities accepted for exchange, for a like aggregate principal amount
of the New Junior Subordinated Debentures. The New Guarantee and New Junior
Subordinated Debentures have been registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $100,000,000 aggregate Liquidation Amount of New Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
validly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures described below. The Trust will issue,
promptly after the Expiration Date, an aggregate Liquidation Amount of up to
$100,000,000 of New Capital Securities in exchange for a like principal amount
of outstanding Old Capital Securities tendered and accepted in connection with
the Exchange Offer. Holders may tender their Old Capital Securities in whole or
in part in a Liquidation Amount of not less than $100,000 (100 Capital
Securities) or any integral multiple of $1,000 Liquidation Amount (one Capital
Security) in excess thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount of
Old Capital Securities being tendered. As of the date of this Prospectus,
$100,000,000 aggregate Liquidation Amount of the Old Capital Securities is
outstanding.
Holders of Old Capital Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Capital Securities which are
not tendered for or which are tendered but not accepted in connection with the
Exchange Offer will remain outstanding and be entitled to the benefits of the
Trust Agreement, but will not be entitled to any further registration rights
under the Registration Rights Agreement, except under limited circumstances. See
"Risk Factors--Consequences of a Failure to Exchange Old Capital Securities"
and "Description of Old Securities."
40
If any tendered Old Capital Securities are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Capital Securities will be
returned, without expense, to the tendering holder thereof promptly after the
Expiration Date.
Holders who tender Old Capital Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Capital Securities in connection with the Exchange Offer.
The Company will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "--Fees and
Expenses."
NEITHER THE COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY TRUSTEE OF
THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL SECURITIES AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD
CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES
MUST MAKE THEIR OWN DECISION WHETHER TO TENDER OLD CAPITAL SECURITIES PURSUANT
TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD CAPITAL SECURITIES
TO TENDER BASED ON SUCH HOLDERS' OWN FINANCIAL POSITIONS AND REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on ,
1997 unless the Exchange Offer is extended by the Company or the Trust (in which
case the term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended).
The Company and the Trust expressly reserve the right in their sole and
reasonable discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Old Capital Securities for exchange,
(ii) to terminate the Exchange Offer (whether or not any Old Capital Securities
have theretofore been accepted for exchange) if the Trust determines, in its
sole and absolute discretion, that any of the events or conditions referred to
under "--Conditions to the Exchange Offer" have occurred or exist or have not
been satisfied, (iii) to extend the Expiration Date of the Exchange Offer and
retain all Old Capital Securities tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Old Capital Securities to withdraw
their tendered Old Capital Securities as described under "--Withdrawal Rights"
and (iv) to waive any condition or otherwise amend the terms of the Exchange
Offer in any respect. If the Exchange Offer is amended in a manner determined by
the Company and the Trust to constitute a material change, or if the Company and
the Trust waive a material condition of the Exchange Offer, the Company and the
Trust will promptly disclose such amendment or waiver by means of a prospectus
supplement that will be distributed to the holders of the Old Capital
Securities. If any facts or events arise which constitute a fundamental change
in the information set forth herein or if any material changes or material
additions are made to the plan of distribution described herein, the Company and
the Trust will file a post-effective amendment to the Registration Statement
setting forth the applicable information and will distribute an amended
prospectus to the holders of the Old Capital Securities. At the time that such
prospectus supplement or amended prospectus is first given to holders of Old
Capital Securities the Exchange Offer is scheduled to expire at any time earlier
than the expiration of a period ending on the tenth business day from and
including the date that such prospectus supplement or amended prospectus is
first so given, then the Exchange Offer will be extended until the expiration of
such period of ten business days.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company and the Trust may choose to make any public
announcement and subject to applicable law, the Company and the Trust shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
41
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the Trust
will exchange, and will issue to the Exchange Agent, New Capital Securities for
Old Capital Securities validly tendered and not withdrawn promptly after the
Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old Capital
Securities tendered and accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of (i) Old Capital
Securities or a book-entry confirmation of a book-entry transfer of Old Capital
Securities into the Exchange Agent's account at DTC, (ii) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or, in the case of a participant in the book-
entry transfer facility system, an Agent's Message, and (iii) any other
documents required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-entry
transfer of Old Capital Securities into the Exchange Agent's account at DTC.
Subject to the terms and conditions of the Exchange Offer, the Trust will be
deemed to have accepted for exchange, and thereby exchanged, Old Capital
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the Exchange Agent of the Trust's acceptance of such
Old Capital Securities for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Trust for the purpose of receiving tenders of
Old Capital Securities, Letters of Transmittal and related documents, and as
agent for tendering holders for the purpose of receiving Old Capital Securities,
Letters of Transmittal and related documents and transmitting New Capital
Securities to validly tendering holders. Such exchange will be made promptly
after the Expiration Date. If, for any reason whatsoever, acceptance for
exchange or the exchange of any Old Capital Securities tendered pursuant to the
Exchange Offer is delayed (whether before or after the Trust's acceptance for
exchange of Old Capital Securities) or the Trust extends the Exchange Offer or
is unable to accept for exchange or exchange Old Capital Securities tendered
pursuant to the Exchange Offer, then, without prejudice to the Trust's rights
set forth herein, the Exchange Agent may, nevertheless, on behalf of the Trust
and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Capital
Securities and such Old Capital Securities may not be withdrawn except to the
extent tendering holders are entitled to withdrawal rights as described under
"--Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Old Capital Securities will
warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Old Capital Securities,
that the Trust will acquire good, marketable and unencumbered title to the
tendered Old Capital Securities, free and clear of all liens, restrictions,
charges and encumbrances, and that the Old Capital Securities tendered for
exchange are not subject to any adverse claims or proxies. The holder also will
warrant and agree that it will, upon request, execute and deliver any additional
documents deemed by the Trust or the Exchange Agent to be necessary or desirable
to complete the exchange, sale, assignment and transfer of the Old Capital
Securities tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
VALID TENDER. Except as set forth below, in order for Old Capital Securities
to be validly tendered pursuant to the Exchange Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, or an Agent's Message in
case of book-entry delivery as described below, must be received by the Exchange
Agent at one of its addresses set forth under "--Exchange Agent," and either
(i) tendered Old Capital Securities must be received by the Exchange Agent, or
(ii) such Old Capital Securities must be tendered pursuant to the procedures for
book-entry transfer set forth below and a book-entry confirmation must be
received by the Exchange Agent, in each case on or prior to the Expiration Date,
or (iii) the guaranteed delivery procedures set forth below must be complied
with.
42
If less than all of the Old Capital Securities are tendered, a tendering
holder should fill in the amount of Old Capital Securities being tendered in the
appropriate box on the Letter of Transmittal. The entire amount of Old Capital
Securities delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND DELIVERY THEREOF WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, TENDERING HOLDERS OF OLD CAPITAL
SECURITIES ARE RECOMMENDED TO USE EITHER REGISTERED MAIL, RETURN RECEIPT
REQUESTED AND PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Exchange Agent will establish an account with
respect to the Old Capital Securities at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Capital Securities by causing DTC to
transfer such Old Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. Except in the case of a
participant in the book-entry transfer facility system who transfers the Old
Capital Securities by an Agent's Message, delivery of Old Capital Securities
effected through book-entry transfer into the Exchange Agent's account at DTC
requires that 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" on or prior
to the Expiration Date, or the guaranteed delivery procedure set forth below
must be complied with. A holder who is a participant in the book-entry transfer
facility system and transfers the Old Capital Securities by an Agent's Message
need not transmit the Letter of Transmittal to the Exchange Agent to consummate
the exchange.
The term "Agent's Message" means a message transmitted through electronic
means by a book-entry transfer facility to and received by the Exchange Agent
and forming a part of a book-entry confirmation, which states that DTC has
received an express acknowledgment from the participant tendering the Old
Capital Securities that such participant has received and agrees to be bound by
the Letter of Transmittal and/or the Notice of Guaranteed Delivery (as discussed
below), where applicable.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES. Certificates for the Old Capital Securities need not be
endorsed and signature guarantees on the Letter of Transmittal are unnecessary
unless (a) a certificate for the Old Capital Securities is registered in a name
other than that of the person surrendering the certificate or (b) such holder
completes the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the Letter of Transmittal. In the case of (a) or (b) above,
such certificates for Old Capital Securities must be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or signature
on the bond power and on the Letter of Transmittal guaranteed by a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible
guarantor institution," including (as such terms are defined therein): (i) a
bank; (ii) a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association (an
"Eligible Institution"), unless surrendered on behalf of such Eligible
Institution. See Instruction 1 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Old Capital Securities
pursuant to the Exchange Offer and the certificates for such Old Capital
Securities are not immediately available or time will not permit all required
documents to reach the Exchange Agent on or prior to the Expiration Date, or the
procedure for book-
43
entry transfer cannot be completed on a timely basis, such Old Capital
Securities may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, or, in the
case of a participant in the book-entry transfer facility system, an Agent's
Message, is received by the Exchange Agent, as provided below, on or prior to
the Expiration Date; and
(c) the certificates (or a book-entry confirmation) representing all tendered
Old Capital Securities, in proper form for transfer, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other documents required by the Letter
of Transmittal, or, in the case of a participant in the book-entry transfer
facility system, an Agent's Message, are received by the Exchange Agent within
three New York Stock Exchange trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by
facsimile or mailed to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a book-
entry confirmation with respect to such Old Capital Securities, and a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
together with any required signature guarantees and any other documents required
by the Letter of Transmittal, or, in the case of a participant in the book-entry
transfer facility system, an Agent's Message. Accordingly, the delivery of New
Capital Securities might not be made to all tendering holders at the same time
and will depend upon when Old Capital Securities, book-entry confirmations with
respect to Old Capital Securities and other required documents are received by
the Exchange Agent.
The Trust's acceptance for exchange of Old Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and subject
to the conditions of the Exchange Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Capital Securities will be determined by the Company and the
Trust, in their sole and absolute discretion, whose determination shall be final
and binding on all parties. The Company and the Trust reserve the absolute
right, in their sole and absolute discretion, to reject any and all tenders
determined by them not to be in proper form or the acceptance of which, or
exchange for, may, in the opinion of counsel to the Company and the Trust, be
unlawful. The Company and the Trust also reserve the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "--Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Old Capital Securities of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders.
The interpretation by the Company and the Trust of the terms and conditions of
the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Old Capital Securities will be
deemed to have been validly made until all irregularities with respect to such
tender have been cured or waived. Neither the Company, the Trust, any affiliates
or assigns of the Company or the Trust, the Exchange Agent nor any other person
shall be under any duty to give any notification of any irregularities in
tenders or incur any liability for failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when
44
signing, and unless waived by the Company and the Trust, proper evidence
satisfactory to the Company and the Trust, in their sole and absolute
discretion, of such person's authority to so act must be submitted.
A beneficial owner of Old Capital Securities that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF NEW CAPITAL SECURITIES
The Trust is making the Exchange Offer for the New Capital Securities in
reliance on the position of the Staff of the Commission as set forth in certain
interpretive letters addressed to third parties in other transactions. However,
neither the Company nor the Trust sought its own interpretive letter and there
can be no assurance that the Staff would make a similar determination with
respect to the Exchange Offer as it has in such prior interpretive letters to
third parties. Based on these interpretations by the Staff, and subject to the
two immediately following sentences, the Company and the Trust believe that New
Capital Securities issued pursuant to the Exchange Offer in exchange for Old
Capital Securities may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Capital Securities 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 New Capital Securities. However, any holder of Old Capital Securities who
is an "affiliate" of the Company or the Trust or who intends to participate in
the Exchange Offer for the purpose of distributing New Capital Securities, or
any broker-dealer who purchased Old Capital Securities from the Trust 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 set forth in
the above-mentioned interpretive letters, (b) will not be permitted or entitled
to tender such Old Capital Securities in the Exchange Offer and (c) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any sale or other transfer of such Old Capital Securities
unless such sale is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Old Capital Securities
acquired for its own account as a result of market-making or other trading
activities and exchanges such Old Capital Securities for New Capital Securities,
then such broker-dealer must deliver a prospectus meeting the requirements of
the Securities Act in connection with any resales of such New Capital
Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an "affiliate" of the Company or the Trust, (ii)
any New Capital Securities to be received by it are being acquired in the
ordinary course of its business, (iii) it has no arrangement or understanding
with any person to participate in a distribution (within the meaning of the
Securities Act) of such New Capital Securities, and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and does not intend to engage in,
a distribution (within the meaning of the Securities Act) of such New Capital
Securities. In addition, the Company and the Trust may require such holder, as a
condition to such holder's eligibility to participate in the Exchange Offer, to
furnish to the Company and the Trust (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the meaning of Rule
13d-3 under the Exchange Act) on behalf of whom such holder holds the Old
Capital Securities to be exchanged in the Exchange Offer. Each broker-dealer
that receives New Capital Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Capital Securities for
its own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Capital Securities. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the Company and the
Trust believe that Participating Broker-Dealers who acquired Old Capital
Securities for their own accounts as a result of market-making activities or
other trading activities may fulfill their prospectus delivery requirements with
respect to the New Capital Securities received upon exchange of such Old Capital
Securities (other than Old Capital Securities which represent an unsold
allotment from the original sale of the Old Capital
45
Securities) 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 New Capital Securities. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Capital
Securities received in exchange for Old Capital Securities where such Old
Capital Securities were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the Company
and the Trust 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 New Capital Securities for a period of not more
than 180 days after the Expiration Date (subject to extension under certain
limited circumstances described below) or, if earlier, when all such New Capital
Securities have been disposed of by such Participating Broker-Dealer. See "Plan
of Distribution." However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of New Capital Securities received in
exchange for Old Capital Securities pursuant to the Exchange Offer must notify
the Company or the Trust, or cause the Company or the Trust to be notified, on
or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such
notice may be given in the space provided for that purpose in the Letter of
Transmittal or may be delivered to the Exchange Agent at one of the addresses
set forth herein under "--Exchange Agent." Any Participating Broker-Dealer who
is an "affiliate" of the Company or the Trust may not rely on such interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal, that, upon receipt of notice from the
Company or the Trust of the occurrence of any event or the discovery of any fact
which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable) pursuant to
this Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Company or the Trust has given notice that the sale of the New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Company or the Trust
gives such notice to suspend the sale of the New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable), it shall
extend the 180-day period referred to above during which Participating Broker-
Dealers are entitled to use this Prospectus in connection with the resale of New
Capital Securities by the number of days during the period from and including
the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the New Capital
Securities or to and including the date on which the Company or the Trust has
given notice that the sale of New Capital Securities (or the New Guarantee or
the New Junior Subordinated Debentures, as applicable) may be resumed, as the
case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Capital Securities may be
withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written or facsimile transmission
of such notice of withdrawal must be timely received by the Exchange Agent at
one of its addresses set forth under "--Exchange Agent" on or prior to the
Expiration Date. Any such notice of withdrawal must specify the name of the
person who tendered the Old Capital Securities to be withdrawn, the aggregate
principal amount of Old Capital Securities to be withdrawn, and (if certificates
for such Old Capital Securities have been tendered) the name of the registered
holder of the Old Capital Securities as set forth on the Old Capital Securities,
if different from that of the person who tendered such
46
Old Capital Securities. If Old Capital Securities have been delivered or
otherwise identified to the Exchange Agent, then prior to the physical release
of such Old Capital Securities, the tendering holder must submit the serial
numbers shown on the particular Old Capital Securities to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Old Capital Securities tendered for the
account of an Eligible Institution. If Old Capital Securities have been tendered
pursuant to the procedures for book-entry transfer set forth in "--Procedures
for Tendering Old Capital Securities," the notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawal of Old
Capital Securities, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written or facsimile transmission.
Withdrawals of tenders of Old Capital Securities may not be rescinded. Old
Capital Securities properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be retendered at any subsequent time on
or prior to the Expiration Date by following any of the procedures described
above under "--Procedures for Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its sole
discretion, whose determination shall be final and binding on all parties.
Neither the Company, the Trust, any affiliates or assigns of the Company or the
Trust, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Old Capital Securities
which have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
DISTRIBUTIONS ON NEW CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are accepted
for exchange in the Exchange Offer will not receive Distributions on such Old
Capital Securities and will be deemed to have waived the right to receive any
Distributions on such Old Capital Securities accumulated from and after March 7,
1997. Accordingly, holders of New Capital Securities as of the record date for
the payment of Distributions on September 1, 1997 will be entitled to receive
Distributions accumulated from and after March 7, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Company and the Trust will not be required to accept
for exchange, or to exchange, any Old Capital Securities for any New Capital
Securities, and, as described below, may terminate the Exchange Offer (whether
or not any Old Capital Securities have theretofore been accepted for exchange)
or may waive any conditions to or amend the Exchange Offer, if any of the
following conditions have occurred or exists or have not been satisfied:
(a) there shall occur a change in the current interpretation by the Staff of
the Commission which permits the New Capital Securities issued pursuant to the
Exchange Offer in exchange for Old Capital Securities to be offered for resale,
resold and otherwise transferred by holders thereof (other than broker-dealers
and any such holder which is an "affiliate" of the Company or the Trust within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such New Capital Securities are acquired in the ordinary course of such
holders' business and such holders have no arrangement or understanding with any
person to participate in the distribution of such New Capital Securities; or
(b) any law, statute, rule or regulation shall have been adopted or enacted
which, in the judgment of the Company or the Trust, would reasonably be expected
to impair its ability to proceed with the Exchange Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration Statement
or proceedings shall have been initiated or, to the knowledge of the Company or
the Trust, threatened for that purpose or any governmental approval has not been
obtained, which approval the Company or the Trust shall, in its sole and
reasonable discretion, deem necessary for the consummation of the Exchange Offer
as contemplated hereby.
47
If the Company or the Trust determines in its reasonable discretion that any
of the foregoing events or conditions has occurred or exists or has not been
satisfied, it may, subject to applicable law, terminate the Exchange Offer
(whether or not any Old Capital Securities have theretofore been accepted for
exchange in the Exchange Offer) or may waive any such condition or otherwise
amend the terms of the Exchange Offer in any respect. If such waiver or
amendment constitutes a material change to the Exchange Offer, the Company or
the Trust will promptly disclose such waiver or amendment by means of a
supplement to this Prospectus that will be distributed to the registered holders
of the Old Capital Securities. If such waiver or amendment constitutes a
fundamental change to the Exchange Offer, the Company and the Trust will file a
post-effective amendment to the Registration Statement setting forth the
applicable information and will distribute an amended prospectus to the holders
of the Old Capital Securities. At the time such prospectus supplement or amended
prospectus is first given to holders of Old Capital Securities the Exchange
Offer is scheduled to expire at any time earlier than the expiration of a period
ending on the fifth business day from and including the date that such
prospectus supplement or amended prospectus is first so given, then the Exchange
Offer will be extended until the expiration of such period of ten business days.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Delivery of Letters of Transmittal by tendering holders of Old Capital
Securities and any other required documents, questions, requests for assistance,
and requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent, by registered or certified
mail or by hand or overnight delivery, as follows:
The Bank of New York
101 Barclay Street, Floor 7 East
New York, New York 10286
Attention: Enrique Lopez
Attention: Reorganization Section
Confirm By Telephone:
(212) 815-2742
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 571-3080
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary fees
for its services and will reimburse the Exchange Agent for its reasonable
out-of-pocket expenses in connection with the Exchange Offer. The Company will
also pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus and related documents to the beneficial owners of Old Capital
Securities, and in handling or tendering Old Capital Securities for their
customers.
Holders who tender their Old Capital Securities for exchange in the Exchange
Offer will not be obligated to pay any transfer taxes in connection therewith.
If, however, New Capital Securities are to be delivered to, or are to be issued
in the name of, any person other than the registered holder of the Old Capital
Securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of Old Capital Securities in connection with the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder thereof. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
48
Neither the Company nor the Trust will make any payment to brokers, dealers or
other nominees soliciting acceptances of the Exchange Offer.
49
DESCRIPTION OF NEW SECURITIES
DESCRIPTION OF NEW CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Trust has issued the Old
Capital Securities and the Common Securities and will issue the New Capital
Securities. The New Capital Securities will represent preferred beneficial
interests in the Trust and the holders of the New Capital Securities and the Old
Capital Securities will be entitled to a preference over the Common Securities
in certain circumstances with respect to Distributions and amounts payable on
redemption of the Trust Securities or liquidation of the Trust. See
"--Subordination of Common Securities." The Trust Agreement has been qualified
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
This summary of the material provisions of the New Securities and the Trust
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Trust Agreement,
including the definitions therein of certain terms.
GENERAL. The Capital Securities (including the Old Capital Securities and the
New Capital Securities) are limited to $100,000,000 aggregate Liquidation Amount
at any one time outstanding. The Capital Securities will rank pari passu, and
payments will be made thereon pro rata, with the Old Capital Securities and the
Common Securities except as described under "--Subordination of Common
Securities." Legal title to the Junior Subordinated Debentures will be held by
the Property Trustee in trust for the benefit of the holders of the Trust
Securities. The New Guarantee will be a guarantee on a subordinated basis but
will not guarantee payment of Distributions or amounts payable on redemption of
the New Capital Securities or on liquidation of the Trust when the Trust does
not have funds on hand legally available for such payments. See "--Description
of New Guarantee."
DISTRIBUTIONS. Distributions on the New Capital Securities will be cumulative,
will accumulate from March 1, 1997 and will be payable semi-annually in arrears
on March 1 and September 1 of each year, commencing September 1, 1997, at the
annual rate of 8.54% of the Liquidation Amount to the holders of the New Capital
Securities on the relevant record dates. The record dates will be the first day
of the month in which the relevant Distribution Date (as defined below) falls.
The amount of Distributions payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. In the event that any date on which
Distributions are payable on the New Capital Securities is not a Business Day
(as defined below), payment of the Distribution payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect to any such delay), in each case with the same force
and effect as if made on such date (each date on which Distributions are payable
in accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed.
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company will have the right under the Indenture to defer the
payment of interest on the New Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 10 consecutive semi-annual periods
with respect to each Extension Period, provided that (i) no Extension Period may
extend beyond the Stated Maturity Date, (ii) any Extension Period will terminate
as to all Junior Subordinated Debentures upon an acceleration thereof (subject
to reinstatement, upon cure or waiver as provided in the Indenture) and (iii)
any Extension Period will terminate as to any Junior Subordinated Debenture to
be redeemed on the applicable Redemption Date. See "--Description of Junior
Subordinated Debenture--Debenture Events of Default." Upon any such election,
semi-annual Distributions on the New Capital Securities will be deferred by the
Trust during any such Extension Period. Distributions to which holders of the
New Capital Securities are entitled during any such Extension Period will
accumulate additional Distributions thereon at the rate per annum of 8.54%
thereof, compounded semi-annually from the relevant Distribution Date. The term
"Distributions," as used herein, shall include any such additional
Distributions.
Prior to the termination of any such Extension Period, the Company may further
extend such Extension Period, provided that such extension does not cause such
Extension Period to exceed ten consecutive semi-annual
50
periods or to extend beyond the Stated Maturity Date. Upon the termination of
any such Extension Period and the payment of all amounts then due, and subject
to the limitations set forth herein, the Company may elect to begin a new
Extension Period. The Company must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any such Extension
Period at least five Business Days prior to the earlier of (i) the date the
Distributions on the New Capital Securities would have been payable except for
the election to begin such Extension Period or (ii) the date the Administrative
Trustees are required to give notice to any securities exchange or to holders of
such New Capital Securities of the record date or the date such Distributions
are payable but in any event not less than five Business Days prior to such
record date. The Property Trustee will give notice of the Company's election to
commence or continue an Extension Period. Except as described herein, there is
no limitation on the number of times that the Company may elect to begin an
Extension Period. See "--Description of New Junior Subordinated Debentures--
Option to Extend Interest Payment Period" and "Certain United States Federal
Income Tax Considerations--Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock, (ii)
make any payment of principal of or premium, if any, or interest on or repay,
repurchase or redeem any debt securities of the Company (including Other
Debentures) that rank pari passu with or junior in right of payment to the
Junior Subordinated Debentures or (iii) make any guarantee payments with respect
to any guarantee by the Company of the debt securities of any subsidiary of the
Company (including Other Guarantees) if such guarantee ranks pari passu with or
junior in right of payment to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase common shares of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) the purchase of fractional shares resulting from a
reclassification of the Company's capital stock, (e) the exchange or conversion
of any class or series of the Company's (or any subsidiary's) capital stock for
another class or series of the Company's (or any subsidiary's) capital stock or
of any class or series of the Company's (or any subsidiary's) indebtedness, (f)
the purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, and (g) purchases, redemptions or other
acquisitions of shares of capital stock of the Company or any subsidiary under
any employment agreement or benefit plan for the benefit of the Company's
directors, officers, or employees, or any dividend reinvestment or director,
officer or employee stock purchase plan of the Company).
Although the Company has the right in the future to exercise its option to
defer payments of interest on the Junior Subordinated Debentures after their
issuance, the Company has no current intention to do so.
The revenue of the Trust available for distribution to holders of the Capital
Securities will be limited to payments under the Junior Subordinated Debentures
in which the Trust will invest the proceeds from the issuance and sale of the
Trust Securities. See "Description of New Securities--Description of New Junior
Subordinated Debentures--General." If the Company does not make interest
payments on the Junior Subordinated Debentures, the Property Trustee will not
have funds available to pay Distributions on the Capital Securities. The payment
of Distributions (if and to the extent the Trust has funds on hand legally
available for the payment of such Distributions) will be guaranteed by the
Company on a limited basis as set forth herein under "Description of New
Securities--Description of New Guarantee."
REDEMPTION. Upon the repayment on the Stated Maturity Date or prepayment prior
to the Stated Maturity Date of the Junior Subordinated Debentures, the proceeds
from such repayment or prepayment shall be applied by the Property Trustee to
redeem a Like Amount (as defined below) of the Trust Securities, upon not less
than 30 nor more than 60 days' notice of a date of redemption (the "Redemption
Date"), at the applicable Redemption Price, which shall be equal to (i) in the
case of the repayment of the Junior Subordinated Debentures on the Stated
Maturity Date, the Maturity Redemption Price (equal to the principal of, and
accrued interest on, the Junior Subordinated Debentures), (ii) in the case of
the optional prepayment of the Junior Subordinated Debentures prior to March 1,
2007 upon the occurrence and continuation of a Special Event, the Special Event
Redemption Price
51
(equal to the Special Event Prepayment Price in respect of the Junior
Subordinated Debentures) and (iii) in the case of the optional prepayment of the
Junior Subordinated Debentures on or after March 1, 2007, the Optional
Redemption Price (equal to the Optional Prepayment Price in respect of the
Junior Subordinated Debentures). See "Description of New Securities--Description
of New Junior Subordinated Debentures--Optional Prepayment" and "--Special Event
Prepayment."
"Like Amount" means (i) with respect to a redemption of the Trust Securities,
Trust Securities having a Liquidation Amount equal to the principal amount of
Junior Subordinated Debentures to be paid in accordance with their terms and
(ii) with respect to a distribution of Junior Subordinated Debentures upon the
liquidation of the Trust, Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Trust Securities of the holder to
whom such Junior Subordinated Debentures are distributed.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF NEW JUNIOR SUBORDINATED
DEBENTURES. The Company will have the right at any time to dissolve the Trust
and, subject to the rights of creditors, to cause the Junior Subordinated
Debentures to be distributed to the holders of the Trust Securities in
liquidation of the Trust. Such right is subject to the Company having received
an opinion of counsel to the effect that such distribution will not be a taxable
event to holders of Capital Securities.
The Trust shall automatically dissolve upon the first to occur of: (i) certain
events of bankruptcy, dissolution or liquidation of the Company; (ii) the
distribution of a Like Amount of the Junior Subordinated Debentures to the
holders of the Trust Securities, if the Company, as Sponsor, has given written
direction to the Property Trustee to dissolve the Trust (which direction and
distribution is optional and, except as described above, wholly within the
discretion of the Company, as Sponsor); (iii) redemption of all of the Trust
Securities as described under "--Redemption;" (iv) expiration of the term of the
Trust; or (v) the entry of an order for the dissolution of the Trust by a court
of competent jurisdiction. Pursuant to the Trust Agreement, as soon as
practicable after the dissolution of the Trust and upon completion of the
winding up of the Trust, the Trustees shall file a certificate of cancellation
terminating the Trust.
If a dissolution occurs as described in clause (i), (ii), (iv), or (v) above,
the Trust shall be liquidated by the Trustees as expeditiously as the Trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, to the holders of the
Trust Securities a Like Amount of the Junior Subordinated Debentures, unless
such distribution is determined by the Property Trustee not to be practicable,
in which event such holders will be entitled to receive out of the assets of the
Trust legally available for distribution to holders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the aggregate of the Liquidation Amount plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets on hand legally available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on the Trust Securities shall be paid on a pro rata basis, except
that if a Debenture Event of Default has occurred and is continuing, the
Capital Securities shall have a priority over the Common Securities.
See "--Subordination of Common Securities."
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) each registered
global certificate, if any, representing Trust Securities and held by DTC or its
nominee will receive a registered global certificate or certificates
representing the Junior Subordinated Debentures to be delivered upon such
distribution and (iii) any certificates representing Trust Securities not held
by DTC or its nominee will be deemed to represent Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of such Trust
Securities, and bearing accrued and unpaid interest in an amount equal to the
accumulated and unpaid Distributions on such Trust Securities until such
certificates are presented to the Administrative Trustees or their agent for
cancellation, whereupon the Company will issue to such holder, and the Debenture
Trustee will authenticate, a certificate representing such Junior Subordinated
Debentures.
52
There can be no assurance as to the market prices for the Capital Securities
or the Junior Subordinated Debentures that may be distributed in exchange for
the Trust Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Capital Securities that an investor may purchase, or the
Junior Subordinated Debentures that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Capital Securities offered hereby.
REDEMPTION PROCEDURES. If applicable, Trust Securities shall be redeemed at
the applicable Redemption Price with the proceeds from the contemporaneous
payment of the Junior Subordinated Debentures. Any redemption of Trust
Securities shall be made and the applicable Redemption Price shall be payable on
the Redemption Date only to the extent that the Trust has funds legally
available for the payment of such applicable Redemption Price. See also
"--Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are legally available, with respect to the Capital Securities
held by DTC or its nominees, the Property Trustee will deposit irrevocably with
DTC funds sufficient to pay the applicable Redemption Price. See "--Form,
Denomination, Book-Entry Procedures and Transfer." With respect to the Capital
Securities held in certificated form, the Property Trustee, to the extent funds
are legally available, will irrevocably deposit with the paying agent for the
Capital Securities funds sufficient to pay the applicable Redemption Price and
will give such paying agent irrevocable instructions and authority to pay the
applicable Redemption Price to the holders thereof upon surrender of their
certificates evidencing the Capital Securities. See "--Payment and Paying
Agency." Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date shall be payable to the holders of such Capital Securities on
the relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then upon the
date of such deposit, all rights of the holders of the Capital Securities will
cease, except the right of the holders of the Capital Securities to receive the
applicable Redemption Price, but without interest on such Redemption Price, and
the Capital Securities will cease to be outstanding. In the event that any
Redemption Date of Capital Securities is not a Business Day, then the applicable
Redemption Price payable on such date will be paid on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day. In
the event that payment of the applicable Redemption Price is improperly withheld
or refused and not paid either by the Trust or by the Company pursuant to the
Guarantee as described under "Description of Guarantee," Distributions on
Capital Securities will continue to accumulate at the then applicable rate, from
the Redemption Date originally established by the Trust to the date such
applicable Redemption Price is actually paid, in which case the actual payment
date will be the Redemption Date for purposes of calculating the applicable
Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Capital Securities by tender, in the open
market or by private agreement.
Subject to the provisions regarding the subordination of Common Securities
described under "--Subordination of Common Securities" below, if less than all
of the Capital Securities and Common Securities are to be redeemed on a
Redemption Date, then the aggregate Liquidation Amount of such Capital
Securities and Common Securities to be redeemed shall be allocated pro rata to
the Capital Securities and the Common Securities based upon the relative
Liquidation Amounts of such classes. The particular Capital Securities to be
redeemed shall be selected on a pro rata basis, rounded to the nearest 100
Capital Securities, not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Capital Securities not previously called
for redemption, or if the Capital Securities are then held in the form of a
Global Capital Security (as defined below), in accordance with DTC's customary
procedures, provided, in each case, that each holder of any Capital Securities
has at least 100 Capital Securities remaining after the redemption. The Property
Trustee shall promptly notify the securities registrar for the Trust Securities
in writing of the Capital Securities selected for redemption and, in the case of
any Capital Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of the Trust Agreement, unless the
context otherwise requires, all provisions relating to the
53
redemption of Capital Securities shall relate, in the case of any Capital
Securities redeemed or to be redeemed only in part, to the portion of the
aggregate Liquidation Amount of Capital Securities which has been or is to be
redeemed.
Notice of any redemption will be mailed at least 30 days but not more than 60
days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Company defaults in payment of the applicable
Prepayment Price on, or in the repayment of, the Junior Subordinated Debentures,
on and after the Redemption Date, Distributions will cease to accrue on the
Trust Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES. Payment of Distributions on, and the
Redemption Price of, the Capital Securities and Common Securities, as
applicable, shall be made pro rata based on the Liquidation Amount of the Trust
Securities; provided, however, that if on any Distribution Date or Redemption
Date an Event of Default shall have occurred and be continuing, no payment of
any Distribution on, or applicable Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of the Common Securities shall be made unless payment in full
in cash of all accumulated and unpaid Distributions on all of the outstanding
Capital Securities for all Distribution periods terminating on or prior thereto,
or in the case of payment of the applicable Redemption Price the full amount of
such Redemption Price, shall have been made or provided for, and all funds
available to the Property Trustee shall first be applied to the payment in full
in cash of all Distributions on, or Redemption Price of, the Capital Securities
then due and payable.
In the case of any Event of Default, the Company as holder of the Common
Securities will be deemed to have waived any right to act with respect to such
Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Capital Securities and not on behalf of the
Company as holder of the Common Securities, and only the holders of the Capital
Securities will have the right to direct the Property Trustee to act on their
behalf.
EVENTS OF DEFAULT; NOTICE. The occurrence of a Debenture Event of Default (see
"Description of New Junior Subordinated Debentures--Debenture Events of
Default") constitutes an "Event of Default" under the Trust Agreement.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Company, as Sponsor, unless such Event of
Default shall have been cured or waived. The Company, as Sponsor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described under
"--Liquidation of the Trust and Distribution of New Junior Subordinated
Debentures" and "--Subordination of Common Securities."
REMOVAL OF TRUSTEES. Unless a Debenture Event of Default shall have occurred
and be continuing, any Issuer Trustee may be removed at any time by the holder
of the Common Securities. If a Debenture Event of Default has occurred and is
continuing, the Property Trustee and the Delaware Trustee may be removed at such
time by the holders of a majority in Liquidation Amount of the outstanding
Capital Securities. In no event will the holders of the Capital Securities have
the right to vote to appoint, remove or replace the Administrative Trustees,
which voting rights are vested exclusively in the Company as the holder of the
Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
MERGER OR CONSOLIDATION OF TRUSTEES. Any corporation into which the Property
Trustee, the Delaware Trustee or any Administrative Trustee that is not a
natural person may be merged or converted or with which it
54
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which such Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of such
Trustee, shall be the successor of such Trustee under the Trust Agreement,
provided such corporation shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST. The Trust
may not merge with or into, consolidate, amalgamate, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any corporation or other Person, except as
described below. The Trust may, at the request of the Company, as Sponsor, with
the consent of the Administrative Trustees but without the consent of the
holders of the Capital Securities, merge with or into, consolidate, amalgamate,
or be replaced by or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to a trust organized as such under the
laws of any State, the District of Columbia or of Bermuda; provided, that (i)
such successor entity either (a) expressly assumes all of the obligations of the
Trust with respect to the Capital Securities or (b) substitutes for the Capital
Securities other securities having substantially the same terms as the Capital
Securities (the "Successor Securities") so long as the Successor Securities rank
in priority the same as the Capital Securities with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Company expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee with respect to the Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Capital Securities are
then listed, if any, (iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Capital Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Capital Securities (including
any Successor Securities) in any material respect, (vi) such successor entity
has a purpose identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Company has received an opinion from independent counsel to the Trust
experienced in such matters to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Capital
Securities (including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Trust nor such successor entity will be required
to register as an investment company under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), and (viii) the Company or any
permitted successor or assignee owns all of the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in Liquidation Amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Trust or the successor entity not
to be classified as a grantor trust or other entity exempt from taxation for
United States federal income tax purposes. In addition, the Property Trustee
will be required pursuant to the Indenture to exchange, as a part of the
Exchange Offer, the Junior Subordinated Debentures for the Exchange Debentures,
which will have terms substantially identical to the Junior Subordinated
Debentures except for the transfer restrictions under the Securities Act, the
$100,000 minimum aggregate principal amount transfer restrictions and the
provision for liquidated damages thereon under certain circumstances.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT. Except as provided below and
under "--Mergers, Consolidations, Amalgamations or Replacements of the Trust"
and "--Description of New Guarantee--Amendments and Assignment" and as
otherwise required by law and the Trust Agreement, the holders of the New
Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities (i) to cure any ambiguity, correct or supplement
any provisions in the Trust Agreement that may be inconsistent with any other
provision, or
55
to make any other provisions with respect to matters or questions arising
under the Trust Agreement, which shall not be inconsistent with the other
provisions of the Trust Agreement, or (ii) to modify, eliminate or add to any
provisions of the Trust Agreement to such extent as shall be necessary to ensure
that the Trust will be classified for United States federal income tax purposes
as a grantor trust at all times that any Trust Securities are outstanding or to
ensure that the Trust will not be required to register as an "investment
company" under the Investment Company Act; provided, however, that in the case
of clause (i), such action shall not adversely affect in any material respect
the interests of the holders of the Trust Securities, and any amendments of the
Trust Agreement shall become effective when notice thereof is sent to the
holders of the Trust Securities. The Trust Agreement may be amended by the
Trustees and the Company (i) with the consent of holders representing a majority
(based upon Liquidation Amount) of the outstanding Trust Securities, and (ii)
upon receipt by the Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect the Trust's status as a grantor trust for
United States federal income tax purposes or the Trust's exemption from status
as an "investment company" under the Investment Company Act, provided that,
without the consent of each holder of Trust Securities, the Trust Agreement may
not be amended to (i) change the amount or timing of any Distribution on the
Trust Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Securities as of a specified date or
(ii) restrict the right of a holder of Trust Securities to institute suit for
the enforcement of any such payment on or after such date; it being understood
that the New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Trust Agreement.
So long as any Junior Subordinated Debentures are held by the Property Trustee
for the benefit of the holders of the Trust Securities, the Trustees shall not
(i) direct the time, method and place of conducting any proceeding for any
remedy available to the Debenture Trustee, or execute any trust or power
conferred on such Property Trustee with respect to the Junior Subordinated
Debentures, (ii) waive certain past defaults under the Indenture, (iii) exercise
any right to rescind or annul a declaration of acceleration of the maturity of
the principal of the Junior Subordinated Debentures or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the holders of a majority in Liquidation
Amount of all outstanding Capital Securities; provided, however, that where a
consent under the Indenture would require the consent of each holder of Junior
Subordinated Debentures affected thereby, no such consent shall be given by the
Property Trustee without the prior approval of each holder of the Capital
Securities. The Trustees shall not revoke any action previously authorized or
approved by a vote of the holders of the Capital Securities except by subsequent
vote of such holders. The Property Trustee shall notify each holder of Capital
Securities of any notice of default with respect to the Junior Subordinated
Debentures. In addition to obtaining the foregoing approvals of such holders of
the Capital Securities, prior to taking any of the foregoing actions, the
Trustees shall obtain an opinion of counsel experienced in such matters to the
effect that the Trust will not be classified as an association taxable as a
corporation or other entity subject to taxation for United States federal income
tax purposes on account of such action.
Any required approval of holders of Capital Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Capital Securities are entitled to vote, or of any matter upon which
action by written consent of such holders is to be taken, to be given to each
holder of record of Capital Securities in the manner set forth in the Trust
Agreement.
No vote or consent of the holders of New Capital Securities will be required
for the Trust to redeem and cancel the New Capital Securities in accordance with
the Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Issuer Trustees or any affiliate
of the Company or any Trustee, shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
56
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER. The New Capital
Securities initially will be represented by one or more Capital Securities
certificates in registered, global form (collectively, the "Global Capital
Securities"). The Global Capital Securities will be deposited upon issuance with
the Property Trustee as custodian for DTC, in New York, New York, and registered
in the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee, and such transfer shall be effective only when reflected in
the securities register maintained on behalf of the Trust. Beneficial interests
in the Global Capital Securities may not be exchanged for Capital Securities in
certificated form except in the limited circumstances described below.
DTC has advised the Trust and the Company that DTC is a limited purpose trust
company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Capital Securities, DTC will
credit the accounts of Participants with portions of the Liquidation Amount of
the Global Capital Securities and (ii) ownership of such interests in the Global
Capital Securities will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the Global Capital Securities).
Except as described below, owners of beneficial interests in the Global
Capital Securities will not have Capital Securities registered in their name,
will not receive physical delivery of Capital Securities in certificated form
and will not be considered the registered owners or holders thereof under the
Trust Agreement for any purpose.
Payments in respect of the Global Capital Security registered in the name of
DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms of
the Trust Agreement, the Property Trustee will treat the persons in whose names
the Capital Securities, including the Global Capital Securities, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Property Trustee nor
any agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial interests in the Global
Capital Securities, or for maintaining, supervising or reviewing any of DTC's
records or any Participant's or Indirect Participant's records relating to the
beneficial interests in the Global Capital Securities or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants or
Indirect Participants. DTC has advised the Trust and the Company that its
current practice, upon receipt of any payment in respect of securities such as
the Capital Securities, is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in Liquidation Amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of New
Capital Securities will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Property Trustee,
the Trust or the Company. Neither the Trust nor the Company nor the Property
Trustee will be liable for
57
any delay by DTC or any of its Participants in identifying the beneficial owners
of the New Capital Securities, and the Trust, the Company and the Property
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Beneficial interests in the Global Capital Securities will trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of New Capital Securities only at the
direction of one or more Participants to whose account with DTC interests in the
Global Capital Securities are credited and only in respect of such portion of
the Liquidation Amount of the New Capital Securities as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Trust Agreement, DTC reserves the right to
exchange the Global Capital Securities for New Capital Securities in
certificated form and to distribute such New Capital Securities to its
Participants.
The information in this section concerning DTC and its book-entry system has
been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL SECURITIES.
A Global Capital Security is exchangeable for New Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Capital Security
and the Trust thereupon fails to appoint a successor Depositary within 90-days
or (y) has ceased to be a clearing agency registered under the Exchange Act,
(ii) the Company in its sole discretion elects to cause the issuance of the New
Capital Securities in certificated form or (iii) there shall have occurred and
be continuing an Event of Default or any event which after notice or lapse of
time or both would be an Event of Default under the Trust Agreement. In
addition, beneficial interests in a Global Capital Security may be exchanged for
certificated New Capital Securities upon request but only upon at least 20-days
prior written notice given to the Property Trustee by or on behalf of DTC in
accordance with customary procedures. In all cases, certificated New Capital
Securities delivered in exchange for any Global Capital Security or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures), unless the Property Trustee determines otherwise in
compliance with applicable law.
PAYMENT AND PAYING AGENCY. Payments in respect of the New Capital Securities
held in global form shall be made to the Depositary, which shall credit the
relevant accounts at the Depositary on the applicable Distribution Dates or in
respect of the New Capital Securities that are not held by the Depositary, such
payments shall be made by check mailed to the address of the holder entitled
thereto as such address shall appear on the register. The initial paying agent
(the "Paying Agent") is the Property Trustee. The Paying Agent is permitted to
resign as Paying Agent upon 30 days written notice to the Property Trustee and
the Company. In the event that the Property Trustee shall no longer be the
Paying Agent, the Administrative Trustees shall appoint a successor (which shall
be a bank or trust company acceptable to the Administrative Trustees and the
Company) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT. The Property Trustee will act as registrar and
transfer agent for the New Capital Securities.
Registration of transfers of the New Capital Securities will be effected
without charge by or on behalf of the Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Trust will not be required to register or cause to be
registered the transfer of the New Capital Securities after they have been
called for redemption.
CUSIP NUMBER. The Company and the Trust intend to apply for, and expect to
receive, a debt CUSIP number for the New Capital Securities.
58
INFORMATION CONCERNING THE PROPERTY TRUSTEE. The Property Trustee, other than
during the occurrence and continuance of an Event of Default, undertakes to
perform only such duties as are specifically set forth in the Trust Agreement
and, after such Event of Default, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the Property Trustee is under no obligation
to exercise any of the powers vested in it by the Trust Agreement at the request
of any holder of Trust Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby. If
no Event of Default has occurred and is continuing and the Property Trustee is
required to decide between alternative causes of action, construe ambiguous
provisions in the Trust Agreement or is unsure of the application of any
provision of the Trust Agreement, and the matter is not one on which holders of
the Capital Securities or the Common Securities are entitled under the Trust
Agreement to vote, then the Property Trustee shall take such action as is
directed by the Company and if not so directed, shall take such action as it
deems advisable and in the best interests of the holders of the Trust Securities
and will have no liability except for its own bad faith, negligence or willful
misconduct.
MISCELLANEOUS. The Administrative Trustees are authorized and directed to
conduct the affairs of and to operate the Trust in such a way that the Trust
will not be deemed to be an "investment company" required to be registered under
the Investment Company Act or classified as an association taxable as a
corporation or other entity subject to taxation for United States federal income
tax purposes and so that the Junior Subordinated Debentures will be treated as
indebtedness of the Company for United States federal income tax purposes. In
this connection, the Company and the Administrative Trustees are authorized to
take any action, not inconsistent with applicable law, the certificate of trust
of the Trust or the Trust Agreement, that the Company and the Administrative
Trustees determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not materially adversely affect the
interests of the holders of the Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any of
its assets.
DESCRIPTION OF NEW JUNIOR SUBORDINATED DEBENTURES
The Old Junior Subordinated Debentures were issued and the New Junior
Subordinated Debentures will be issued as separate series under the Indenture.
The Indenture has been qualified under, and is governed by, the Trust Indenture
Act. This summary of certain terms and provisions of the Junior Subordinated
Debentures and the Indenture does not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, some of which are not otherwise
defined herein, are qualified in their entirety by reference to all of the
provisions of the Indenture and those terms made a part of the Indenture by the
Trust Indenture Act.
GENERAL. Concurrently with the issuance of the Old Capital Securities, the
Trust invested the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in Old Junior Subordinated Debentures issued
by the Company. Pursuant to the Exchange Offer, the Company will exchange the
Old Junior Subordinated Debentures, in an amount corresponding to the Old
Capital Securities accepted for exchange, for a like aggregate principal amount
of the New Junior Subordinated Debentures as soon as practicable after the date
hereof.
The New Junior Subordinated Debentures will bear interest at the annual rate
of 8.54% of the principal amount thereof, payable semi-annually in arrears on
March 1 and September 1 of each year (each, an "Interest Payment Date"),
commencing September 1, 1997, to the person in whose name each New Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the February 15 or August 15 preceding the relevant payment
date. It is anticipated that, until the liquidation, if any, of the Trust, each
New Junior Subordinated Debenture will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the New Junior
59
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay), in
each case with the same force and effect as if made the date such payment was
originally payable. Accrued interest that is not paid on the applicable Interest
Payment Date will bear additional interest on the amount thereof (to the extent
permitted by law) at the rate per annum of 8.54% thereof, compounded semi-
annually. The term "interest", as used herein, shall include semi-annual
interest payments and interest on semi-annual interest payments not paid on the
applicable Interest Payment Date.
The New Junior Subordinated Debentures will mature on March 1, 2027 (the
"Stated Maturity Date"). The New Junior Subordinated Debentures will rank pari
passu with the Old Junior Subordinated Debentures and with all Other Debentures
and will be unsecured and subordinate and junior in right of payment to the
extent and in the manner set forth in the Indenture to all Senior Indebtedness.
See "--Subordination." Because the Company is a holding company, the right of
the Company to participate in any distribution of assets of any subsidiary upon
such subsidiary's liquidation or reorganization or otherwise (and thus the
ability of holders of the Capital Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of the subsidiary,
except to the extent the Company may itself be recognized as a creditor of that
subsidiary. Accordingly, the New Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of New Junior Subordinated Debentures should look only
to the assets of the Company for payments on the New Junior Subordinated
Debentures. In addition, since the Company's subsidiaries are insurance
companies subject to regulatory control by various state insurance departments,
the ability of such subsidiaries to pay dividends to the Company without prior
regulatory approval is limited by applicable laws and regulations. The Indenture
does not limit the incurrence or issuance of other secured or unsecured debt of
the Company, including Senior Indebtedness. See "--Subordination."
FORM, REGISTRATION AND TRANSFER. If the New Junior Subordinated Debentures are
distributed to holders of the Trust Securities, such New Junior Subordinated
Debentures may be represented by one or more global certificates registered in
the name of Cede & Co. as the nominee of DTC. The depositary arrangements for
such New Junior Subordinated Debentures are expected to be substantially similar
to those in effect for the New Capital Securities. For a description of DTC and
the terms of the depositary arrangements relating to payments, transfers, voting
rights, redemptions and other notices and other matters, see "--Description of
New Capital Securities--Form, Denomination, Book-Entry Procedures and
Transfer."
PAYMENT AND PAYING AGENTS. Payment of principal of (and premium, if any) and
any interest on New Junior Subordinated Debentures will be made at the office of
the Debenture Trustee in The City of New York or at the office of such Paying
Agent or Paying Agents as the Company may designate from time to time, except
that at the option of the Company payment of any interest may be made, except in
the case of New Junior Subordinated Debentures in global form, (i) by check
mailed to the address of the Person entitled thereto as such address shall
appear in the register for the New Junior Subordinated Debentures or (ii) by
transfer to an account maintained by the Person entitled thereto as specified in
such register, provided that proper transfer instructions have been received by
the relevant Record Date. Payment of any interest on any New Junior Subordinated
Debenture will be made to the Person in whose name such New Junior Subordinated
Debenture is registered at the close of business on the Record Date for such
interest, except in the case of defaulted interest. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent; however, the Company will at all times be required to maintain a Paying
Agent in each Place of Payment for the New Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by the Company in trust, for the payment of the principal of (and premium,
if any) or interest on any New Junior Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall, at the request of the Company, be repaid to
the Company and the holder of such New Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
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OPTION TO EXTEND INTEREST PAYMENT DATE. So long as no Debenture Event of
Default has occurred and is continuing, the Company will have the right under
the Indenture at any time during the term of the New Junior Subordinated
Debentures to defer the payment of interest at any time or from time to time for
a period not exceeding 10 consecutive semi-annual periods with respect to each
Extension Period, provided that (i) no Extension Period may extend beyond the
Stated Maturity Date, (ii) any Extension Period will terminate as to all Junior
Subordinated Debentures upon an acceleration thereof (subject to reinstatement,
upon cure or waiver as provided in the Indenture) and (iii) any Extension Period
will terminate as to any Junior Subordinated Debenture to be redeemed on the
applicable Redemption Date. See "--Description of Junior Subordinated
Debenture--Debenture Events of Default." At the end of such Extension Period,
the Company must pay all interest then accrued and unpaid (together with
interest thereon at the annual rate of 8.54%, compounded semi-annually, to the
extent permitted by applicable law). During an Extension Period, interest will
continue to accrue and holders of New Junior Subordinated Debentures (and
holders of the Trust Securities while Trust Securities are outstanding) will be
required to accrue interest income for United States federal income tax purposes
prior to the receipt of cash attributable to such income. See "Certain United
States Federal Income Tax Considerations--Interest Income and Original Issue
Discount."
During any such Extension Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including any Other
Debentures) that rank pari passu with or junior in right of payment to the
Junior Subordinated Debentures or (iii) make any guarantee payments with respect
to any guarantee by the Company of the debt securities of any subsidiary of the
Company (including any Other Guarantees) if such guarantee ranks pari passu with
or junior in right of payment to the Junior Subordinated Debentures (other than
(a) dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase common shares of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) the purchase of fractional shares resulting from a
reclassification of the Company's capital stock, (e) the exchange or conversion
of one class or series of the Company's (or any subsidiary's) capital stock for
another class or series of the Company's (or any subsidiary's) capital stock or
of any class or series of the Company's (or any subsidiary's) indebtedness, (f)
the purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged and (g) purchases, redemptions or other
acquisitions of shares of capital stock of the Company or any subsidiary of the
Company related to the issuance of common shares or rights under any employment
agreement or benefit plan for the Company's directors, officers, or employees,
or any dividend reinvestment or director, officer or employee stock purchase
plan of the Company).
Prior to the termination of any such Extension Period, the Company may further
extend such Extension Period, provided that such extension does not cause such
Extension Period to exceed 10 consecutive semi-annual periods or to extend
beyond the Stated Maturity Date. Upon the termination of any such Extension
Period and the payment of all amounts then due on any Interest Payment Date, the
Company may elect to begin a new Extension Period, subject to the above
requirements. Except as described above, no interest shall be due and payable
during an Extension Period, except at the end thereof. The Company must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of any Extension Period (or an extension thereof) at least five
Business Days prior to the earlier of (i) the date the Distributions on the
Trust Securities would have been payable except for the election to begin or
extend such Extension Period or (ii) the date the Administrative Trustees are
required to give notice to any securities exchange or to holders of New Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. The
Debenture Trustee shall give notice of the Company's election to begin or extend
a new Extension Period to the holders of the Capital Securities, and the
Property Trustee will provide notice thereof to Holder of the Capital
Securities. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.
OPTIONAL PREPAYMENT. The New Junior Subordinated Debentures will be
prepayable, in whole or in part, at the option of the Company on or after March
1, 2007, at a prepayment price (the "Optional Prepayment Price")
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equal to the percentage of the outstanding principal amount of the Junior
Subordinated Debentures specified below, plus, in each case, accrued interest
thereon to the date of prepayment if redeemed during the 12-month period
beginning March 1 of the years indicated below:
SPECIAL EVENT PREPAYMENT. If a Special Event shall occur and be continuing,
the Company may, at its option, prepay the Junior Subordinated Debentures in
whole (but not in part) at any time within 90 days of the occurrence of such
Special Event, at a prepayment price (the "Special Event Prepayment Price")
equal to the greater of (i) 100% of the principal amount of such Junior
Subordinated Debentures or (ii) the sum, as determined by a Quotation Agent, of
the present values of the principal amount and premium payable with respect to
an optional redemption of Junior Subordinated Debentures on March 1, 2007,
together with scheduled payments of interest on the Junior Subordinated
Debentures accruing from the prepayment date to and including February 1, 2007
discounted to the prepayment date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in
each case, accrued interest thereon to the date of prepayment.
A "Special Event" means a Tax Event (as defined below) or an Investment
Company Event (as defined below), as the case may be.
"Investment Company Event" means that the Company shall have received an
opinion of counsel experienced in practice under the Investment Company Act to
the effect that, as a result of the occurrence of a change in law or regulation
or a change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a "Change
in Investment Company Act Law"), there is more than insubstantial risk that the
Trust is or will be considered an "investment company" which is required to be
registered under the Investment Company Act, which Change in Investment Company
Act Law becomes effective on or after the Issue Date.
A "Tax Event" means the receipt by the Company and the Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of (a) any
amendment to, or change (including any announced proposed change) in, the laws
or any regulations thereunder of the United States or any political subdivision
or taxing authority thereof or therein, or (b) any amendment to or change in an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory agency (including the enactment
of any legislation, the publication of any judicial decision or regulatory
determination or the issuance by the Internal Revenue Service of a revenue
ruling, revenue procedure, notice or announcement (which notice or announcement
is published in the Internal Revenue Bulletin), on or after March 7, 1997),
there is more than an insubstantial risk that (i) interest payable to the Trust
on the Junior Subordinated Debentures would not be deductible by the Company for
United States federal income tax purposes or (ii) the Trust will be subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
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"Adjusted Treasury Rate" means, with respect to any prepayment date, the rate
per annum equal to (i) the yield, under the heading which represents the average
for the immediately prior week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Federal Reserve and which established yields on actively
traded United States Treasury securities adjusted to constant maturity under the
caption "Treasury Constant Maturities," for the maturity date corresponding to
the Initial Optional Prepayment Date (if no maturity date is within three months
before or after the Initial Optional Prepayment Date, yields for the first two
published maturities most closely corresponding to the Initial Optional
Prepayment Date shall be interpolated and the Adjusted Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis, rounding
to the nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual bond equivalent yield
to maturity of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such prepayment date plus, in either
case (A) 1.25% if such prepayment date occurs on or prior to March 1, 1998 and
(B) .50% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security selected
by the Quotation Agent as having a maturity date corresponding to the Initial
Optional Prepayment Date that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities with a maturity date corresponding to the Initial Optional
Prepayment Date. If no United States Treasury security has a maturity date which
is within three months before or after the Initial Optional Prepayment Date, the
two most closely corresponding United States Treasury securities shall be used
as the Comparable Treasury Issue, and the calculation of the Adjusted Treasury
Rate pursuant to clause (ii) of the definition thereof shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Company. "Reference Treasury Dealer" means: (i) Merrill Lynch Government
Securities, Inc. and its respective successors; provided, however, that if the
foregoing shall cease to be a primary U.S. Government securities dealer in the
City of New York (a "Primary Treasury Dealer"), the Company shall substitute
therefor another Primary Treasury Dealer; and (ii) any other Primary Treasury
Dealer selected by the Company.
"Comparable Treasury Price" means, with respect to any prepayment 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 prepayment 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 prepayment date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Debenture Trustee 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 prepayment date, the average, as determined by the
Debenture Trustee, 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 Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such prepayment date.
Notice of any prepayment will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of Junior Subordinated Debentures
to be prepaid at its registered address. Unless the Company defaults in payment
of the prepayment price, on and after the prepayment date interest ceases to
accrue on such Junior Subordinated Debentures called for prepayment.
TRUST EXPENSES AND TAXES. In the Indenture, the Company, as issuer of the
Junior Subordinated Debentures, has agreed to pay to the Trust all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trust (including costs and expenses relating to the organization
of the Trust, fees
63
and expenses of the Trustees and the costs and expenses relating to the
operation of the Trust) and to pay any and all taxes and all costs and expenses
related thereto (other than United States withholding taxes) to which the Trust
might become subject.
RESTRICTIONS ON CERTAIN PAYMENTS AND CERTAIN COVENANTS. The Company will also
covenant that it will not (i) declare or pay any dividends or distributions on,
or redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Company's capital stock, (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities of the
Company (including Other Debentures) that rank pari passu with or junior in
right of payment to the Junior Subordinated Debentures or (iii) make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company (including under Other Guarantees)
if such guarantee ranks pari passu or junior in right of payment to the Junior
Subordinated Debentures (other than (a) dividends or distributions in shares of,
or options, warrants or rights to subscribe for or purchase common shares of the
Company, (b) any declaration of a dividend in connection with the implementation
of a stockholder's rights plan, or the issuance of stock under any such plan in
the future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, (d) the purchase of fractional shares
resulting from a reclassification of the Company's capital stock, (e) the
exchange or conversion of any class or series of the Company's (or any
subsidiary's) capital stock for another class or series of the Company's (or any
subsidiary's) capital stock or of any class or series of the Company's (or any
subsidiary's) indebtedness, (f) the purchase of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged, and (g)
purchases, redemptions or other acquisitions of shares of capital stock of the
Company or any subsidiary under any employment agreement or any benefit plan for
the Company's directors, officers, or employees or any dividend reinvestment or
director, officer or employee stock purchase plan of the Company) if at such
time (1) there shall have occurred and be continuing any event of which the
Company has actual knowledge which would constitute an Event of Default under
the Trust Agreement, (2) there shall have occurred and be continuing any event
of which the Company has actual knowledge which would constitute a Debenture
Event of Default, (3) there shall have occurred and be continuing a payment
default under the Trust Agreement or the Indenture, (4) such Junior Subordinated
Debentures are held by the Trust and the Company shall be in default with
respect to its payment of any obligations under the Guarantee or (5) the Company
shall have given notice of its election of an Extension Period as provided in
the Indenture and shall not have rescinded such notice, and such Extension
Period, or any extension thereof, shall have commenced.
For so long as the Trust Securities remain outstanding, the Company will
covenant (i) to directly or indirectly maintain 100% direct or indirect
ownership of the Common Securities; provided, however, that any permitted
successor of the Company under the Indenture may succeed to the Company's
ownership of such Common Securities, (ii) not to cause, as sponsor of the Trust,
or to permit, as holder of the Common Securities, the dissolution, winding-up or
termination of the Trust, except as provided under the Trust Agreement or the
Indenture, and (iii) to use its reasonable efforts to cause the Trust (a) to
remain a statutory business trust, except in connection with the distribution of
Junior Subordinated Debentures to the holders of Trust Securities in liquidation
of the Trust, the redemption of all the Trust Securities, or certain mergers or
consolidations, each as permitted by the Trust Agreement, and (b) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes.
MODIFICATION OF INDENTURE. From time to time the Company and the Debenture
Trustee may, without the consent of the holders of Junior Subordinated
Debentures, amend, waive or supplement the Indenture for specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies
(provided that any such action does not materially adversely affect the interest
of the holders of Junior Subordinated Debentures) and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting the Company and the Debenture Trustee, with the
consent of the holders of a majority in principal amount of Junior Subordinated
Debentures, to modify the Indenture in a manner affecting the rights of the
holders of Junior Subordinated Debentures; provided, that no such modification
may, without the consent of the holders of each outstanding Junior Subordinated
Debenture so affected, (i) change the Stated Maturity, or reduce the principal
amount of the Junior Subordinated Debentures or reduce the rate or extend the
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time of payment of interest thereon or (ii) reduce the percentage of principal
amount of Junior Subordinated Debentures, the holders of which are required to
consent to any such modification of the Indenture.
DEBENTURE EVENTS OF DEFAULT. The Indenture provides that any one or more of
the following described events with respect to the New Junior Subordinated
Debentures constitutes a "Debenture Event of Default" (whatever the reason for
such Debenture Event of Default and whether it shall be voluntary or involuntary
or be effected by 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) failure for 30 days to pay any interest on the New Junior Subordinated
Debentures or any Other Debentures when due (subject to the deferral of any due
date in the case of an Extension Period); or
(ii) failure to pay any principal on the New Junior Subordinated Debentures or
any Other Debentures when due whether at maturity, upon redemption, by
declaration of acceleration of maturity or otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to the
Company from the Debenture Trustee or the holders of at least 25% in aggregate
outstanding principal amount of Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default, except a default
in the payment of principal or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF NEW CAPITAL SECURITIES. If a
Debenture Event of Default shall have occurred and be continuing and shall be
attributable to the failure of the Company to pay principal of or interest on
the New Junior Subordinated Debentures on the due date, a holder of New Capital
Securities may institute a Direct Action. The Company may not amend the
Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the New Capital Securities. If
the right to bring a Direct Action is removed following the Exchange Offer, the
Trust may become subject to the reporting obligations under the Exchange Act.
Notwithstanding any payments made to a holder of New Capital Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of or interest on the New Junior Subordinated Debentures,
and the Company shall be subrogated to the rights of the holder of such New
Capital Securities with respect to payments on the New Capital Securities to the
extent of any payments made by the Company to such holder in any Direct Action.
See "Risks Factors--Service of Process and Enforcement of Judgments."
The holders of the New Capital Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the New Junior Subordinated Debentures
65
unless there shall have been an Event of Default under the Trust Agreement. See
"--Description of New Capital Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS. The Indenture
provides that the Company shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any Person, and no Person shall consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
as an entirety or substantially as an entirety to the Company, unless: (i) in
case where the Company consolidates with or merges into another Person or
conveys or transfers its properties and assets substantially as an entirety to
any Person, the successor Person expressly assumes the Company's obligations on
the Junior Subordinated Debentures; (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
occurred and be continuing; and (iii) certain other conditions as prescribed in
the Indenture are met.
The general provisions of the Indenture do not afford holders of the New
Junior Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving the Company that may adversely affect holders of the
New Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE; DEFEASANCE. The Indenture provides that when,
among other things, all New Junior Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation (i) have become due and
payable or (ii) will become due and payable at maturity within one year, and the
Company deposits or causes to be deposited with the Debenture Trustee funds, in
trust, for the purpose and in an amount sufficient to pay and discharge the
entire indebtedness on the New Junior Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation, for the principal and
interest to the date of the deposit or to the Stated Maturity Date, as the case
may be, then the Indenture will cease to be of further effect (except as to the
Company's obligations to pay all other sums due pursuant to the Indenture and to
provide the officers' certificates and opinions of counsel described therein),
and the Company will be deemed to have satisfied and discharged the Indenture.
DEFEASANCE AND DISCHARGE. The Indenture provides, subject to the terms and
conditions set forth therein, that the Company, at the Company's option: (a)
will be discharged from any and all obligations in respect of the Junior
Subordinated Debentures (except for certain obligations to register the transfer
or exchange of Junior Subordinated Debentures, replace stolen, lost or mutilated
Junior Subordinated Debentures, maintain paying agencies and hold moneys for
payments in trust) or (b) need not comply with certain restrictive covenants of
the Indenture, in each case if the Company deposits, in trust with the Debenture
Trustee, money or U.S. government obligations which through the payment of
interest thereon and principal thereof in accordance with their terms will
provide money, in an amount sufficient to pay all the principal of, and interest
and premium, if any, on the Junior Subordinated Debentures on the dates such
payments are due in accordance with the terms of such Junior Subordinated
Debentures. To exercise any such option, the Company is required to deliver to
the Debenture Trustee an opinion of counsel to the effect that the deposit and
related defeasance would not cause the holders of the Junior Subordinated
Debentures to recognize income, gain or loss for United States federal income
tax purposes and, in the case of a discharge pursuant to clause (a), such
opinion shall be accompanied by (i) a private letter ruling to such effect
received by the Company from the United States Internal Revenue Service, (ii) a
revenue ruling pertaining to a comparable form of transaction to such effect
published by the United States Internal Revenue Service or (iii) other written
evidence of a relevant change in tax law or interpretation thereof.
SUBORDINATION. The Indenture provides that the Junior Subordinated Debentures
issued thereunder will be subordinate and junior in right of payment to all
Senior Indebtedness. No payment on account of the Junior Subordinated Debentures
may be made at any time when (i) any Senior Indebtedness is not paid when due,
(ii) any applicable grace period with respect to such default has ended and such
default has not been cured or waived or ceased to exist, or (iii) the maturity
of any Senior Indebtedness has been accelerated because of a default.
66
Upon any distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, all Senior Indebtedness must be paid in
full before the holders of the Junior Subordinated Debentures are entitled to
receive or retain any payment in respect thereof.
No payment on account of the Junior Subordinated Debentures may be made if
there shall have occurred and be continuing a default in any payment with
respect to Senior Indebtedness, or an event of default with respect to any
Senior Indebtedness resulting in the acceleration of the maturity thereof, or if
any judicial proceeding shall be pending with respect to any such default.
The term "Senior Indebtedness" shall mean, with respect to the Company, (i)
the principal, premium, if any, and interest in respect of (A) indebtedness of
the Company for money borrowed, and (B) indebtedness evidenced by securities,
notes, debentures, bonds or other similar instruments issued by the Company,
(ii) all capital lease obligations of the Company, (iii) all obligations of the
Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of the Company
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business), (iv) all obligations of the Company
for the reimbursement on any letter of credit, banker's acceptance, security
purchase facility or similar credit transaction, (v) all obligations of the type
referred to in clauses (i) through (iv) above of other persons for the payment
of which the Company is responsible or liable as obligor, guarantor or
otherwise, (vi) all obligations of the type referred to in clauses (i) through
(v) above of other persons secured by any lien on any property or asset of the
Company (whether or not such obligation is assumed by the Company), except for
(1) any such indebtedness that is by its terms expressly subordinated to or
ranks pari passu the Junior Subordinated Debentures, and (2) all debt securities
or guarantees in respect of those debt securities, issued to any other trust, or
a trustee of such trust, partnership or other entity affiliated with the Company
that is a financing vehicle of the Company (a "financing entity") in connection
with the issuance by such financing entity of equity securities or other
securities guaranteed by the Company pursuant to an instrument that ranks pari
passu with or junior in right of payment to the Guarantee. Such Senior
Indebtedness shall continue to be Senior Indebtedness and be entitled to the
benefits of the subordination provisions relating to the Junior Subordinated
Debentures irrespective of any amendment, modification or waiver of any term of
such Senior Indebtedness.
By reason of such subordination, in the event of an insolvency, creditors of
the Company who are holders of Senior Indebtedness, as well as certain general
creditors of the Company, may recover more, ratably, than the holders of the
Junior Subordinated Debentures. Additionally, the Company currently conducts
substantially all of its operations through subsidiaries, and the holders of
Junior Subordinated Debentures will be structurally subordinated to the
creditors of the Company's subsidiaries. See "Risk Factors--Ranking of
Subordinated Obligations Under the Guarantee and the Junior Subordinated
Debentures; Holding Company Structure."
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Company. The Company expects from time
to time to incur additional indebtedness constituting Senior Indebtedness.
GOVERNING LAW. The Indenture is, and the New Junior Subordinated Debentures
will be, governed by and construed in accordance with the laws of the State of
New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE. Following the Exchange Offer,
the Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of New Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
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DESCRIPTION OF NEW GUARANTEE
The Old Guarantee was executed and delivered by the Company concurrently with
the issuance by the Trust of the Old Capital Securities for the benefit of the
holders from time to time of the Old Capital Securities. As soon as practicable
after the date hereof, the Old Guarantee will be exchanged by the Company for
the New Guarantee for the benefit of the holders from time to time of the New
Capital Securities. The New Guarantee has been qualified under the Trust
Indenture Act. This summary of certain provisions of the New Guarantee does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the New Guarantee, including the
definitions therein of certain terms, and the Trust Indenture Act. The Guarantee
Trustee will hold the New Guarantee for the benefit of the holders of the New
Capital Securities.
GENERAL. The Company will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of the New Capital Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
New Capital Securities, to the extent not paid by or on behalf of the Trust (the
"Guarantee Payments"), will be subject to the New Guarantee: (i) any accumulated
and unpaid Distributions required to be paid on New Capital Securities, to the
extent that the Trust has funds on hand legally available therefor at such time,
(ii) the applicable Redemption Price with respect to New Capital Securities
called for redemption, to the extent that the Trust has funds on hand legally
available therefor at such time, or (iii) upon a voluntary or involuntary
termination and liquidation of the Trust, the lesser of (a) the Liquidation
Distribution and (b) the amount of assets of the Trust remaining available for
distribution to holders of New Capital Securities. The Company's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of the New Capital Securities or by
causing the Trust to pay such amounts to such holders.
The New Guarantee will rank subordinate and junior in right of payment to all
Senior Indebtedness to the extent provided therein. See "--Status of New
Guarantee". Because the Company is a holding company, the right of the Company
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise, is subject to the prior
claims of creditors of that subsidiary, except to the extent the Company may
itself be recognized as a creditor of that subsidiary. Accordingly, the
Company's obligations under the New Guarantee will be effectively subordinated
to all existing and future liabilities of the Company's subsidiaries, and
claimants should look only to the assets of the Company for payments thereunder.
See "--Description of New Junior Subordinated Debentures--General." The New
Guarantee does not limit the incurrence or issuance of other secured or
unsecured debt of the Company, including Senior Indebtedness, whether under the
Indenture, any other indenture that the Company may enter into in the future or
otherwise. The Company expects from time to time to incur additional
indebtedness constituting Senior Indebtedness.
The Company will, through the New Guarantee, the Trust Agreement, the New
Junior Subordinated Debentures and the Indenture, taken together, fully,
irrevocably and unconditionally guarantee all of the Trust's obligations under
the New Capital Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the New Capital Securities. See "Relationship Among
the New Capital Securities, the Trust Agreement, the New Junior Subordinated
Debentures and the New Guarantee."
STATUS OF THE NEW GUARANTEE. The New Guarantee will constitute an unsecured
obligation of the Company and will rank subordinate and junior in right of
payment to all Senior Indebtedness in the same manner as New Junior Subordinated
Debentures. The New Guarantee will rank pari passu with the Old Guarantee and
with all Other Guarantees issued by the Company.
The New Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the New Guarantee without first
instituting a legal proceeding against any other person or entity). The New
Guarantee will be held for
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the benefit of the holders of the New Capital Securities. The New Guarantee will
not be discharged except by payment of the Guarantee Payments in full to the
extent not paid by the Trust or upon distribution to the holders of the New
Capital Securities of the New Junior Subordinated Debentures. The Guarantee does
not place a limitation on the amount of additional Senior Indebtedness that may
be incurred by the Company. The Company expects from time to time to incur
additional indebtedness constituting Senior Indebtedness.
AMENDMENTS AND ASSIGNMENT. Except with respect to any changes that do not
materially adversely affect the rights of holders of the New Capital Securities
(in which case no vote will be required), the New Guarantee may not be amended
without the prior approval of the holders of a majority of the Liquidation
Amount of such outstanding New Capital Securities. The manner of obtaining any
such approval will be as set forth under "--Description of New Capital
Securities--Voting Rights; Amendment of the Trust Agreement." All guarantees
and agreements contained in the Guarantee Agreement shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall inure
to the benefit of the holders of the New Capital Securities then outstanding.
EVENTS OF DEFAULT. An event of default under the New Guarantee will occur upon
the failure of the Company to perform any of its payment or other obligations
thereunder. The holders of a majority in Liquidation Amount of the New Capital
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the New Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the New Guarantee.
Any holder of the New Capital Securities may institute a legal proceeding
directly against the Company to enforce its rights under the New Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity.
The Company, as guarantor, will be required to file annually with the New
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the New
Guarantee.
INFORMATION CONCERNING THE NEW GUARANTEE TRUSTEE. The New Guarantee Trustee,
other than during the continuance of a default by the Company in performance of
the New Guarantee, will undertake to perform only such duties as are
specifically set forth in the Guarantee and, during the continuance of such a
default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the New Guarantee Trustee will be under no obligation to exercise any
of the powers vested in it by the New Guarantee at the request of any holder of
the New Capital Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE NEW GUARANTEE. The New Guarantee will terminate and be of
no further force and effect upon full payment of the applicable Redemption Price
of the New Capital Securities, upon full payment of the Liquidation Amount
payable upon liquidation of the Trust or upon distribution of New Junior
Subordinated Debentures to the holders of the New Capital Securities. The New
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the New Capital Securities must restore payment
of any sums paid under the New Capital Securities or the New Guarantee.
GOVERNING LAW. The New Guarantee will be governed by and construed in
accordance with the laws of the State of New York.
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DESCRIPTION OF OLD SECURITIES
The terms of the Old Securities are substantially identical to the New
Securities, except that (i) the Old Securities have not been registered under
the Securities Act and are entitled to certain rights under the Registration
Rights Agreement (which rights will terminate upon consummation of the Exchange
Offer, except under limited circumstances), (ii) the New Capital Securities will
not contain the $100,000 minimum Liquidation Amount transfer restriction and
certain other restrictions on transfer applicable to the Old Capital Securities,
(iii) the New Capital Securities will not provide for any increase in the
Distribution rate thereon, (iv) the New Junior Subordinated Debentures will not
contain the $100,000 minimum principal amount transfer restriction and (v) the
New Junior Subordinated Debentures will not provide for any increase in the
interest rate thereon. The Old Securities provide that, in the event that the
Exchange Offer Registration Statement has not been filed by August 4, 1997 and
been declared effective by September 3, 1997, or, in certain limited
circumstances, in the event a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Old Capital
Securities is not declared effective by September 3, 1997, then interest will
accrue (in addition to the stated interest rate on the Old Junior Subordinated
Debentures) at the rate of 0.25% per annum on the principal amount of the Old
Junior Subordinated Debentures and Distributions will accrue (in addition to the
stated Distribution rate on the Old Capital Securities) at the rate of 0.25% per
annum on the Liquidation Amount of the Old Capital Securities, for the period
from the occurrence of such event until such time as such required Exchange
Offer Registration Statement or any required Shelf Registration Statement is
filed effective, as the case may be. In addition, if the Company has not
consummated the Exchange Offer on or prior to the 45th day after the date on
which the Exchange Offer Registration Statement is declared effective, and such
event continues for a period exceeding 30 consecutive days or 90 days in any
360-day period, then the interest rate on the Old Junior Subordinated Debentures
and the Distribution rate borne by the Old Capital Securities will,
respectively, increase by .25% commencing on the day after any such event, until
the Exchange Offer is consummated. The New Securities are not, and upon
consummation of the Exchange Offer the Old Securities will not be, entitled to
any such additional interest or Distributions. Accordingly, holders of Old
Capital Securities should review the information set forth under "Risk Factors--
Certain Consequences of a Failure to Exchange Old Capital Securities" and
"Description of New Securities."
RELATIONSHIP AMONG THE NEW CAPITAL SECURITIES, THE TRUST AGREEMENT, THE
NEW JUNIOR SUBORDINATED DEBENTURES AND THE NEW GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the New Capital Securities
(to the extent the Trust has funds on hand legally available for the payment of
such Distributions) will be irrevocably guaranteed by the Company as and to the
extent set forth under "Description of New Securities--Description of New
Guarantee." Taken together, the Company's obligations under the New Junior
Subordinated Debentures, the Indenture, the Trust Agreement and the New
Guarantee will provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of Distributions and other amounts due on the New Capital
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the New
Capital Securities. If and to the extent that the Company does not make the
required payments on the New Junior Subordinated Debentures, the Trust will not
have sufficient funds to make the related payments, including Distributions, on
the New Capital Securities. The New Guarantee will not cover any such payment
when the Trust does not have sufficient funds on hand legally available
therefor. In such event, the remedy of a holder of New Capital Securities is to
institute a Direct Action. The obligations of the Company under the New
Guarantee will be subordinate and junior in right of payment to all Senior
Indebtedness.
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SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
New Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the New Capital Securities, primarily
because: (i) the aggregate principal amount or Prepayment Price of the New
Junior Subordinated Debentures will be equal to the sum of the Liquidation
Amount or Redemption Price, as applicable, of the New Capital Securities and
Common Securities, (ii) the interest rate and interest and other payment dates
on the New Junior Subordinated Debentures will match the Distribution rate and
Distribution and other payment dates for the Trust Securities; (iii) the Company
shall, directly or indirectly, pay for all and any costs, expenses and
liabilities of the Trust except the Trust's obligations to holders of Trust
Securities under such Trust Securities; and (iv) the Trust Agreement provides
that the Trust is not authorized to engage in any activity that is not
consistent with the limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF NEW CAPITAL SECURITIES
A holder of any New Capital Security may institute a legal proceeding directly
against the Company to enforce its rights under the New Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Trust Agreement. However, in
the event of payment defaults under, or acceleration of, Senior Indebtedness,
the subordination provisions of the Indenture provide that no payments may be
made in respect of the New Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on New Junior Subordinated
Debentures would constitute an Event of Default under the Trust Agreement.
LIMITED PURPOSE OF THE TRUST
The New Capital Securities will represent beneficial ownership interests in
the Trust, and the Trust exists for the sole purpose of issuing and selling the
Trust Securities, investing the proceeds from the sale of the Trust Securities
in the Junior Subordinated Debentures and engaging in only those other
activities incidental thereto. A principal difference between the rights of a
holder of a New Capital Security and a holder of a New Junior Subordinated
Debenture is that a holder of a New Junior Subordinated Debenture will be
entitled to receive from the Company the principal amount of and interest on New
Junior Subordinated Debentures held, while a holder of New Capital Securities is
entitled to receive Distributions from the Trust (or, in certain circumstances,
from the Company under the New Guarantee) if and to the extent the Trust has
funds on hand legally available for the payment of such Distributions.
RIGHTS UPON DISSOLUTION
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary dissolution and liquidation
of the Trust, the holders of the Trust Securities will be entitled to receive,
out of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of New Securities--Description of New Capital Securities--
Liquidation of the Trust and Distribution of New Junior Subordinated
Debentures." Upon any voluntary or involuntary liquidation or bankruptcy of the
Company, the Property Trustee, as holder of the New Junior Subordinated
Debentures, would be a subordinated creditor of the Company, subordinated in
right of payment to all Senior Indebtedness as set forth in the Indenture, but
entitled to receive payment in full of principal and interest, before any
stockholders of the Company receive payments or distributions. Since the Company
will be the guarantor under the New Guarantee and will agree to pay for all
costs, expenses and liabilities of the Trust (other than the Trust's obligations
to the holders of its Trust Securities), the positions of a holder of New
Capital Securities and a holder of New Junior Subordinated Debentures relative
to stockholders of the Company in the event of liquidation or bankruptcy of the
Company are expected to be substantially the same.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
In the opinion of Willkie Farr & Gallagher, special United States tax counsel
to the Company and the Trust ("Tax Counsel"), the following is a summary of
certain of the material United States federal income tax consequences of the
purchase, ownership and disposition of Capital Securities held as capital assets
by a holder. This summary only addresses the tax consequences to a holder that
acquired the Old Capital Securities upon initial issuance at their original
offering price. It does not deal with special classes of holders such as banks,
thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors,
or persons that will hold the Capital Securities as a position in a "straddle,"
as part of a "synthetic security" or "hedge," as part of a "conversion
transaction" or other integrated investment, or as other than a capital asset.
This summary also does not address the tax consequences to persons that have a
functional currency other than the U.S. dollar or the tax consequences to
stockholders, partners or beneficiaries of a holder of Capital Securities.
Further, it does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any foreign
government that may be applicable to the Capital Securities. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations thereunder and the administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change, possibly on
a retroactive basis.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Old Capital Securities for New Capital Securities will not be
a taxable event to holders for United States federal income tax purposes. The
exchange of Old Capital Securities for New Capital Securities pursuant to the
Exchange Offer will not be treated as an "exchange" for United States federal
income tax purposes because the New Capital Securities should not be considered
to differ materially in kind or extent from the Old Capital Securities and
because the exchange will occur by operation of the terms of the Old Capital
Securities. If, however, the exchange of the Old Capital Securities for the New
Capital Securities were treated as an exchange for United States federal income
tax purposes, such exchange would constitute a recapitalization for federal
income tax purposes. Accordingly, the New Capital Securities will have the same
issue price as the Old Capital Securities, and a holder will have the same
adjusted tax basis and holding period in the New Capital Securities as the
holder had in the Old Capital Securities immediately before the exchange.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Old Junior Subordinated Debentures, Tax
Counsel has rendered its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Old Junior Subordinated Debentures will be classified for
United States federal income tax purposes as indebtedness of the Company. An
opinion of Tax Counsel, however, is not binding on the Internal Revenue Service
(the "IRS") or the courts. Prospective investors should note that no rulings
have been or are expected to be sought from the IRS with respect to any of these
issues and no assurance can be given that the IRS will not take contrary
positions. Moreover, no assurance can be given that any of the opinions
expressed herein will not be challenged by the IRS or, if challenged, that such
a challenge would not be successful.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Old Capital Securities, Tax Counsel has
rendered its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Trust Agreement and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, the Trust will be classified for United States
federal income tax purposes as a grantor trust and not as an association taxable
as a corporation, or any other entity subject to taxation. Accordingly, for
United States federal income tax purposes, each holder of Capital Securities
generally will be considered the owner of an undivided interest in the Junior
Subordinated Debentures, and each holder will be required to include in its
gross
72
income any interest (or original issue discount ("OID" accrued) with respect to
its allocable share of those Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations") applicable to
debt instruments issued on or after August 13, 1996, a "remote" contingency that
stated interest will not be timely paid will be ignored in determining whether a
debt instrument is issued with OID. The Company believes that the likelihood of
its exercising its option to defer payments of interest is "remote" since
exercising that option would prevent the Company from declaring dividends on any
class of its equity securities. Accordingly, the Company intends to take the
position, based on the advice of Tax Counsel, that the Junior Subordinated
Debentures will not be considered to be issued with OID and, accordingly, stated
interest on the Junior Subordinated Debentures generally will be taxable to a
holder as ordinary income at the time it is paid or accrued in accordance with
such holder's method of accounting.
Under the Regulations, if the Company were to exercise its option to defer
payments of interest, the Junior Subordinated Debentures would at that time be
treated as issued with OID, and all stated interest on the Junior Subordinated
Debentures would thereafter be treated as OID as long as the Junior Subordinated
Debentures remain outstanding. In such event, all of a holder's taxable interest
income with respect to the Junior Subordinated Debentures would thereafter be
accounted for on an economic accrual basis regardless of such holder's method of
tax accounting, and actual distributions of stated interest would not be
reported as taxable income. Consequently, a holder of Capital Securities would
be required to include in gross income OID even though the Company would not
make actual cash payments during an Extension Period. Moreover, under the
Regulations, if the option to defer the payment of interest were determined not
to be "remote", the Junior Subordinated Debentures would be treated as having
been originally issued with OID. In such event, all of a holder's taxable
interest income with respect to the Junior Subordinated Debentures would be
accounted for on an economic accrual basis regardless of such holder's method of
tax accounting, and actual distributions of stated interest would not be
reported as taxable income.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a dividends-
received deduction with respect to any income recognized with respect to the
Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF
THE TRUST
The Company will have the right at any time to liquidate the Trust and cause
the Junior Subordinated Debentures to be distributed to the holders of the Trust
Securities. Under current law, such a distribution, for United States federal
income tax purposes, would be treated as a nontaxable event to each holder, and
each holder would receive an aggregate tax basis in the Junior Subordinated
Debentures equal to such holder's aggregate tax basis in its Capital Securities.
A holder's holding period in the Junior Subordinated Debentures so received in
liquidation of the Trust would include the period during which the Capital
Securities were held by such holder. If, however, the Trust is characterized for
United States federal income tax purposes as an association taxable as a
corporation at the time of its dissolution, the distribution of the Junior
Subordinated Debentures may constitute a taxable event to holders of Capital
Securities and a holder's holding period in Junior Subordinated Debentures would
begin on the date such Junior Subordinated Debentures were received.
Under certain circumstances described herein (see "Description of New
Securities--Description of New Capital Securities"), the Junior Subordinated
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Capital Securities. Under current
law, such a redemption would, for United States federal income tax purposes,
constitute a taxable disposition of the redeemed Capital
73
Securities, and a holder could recognize gain or loss as if it sold such
redeemed Capital Securities for cash. See "-Sales of Capital Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities will recognize gain or loss equal to
the difference between its adjusted tax basis in the Capital Securities and the
amount realized on the sale of such Capital Securities (other than with respect
to accrued and unpaid interest which has not yet been included in income, which
will be treated as ordinary income). A holder's adjusted tax basis in the
Capital Securities generally will be its initial purchase price increased by OID
(if any) previously includible in such holder's gross income to the date of
disposition and decreased by payments (if any) received on the Capital
Securities in respect of OID. Such gain or loss generally will be a capital gain
or loss and generally will be a long-term capital gain or loss if the Capital
Securities have been held for more than one year.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who uses the accrual method of accounting for
tax purposes (and a cash method holder, if the Junior Subordinated Debentures
are deemed to have been issued with OID) who disposes of his Capital Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Junior Subordinated Debentures
through the date of disposition in income as ordinary income (i.e., interest or,
possibly, OID), and to add such amount to his adjusted tax basis in his pro rata
share of the underlying Junior Subordinated Debentures deemed disposed of. To
the extent the selling price is less than the holder's adjusted tax basis (which
will include all accrued but unpaid interest) a holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed the Proposed Legislation, which
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations, such as the Junior Subordinated
Debentures, issued on or after December 7, 1995 if such debt obligations have a
maximum term in excess of 20 years and are not shown as indebtedness on the
issuer's applicable consolidated balance sheet. In addition, the Proposed
Legislation would generally deny corporate issuers a deduction for interest in
respect of certain debt obligations, such as the Junior Subordinated Debentures,
issued on or after December 7, 1995, if such debt obligations have a weighted
average maturity of more than 40 years. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued the Joint Statement indicating their intent that the
Proposed Legislation, if adopted by either of the tax-writing committees of
Congress, would have an effective date that is no earlier than the date of
"appropriate Congressional action." In addition, subsequent to the publication
of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam
M. Gibbons and Charles B. Rangel wrote the Democrat Letters, which concurred
with the view expressed in the Joint Statement. If the principles contained in
the Joint Statement and the Democrat Letters were followed and if the Proposed
Legislation were enacted, such legislation would not apply to the Junior
Subordinated Debentures. There can be no assurance, however, that the effective
date guidance contained in the Joint Statement and the Democrat Letters will be
incorporated into the Proposed Legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Company to deduct the interest payable on the Junior
Subordinated Debentures. Accordingly, there can be no assurance that a Tax Event
will not occur. The occurrence of a Tax Event may result in the redemption of
the Junior Subordinated Debentures for cash, in which event the holders of the
Capital Securities would receive cash in redemption of their Capital Securities.
See "Description of New Securities--Description of New Capital Securities-
Redemption" and "Description of New Junior Subordinated Debentures-
Conditional Right to Advance Maturity and Special Event Prepayment."
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UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes. A "U.S. Holder" is a holder of
Capital Securities who or which is a citizen or individual resident (or is
treated as a citizen or individual resident) of the United States for federal
income tax purposes, a corporation or partnership created or organized (or
treated as created or organized for federal income tax purposes) in or under the
laws of the United States or any political subdivision thereof, or a trust or
estate the income of which is includible in its gross income for federal income
tax purposes without regard to its source. (For taxable years beginning after
December 31, 1996 (or for the immediately preceding taxable year, if the trustee
of a trust so elects), a trust is a U.S. Holder for federal income tax purposes
if, and only if, (i) a court within the United States is able to exercise
primary supervision over the administration of the trust and (ii) one or more
United States trustees have the authority to control all substantial decisions
of the trust.) Under present United States federal income tax laws: (i) payments
by the Trust or any of its paying agents to any holder of a Capital Security who
or which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the Capital
Security does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of the Company entitled to vote,
(b) the beneficial owner of the Capital Security is not a controlled foreign
corporation that is related to the Company through stock ownership, and (c)
either (A) the beneficial owner of the Capital Security certifies to the Trust
or its agent, under penalties of perjury, that it is not a United States holder
and provides its name and address or (B) a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution"), and holds
the Capital Security in such capacity, certifies to the Trust or its agent,
under penalties of perjury, that such statement has been received from the
beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes the Trust or its agent with a copy thereof; and
(ii) a United States Alien Holder of a Capital Security will not be subject to
United States federal withholding tax on any gain realized upon the sale or
other disposition of a Capital Security.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may be
subject to a "backup" withholding tax of 31 percent unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States federal income tax, provided the
required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
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CERTAIN ERISA CONSIDERATIONS
The Company, the obligor with respect to the New Junior Subordinated
Debentures held by the Trust, and its affiliates and the Property Trustee 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 that are subject to ERISA and/or Section 4975 of the Code
("Plans"). Any purchaser proposing to acquire New Capital Securities with assets
of any Plan should consult with its counsel. The purchase and/or holding of New
Capital Securities 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 Company, the
Property Trustee 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 New Capital
Securities 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 entered into at the direction of 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
entered into at the direction of an in-house manager). In addition, as described
below, a Plan fiduciary considering the acquisition of New Capital Securities
should be aware that the assets of the Trust may be considered "plan assets" for
ERISA purposes. Therefore, a Plan fiduciary should consider whether the
acquisition of New Capital Securities could result in a delegation of fiduciary
authority to the Property Trustee, and, if so, whether such a delegation of
authority is permissible under the Plan's governing instrument or any investment
management agreement with the Plan. In making such determination, a Plan
fiduciary should note that the Property Trustee is a U.S. bank qualified to be
an investment manager (within the meaning of section 3(38) of ERISA) to which
such a delegation of authority generally would be permissible under ERISA.
Further, prior to an Event of Default with respect to the New Junior
Subordinated Debentures, the Property Trustee will have only limited custodial
and ministerial authority with respect to Trust assets.
Under the U.S. Department of Labor regulations defining "plan assets" for
ERISA purposes (the "Plan Assets Regulations"), the assets of the Trust will be
considered plan assets of Plans owning New Capital Securities unless the
aggregate investment in New Capital Securities by "benefit plan investors" is
not deemed "significant" or the New Capital Securities qualify as "publicly
offered securities" as defined in such Regulations. For this purpose, equity
participation by benefit plan investors will not be considered "significant" on
any date only if, immediately after the most recent acquisition of New Capital
Securities, the aggregate interest in the New Capital Securities held by benefit
plan investors will be less than 25% of the value of the New Capital Securities.
Although it is possible that the equity participation by benefit plan investors
in New Capital Securities on any date will not be "significant" for purposes of
the Plan Assets Regulations, such result cannot be assured.
The New Capital Securities may qualify as "publicly offered securities" under
the Plan Assets Regulations if at the time of the Exchange Offer they are also
"widely held" and "freely transferable." Under the Plan Assets Regulations, a
class of securities is "widely held" only if it is a class of securities that is
owned by 100 or more investors independent of the issuer and of one another.
Although it is possible that at the time of the Exchange Offer the New Capital
Securities will be "widely held," such result cannot be assured. Whether a
security is "freely transferable" for purposes of the Plan Assets Regulations is
a factual question to be determined on the basis of all relevant facts and
circumstances. If at the time of the Exchange Offer the New Capital Securities
qualify as "publicly offered securities," the assets of the Trust should not be
"plan assets" with respect to Plans acquiring New Capital Securities. If at the
time of the Exchange Offer the New Capital Securities do not qualify as
"publicly offered securities," the "plan asset" considerations discussed in the
preceding paragraphs could be applicable in connection with the investment by
Plans in the New Capital Securities.
76
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Capital Securities for its own account as
a result of market-making or other trading activities in connection with the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Capital Securities. This Prospectus, as it may be
amended or supplemented from time to time, may be used by Participating Broker-
Dealers during the period referred to below in connection with resales of New
Capital Securities received in exchange for Old Capital Securities if such Old
Capital Securities were acquired by such Participating Broker-Dealers for their
own accounts as a result of such activities. The Company and the Trust 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 New Capital Securities for a period of not more than 180 days after the
Expiration Date (subject to extension under certain limited circumstances
described herein) or, if earlier, when all such New Capital Securities have been
disposed of by such Participating Broker-Dealer. However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of New Capital Securities received in exchange for Old Capital Securities
pursuant to the Exchange Offer must notify the Company or the Trust, or cause
the Company or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the space
provided for that purpose in the Letter of Transmittal or may be delivered to
the Exchange Agent at one of the addresses set forth herein under "The Exchange
Offer--Exchange Agent." See "The Exchange Offer--Resales of New Capital
Securities. "
The Company or the Trust will not receive any cash proceeds from the issuance
of the New Capital Securities offered hereby. New Capital Securities received by
broker-dealers for their own accounts in connection with the Exchange Offer may
be sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the New
Capital Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such New Capital Securities.
Any broker-dealer that resells New Capital Securities that were received by it
for its own account in connection with the Exchange Offer and any broker or
dealer that participates in a distribution of such New Capital Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act, and any
profit on any such resale of New Capital Securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the New Capital
Securities will be passed upon by Morris, Nichols, Arsht & Tunnel, special
Delaware counsel to the Trust and the Company. The validity under New York law
of the New Guarantee and the New Junior Subordinated Debentures and certain
other matters of New York law will be passed upon by Willkie Farr & Gallagher,
special United States counsel to the Company and the Trust. Certain matters of
Bermuda law will be passed upon by Conyers, Dill & Pearman, special Bermuda
counsel to the Company and the Trust. Certain matters relating to United States
federal income tax considerations will be passed upon for the Company and the
Trust by Willkie Farr & Gallagher, special United States tax counsel to the
Company and the Trust. Willkie Farr & Gallagher will rely on the opinion of
Conyers, Dill & Pearman with respect to Bermuda law and on the opinion of
Morris, Nichols, Arsht & Tunnel with respect to certain Delaware law matters.
Willkie Farr & Gallagher has from time to time represented each of the Initial
Purchasers, and may represent such parties in the future, in connection with
matters unrelated to the offering of the New Capital Securities.
77
EXPERTS
The consolidated financial statements of RenaissanceRe Holdings Ltd. and
subsidiaries as of December 31, 1996, 1995 and 1994 and for each of the years in
the three-year period ended December 31, 1996 and the selected financial data
for each of the years in the three-year period ended December 31, 1996 included
in the 1996 Form 10-K incorporated herein by reference have been audited by
Ernst & Young, independent auditors. Such consolidated financial statements and
selected financial data are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
78
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 98 of the Companies Act 1981 of Bermuda (the "Act"), which is
applicable to the Company, provides generally that a Bermuda company may
indemnify its directors, officers and auditors against any liability which by
virtue of Bermuda law otherwise would be imposed on them, except in cases where
such liability arises from the fraud or dishonesty of which such director,
officer or auditor may be guilty in relation to the company. Section 98 further
provides that a Bermudian company may indemnify its directors, officers and
auditors against any liability incurred by them in defending any proceedings,
whether civil or criminal, in which judgment is awarded in their favor or in
which they are acquitted or granted relief by the Supreme Court of Bermuda in
certain proceedings arising under Section 281 of the Act.
The Company has adopted provisions in its Bye-Laws that provide that the
Company shall indemnify its officers and directors as permitted under the Act;
provided, however, that such indemnity does not extend to any matter in respect
of any willful negligence, fraud or dishonesty which may attach to any officer
or director.
The Trust Agreement provides, in certain circumstances, for indemnification
by the Company in favor of the administrative trustees of the Trust, the
officers, directors, shareholders, members, partners, employees, representatives
or agents of such trustees, or any officer, employee or agent of the Trust or
its affiliates. In addition, the Purchase Agreement between the Company, the
Trust and the Initial Purchasers, relating to the initial private placement of
the Old Capital Securities, provides for indemnification of the Trust, the
Company, its officers and its directors by the Initial Purchasers under certain
circumstances.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
4.1 Indenture, dated as of March 7, 1997, between RenaissanceRe Holdings Ltd.
and The Bank of New York, as Debenture Trustee, dated as of March 7,
1997, relating to the Junior Subordinated Debentures**
4.2 Form of Certificate of New Junior Subordinated Debenture (included as
Exhibit A to Exhibit 4.1)
4.3 Certificate of Trust of RenaissanceRe Capital Trust+
4.4 Amended and Restated Declaration of Trust for RenaissanceRe Capital
Trust, dated as of March 9, 1997, by the Company, The Bank of New York
(Delaware), as Delaware Trustee, The Bank of New York, as Property
Trustee, and the Administrative Trustees named therein**
4.5 Form of New Capital Security Certificate for RenaissanceRe Capital Trust
(included as Exhibit A-1 to Exhibit 4.4)**
4.6 Form of New Capital Securities Guarantee of RenaissanceRe Holdings Ltd.
relating to the New Capital Securities+
4.7 Registration Rights Agreement, dated March 7, 1997, among the Company,
the Trust and the Initial Purchasers named therein**
5.1 Opinion of Willkie Farr & Gallagher as to certain issues of New York law+
5.2 Opinion of Morris, Nichols, Arsht & Tunnell as to legality of the New
Capital Securities to be issued by RenaissanceRe Capital Trust+
5.3 Opinion of Conyers, Dill & Pearman as to legality of the New Junior
Subordinated Debentures and the New Capital Securities Guarantee to be
issued by RenaissanceRe Holdings Ltd.+
8.1 Opinion of Willkie Farr & Gallagher as to certain United States federal
income tax matters+
12.1 Computation of ratio of earnings to combined fixed charges and preferred
stock dividends+
23.1 Consent of Ernst & Young+
23.2 Consent of Willkie Farr & Gallagher (included in Exhibits 5.1 and 8.1)+
23.3 Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit 5.2)+
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23.4 Consent of Conyers Dill & Pearman (included in Exhibit 5.3+
24.1 Power of Attorney of certain officers and directors of RenaissanceRe
Holdings Ltd.+
25.1 Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the Indenture+
25.2 Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the Amended and Restated Declaration of RenaissanceRe
Capital Trust+
25.3 Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the New Guarantee for the benefit of the holders of New
Capital Securities of RenaissanceRe Capital Trust+
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
- --------------------
+ Filed herewith.
* To be filed by amendment.
** Incorporated by reference to the Company's Current Report on Form 8-K
filed with the Commission on March 19, 1997.
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
facts or events arising after the effective date of the Registration
Statement which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement and to
include any material information with respect to the plan of distribution
not previously disclosed in the Registration Statement or any material
change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration 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.
The undersigned Registrants hereby undertake that, for purposes of determining
any liability under the Securities Act, as amended, each filing of a
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of each
undersigned Registrant pursuant to the foregoing provisions, or otherwise, each
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by each undersigned Registrant
of expenses incurred or paid by a director, officer of controlling person of
each 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, each Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt
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of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired or involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
II-3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, RENAISSANCERE
HOLDINGS LTD. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN PEMBROKE, BERMUDA ON
THE THIRD DAY OF JULY, 1997.
RenaissanceRe Holdings Ltd.
By: /s/ James N. Stanard
-----------------------------
JAMES N. STANARD
President, Chief Executive
Officer and Chairman of the
Board of Directors
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT
IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ James N. Stanard President and Chief July 3, 1997
- ------------------------------- Executive Officer
JAMES N. STANARD and Chairman of the
Board of Directors
/s/ Keith S. Hynes Senior Vice July 3, 1997
- ------------------------------- President and Chief
KEITH S. HYNES Financial Officer
(Principal
Accounting Officer)
/s/ Arthur S. Bahr Director July 3, 1997
- -------------------------------
ARTHUR S. BAHR
/s/ Thomas A. Cooper Director July 3, 1997
- -------------------------------
THOMAS A. COOPER
/s/ Edmund B. Greene Director July 3, 1997
- -------------------------------
EDMUND B. GREENE
/s/ Gerald L. Igou Director July 3, 1997
- -------------------------------
GERALD L. IGOU
/s/ Kewsong Lee Director July 3, 1997
- -------------------------------
KEWSONG LEE
/s/ John M. Lummis Director July 3, 1997
- -------------------------------
JOHN M. LUMMIS
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SIGNATURE TITLE DATE
/s/ Howard H. Newman Director July 3, 1997
- -------------------------------
HOWARD H. NEWMAN
/s/ Scott E. Pardee Director July 3, 1997
- -------------------------------
SCOTT E. PARDEE
/s/ John C. Sweeney Director July 3, 1997
- -------------------------------
JOHN C. SWEENEY
/s/ David A. Tanner Director July 3, 1997
- -------------------------------
DAVID A. TANNER
CT Corporation System
By:/s/ Duane Coots Authorized July 3, 1997
---------------------------- Representative in
NAME: DUANE COOTS the United States
TITLE: ASSISTANT SECRETARY
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Pursuant to the requirements of the Securities Act of 1933, Renaissancere
Capital Trust certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 3rd day of July, 1997.
RENAISSANCERE CAPITAL TRUST
By: /s/ Keith S. Hynes
---------------------------------
KEITH S. HYNES,
as Administrative Trustee
By: /s/ John D. Nichols, Jr.
---------------------------------
JOHN D. NICHOLS, JR.,
as Administrative Trustee
By: /s/ Martin J. Merritt
---------------------------------
MARTIN J. MERRITT,
as Administrative Trustee
II-6
EXHIBIT INDEX
- ---------------
+ Filed herewith.
* To be filed by amendment.
** Incorporated by reference to the Company's Current Report on Form 8-K
filed with the Commission on March 19, 1997.
II-7