S-3/A: Registration statement for specified transactions by certain issuers
Published on May 6, 2002
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 2002
REGISTRATION NO. 333-83308
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RENAISSANCERE HOLDINGS LTD.
(Exact name of registrant as specified in its charter)
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RENAISSANCERE CAPITAL TRUST II
(Exact name of registrant as specified in its certificate of trust)
COPIES TO:
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE
PROSPECTUS INCLUDED HEREIN IS A COMBINED PROSPECTUS AND ALSO RELATES TO
$64,250,000 AGGREGATE PRINCIPAL AMOUNT OF COMMON SHARES, PREFERENCE SHARES,
DEPOSITARY SHARES, DEBT SECURITIES, WARRANTS, SHARE PURCHASE CONTRACTS AND SHARE
PURCHASE UNITS REGISTERED PURSUANT TO REGISTRATION STATEMENT NO. 333-70528
PREVIOUSLY FILED BY THE REGISTRANT ON FORM S-3 AND DECLARED EFFECTIVE ON OCTOBER
3, 2001. IN CONNECTION WITH THE REGISTRATION OF THOSE SECURITIES THE REGISTRANT
PAID AN AGGREGATE REGISTRATION FEE IN THE AMOUNT OF $16,062.50.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 6, 2002
PROSPECTUS
$564,250,000
RENAISSANCERE HOLDINGS LTD.
COMMON SHARES, PREFERENCE SHARES, DEPOSITARY SHARES, DEBT SECURITIES, WARRANTS
TO PURCHASE COMMON SHARES, WARRANTS TO PURCHASE PREFERENCE SHARES, WARRANTS TO
PURCHASE DEBT SECURITIES, SHARE PURCHASE CONTRACTS AND SHARE PURCHASE UNITS
RENAISSANCERE CAPITAL TRUST II
PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED TO THE EXTENT PROVIDED IN THIS PROSPECTUS
BY
RENAISSANCERE HOLDINGS LTD.
We and the Capital Trust may offer and sell from time to time:
- common shares;
- preference shares;
- depositary shares representing preference shares, common shares or debt
securities;
- senior or subordinated debt securities;
- warrants to purchase common shares, preference shares or debt securities;
- preferred securities of the Capital Trust which we will guarantee; and
- share purchase contracts and share purchase units.
We will provide the specific terms and initial public offering prices of
these securities in supplements to this prospectus. You should read this
prospectus and any supplement carefully before you invest. We will not use this
prospectus to confirm sales of any securities unless it is attached to a
prospectus supplement.
We may sell these securities to or through underwriters and also to other
purchasers or through agents. The names of any underwriters or agents will be
stated in an accompanying prospectus supplement.
We may sell any combination of these securities in one or more offerings up
to a total dollar amount of $564,250,000.
Our common shares are traded on the New York Stock Exchange under the
symbol "RNR." On April 30, 2002, the closing price of the common shares, as
reported by the New York Stock Exchange, was $117.20 per share. Other than our
common shares, there is no market for the other securities we may offer.
INVESTING IN OUR SECURITIES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON
PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus may not be used to consummate sales of offered securities
unless accompanied by a prospectus supplement.
The date of this prospectus is , 2002.
Except as expressly provided in an underwriting agreement, no offered
securities may be offered or sold in Bermuda (although offers may be made to
persons in Bermuda from outside Bermuda) and offers may only be accepted from
persons resident in Bermuda, for Bermuda exchange control purposes, where such
offers have been delivered outside of Bermuda. Persons resident in Bermuda, for
Bermuda exchange control purposes, may require the prior approval of the Bermuda
Monetary Authority in order to acquire any offered securities.
In this prospectus, references to "dollar" and "$" are to United States
currency, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
TABLE OF CONTENTS
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ABOUT THIS PROSPECTUS
This prospectus is part of registration statement that we and the Capital
Trust have filed with the Securities and Exchange Commission using a "shelf"
registration process, relating to the common shares, preference shares,
depositary shares, debt securities, warrants, share purchase contracts, share
purchase units, preferred securities and preferred securities guarantees
described in this prospectus. This means:
- we and the Capital Trust may issue any combination of securities covered
by this prospectus from time to time, up to a total initial offering
price of $564,250,000;
- we or the Capital Trust, as the case may be, will provide a prospectus
supplement each time these securities are offered pursuant to this
prospectus; and
- the prospectus supplement will provide specific information about the
terms of that offering and also may add, update or change information
contained in this prospectus.
This prospectus provides you with a general description of the securities we or
the Capital Trust may offer. This prospectus does not contain all of the
information set forth in the registration statement as permitted by the rules
and regulations of the Commission. For additional information regarding us, the
Capital Trust and the offered securities, please refer to the registration
statement. Each time we or the Capital Trust sells securities, we or the Capital
Trust will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with additional
information described under the heading "Where You Can Find More Information."
All references to "we," "our" or "RenaissanceRe" refer to RenaissanceRe Holdings
Ltd.
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RENAISSANCERE HOLDINGS LTD.
OVERVIEW
RenaissanceRe Holdings Ltd., also referred to as "RenaissanceRe," 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. Our principal business is property catastrophe reinsurance, written on
a worldwide basis through Renaissance Reinsurance Ltd. ("Renaissance
Reinsurance"), a Bermuda company and wholly owned subsidiary. Some of our
coverages in Europe are provided through Renaissance Reinsurance of Europe, a
wholly owned subsidiary organized in Ireland. Based on gross premiums written,
we are one of the largest providers of property catastrophe reinsurance coverage
in the world.
We provide 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 coverages we provide also expose us to claims arising from
other natural and man-made catastrophes such as winter storms, freezes, floods,
fires and tornadoes.
Our results depend to a large extent on the frequency and severity of
catastrophic events, and the coverage offered to clients impacted thereby. In
addition, from time to time, we may consider opportunistic diversification into
new ventures, either through organic growth or the acquisition of other
companies or books of business. In evaluating such new ventures, we seek an
attractive return on equity, the ability to develop or capitalize on a
competitive advantage and opportunities that will not detract from our core
reinsurance operations. Accordingly, we regularly review strategic opportunities
and periodically engage in discussions regarding possible transactions.
OTHER INFORMATION
For further information regarding RenaissanceRe including financial
information, you should refer to our recent filings with the Securities and
Exchange Commission.
We were incorporated in June 1993. We conduct our operations through wholly
owned subsidiaries and joint ventures in Bermuda, the United States and Europe.
Our registered and principal executive offices are located at Renaissance House,
8-12 East Broadway, Pembroke HM 19 Bermuda, and our telephone number is (441)
295-4513.
THE CAPITAL TRUST
The Capital Trust is a statutory business trust created under Delaware law
pursuant to (1) a trust agreement executed by us, as sponsor of the Capital
Trust, and the Capital Trustees for the Capital Trust and (2) the filing of a
certificate of trust with the Delaware Secretary of State on January 5, 2001.
The trust agreement will be amended and restated in its entirety substantially
in the form filed as an exhibit to the registration statement of which this
prospectus forms a part. The restated trust agreement will be qualified as an
indenture under the Trust Indenture Act of 1939. The Capital Trust exists for
the exclusive purposes of:
- issuing and selling the preferred securities and common securities that
represent undivided beneficial interests in the assets of the Capital
Trust;
- using the gross proceeds from the sale of the preferred securities and
common securities to acquire a particular series of our junior
subordinated debt securities; and
- engaging in only those other activities necessary or incidental to the
issuance and sale of the preferred securities and common securities.
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We will indirectly or directly own all of the common securities of the
Capital Trust. The common securities of the Capital Trust will rank equally, and
payments will be made thereon pro rata, with the preferred securities of the
Capital Trust, except that, if an event of default under the restated trust
agreement has occurred and is continuing, the rights of the holders of the
common securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the preferred securities. Unless otherwise disclosed in the
applicable prospectus supplement, we will, directly or indirectly, acquire
common securities in an aggregate liquidation amount equal to at least 3% of the
total capital of the Capital Trust. The Capital Trust is a legally separate
entity.
Unless otherwise disclosed in the related prospectus supplement, the
Capital Trust will have a term of approximately 55 years, but may dissolve
earlier as provided in the restated trust agreement of the Capital Trust. Unless
otherwise disclosed in the applicable prospectus supplement, the Capital Trust's
business and affairs will be conducted by the trustees (the "Capital Trustees")
appointed by us, as the direct or indirect holder of all of the common
securities. The holder of the common securities will be entitled to appoint,
remove or replace any of, or increase or reduce the number of, the Capital
Trustees of the Capital Trust. The duties and obligations of the Capital
Trustees of the Capital Trust will be governed by the restated trust agreement
of the Capital Trust.
Unless otherwise disclosed in the related prospectus supplement, two of the
Capital Trustees (the "Administrative Trustees") of the Capital Trust will be
persons who are our employees or employees or officers of companies affiliated
with us. One Capital Trustee of the Capital Trust will be a financial
institution (the "Property Trustee") that is not affiliated with us and has a
minimum amount of combined capital and surplus of not less than $50,000,000,
which shall act as property trustee and as indenture trustee for the purposes of
compliance with the provisions of the Trust Indenture Act, pursuant to the terms
set forth in the applicable prospectus supplement. In addition, one Capital
Trustee of the Capital Trust (which may be the Property Trustee, if it otherwise
meets the requirements of applicable law) will have its principal place of
business or reside in the State of Delaware (the "Delaware Trustee"). We will
pay all fees and expenses related to the Capital Trust and the offering of
preferred securities and common securities.
The office of the Delaware Trustee for the Capital Trust in the State of
Delaware is located at c/o Bankers Trust (Delaware), 1011 Centre Road, Suite
200, Wilmington, Delaware 19805-1266. The principal executive offices for the
Capital Trust is located at c/o Renaissance U.S. Holdings Inc., 319 W. Franklin
Street, Suite 104, Richmond, Virginia 23220. The telephone number of the Capital
Trust is (804) 344-3600.
GENERAL DESCRIPTION OF THE OFFERED SECURITIES
We may from time to time offer under this prospectus, separately or
together:
- common shares, which we would expect to list on the New York Stock
Exchange,
- preference shares, the terms and series of which would be described in
the related prospectus supplement,
- depositary shares, each representing a fraction of a share of common
shares or a particular series of preference shares, which will be
deposited under a deposit agreement among us, a depositary selected by us
and the holders of the depository receipts,
- senior debt securities,
- subordinated debt securities which will be subordinated in right of
payment to our senior indebtedness, of which $183.5 million was
outstanding as of April 15, 2002,
- warrants to purchase common shares and warrants to purchase preference
shares, which will be evidenced by share warrant certificates and may be
issued under the share warrant agreement independently or together with
any other securities offered by any prospectus supplement and may be
attached to or separate from such other offered securities,
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- warrants to purchase debt securities, which will be evidenced by debt
warrant certificates and may be issued under the debt warrant agreement
independently or together with any other securities offered by any
prospectus supplement and may be attached to or separate from such other
offered securities,
- share purchase contracts obligating holders to purchase from us a
specified number of common shares or preference shares at a future date
or dates, and
- share purchase units, consisting of a share purchase contract and, as
security for the holder's obligation to purchase common shares or
preference shares under the share purchase contract, any of (1) our debt
securities, (2) debt obligations of third parties, including U.S.
Treasury securities or (3) preferred securities of the Capital Trust.
The Capital Trust may offer preferred securities representing undivided
beneficial interests in its assets, which will be fully and unconditionally
guaranteed to the extent described in this prospectus by us.
The aggregate initial offering price of these offered securities will not
exceed $564,250,000.
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERENCE SHARE DIVIDENDS OF RENAISSANCERE
For purposes of computing the following ratios, earnings consist of net
income before income tax expense plus fixed charges to the extent that such
charges are included in the determination of earnings. Fixed charges consist of
interest costs plus one-third of minimum rental payments under operating leases
(estimated by management to be the interest factor of such rentals).
The Capital Trust had no operations during the periods set forth above.
The ratios for the fiscal year ended December 31, 2001 reflect our issuance
of $150,000,000 aggregate principal amount of 7.0% Senior Notes due 2008 in July
2001 and $150,000,000 of Series A Preference Shares in November 2001.
RECENT DEVELOPMENTS
On May 2, 2002, we announced that our Board of Directors approved a
three-for-one split of our common shares in the form of a share dividend. We
expect to pay the stock dividend on May 30, 2002 to shareholders of record on
May 16, 2002. The share information and per share information contained herein
does not give effect to the stock split.
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RISK FACTORS
Before you invest in our securities, you should carefully consider the
risks involved. In addition, we may include additional risk factors in a
prospectus supplement to the extent there are additional risks related to the
securities offered by that prospectus supplement. Accordingly, you should
carefully consider the following risk factors and any additional risk factors
included in the relevant prospectus supplement:
BECAUSE OF OUR EXPOSURE TO CATASTROPHIC EVENTS, OUR FINANCIAL RESULTS MAY VARY
SIGNIFICANTLY FROM ONE PERIOD TO THE NEXT.
Our principal product is property catastrophe reinsurance. We also sell
primary insurance that is exposed to catastrophe risk. We therefore have a large
overall exposure to natural and man-made disasters. Our property catastrophe
reinsurance contracts cover unpredictable events such as earthquakes,
hurricanes, winter storms, freezes, floods, fires, tornados and other man-made
or natural disasters. As a result, our operating results have historically been,
and we expect will continue to be, largely affected by relatively few events of
high magnitude. Under the reinsurance policies that we write, we generally do
not experience significant claims until insured industry losses reach or exceed
at least several hundred million dollars.
Claims from catastrophic events could cause substantial volatility in our
financial results for any fiscal quarter or year and adversely affect our
financial condition or results of operations. Our ability to write new business
could also be impacted. We believe that increases in the value and geographic
concentration of insured property and the effects of inflation will increase the
severity of claims from catastrophic events in the future.
OUR CLAIMS AND LOSS RESERVES ARE BASED ON PROBABILITIES AND MODELED LOSSES,
WHICH ARE SUBJECT TO INHERENT UNCERTAINTIES.
Our financial results depend in part on our ability to accurately price and
manage the risks we reinsure and insure. Our claim and loss reserves reflect our
estimates using actuarial and statistical projections at a given point in time,
and our expectations of the ultimate settlement and administration costs of
claims incurred. We utilize actuarial and computer models as well as historical
reinsurance and insurance industry loss statistics to assist in the
establishment of appropriate claim reserves. However, because of the many
assumptions and estimates involved in establishing reserves, the reserving
process is inherently uncertain.
As a result, if some of these assumptions or estimates prove to be
inaccurate, our actual claims and claim expenses paid might exceed, perhaps
substantially, the reserve estimates reflected in our financial statements. If
this were to occur, we would be required to increase claim reserves. This would
reduce our net income by a corresponding amount in the period in which the
deficiency is identified.
Unlike the loss reserves of U.S. insurers, the loss reserves established by
our Bermuda companies are not regularly examined by insurance regulators.
WE COULD FACE UNANTICIPATED LOSSES FROM WAR, TERRORISM AND POLITICAL UNREST,
AND THESE OR OTHER UNANTICIPATED LOSSES COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We may have substantial exposure to unexpected, large losses resulting from
future man-made catastrophic events, such as acts of war, acts of terrorism and
political instability. Although we may attempt to exclude losses from terrorism
and certain other similar risks from some coverages written by us, we may not be
successful in doing so. These risks are inherently unpredictable, although
recent events may lead to increased frequency and severity of losses. It is
difficult to predict the timing of such events with statistical certainty or
estimate the amount of loss any given occurrence will generate. We believe it is
impossible to eliminate completely our exposure to unforeseen or unpredictable
events.
Accordingly, our reserves may not be adequate to cover losses when they
materialize. As described above, if we were required to increase our reserves
our reported income would decrease in the affected period. In particular,
unforeseen large losses could materially adversely affect our financial
condition and
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results of operations. Over time, if the severity and frequency of these events
remains higher than in the past, our results of operations could become more
volatile, which could cause the value of investment in our securities to
fluctuate more widely.
REINSURANCE PRICES MAY DECLINE, WHICH COULD AFFECT OUR PROFITABILITY.
Demand for reinsurance depends on numerous factors, including the frequency
and severity of catastrophic events, levels of capacity, general economic
conditions and underwriting results of primary property insurers. The supply of
reinsurance is related to prevailing prices, recent loss experience and levels
of surplus capacity. All of these factors fluctuate and may contribute to price
declines generally in the reinsurance industry. Our recent, and anticipated,
growth relates in part to improved industry pricing. Premium rates or other
terms and conditions of trade may vary in the future. If any of these factors
were to cause the demand for reinsurance to fall or the supply to rise, our
profitability could be adversely affected. In particular, we might lose existing
customers, decline new business or experience a drop in prices.
WE OPERATE IN A HIGHLY COMPETITIVE ENVIRONMENT.
The property catastrophe reinsurance industry is highly competitive. We
compete, and will continue to compete, with major U.S. and non-U.S. insurers and
property catastrophe reinsurers, including other Bermuda-based property
catastrophe reinsurers. Following the September 11th tragedy, a number of new
companies were formed to compete in the reinsurance markets. A number of these
new companies were formed in Bermuda. In addition, a number of existing market
participants raised new capital, thereby strengthening their ability to compete.
At this time, the effect of these new entrants and of the additional capital
placed into the market is not precisely known.
We believe that our principal competitors in the property catastrophe
reinsurance market include other companies active in the Bermuda Market,
including Ace Ltd., Partner Re and XL Capital Ltd. We also compete with certain
Lloyd's syndicates active in the London Market. We also compete with a number of
other industry participants, such as Berkshire Hathaway, Munich Re and Swiss Re.
As our business evolves over time we expect our competitors to change as well.
Many of our competitors have greater financial, marketing and management
resources than we do. In addition, we may not be aware of other companies that
may be planning to enter the property catastrophe reinsurance market or of
existing companies which may be planning to raise additional capital. We also
have recently seen the creation of alternative products from capital market
participants that are intended to compete with reinsurance products and which
could impact the demand for traditional catastrophe reinsurance. We cannot
predict what effect any of these developments may have on our businesses.
Competition in the types of reinsurance that we underwrite is based on many
factors, including premium rates 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. Ultimately, increasing
competition could affect our ability to attract business on terms having the
potential to yield an attractive return on equity.
The primary insurance business is also highly competitive. Primary insurers
compete on the basis of factors including selling effort, product, price,
service and financial strength. We seek primary insurance pricing that will
result in adequate returns on the capital allocated to our primary insurance
business. We may lose primary insurance business to competitors offering
competitive insurance products at lower prices.
A DECLINE IN THE RATINGS ASSIGNED TO OUR CLAIMS-PAYING ABILITY MAY IMPACT OUR
POTENTIAL TO WRITE NEW BUSINESS.
Third party rating agencies assess and rate the claims-paying ability of
reinsurers and insurers, such as Renaissance Reinsurance, Glencoe Insurance
Ltd., Top Layer Reinsurance Ltd. and DaVinci Reinsurance Ltd. These ratings are
based upon criteria established by the rating agencies. Periodically the rating
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agencies evaluate us to confirm that we continue to meet the criteria of the
ratings previously assigned to us. The claims-paying ability ratings assigned by
rating agencies to reinsurance or insurance companies are based upon factors
relevant to policyholders and are not directed toward the protection of
investors. Ratings by rating agencies are not ratings of securities or
recommendations to buy, hold, or sell any security.
Renaissance Reinsurance is rated "A+" by A.M. Best, "A+" by Standard &
Poor's and "A1" by Moody's Investors Services. Top Layer Re is rated "AAA" by
Standard & Poor's and "A++" by A.M. Best. Glencoe is rated "A" by A.M. Best.
DaVinci is rated "A" by each of A.M. Best and Standard & Poor's. These rating
agencies may downgrade or withdraw their claims-paying ability ratings in the
future if we do not continue to meet the criteria of the ratings previously
assigned to us. The ability of Renaissance Reinsurance, Top Layer Re, Glencoe,
DaVinci and our other rated insurance subsidiaries to compete with other
reinsurers and insurers, and our results of operations, could be materially
adversely affected by any such ratings downgrade. For example, following a
ratings downgrade we might lose clients to more highly rated competitors or
retain a lower share of the business of our clients.
RECENT EVENTS MAY RESULT IN POLITICAL, REGULATORY AND INDUSTRY INITIATIVES
WHICH COULD ADVERSELY AFFECT OUR BUSINESS.
Changes in the marketplace, including the tightening in supply of certain
coverages arising out of the September 11th tragedy, may result in government
intervention in the insurance and reinsurance markets, both in the United States
and worldwide. Recently, the insurance and reinsurance regulatory framework has
been subject to increased scrutiny by the United States and individual state
governments. Government regulators are generally concerned with the protection
of policyholders to the exclusion of other constituencies, including
shareholders. While we cannot predict the exact nature, timing or scope of
possible governmental initiatives, such proposals could adversely affect our
business by:
- providing insurance and reinsurance capacity in markets and to consumers
that we target;
- requiring our participation in industry pools and guaranty associations;
- regulating the terms of insurance and reinsurance policies; or
- disproportionately benefiting the companies of one country over those of
another.
The insurance industry is also affected by political, judicial and legal
developments that may create new and expanded theories of liability. Such
changes may result in delays or cancellations of products and services by
insurers and reinsurers which could adversely affect our business. The
Gramm-Leach-Bliley Act of 1999 permits the transformation of the already
converging banking, insurance and securities industries by permitting mergers
that combine commercial banks, insurers and securities firms under one holding
company, a "financial holding company." The ability of banks to affiliate with
insurers may affect our U.S. subsidiaries' product lines by substantially
increasing the number, size and financial strength of potential competitors.
WE MAY BE ADVERSELY AFFECTED BY INTEREST RATE CHANGES.
Our operating results depend in part on the performance of our investment
portfolio. Our investment portfolio contains interest sensitive instruments,
such as bonds and mortgage-backed securities. Changes in interest rates could
cause the yield on our investment portfolio to decrease, perhaps substantially.
A decline of our investment yield would likely reduce our overall profitability.
Interest rates are highly sensitive to many factors, including governmental
monetary policies, domestic and international economic and political conditions
and other factors beyond our control. Any measures we take that are intended to
manage the risks of operating in a changing interest rate environment may not
effectively mitigate such interest rate sensitivity.
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U.S. TAXING AUTHORITIES COULD CONTEND THAT OUR BERMUDA SUBSIDIARIES ARE
SUBJECT TO U.S. CORPORATE INCOME TAX.
If the United States Internal Revenue Service were to contend successfully
that Renaissance Reinsurance, DaVinci or Glencoe, is engaged in a trade or
business in the United States, Renaissance Reinsurance, DaVinci or Glencoe
would, to the extent not exempted from tax by the United States-Bermuda income
tax treaty, be subject to U.S. corporate income tax on that portion of its net
income treated as effectively connected with a U.S. trade or business, as well
as the U.S. corporate branch profits tax. Although we would intend vigorously to
resist the imposition of any such tax, if we were ultimately held to be subject
to this taxation our earnings would correspondingly decline.
In addition, benefits of the United States-Bermuda income tax treaty which
may limit any such tax to income attributable to a permanent establishment
maintained by Renaissance Reinsurance, DaVinci or Glencoe in the United States
are only available to Renaissance Reinsurance, DaVinci and Glencoe if more than
50% of their shares are beneficially owned, directly or indirectly, by
individuals who are Bermuda residents or U.S. citizens or residents. Renaissance
Reinsurance, DaVinci or Glencoe may not be able to continually satisfy such
beneficial ownership test or be able to establish its satisfaction to the IRS.
Finally, it should be noted that it is unclear whether the income tax treaty
(assuming satisfaction of the beneficial ownership test) applies to income other
than premium income, such as investment income.
BECAUSE WE DEPEND ON A FEW REINSURANCE BROKERS FOR A LARGE PORTION OF REVENUE,
LOSS OF BUSINESS PROVIDED BY THEM COULD ADVERSELY AFFECT US.
We market our reinsurance products worldwide exclusively through
reinsurance brokers. Four (in prior years five) brokerage firms accounted for
79.9%, 78.3%, and 78.8% of our net premiums written for the years ended December
31, 2001, 2000, and 1999, respectively. Subsidiaries and affiliates of the
Benfield Group PLC, Marsh Inc., Willis Faber and AON Re Group accounted for
approximately 28.0%, 23.0%, 14.0%, and 11.9%, respectively, of our premiums
written in 2001. Loss of all or a substantial portion of the business provided
by these brokers could have a material adverse effect on us. Our ability to
market our products could decline and it is possible that our premiums written
would decrease.
OUR RELIANCE ON REINSURANCE BROKERS EXPOSES US TO THEIR CREDIT RISK.
In accordance with industry practice, we frequently pay amounts owed on
claims under our policies to reinsurance brokers, and these brokers, in turn,
pay these amounts over to the insurers that have reinsured a portion of their
liabilities with us (we refer to these insurers as ceding insurers). In some
jurisdictions, if a broker failed to make such a payment, we might remain liable
to the ceding insurer for the deficiency. Conversely, in certain jurisdictions,
when the ceding insurer pays premiums for these policies to reinsurance brokers
for payment over to us, these premiums are considered to have been paid and the
ceding insurer will no longer be liable to us for those amounts, whether or not
we have actually received the premiums. Consequently, in connection with the
settlement of reinsurance balances, we assume a degree of credit risk associated
with brokers around the world.
ANY SUBORDINATED DEBT SECURITIES THAT WE ISSUE WOULD RANK BELOW OUR EXISTING
AND FUTURE SENIOR DEBT.
Any subordinated debt securities that we issue would be unsecured and
subordinated in right of payment to all of our existing and future senior debt.
Because these subordinated debt securities would be subordinated to our senior
debt, we would be unable to make any payments of principal, including redemption
payments, or interest on the subordinated debt securities, in the event of
payment default on senior debt obligations and may be prohibited in the event of
some non-payment defaults. Moreover, in the event of our bankruptcy, liquidation
or reorganization, the acceleration of the debt underlying any of our
subordinated debt securities due to an event of default, and certain other
events, we would make payments on such subordinated debt securities only after
we have satisfied all of our senior debt obligations. As of April 15, 2002, we
had an aggregate of $183,500,000 outstanding senior debt, to which any
subordinated debt securities we might issue would be subordinated.
8
In addition, because we are holding company, any subordinated debt
securities we may offer would be effectively subordinated to all existing and
future liabilities of our subsidiaries, including our insurance subsidiaries.
The rights of our creditors (including the holders of any debt securities we
might issue) to participate in distributions by certain of our subsidiaries,
including our insurance subsidiaries, may also be subject to the approval of
insurance regulatory authorities having jurisdiction over these subsidiaries. As
of April 15, 2002, our subsidiaries had an aggregate of approximately $33.5
million of indebtedness. Unless we specify otherwise in a prospectus supplement,
the subordinated indenture will not limit the amount of other indebtedness or
liabilities that we or our subsidiaries may incur or securities that we or our
subsidiaries may issue in the future.
THE COVENANTS IN OUR DEBT AGREEMENTS LIMIT OUR FINANCIAL AND OPERATIONAL
FLEXIBILITY, WHICH COULD HAVE AN ADVERSE EFFECT ON OUR FINANCIAL CONDITION.
We have incurred indebtedness, and may incur additional indebtedness in the
future. At April 15, 2002, we had $33.5 million of bank loans outstanding. In
addition, we also had at that date $84.6 million of outstanding junior
subordinated debentures relating to an issuance of trust preferred securities by
our subsidiary RenaissanceRe Capital Trust I. On April 22, 2002, we announced
that our affiliate DaVinciRe Holdings Ltd. had entered into an agreement with
Citibank, N.A., providing for an unsecured $100.0 million revolving credit
facility. Our insurance and reinsurance subsidiaries also maintain uncommitted
letter of credit facilities.
The agreements covering our indebtedness, and particularly our bank loans,
contain numerous covenants that limit our ability, among other things, to borrow
money, make particular types of investments or other restricted payments, sell
assets, merge or consolidate. These agreements also require us to maintain
specified financial ratios. If we fail to comply with these covenants or meet
these financial ratios, the lenders under our credit facility could declare a
default and demand immediate repayment of all amounts owed to them.
In addition, if we are in default under our indebtedness or if we have
given notice of our intention to defer our related payment obligations, the
terms of our indebtedness would restrict our ability to:
- declare or pay any dividends on our capital shares,
- redeem, purchase or acquire any capital shares, or
- make a liquidation payment with respect to our capital shares.
BECAUSE WE ARE A HOLDING COMPANY, WE ARE DEPENDENT ON DIVIDENDS AND PAYMENTS
FROM OUR SUBSIDIARIES.
As a holding company with no direct operations, we rely on investment
income, cash dividends and other permitted payments from our subsidiaries to
make principal and interest payments on our debt and to pay dividends to our
shareholders. If our subsidiaries are restricted from paying dividends to us, we
may be unable to pay dividends or to repay our indebtedness.
Bermuda law and regulations require our subsidiaries which are registered
in Bermuda as insurers to maintain a minimum solvency margin and minimum
liquidity ratio, and prohibit dividends that would result in a breach of these
requirements. Further, Renaissance Reinsurance and DaVinci, as Class 4 insurers
in Bermuda, may not pay dividends which would exceed 25% of their respective
capital and surplus, unless they first make filings confirming that they meet
the required margins.
Generally, our U.S. insurance subsidiaries may only pay dividends out of
earned surplus. Further, the amount payable without the prior approval of the
applicable state insurance department is generally limited to the greater of 10%
of policyholders' surplus or statutory capital, or 100% of the subsidiary's
prior year statutory net income.
WE MAY FAIL TO MEET OUR FINANCIAL AND OPERATING GOALS IF WE DO NOT MANAGE OUR
GROWTH EFFECTIVELY.
Our business has expanded rapidly in the past several years, and we
currently project that we will grow rapidly in 2002. Expansion places increased
stress on our financial, managerial and human resources.
9
Further our growth in new or expanded lines, such as specialty reinsurance and
primary insurance, could detract from our core property catastrophe reinsurance
business and may divert management attention away from our core operations. Our
future profitability will depend in part upon our ability to further develop our
resources and effectively manage this expansion. We may need to attract
additional professionals to, or expand our facilities in, Bermuda, a small
jurisdiction with limited resources. To the extent we are unable to so attract
additional professionals, our financial, managerial and human resources will be
further strained.
Historically, our principal product has been property catastrophe
reinsurance. The anticipated growth of our specialty reinsurance and primary
insurance businesses will present us with new, or expanded, challenges and
risks. We may not manage these challenges and risks successfully. Even if we
operate these new or expanded businesses successfully, our loss results in these
businesses may differ from our historical results in property catastrophe
reinsurance, which is generally characterized by loss events of high severity
but low frequency. As a result, our future financial results may be affected,
perhaps adversely.
THE LOSS OF ONE OR MORE KEY EXECUTIVE OFFICERS COULD ADVERSELY AFFECT US.
Our success has depended, and will continue to depend, in substantial part
upon our ability to attract and retain our executive officers. If we were to
lose the services of members of our senior management team, our business could
be adversely affected. For example, we might lose clients whose relationship
depends in part on the service of a departing executive. In addition, the loss
of services of members of our management team would strain our ability to
execute our growth initiatives, as described above.
Our ability to execute our business strategy is dependent on our ability to
attract and retain a staff of qualified underwriters and service personnel. We
do not currently maintain key man life insurance policies with respect to any of
our employees.
Under Bermuda law, non-Bermudians may not engage in any gainful occupation
in Bermuda without the specific permission of the appropriate government
authority. The Bermuda government will issue a work permit for a specific period
of time, which may be extended upon showing that, after proper public
advertisement, no Bermudian (or spouse of a Bermudian) is available who meets
the minimum standards for the advertised position. Substantially all of our
officers are working in Bermuda under work permits that will expire over the
next three years. The Bermuda government could refuse to extend these work
permits. If any of our senior executive officers were not permitted to remain in
Bermuda, our operations could be disrupted and our financial performance could
be adversely affected as a result.
REGULATORY CHALLENGES IN THE UNITED STATES OR ELSEWHERE COULD RESULT IN
RESTRICTIONS ON OUR ABILITY TO OPERATE.
Neither Renaissance Reinsurance nor DaVinci is licensed or admitted to do
business in any jurisdiction except Bermuda. Renaissance Reinsurance and DaVinci
conduct business from their principal offices in Bermuda and do not maintain an
office in the United States. Recently, the insurance and reinsurance regulatory
framework has been subject to increased scrutiny in many jurisdictions,
including the United States and various states in the United States. If
Renaissance Reinsurance or DaVinci become subject to the insurance laws of any
state in the United States, we could face inquiries or challenges to the future
operations of these companies.
Glencoe is currently an eligible, non-admitted excess and surplus lines
insurer in 32 states of the United States and is subject to certain regulatory
and reporting requirements of these states. We are in the process of applying
for licenses in additional states. Any failure by Glencoe to obtain these
licenses could impede its anticipated growth.
Our growth plans could cause one or more of our subsidiaries to become
subject to additional regulation in more numerous jurisdictions. If Renaissance
Reinsurance, DaVinci or Glencoe or any of our subsidiaries were to become
subject to the laws of a new jurisdiction where that subsidiary is not presently
admitted, they may not be in compliance with the laws of the new jurisdiction.
Any failure to comply with
10
applicable laws could result in the imposition of significant restrictions on
our ability to do business, and could also result in fines and other sanctions,
any or all of which could adversely affect our financial results and operations.
We also own four subsidiaries which write insurance in the United States.
These subsidiaries are subject to extensive regulation under state statutes
which delegate regulatory, supervisory and administrative powers to state
insurance commissioners. Such regulation generally is designed to protect
policyholders rather than investors, and relates to such matters as rate
setting; limitations on dividends and transactions with affiliates; solvency
standards which must be met and maintained; the licensing of insurers and their
agents; the examination of the affairs of insurance companies, which includes
periodic market conduct examinations by the regulatory authorities; annual and
other reports, prepared on a statutory accounting basis; establishment and
maintenance of reserves for unearned premiums and losses; and requirements
regarding numerous other matters. We could be required to allocate considerable
time and resources to comply with these requirements, and could be adversely
affected if a regulatory authority believed we had failed to comply with
applicable law or regulation.
RENAISSANCE REINSURANCE, GLENCOE AND DAVINCI ARE NOT LICENSED OR ADMITTED IN
THE UNITED STATES.
Renaissance Reinsurance, Glencoe and DaVinci are registered Bermuda
insurance companies and are not licensed or admitted as insurers in any
jurisdiction in the United States. Among other things, jurisdictions in the
United States do not permit insurance companies to take credit for reinsurance
obtained from unlicensed or non-admitted insurers on their statutory financial
statements unless security is posted. Our contracts generally require us to post
a letter of credit or provide other security after a reinsured reports a claim.
In order to post these letters of credit, issuing banks generally require
collateral.
The non-admitted status of Renaissance Reinsurance, Glencoe and DaVinci
could put us at a competitive disadvantage in the future with respect to
competitors that are licensed and admitted in U.S. jurisdictions.
RETROCESSIONAL REINSURANCE MAY BECOME UNAVAILABLE ON ACCEPTABLE TERMS.
In order to limit the effect of large and multiple losses upon our
financial condition, we buy reinsurance for our own account. This type of
insurance is known as "retrocessional reinsurance." Our primary insurance
companies also buy reinsurance from third parties. A reinsurer's insolvency or
inability to make payments under the terms of its reinsurance treaty with us
could have a material adverse effect on us.
From time to time, market conditions have limited, and in some cases have
prevented, insurers and reinsurers from obtaining the types and amounts of
reinsurance, which they consider adequate for their business needs. Following
the September 11th tragedy, terms and conditions in the retrocessional market
generally became less attractive. Accordingly, we may not be able to obtain our
desired amounts of retrocessional reinsurance. In addition, even if we are able
to obtain such retrocessional reinsurance, we may not be able to negotiate terms
as favorable to us as in prior years. This could limit the amount of business we
are willing to write, or decrease the protection available to us as a result of
large loss events.
WE MAY BE ADVERSELY AFFECTED BY FOREIGN CURRENCY FLUCTUATIONS.
Our functional currency is the U.S. dollar. A portion of our premium is
written in currencies other than the U.S. dollar and a portion of our loss
reserves are also in non-dollar currencies. Moreover, we maintain a portion of
our cash equivalent investments in currencies other than the U.S. dollar. We
may, from time to time, experience losses resulting solely from fluctuations in
the values of these foreign currencies, which could cause our consolidated
earnings to decrease. In addition, failure to manage our foreign currency
exposures could cause our results to be more volatile.
11
SOME ASPECTS OF OUR CORPORATE STRUCTURE MAY DISCOURAGE THIRD PARTY
TAKEOVERS AND OTHER TRANSACTIONS OR PREVENT THE REMOVAL OF OUR CURRENT BOARD OF
DIRECTORS AND MANAGEMENT.
Some provisions of our Memorandum of Association and of our Amended and
Restated Bye-Laws have the effect of making more difficult or discouraging
unsolicited takeover bids from third parties or preventing the removal of our
current board of directors and management. In particular, our Bye-Laws prohibit
transfers of our capital shares if the transfer would result in a person owning
or controlling shares that constitute 9.9% or more of any class or series of our
shares. The primary purpose of this restriction is to reduce the likelihood that
we will be deemed a "controlled foreign corporation" within the meaning of the
Internal Revenue Code for U.S. federal tax purposes. However, this limit may
also have the effect of deterring purchases of large blocks of common shares or
proposals to acquire us, even if some or a majority of our shareholders might
deem these purchases or acquisition proposals to be in their best interests.
In addition, our Bye-Laws provide for:
- a classified Board, whose size is fixed and whose members may be removed
by the shareholders only for cause upon a 66 2/3% vote;
- restrictions on the ability of shareholders to nominate persons to serve
as directors, submit resolutions to a shareholder vote and requisition
special general meetings;
- a large number of authorized but unissued shares which may be issued by
the Board without further shareholder action; and
- a 66 2/3% shareholder vote to amend, repeal or adopt any provision
inconsistent with several provisions of the Bye-Laws.
These Bye-Law provisions make it more difficult to acquire control of us by
means of a tender offer, open market purchase, a proxy fight or otherwise. These
provisions are designed to encourage persons seeking to acquire control of us to
negotiate with our directors, which we believe would generally best serve the
interests of our shareholders. However, these provisions could have the effect
of discouraging a prospective acquirer from making a tender offer or otherwise
attempting to obtain control of us. In addition, these Bye-Law provisions could
prevent the removal of our current board of directors and management. To the
extent these provisions discourage takeover attempts, they could deprive
shareholders of opportunities to realize takeover premiums for their shares or
could depress the market price of the shares.
We indirectly own DeSoto Insurance Company, DeSoto Prime Insurance Company,
and Stonington Insurance Company. Our ownership of U.S. insurance companies such
as these can, under applicable state insurance company laws and regulations,
delay or impede a change of control of RenaissanceRe. Under applicable Florida
and Texas insurance regulations, any proposed purchase of 10% or more of our
voting securities would require the prior approval of the Florida and Texas
insurance regulatory authorities.
INVESTORS MAY HAVE DIFFICULTIES IN SERVING PROCESS OR ENFORCING JUDGMENTS
AGAINST US IN THE UNITED STATES.
We are a Bermuda company. In addition, certain of our officers and
directors reside in countries outside the United States. All or a substantial
portion of our assets and the assets of these officers and directors are or may
be located outside the United States. Investors may have difficulty effecting
service of process within the United States on our directors and officers who
reside outside the United States or to recover against us or these directors and
officers on judgments of United States courts based on civil liabilities
provisions of the United States federal securities laws whether or not we
appoint an agent in the United States to receive service of process.
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FORWARD-LOOKING STATEMENTS
We caution readers regarding certain forward-looking statements contained
herein. Forward-looking statements are necessarily based on estimates and
assumptions that are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which, with respect to
future business decisions, are subject to change. These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, us. In particular, statements using words such as "may," "should,"
"estimate," "expect," "anticipate," "intend," "believe," "predict," "potential"
or words of similar import generally involve forward-looking statements. In
light of the risks and uncertainties inherent in all future projections, the
inclusion of forward-looking statements in this report should not be considered
as a representation by us or any other person that our objectives or plans will
be achieved.
Numerous factors could cause our actual results to differ materially from
those in the forward-looking statements, including the following:
(1) the occurrence of natural or man-made catastrophic events with a
frequency or severity exceeding our estimates;
(2) a decrease in the level of demand for our reinsurance or insurance
business, or increased competition in the industry;
(3) the lowering or loss of one of the financial or claims-paying
ratings of ours or one or more of our subsidiaries;
(4) risks associated with implementing our business strategies and
initiatives for organic growth, including risks relating to managing that
growth;
(5) acts of terrorism or acts of war;
(6) slower than anticipated growth in our fee-based operations;
(7) changes in economic conditions, including interest and currency
rate conditions which could affect our investment portfolio;
(8) uncertainties in our reserving process;
(9) failure of our reinsurers to honor their obligations;
(10) extraordinary events affecting our clients, such as bankruptcies
and liquidations;
(11) loss of services of any one of our key executive officers;
(12) the passage of federal or state legislation subjecting
Renaissance Reinsurance to supervision or regulation, including additional
tax regulation, in the United States or other jurisdictions in which we
operate;
(13) challenges by insurance regulators in the United States to
Renaissance Reinsurance's claim of exemption from insurance regulation
under current laws;
(14) a contention by the United States Internal Revenue Service that
our Bermuda subsidiaries, including Renaissance Reinsurance, are subject to
U.S. taxation; and
(15) actions of competitors, including industry consolidation, the
launch of new entrants and the development of competing financial products.
The factors listed above should not be construed as exhaustive. Certain of
these factors are described in more detail in "Risk Factors" above. We undertake
no obligation to release publicly the results of any future revisions we may
make to forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
13
USE OF PROCEEDS
Unless the applicable prospectus supplement states otherwise, the net
proceeds from the sale of securities offered by RenaissanceRe or the Capital
Trust will be used for working capital, capital expenditures, acquisitions and
other general corporate purposes. Until we use the net proceeds in this manner,
we may temporarily use them to make short-term investments or reduce short-term
borrowings.
DESCRIPTION OF OUR CAPITAL SHARES
The following is a summary of certain provisions of our Memorandum of
Association and Bye-Laws. Because this summary is not complete, you should refer
to our Memorandum and Bye-Laws for complete information regarding the provisions
of the Memorandum and Bye-Laws, including the definitions of some of the terms
used below. Copies of the Memorandum and Bye-Laws are incorporated by reference
as exhibits to the registration statement of which this prospectus forms a part.
Whenever we refer to particular sections or defined terms of the Memorandum and
Bye-Laws, such sections or defined terms are incorporated herein by reference.
COMMON SHARES
Our common shares are listed on the New York Stock Exchange under the
symbol "RNR." The common shares currently issued and outstanding are fully paid
and nonassessable within the meaning of applicable Bermuda law. We have
authorized the issuance of 225,000,000 common shares. Approximately 22,750,000
shares were outstanding on March 31, 2002. Any common shares offered by a
prospectus supplement, upon issuance against full consideration, will be fully
paid and nonassessable within the meaning of applicable Bermuda law. There are
no provisions of Bermuda law or our Memorandum or Bye-Laws which impose any
limitation on the rights of shareholders to hold or vote common shares by reason
of their not being residents of Bermuda.
A more detailed description of our common shares is set forth in our
registration statement filed under the Exchange Act on Form 8-A on July 24,
1995, including any amendment or report for the purpose of updating such
description.
Certain shares held by PT Investments Inc., one of our founding investors,
consist of our diluted voting class I common shares. Each holder of these
diluted voting common shares is entitled to a fixed voting interest in
RenaissanceRe of up to 9.9% of all outstanding voting rights attached to the
full voting common shares, taking into account the percentage interest in
RenaissanceRe represented by full voting common shares owned directly,
indirectly, or constructively by the holder within the meaning of Section 958 of
the Internal Revenue Code and applicable rules and regulations thereunder. The
diluted voting common shares are not listed on the New York Stock Exchange.
The diluted voting common shares are convertible into an equal number of
our full voting common shares on a one-for-one basis at the option of the holder
thereof upon two days prior written notice.
PREFERENCE SHARES
The Bye-Laws divide our share capital into 225,000,000 common shares and
100,000,000 preference shares. As of March 31, 2002, 6,000,000 of our 8.10%
Series A Preference Shares were outstanding. From time to time, pursuant to the
authority granted by the Bye-Laws, our Board may create and issue one or more
series of preference shares. The preference shares, upon issuance against full
consideration, will be fully paid and nonassessable. The particular rights and
preferences of the preference shares offered by any prospectus supplement and
the extent, if any, to which the general provisions described below may apply to
the offered preference shares, will be described in the prospectus supplement.
Certain terms of the 8.10% Series A Preference Shares are summarized below under
"Series A Preference Shares."
14
Because the following summary of the terms of preference shares is not
complete, you should refer to the Memorandum, the Bye-Laws and any applicable
Certificate of Designation, Preferences and Rights or other governing instrument
for complete information regarding the terms of the class or series of
preference shares described in a prospectus supplement. Whenever we refer to
particular sections or defined terms of the Memorandum, the Bye-Laws and an
applicable Certificate of Designation, Preferences and Rights or other governing
instrument, such sections or defined terms are incorporated herein by reference.
A prospectus supplement will specify the terms of a particular class or
series of preference shares as follows:
- the number of shares to be issued and sold and the distinctive
designation thereof;
- the dividend rights of the preference shares, whether dividends will be
cumulative and, if so, from which date or dates and the relative rights
or priority, if any, of payment of dividends on preference shares and any
limitations, restrictions or conditions on the payment of such dividends;
- the voting powers, if any, of the preference shares, equal to or greater
than one vote per share, which may include the right to vote, as a class
or with other classes of capital stock, to elect one or more of our
directors;
- the terms and conditions (including the price or prices, which may vary
under different conditions and at different redemption dates), if any,
upon which all or any part of the preference shares may be redeemed, at
whose option such a redemption may occur, and any limitations,
restrictions or conditions on such redemption;
- the terms, if any, upon which the preference shares will be convertible
into or exchangeable for our shares of any other class, classes or
series;
- the relative amounts, and the relative rights or priority, if any, of
payment in respect of preference shares, which the holders of the
preference shares will be entitled to receive upon our liquidation,
dissolution, winding up, merger or sale of assets;
- the terms, if any, of any purchase, retirement or sinking fund to be
provided for the preference shares;
- the restrictions, limitations and conditions, if any, upon the issuance
of our indebtedness so long as any preference shares are outstanding; and
- any other relative rights, preferences, limitations and powers not
inconsistent with applicable law, the Memorandum or the Bye-Laws.
Subject to the specification of the above terms of preference shares in a
supplement to this prospectus, we anticipate that the terms of such preference
shares will correspond to those set forth below.
DIVIDENDS
The holders of preference shares will be entitled to receive dividends, if
any, at the rate established in accordance with the Bye-Laws, payable on
specified dates each year for the respective dividend periods ending on such
dates ("dividend periods"), when and as declared by our Board of Directors. Such
dividends will accrue on each preference share from the first day of the
dividend period in which such share is issued or from such other date as the
Board may fix for such purpose. All dividends on preference shares will be
cumulative. If we do not pay or set apart for payment the dividend, or any part
thereof, on the issued and outstanding preference shares for any dividend
period, the deficiency in the dividend on the preference shares must thereafter
be fully paid or declared and set apart for payment (without interest) before
any dividend may be paid or declared and set apart for payment on the common
shares. The holders of preference shares will not be entitled to participate in
any other or additional earnings or profits of ours, except for such premiums,
if any, as may be payable in case of our liquidation, dissolution or winding up.
15
Any dividend paid upon the preference shares at a time when any accrued
dividends for any prior dividend period are delinquent will be expressly
declared to be in whole or partial payment of the accrued dividends to the
extent thereof, beginning with the earliest dividend period for which dividends
are then wholly or partly delinquent, and will be so designated to each
shareholder to whom payment is made.
No dividends will be paid upon any shares of any class or series of
preference shares for a current dividend period unless there will have been paid
or declared and set apart for payment dividends required to be paid to the
holders of each other class or series of preference shares for all past dividend
periods of such other class or series. If any dividends are paid on any of the
preference shares with respect to any past dividend period at any time when less
than the total dividends then accumulated and payable for all past dividend
periods on all of the preference shares then outstanding are to be paid or
declared and set apart for payment, then the dividends being paid will be paid
on each class or series of preference shares in the proportions that the
dividends then accumulated and payable on each class or series for all past
dividend periods bear to the total dividends then accumulated and payable for
all past dividend periods on all outstanding preference shares.
LIQUIDATION, DISSOLUTION OR WINDING UP
In case of our voluntary or involuntary liquidation, dissolution or winding
up, the holders of each class or series of preference shares will be entitled to
receive out of our assets in money or money's worth the liquidation preference
with respect to that class or series of preference shares. These holders will
also receive an amount equal to all accrued but unpaid dividends thereon
(whether or not earned or declared), before any of our assets will be paid or
distributed to holders of common shares.
It is possible that, in case of our voluntary or involuntary liquidation,
dissolution or winding up, our assets could be insufficient to pay the holders
of all of the classes or series of preference shares then outstanding the full
amounts to which they may be entitled. In that circumstance, the holders of each
outstanding class or series of preference shares will share ratably in such
assets in proportion to the amounts which would be payable with respect to such
class or series if all amounts payable thereon were paid in full.
Our consolidation or merger with or into any other corporation, or a sale
of all or any part of our assets, will not be deemed to constitute a
liquidation, dissolution or winding up.
REDEMPTION
Except as otherwise provided with respect to a particular class or series
of preference shares, the following general redemption provisions will apply to
each class or series of preference shares.
On or prior to the date fixed for redemption of a particular class or
series of preference shares or any part thereof as specified in the notice of
redemption for such class or series, we will deposit adequate funds for such
redemption, in trust for the account of holders of such class or series, with a
bank or trust company that has an office in the United States, and that has, or
is an affiliate of a bank or trust company that has, capital and surplus of at
least $50,000,000. If the name and address of such bank or trust company and the
deposit of or intent to deposit the redemption funds in such trust account have
been stated in the redemption notice, then from and after the mailing of the
notice and the making of such deposit the shares of the class or series called
for redemption will no longer be deemed to be outstanding for any purpose
whatsoever, and all rights of the holders of such shares in or with respect to
us will cease and terminate except only the right of the holders of the shares:
(1) to transfer such shares prior to the date fixed for redemption,
(2) to receive the redemption price of such shares, including accrued
but unpaid dividends to the date fixed for redemption, without interest,
upon surrender of the certificate or certificates representing the shares
to be redeemed, and
16
(3) on or before the close of business on the fifth day preceding the
date fixed for redemption to exercise privileges of conversion, if any, not
previously expired.
Any moneys so deposited by us which remain unclaimed by the holders of the
shares called for redemption and not converted will, at the end of six years
after the redemption date, be paid to us upon our request, after which repayment
the holders of the shares called for redemption can no longer look to such bank
or trust company for the payment of the redemption price but must look only to
us for the payment of any lawful claim for such moneys which holders of such
shares may still have. After such six-year period, the right of any shareholder
or other person to receive such payment may lapse through limitations imposed in
the manner and with the effect provided under the law of Bermuda. Any portion of
the moneys so deposited by us, in respect of preference shares called for
redemption that are converted into common shares, will be repaid to us upon our
request.
In case of redemption of only a part of a class or series of preference
shares, we will designate by lot, in such manner as the Board may determine, the
shares to be redeemed, or will effect such redemption pro rata.
CONVERSION RIGHTS
Except as otherwise provided with respect to a particular class or series
of preference shares and subject in each case to applicable Bermuda law, the
following general conversion provisions will apply to each class or series of
preference shares that is convertible into common shares.
All common shares issued upon conversion will be fully paid and
nonassessable, and will be free of all taxes, liens and charges with respect to
the issue thereof except taxes, if any, payable by reason of issuance in a name
other than that of the holder of the shares converted and except as otherwise
provided by applicable law or the Bye-Laws.
The number of common shares issuable upon conversion of a particular class
or series of preference shares at any time will be the quotient obtained by
dividing the aggregate conversion value of the shares of such class or series
surrendered for conversion, by the conversion price per share of common shares
then in effect for such class or series. We will not be required, however, upon
any such conversion, to issue any fractional share of common shares, but instead
we will pay to the holder who would otherwise be entitled to receive such
fractional share if issued, a sum in cash equal to the value of such fractional
share based on the last reported sale price per common share on the New York
Stock Exchange at the date of determination. Preference shares will be deemed to
have been converted as of the close of business on the date of receipt at the
office of the transfer agent of the certificates, duly endorsed, together with
written notice by the holder of his election to convert the shares.
Except as otherwise provided with respect to a particular class or series
of preference shares and subject in each case to applicable Bermuda law, the
Memorandum and the Bye-Laws the basic conversion price per ordinary share for a
class or series of preference shares, as fixed by the Board, will be subject to
adjustment from time to time as follows:
- In case RenaissanceRe (1) pays a dividend or makes a distribution to all
holders of outstanding common shares as a class in common shares, (2)
subdivides or splits the outstanding common shares into a larger number
of shares or (3) combines the outstanding common shares into a smaller
number of shares, the basic conversion price per ordinary share in effect
immediately prior to that event will be adjusted retroactively so that
the holder of each outstanding share of each class or series of
preference shares which by its terms is convertible into common shares
will thereafter be entitled to receive upon the conversion of such share
the number of common shares which that holder would have owned and been
entitled to receive after the happening of any of the events described
above had such share of such class or series been converted immediately
prior to the happening of that event. An adjustment made pursuant to this
clause will become effective retroactively immediately after such record
date in the case of a dividend or distribution and
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immediately after the effective date in the case of a subdivision, split
or combination. Such adjustments will be made successively whenever any
event described in this clause occurs.
- In case RenaissanceRe issues to all holders of common shares as a class
any rights or warrants enabling them to subscribe for or purchase common
shares at a price per share less than the current market price per common
share at the record date for determination of shareholders entitled to
receive such rights or warrants, the basic conversion price per ordinary
share in effect immediately prior thereto for each class or series of
preference shares which by its terms is convertible into common shares
will be adjusted retroactively by multiplying such basic conversion price
by a fraction, of which the numerator will be the sum of number of common
shares outstanding at such record date and the number of common shares
which the aggregate exercise price (before deduction of underwriting
discounts or commissions and other expenses of RenaissanceRe in
connection with the issue) of the total number of shares so offered for
subscription or purchase would purchase at such current market price per
share and of which the denominator will be the sum of the number of
common shares outstanding at such record date and the number of
additional common shares so offered for subscription or purchase. An
adjustment made pursuant to this clause will become effective
retroactively immediately after the record date for determination of
shareholders entitled to receive such rights or warrants. Such
adjustments will be made successively whenever any event described in
this clause occurs.
- In case RenaissanceRe distributes to all holders of common shares as a
class evidences of indebtedness or assets (other than cash dividends),
the basic conversion price per ordinary share in effect immediately prior
thereto for each class or series of preference shares which by its terms
is convertible into common shares will be adjusted retroactively by
multiplying such basic conversion price by a fraction, of which the
numerator will be the difference between the current market price per
ordinary share at the record date for determination of shareholders
entitled to receive such distribution and the fair value (as determined
by the Board) of the portion of the evidences of indebtedness or assets
(other than cash dividends) so distributed applicable to one common share
and of which the denominator will be the current market price per common
share. An adjustment made pursuant to this clause will become effective
retroactively immediately after such record date. Such adjustments will
be made successively whenever any event described in this clause occurs.
For the purpose of any computation under the last clause above, the current
market price per common share on any date will be deemed to be the average of
the high and low sales prices of the common shares, as reported in the New York
Stock Exchange -- Composite Transactions (or such other principal market
quotation as may then be applicable to the common shares) for each of the 30
consecutive trading days commencing 45 trading days before such date.
No adjustment will be made in the basic conversion price for any class or
series of preference shares in effect immediately prior to such computation if
the amount of such adjustment would be less than fifty cents. However, any
adjustments which by reason of the preceding sentence are not required to be
made will be carried forward and taken into account in any subsequent
adjustment. Notwithstanding anything to the contrary, any adjustment required
for purposes of making the computations described above will be made not later
than the earlier of (1) three years after the effective date described above for
such adjustment or (2) the date as of which such adjustment would result in an
increase or decrease of at least 3% in the aggregate number of common shares
issued and outstanding on the first date on which an event occurred which
required the making of a computation described above. All calculations will be
made to the nearest cent or to the nearest 1/100th of a share, as the case may
be.
In the case of any capital reorganization or reclassification of common
shares, or if we amalgamate or consolidate with or merge into, or sell or
dispose of all or substantially all of our property and assets to, any other
corporation, proper provisions will be made as part of the terms of such capital
reorganization, reclassification, amalgamation, consolidation, merger or sale
that any shares of a particular class or series of preference shares at the time
outstanding will thereafter be convertible into the number of shares of stock or
other securities or property to which a holder of the number of common shares
deliverable upon
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conversion of such preference shares would have been entitled upon such capital
reorganization, reclassification, consolidation or merger.
No dividend adjustment with respect to any preference shares or common
shares will be made in connection with any conversion.
Whenever there is an issue of additional common shares requiring a change
in the conversion price as provided above, and whenever there occurs any other
event which results in a change in the existing conversion rights of the holders
of shares of a class or series of preference shares, we will file with our
transfer agent or agents, a statement signed by one of our executive officers,
describing specifically such issue of additional common shares or such other
event (and, in the case of a capital reorganization, reclassification,
amalgamation, consolidation or merger, the terms thereof) and the actual
conversion prices or basis of conversion as changed by such issue or event and
the change, if any, in the securities issuable upon conversion. Whenever we
issue to all holders of common shares as a class any rights or warrants enabling
them to subscribe for or purchase common shares, we will also file in like
manner a statement describing the same and the consideration they will receive.
The statement so filed will be open to inspection by any holder of record of
shares of any class or series of preference shares.
We will at all times have authorized and will at all times reserve and set
aside a sufficient number of duly authorized common shares for the conversion of
all shares of all then outstanding classes or series of preference shares which
are convertible into common shares.
REISSUANCE OF SHARES
Any preference shares retired by purchase, redemption, through conversion,
or through the operation of any sinking fund or redemption or purchase account,
will have the status of authorized but unissued preference shares, and may be
reissued as part of the same class or series or may be reclassified and reissued
by the Board in the same manner as any other authorized and unissued preference
shares.
VOTING RIGHTS
Except as indicated below or as otherwise required by applicable law, the
holders of preference shares will have no voting rights.
Whenever dividends payable on any class or series of preference shares are
in arrears in an aggregate amount equivalent to six full quarterly dividends on
all of the preference shares of that class or series then outstanding, the
holders of preference shares of that class or series will have the exclusive and
special right, voting separately as a class, to elect two directors of our
Board. We will use our best efforts to increase the number of directors
constituting the Board to the extent necessary to effectuate such right.
Whenever such special voting power of the holders of any class or series of
the preference shares has vested, such right may be exercised initially either
at an extraordinary meeting of the holders of such class or series of the
preference shares, or at any annual general meeting of shareholders, and
thereafter at annual general meetings of shareholders. The right of the holders
of any class or series of the preference shares voting separately as a class to
elect members of the Board will continue until such time as all dividends
accumulated on such class or series of the preference shares have been paid in
full, at which time that special right will terminate, subject to revesting in
the event of each and every subsequent default in an aggregate amount equivalent
to six full quarterly dividends.
At any time when such special voting power has vested in the holders of any
class or series of the preference shares as described in the preceding
paragraph, our President will, upon the written request of the holders of record
of at least 10% of such class or series of the preference shares then
outstanding addressed to our Secretary, call a special general meeting of the
holders of such class or series of the preference shares for the purpose of
electing directors. Such meeting will be held at the earliest practicable date
in such place as may be designated pursuant to the Bye-Laws (or if there be no
designation, at our principal office in Bermuda). If such meeting shall not be
called by our proper officers within 20 days after our Secretary has been
personally served with such request, or within 60 days after mailing the same by
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registered or certified mail addressed to our Secretary at our principal office,
then the holders of record of at least 10% of such class or series of the
preference shares then outstanding may designate in writing one of their number
to call such meeting at our expense, and such meeting may be called by such
person so designated upon the notice required for annual general meetings of
shareholders and will be held in Bermuda, unless we otherwise designate.
Any holder of such class or series of preference shares so designated will
have access to our register of members for the purpose of causing meetings of
shareholders to be called pursuant to these provisions. Notwithstanding the
foregoing, no such extraordinary meeting will be called during the period within
90 days immediately preceding the date fixed for the next annual general meeting
of shareholders.
At any annual or extraordinary meeting at which the holders of any class or
series of the preference shares have the special right, voting separately as a
class, to elect directors as described above, the presence, in person or by
proxy, of the holders of 50% of such class or series of the preference shares
will be required to constitute a quorum of such class or series for the election
of any director by the holders of such class or series, voting as a class. At
any such meeting or adjournment thereof the absence of a quorum of such class or
series of the preference shares will not prevent the election of directors other
than those to be elected by such class or series of the preference shares,
voting as a class, and the absence of a quorum for the election of such other
directors will not prevent the election of the directors to be elected by such
class or series of the preference shares, voting as a class.
During any period in which the holders of any class or series of the
preference shares have the right to vote as a class for directors as described
above, any vacancies in the Board will be filled by vote of a majority of the
Board pursuant to the Bye-Laws. During such period the directors so elected by
the holders of any class or series of the preference shares will continue in
office (1) until the next succeeding annual general meeting or until their
successors, if any, are elected by such holders and qualify or (2) unless
required by applicable law to continue in office for a longer period, until
termination of the right of the holders of such class or series of the
preference shares to vote as a class for directors, if earlier. If and to the
extent permitted by applicable law, immediately upon any termination of the
right of the holders of any class or series of the preference shares to vote as
a class for directors as provided herein, the term of office of the directors
then in office so elected by the holders of such class or series will terminate.
Whether or not we are being wound up, the rights attached to any class or
series of preference shares may only be varied with the consent in writing of
the holders of three-quarters of the issued shares of that class or series, or
with the sanction of a special resolution approved by at least a majority of the
votes cast by the holders of the shares of that class or series at a separate
general meeting in accordance with Section 47(7) of the Companies Act 1981 of
Bermuda. The rights attached to any class or series of preference shares will
not be deemed to be varied by the creation or issue of any shares or any
securities convertible into or evidencing the right to purchase shares ranking
prior to or equally with such class or series of the preference shares with
respect to the payment of dividends or of assets upon liquidation, dissolution
or winding up. Holders of preference shares are not entitled to vote on any
amalgamation, consolidation, merger or statutory share exchange, except to the
extent that such a transaction would vary the rights attached to any class or
series of preference shares, in which case any such variation is subject to the
approval process described above. Holders of preference shares are not entitled
to vote on any sale of all or substantially all of our assets.
On any item on which the holders of the preference shares are entitled to
vote, such holders will be entitled to one vote for each preference share held.
RESTRICTIONS IN EVENT OF DEFAULT IN DIVIDENDS ON PREFERENCE SHARES
Unless we provide otherwise in a prospectus supplement, if at any time we
have failed to pay dividends in full on the preference shares, thereafter and
until dividends in full, including all accrued and unpaid dividends for all past
quarterly dividend periods on the preference shares outstanding, shall have been
declared and set apart in trust for payment or paid, or if at any time we have
failed to pay in full
20
amounts payable with respect to any obligations to retire preference shares,
thereafter and until such amounts shall have been paid in full or set apart in
trust for payment:
(1) we may not redeem less than all of the preference shares at such
time outstanding unless we obtain the affirmative vote or consent of the
holders of at least 66 2/3% of the outstanding preference shares given in
person or by proxy, either in writing or by resolution adopted at an
extraordinary meeting called for the purpose, at which the holders of the
preference shares shall vote separately as a class, regardless of class or
series;
(2) we may not purchase any preference shares except in accordance
with a purchase offer made in writing to all holders of preference shares
of all classes or series upon such terms as the Board in its sole
discretion after consideration of the respective annual dividend rate and
other relative rights and preferences of the respective classes or series,
will determine (which determination will be final and conclusive) will
result in fair and equitable treatment among the respective classes or
series; provided that (a) we, to meet the requirements of any purchase,
retirement or sinking fund provisions with respect to any class or series,
may use shares of such class or series acquired by it prior to such failure
and then held by it as treasury stock and (b) nothing will prevent us from
completing the purchase or redemption of preference shares for which a
purchase contract was entered into for any purchase, retirement or sinking
fund purposes, or the notice of redemption of which was initially mailed,
prior to such failure; and
(3) we may not redeem, purchase or otherwise acquire, or permit any
subsidiary to purchase or acquire any shares of any other class of our
stock ranking junior to the preference shares as to dividends and upon
liquidation.
PREEMPTIVE RIGHTS
No holder of preference shares, solely by reason of such holding, has or
will have any preemptive right to subscribe to any additional issue of shares of
any class or series or to any security convertible into such shares.
SERIES A PREFERENCE SHARES
As of March 31, 2002, 6,000,000 of our 8.10% Series A Preference Shares
were outstanding. Certain terms of the Series A Preference Shares are summarized
below. A more detailed description of the Series A Preference Shares is set
forth in our registration statement filed under the Exchange Act on Form 8-A on
November 16, 2001, including any amendment or report for the purpose of updating
such description. If we issue preference shares in the future, they may, or may
not, be on terms similar to the Series A Preference Shares.
Dividends on the Series A Preference Shares are cumulative from the date of
original issuance and are payable when, as and if declared by our Board of
Directors, quarterly in arrears, in an amount per share equal to 8.10% of the
liquidation preference per annum. The Series A Preference Shares rank senior to
our common shares with respect to payment of dividends and amounts upon
liquidation, dissolution or winding up. Upon liquidation, the holders of the
Series A Preference Shares will be entitled to receive from our assets legally
available for distribution to shareholders a liquidation preference of $25 per
share, plus accrued and unpaid dividends, if any, to the date of liquidation.
On or after November 19, 2006, we may redeem the Series A Preference
Shares, in whole or in part, at any time, at a redemption price of $25 per
share, plus accrued and unpaid dividends, if any, to the date of redemption,
without interest. At any time prior to November 19, 2006, if we submit to the
holders of our common shares a proposal for an amalgamation or submit any
proposal for any other matter that, as a result of any changes in Bermuda law
after November 14, 2001, requires for its validation or effectuation an
affirmative vote of the holders of preference shares at the time outstanding,
voting separately as a single class, we have the option to redeem all of the
outstanding Series A Preference Shares at a redemption price of $26 per share,
plus accrued and unpaid dividends, if any, to the date of redemption, without
21
interest. The Series A Preference Shares have no stated maturity, are not
subject to any sinking fund or mandatory redemption and are not convertible into
or exchangeable for any of our other securities.
Generally, the holders of the Series A Preference Shares do not have any
voting rights. Whenever dividends on the Series A Preference Shares are in
arrears in an amount equivalent to dividends for six full dividend periods
(whether or not consecutive), the holders of the Series A Preference Shares will
have the right to elect two directors until such dividend arrearage is
eliminated. In addition, certain transactions that would vary the rights of
holders of the Series A Preference Shares cannot be made without the approval in
writing of the holders of three-quarters of the Series A Preference Shares or
the sanction of a resolution passed by a majority of the votes cast at a
separate meeting of the holders of the Series A Preference Shares.
TRANSFER AGENT
Our registrar and transfer agent for the common shares and the Series A
Preference Shares is Mellon Investor Services, L.L.C.
TRANSFER OF SHARES
Our Bye-Laws contain various provisions affecting the transferability of
our shares. Under the Bye-Laws, the Board has absolute discretion to decline to
register a transfer of shares:
(1) unless the appropriate instrument of transfer is submitted along
with such evidence as the Board may reasonably require showing the right of
the transferor to make the transfer,
(2) unless all applicable consents and authorizations of any
governmental body or agency in Bermuda have been obtained, or
(3) if the Board determines that such transfer would result in a
person owning or controlling shares that constitute 9.9% or more of any
class or series of our issued shares.
The primary purpose for the restriction on a holder of our shares from
owning or exercising more than 9.9% of the total voting rights of all our
shareholders is to reduce the likelihood that we will be continue to be deemed a
"controlled foreign corporation" within the meaning of the Internal Revenue Code
for U.S. Federal tax purposes. This limit may also have the effect of deterring
purchases of large blocks of common shares or proposals to acquire us, even if
some or a majority of the shareholders might deem these purchases or acquisition
proposals to be in their best interests. With respect to this issue, also see
the provisions discussed below under "Anti-Takeover Effects of Certain Bye-Laws
Provisions."
If the Board refuses to register any transfer of shares, our Secretary
shall send notice of such refusal to the transferor and transferee within 10
days of the date on which the transfer was lodged with us.
Our Bermuda counsel has advised us that while the precise form of the
restrictions on transfers contained in the Bye-Laws is untested, as a matter of
general principle, restrictions on transfers are enforceable under Bermuda law
and are not uncommon. The transferor of such shares will be deemed to own such
shares for dividend, voting and reporting purposes until a transfer of such
shares has been registered on our register of members.
ANTI-TAKEOVER EFFECTS OF CERTAIN BYE-LAW PROVISIONS
Our Bye-Laws contain certain provisions that make it more difficult to
acquire control of us by means of a tender offer, open market purchase, a proxy
fight or otherwise. These provisions are designed to encourage persons seeking
to acquire control of us to negotiate with our directors. We believe that, as a
general rule, the interests of our shareholders would be best served if any
change in control results from negotiations with our directors. Our directors
would negotiate based upon careful consideration of the proposed terms, such as
the price to be paid to shareholders, the form of consideration to be paid and
the anticipated tax effects of the transaction. However, these provisions could
have the effect of discouraging a prospective acquiror from making a tender
offer or otherwise attempting to obtain control of us. In
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addition, these Bye-Law provisions could prevent the removal of our current
board of directors and management. To the extent these provisions discourage
takeover attempts, they could deprive shareholders of opportunities to realize
takeover premiums for their shares or could depress the market price of the
shares.
In addition to those provisions of the Bye-Laws discussed above under
"Transfers of Shares," set forth below is a description of certain other
provisions of the Bye-Laws. Because the following description is intended as a
summary only and is therefore not complete, you should refer to the Bye-Laws,
which are incorporated by reference as an exhibit to the registration statement
of which this prospectus forms a part, for complete information regarding these
provisions.
BOARD OF DIRECTOR PROVISIONS
Our Bye-Laws provide for a classified board, to which approximately
one-third of the Board is elected each year at our annual general meeting of
shareholders. Accordingly, our directors serve three-year terms rather than
one-year terms. Moreover, our Bye-Laws provide that each director may be removed
by the shareholders only for cause upon the affirmative vote of the holders of
not less than 66 2/3% of the voting rights attached to all issued and
outstanding capital shares entitled to vote for the election of that director.
Further, our Bye-Laws fix the size of the Board at eight directors (although the
incumbent Board may increase its size to eleven members). In addition,
shareholders may only nominate persons for election as director at an annual or
special general meeting of shareholders called for the purpose of electing
directors and only if, among other things, a satisfactory written notice signed
by not less than 20 shareholders holding in the aggregate not less than 10% of
our outstanding paid up share capital is timely submitted.
We believe that these Bye-Law provisions enhance the likelihood of
continuity and stability in the composition of the Board and in the policies
formulated by the Board. We believe these provisions assist our Board to
represent more effectively the interests of all shareholders, including taking
action in response to demands or actions by a minority shareholder or group.
Our classified Board makes it more difficult for shareholders to change the
composition of our Board even if some or a majority of the shareholders believe
such a change would be desirable. Moreover, these Bye-Law provisions may deter
changes in the composition of the Board or certain mergers, tender offers or
other future takeover attempts which some or a majority of holders of our
securities may deem to be in their best interest.
RESTRICTIONS ON CERTAIN SHAREHOLDER ACTIONS
Our Bye-Laws restrict the ability of our shareholders to take certain
actions. These restrictions, among other things, limit the power of our
shareholders to:
- nominate persons to serve as directors;
- submit resolutions to the vote of shareholders at an annual or special
general meeting; and
- to requisition special general meetings.
Generally, the Bye-Laws prohibit shareholders from taking these actions
unless certain requirements specified in the Bye-Laws are met. These
requirements include the giving of written notice, specify information that must
be provided in connection with the notice or in relation to the requested
action, provide that action must be taken within specified time periods, and
require a minimum number of holders to act.
These requirements regulating shareholder nominations and proposals may
have the effect of deterring a contest for the election of directors or the
introduction of a shareholder proposal if the procedures summarized above are
not followed. They may also discourage or deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or to introduce a
proposal. For a more complete description of these provisions, you should refer
to the Bye-Laws, which are incorporated by reference as an exhibit to the
registration statement of which this prospectus forms a part.
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SUPERMAJORITY REQUIREMENTS FOR CERTAIN AMENDMENTS
Our Bye-Laws require the affirmative vote of at least 66 2/3% of the voting
rights attached to all of our issued and outstanding capital shares to amend,
repeal or adopt any provision inconsistent with several provisions of the
Bye-Laws. The provisions include, among others things, those relating to: the
size of our Board and its division into classes, the removal of directors, the
powers of shareholders to nominate directors, to call shareholder meetings and
to propose matters to be acted on at shareholder meetings. This supermajority
requirement could make it more difficult for shareholders to propose and adopt
changes to the Bye-Laws intended to facilitate the acquisition or exercise of
control over us.
AVAILABILITY OF SHARES FOR FUTURE ISSUANCES; SHAREHOLDER RIGHTS PLAN
We have available for issuance a large number of authorized but unissued
shares. Generally, these shares may be issued by action of our directors without
further action by shareholders (except as may be required by applicable stock
exchange requirements). The availability of these shares for issue could be
viewed as enabling the directors to make more difficult a change in our control.
For example, the directors could determine to issue warrants or rights to
acquire shares. In addition, we have authorized a sufficient amount of our
shares such that we could put in place a shareholder rights plan without further
action by shareholders. A shareholder rights plan could serve to dilute or deter
stock ownership of persons seeking to obtain control of us.
Our ability to take these actions makes it more difficult for a third party
to acquire us without negotiating with the Board, even if some or a majority of
the shareholders desired to pursue a proposed transaction. Moreover, these
powers could discourage or defeat unsolicited stock accumulation programs and
acquisition proposals.
DESCRIPTION OF THE DEPOSITARY SHARES
GENERAL
We may, at our option, elect to offer depositary shares, each representing
a fraction (to be set forth in the prospectus supplement relating to our common
shares or a particular series of preference shares) of a share of a common share
or a particular series of preference shares as described below. In the event we
elect to do so, depositary receipts evidencing depositary shares will be issued
to the public.
The shares of common shares or a class or series of preference shares
represented by depositary shares will be deposited under a deposit agreement
among us, a depositary selected by us and the holders of the depositary
receipts. The depositary will be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000. Subject to the terms of the deposit agreement, each owner of
a depositary share will be entitled, in proportion to the applicable fraction of
a common share or preference share represented by such depositary share, to all
the rights and preferences of the common shares or preference shares represented
thereby (including dividend, voting, redemption and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the fractional shares of the common shares or related
class or series of preference shares in accordance with the terms of the
offering described in the related prospectus supplement. If we issue depositary
shares we will file copies of the forms of deposit agreement and depositary
receipt as exhibits to the registration statement of which this prospectus forms
a part.
Pending the preparation of definitive depositary receipts, the depositary
may, upon our written order, issue temporary depositary receipts substantially
identical to (and entitling the holders thereof to all the rights pertaining to)
the definitive depositary receipts but not in definitive form. Definitive
depositary receipts will be prepared thereafter without unreasonable delay, and
temporary depositary receipts will be exchangeable for definitive depositary
receipts without charge to the holder thereof.
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The following description of the depositary shares sets forth the material
terms and provisions of the depositary shares to which any prospectus supplement
may relate. The particular terms of the depositary shares offered by any
prospectus supplement, and the extent to which the general provisions described
below may apply to the offered securities, will be described in the prospectus
supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other distributions
received in respect of the related common shares or class or series of
preference shares to the record holders of depositary shares relating to such
common shares or class or series of preference shares in proportion to the
number of such depositary shares owned by such holders.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares
entitled thereto, unless the depositary determines that it is not feasible to
make such distribution, in which case the depositary may, with our approval,
sell such property and distribute the net proceeds from such sale to such
holders.
WITHDRAWAL OF SHARES
Upon surrender of the depositary receipts at the corporate trust office of
the depositary (unless the related depositary shares have previously been called
for redemption), the holder of the depositary shares evidenced thereby is
entitled to delivery of the number of whole shares of the related common shares
or class or series of preference shares and any money or other property
represented by such depositary shares. Holders of depositary shares will be
entitled to receive whole shares of the related common shares or class or series
of preference shares on the basis set forth in the prospectus supplement for
such common shares or class or series of preference shares, but holders of such
whole common shares or preference shares will not thereafter be entitled to
exchange them for depositary shares. If the depositary receipts delivered by the
holder evidence a number of depositary shares in excess of the number of
depositary shares representing the number of whole common shares or preference
shares to be withdrawn, the depositary will deliver to such holder at the same
time a new depositary receipt evidencing such excess number of depositary
shares. In no event will fractional common shares or preference shares be
delivered upon surrender of depositary receipts to the depositary.
REDEMPTION OF DEPOSITARY SHARES
Whenever we redeem common shares or preference shares held by the
depositary, the depositary will redeem as of the same redemption date the number
of depositary shares representing shares of common shares or the related class
or series of preference shares so redeemed. The redemption price per depositary
share will be equal to the applicable fraction of the redemption price per share
payable with respect to such class or series of the common shares or preference
shares. If less than all the depositary shares are to be redeemed, the
depositary shares to be redeemed will be selected by lot or pro rata as may be
determined by the depositary.
VOTING THE COMMON SHARES OR PREFERENCE SHARES
Upon receipt of notice of any meeting at which the holders of the common
shares or preference shares are entitled to vote, the depositary will mail the
information contained in such notice of meeting to the record holders of the
depositary shares relating to such common shares or preference shares. Each
record holder of such depositary shares on the record date (which will be the
same date as the record date for the common shares or preference shares, as
applicable) will be entitled to instruct the depositary as to the exercise of
the voting rights pertaining to the amount of the class or series of preference
shares or common shares represented by such holder's depositary shares. The
depositary will endeavor, insofar as practicable, to vote the number of the
common shares or preference shares represented by such depositary shares in
accordance with such instructions, and we will agree to take all action which
the depositary deems necessary in order to enable the depositary to do so. The
depositary will abstain from voting
25
common shares or preference shares to the extent it does not receive specific
instructions from the holders of depositary shares representing such common
shares or preference shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended by agreement
between us and the depositary. However, any amendment which materially and
adversely alters the rights of the holders of depositary receipts will not be
effective unless such amendment has been approved by the holders of depositary
receipts representing at least a majority (or, in the case of amendments
relating to or affecting rights to receive dividends or distributions or voting
or redemption rights, 66 2/3%, unless otherwise provided in the related
prospectus supplement) of the depositary shares then outstanding. The deposit
agreement may be terminated by us or the depositary only if (1) all outstanding
depositary shares have been redeemed, (2) there has been a final distribution in
respect of the common shares or the related class or series of preference shares
in connection with our liquidation, dissolution or winding up and such
distribution has been distributed to the holders of depositary receipts or (3)
upon the consent of holders of depositary receipts representing not less than
66 2/3% of the depositary shares outstanding.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will also pay
charges of the depositary in connection with the initial deposit of the related
common shares or class or series of preference shares and any redemption of such
common shares or preference shares. Holders of depositary receipts will pay all
other transfer and other taxes and governmental charges and such other charges
as are expressly provided in the deposit agreement to be for their accounts.
The depositary may refuse to effect any transfer of a depositary receipt or
any withdrawal of shares of common shares or a class or series of preference
shares evidenced thereby until all such taxes and charges with respect to such
depositary receipt or such common shares or preference shares are paid by the
holders thereof.
MISCELLANEOUS
The depositary will forward all reports and communications from us which
are delivered to the depositary and which we are required to furnish to the
holders of the common shares or preference shares.
Neither we nor the depositary will be liable if either of us is prevented
or delayed by law or any circumstance beyond our control in performing our
obligations under the deposit agreement. Our obligations and the obligations the
depositary under the deposit agreement will be limited to performance in good
faith of their duties thereunder and neither we nor the depositary will be
obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or class or series of preference shares unless satisfactory
indemnity is furnished. We and the depositary may rely on written advice of
counsel or accountants, or information provided by persons presenting preference
shares for deposit, holders of depositary shares or other persons believed to be
competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to us notice of its
election to do so, and we may at any time remove the depositary. Any such
resignation or removal of the depositary will take effect upon the appointment
of a successor depositary, which successor depositary must be appointed within
60 days after delivery of the notice of resignation or removal and must be a
bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
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DESCRIPTION OF THE DEBT SECURITIES
The following description of our debt securities sets forth the material
terms and provisions of the debt securities to which any prospectus supplement
may relate. Our senior debt securities are to be issued under a senior indenture
between us and Bankers Trust Company, as trustee, the form of which is filed as
an exhibit to the registration statement of which this prospectus forms a part.
Our subordinated debt securities are to be issued under a subordinated indenture
between us and Bankers Trust Company, as trustee, the form of which is filed as
an exhibit to the registration statement of which this prospectus forms a part.
In addition, we may issue junior subordinated debt securities to the Capital
Trust in connection with the issuance of preferred securities and common
securities by the Capital Trust. These junior subordinated debt securities would
be issued under a separate junior subordinated indenture between us and Bankers
Trust Company, as trustee, the form of which is filed as an exhibit to the
registration statement of which this prospectus forms a part. The senior
indenture, the subordinated indenture and the junior subordinated indenture are
sometimes referred to herein collectively as the "indentures" and each
individually as an "indenture." The particular terms of the debt securities
offered by any prospectus supplement, and the extent to which the general
provisions described below may apply to the offered debt securities, will be
described in the prospectus supplement.
Because the following summaries of the material terms and provisions of the
indentures and the related debt securities are not complete, you should refer to
the forms of the indentures and the debt securities for complete information
regarding the terms and provisions of the indentures, including the definitions
of some of the terms used below, and the debt securities. Wherever we refer to
particular articles, sections or defined terms of an indenture, those articles,
sections or defined terms are incorporated herein by reference. Whenever we
refer to particular articles, sections or defined terms of an indenture, without
specific reference to a indenture, those articles, sections or defined terms are
contained in all indentures. The senior indenture and the subordinated indenture
are substantially identical, except for certain covenants of ours and provisions
relating to subordination. The subordinated indenture and the junior
subordinated indenture are substantially identical, except for certain rights
and covenants of ours and provisions relating to the issuance of securities to
the Capital Trust.
GENERAL
The indentures do not limit the aggregate principal amount of the debt
securities which we may issue thereunder and provide that we may issue the debt
securities thereunder from time to time in one or more series. (Section 3.1) The
indentures do not limit the amount of other Indebtedness (as defined below) or
the debt securities, other than certain secured Indebtedness as described below,
which we or our subsidiaries may issue.
Unless otherwise provided in a prospectus supplement, our senior debt
securities will be unsecured obligations of ours and will rank equally with all
of our other unsecured and unsubordinated indebtedness. The subordinated debt
securities will be unsecured obligations of ours, subordinated in right of
payment to the prior payment in full of all Senior Indebtedness (which term
includes the senior debt securities) of ours as described below under
"Subordination of the Subordinated Debt Securities" and in the applicable
prospectus supplement.
Because we are a holding company, our rights and the rights of our
creditors (including the holders of our debt securities) and shareholders to
participate in distributions by certain of our subsidiaries upon that
subsidiary's liquidation or reorganization or otherwise would be subject to the
prior claims of that subsidiary's creditors, except to the extent that we may
ourselves be a creditor with recognized claims against that subsidiary or our
creditor may have the benefit of a guaranty from our subsidiary. None of our
creditors has the benefit of a guaranty from any of our subsidiaries. The rights
of our creditors (including the holders of our debt securities) to participate
in the distribution of stock owned by us in certain of our subsidiaries,
including our insurance subsidiaries, may also be subject to approval by certain
insurance regulatory authorities having jurisdiction over such subsidiaries.
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In the event our junior subordinated debt securities are issued to the
Capital Trust in connection with the issuance of preferred securities and common
securities by the Capital Trust, such junior subordinated debt securities
subsequently may be distributed pro rata to the holders of such preferred
securities and common securities in connection with the dissolution of the
Capital Trust upon the occurrence of certain events. These events will be
described in the prospectus supplement relating to such preferred securities and
common securities. Only one series of our junior subordinated debt securities
will be issued to the Capital Trust in connection with the issuance of preferred
securities and common securities by the Capital Trust.
The prospectus supplement relating to the particular debt securities
offered thereby will describe the following terms of the offered debt
securities:
- the title of such debt securities and the series in which such debt
securities will be included, which may include medium-term notes;
- the aggregate principal amount of such debt securities and any limit upon
such principal amount;
- the date or dates, or the method or methods, if any, by which such date
or dates will be determined, on which the principal of such debt
securities will be payable;
- the rate or rates at which such debt securities will bear interest, if
any, which rate may be zero in the case of certain debt securities issued
at an issue price representing a discount from the principal amount
payable at maturity, or the method by which such rate or rates will be
determined (including, if applicable, any remarketing option or similar
method), and the date or dates from which such interest, if any, will
accrue or the method by which such date or dates will be determined;
- the date or dates on which interest, if any, on such debt securities will
be payable and any regular record dates applicable to the date or dates
on which interest will be so payable;
- the place or places where the principal of, any premium or interest on or
any additional amounts with respect to such debt securities will be
payable, any of such debt securities that are issued in registered form
may be surrendered for registration of transfer or exchange, and any such
debt securities may be surrendered for conversion or exchange;
- whether any of such debt securities are to be redeemable at our option
and, if so, the date or dates on which, the period or periods within
which, the price or prices at which and the other terms and conditions
upon which such debt securities may be redeemed, in whole or in part, at
our option;
- whether we will be obligated to redeem or purchase any of such debt
securities pursuant to any sinking fund or analogous provision or at the
option of any holder thereof and, if so, the date or dates on which, the
period or periods within which, the price or prices at which and the
other terms and conditions upon which such debt securities will be
redeemed or purchased, in whole or in part, pursuant to such obligation,
and any provisions for the remarketing of such debt securities so
redeemed or purchased;
- if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which any debt securities to be issued in registered
form will be issuable and, if other than a denomination of $5,000, the
denominations in which any debt securities to be issued in bearer form
will be issuable;
- whether the debt securities will be convertible into common shares and/or
exchangeable for other securities issued by us, and, if so, the terms and
conditions upon which such debt securities will be so convertible or
exchangeable;
- if other than the principal amount, the portion of the principal amount
(or the method by which such portion will be determined) of such debt
securities that will be payable upon declaration of acceleration of the
maturity thereof;
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- if other than United States dollars, the currency of payment, including
composite currencies, of the principal of, any premium or interest on or
any additional amounts with respect to any of such debt securities;
- whether the principal of, any premium or interest on or any additional
amounts with respect to such debt securities will be payable, at our
election or the election of a holder, in a currency other than that in
which such debt securities are stated to be payable and the date or dates
on which, the period or periods within which, and the other terms and
conditions upon which, such election may be made;
- any index, formula or other method used to determine the amount of
payments of principal of, any premium or interest on or any additional
amounts with respect to such debt securities;
- whether such debt securities are to be issued in the form of one or more
global securities and, if so, the identity of the depositary for such
global security or securities;
- whether such debt securities are the senior debt securities or
subordinated debt securities and, if the subordinated debt securities,
the specific subordination provisions applicable thereto;
- in the case of junior subordinated debt securities issued to the Capital
Trust, the terms and conditions of any obligation or right of ours or the
Capital Trust to convert or exchange such subordinated debt securities
into preferred securities of that trust;
- in the case of junior subordinated debt securities issued to the Capital
Trust, the form of restated trust agreement and, if applicable, the
agreement relating to our guarantee of the preferred securities of the
Capital Trust;
- in the case of the subordinated debt securities, the relative degree, if
any, to which such subordinated debt securities of the series will be
senior to or be subordinated to other series of the subordinated debt
securities or other indebtedness of ours in right of payment, whether
such other series of the subordinated debt securities or other
indebtedness are outstanding or not;
- any deletions from, modifications of or additions to the Events of
Default or covenants of ours with respect to such debt securities;
- whether the provisions described below under "Discharge, Defeasance and
Covenant Defeasance" will be applicable to such debt securities;
- whether any of such debt securities are to be issued upon the exercise of
warrants, and the time, manner and place for such debt securities to be
authenticated and delivered; and
- any other terms of such debt securities and any other deletions from or
modifications or additions to the applicable indenture in respect of such
debt securities. (Section 3.1)
We will have the ability under the indentures to "reopen" a previously
issued series of the debt securities and issue additional debt securities of
that series or establish additional terms of that series. We are also permitted
to issue debt securities with the same terms as previously issued debt
securities. (Section 3.1)
Unless otherwise provided in the related prospectus supplement, principal,
premium, interest and additional amounts, if any, with respect to any debt
securities will be payable at the office or agency maintained by us for such
purposes (initially the corporate trust office of the trustee). In the case of
debt securities issued in registered form, interest may be paid by check mailed
to the persons entitled thereto at their addresses appearing on the security
register or by transfer to an account maintained by the payee with a bank
located in the United States. Interest on debt securities issued in registered
form will be payable on any interest payment date to the persons in whose names
the debt securities are registered at the close of business on the regular
record date with respect to such interest payment date. Interest on such debt
securities which have a redemption date after a regular record date, and on or
before the following interest payment date, will also be payable to the persons
in whose names the debt securities are
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so registered. All paying agents initially designated by us for the debt
securities will be named in the related prospectus supplement. We may at any
time designate additional paying agents or rescind the designation of any paying
agent or approve a change in the office through which any paying agent acts,
except that we will be required to maintain a paying agent in each place where
the principal of, any premium or interest on or any additional amounts with
respect to the debt securities are payable. (Sections 3.7, 10.2 and 11.6)
Unless otherwise provided in the related prospectus supplement, the debt
securities may be presented for transfer (duly endorsed or accompanied by a
written instrument of transfer, if so required by us or the security registrar)
or exchanged for other debt securities of the same series (containing identical
terms and provisions, in any authorized denominations, and of a like aggregate
principal amount) at the office or agency maintained by us for such purposes
(initially the corporate trust office of the trustee). Such transfer or exchange
will be made without service charge, but we may require payment of a sum
sufficient to cover any tax or other governmental charge and any other expenses
then payable. We will not be required to (1) issue, register the transfer of, or
exchange, the debt securities during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of any such
debt securities and ending at the close of business on the day of such mailing
or (2) register the transfer of or exchange any debt security so selected for
redemption in whole or in part, except the unredeemed portion of any debt
security being redeemed in part. (Section 3.5) We have appointed the trustee as
security registrar. Any transfer agent (in addition to the security registrar)
initially designated by us for any debt securities will be named in the related
prospectus supplement. We may at any time designate additional transfer agents
or rescind the designation of any transfer agent or approve a change in the
office through which any transfer agent acts, except that we will be required to
maintain a transfer agent in each place where the principal of, any premium or
interest on or any additional amounts with respect to the debt securities are
payable. (Section 10.2)
Unless otherwise provided in the related prospectus supplement, the debt
securities will be issued only in fully registered form without coupons in
minimum denominations of $1,000 and any integral multiple thereof. (Section 3.2)
The debt securities may be represented in whole or in part by one or more global
debt securities registered in the name of a depositary or its nominee and, if so
represented, interests in such global debt security will be shown on, and
transfers thereof will be effected only through, records maintained by the
designated depositary and its participants as described below. Where the debt
securities of any series are issued in bearer form, the special restrictions and
considerations, including special offering restrictions and special U.S. federal
income tax considerations, applicable to such debt securities and to payment on
and transfer and exchange of such debt securities will be described in the
related prospectus supplement.
The debt securities may be issued as original issue discount securities
(bearing no interest or bearing interest at a rate which at the time of issuance
is below market rates) to be sold at a substantial discount below their
principal amount and may for various other reasons be considered to have
original issue discount for U.S. federal income tax purposes. In general,
original issue discount is included in the income of holders on a
yield-to-maturity basis. Accordingly, depending on the terms of the debt
securities, holders may be required to include amounts in income prior to the
receipt thereof. Special U.S. federal income tax and other considerations
applicable to original issue discount securities will be described in the
related prospectus supplement.
If the purchase price of any debt securities is payable in one or more
foreign currencies or currency units or if any debt securities are denominated
in one or more foreign currencies or currency units or if the principal of, or
any premium or interest on, or any additional amounts with respect to, any debt
securities is payable in one or more foreign currencies or currency units, the
restrictions, elections, certain U.S. federal income tax considerations,
specific terms and other information with respect to such debt securities and
such foreign currency or currency units will be set forth in the related
prospectus supplement.
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We will comply with Section 14(e) under the Exchange Act, and any other
tender offer rules under the Exchange Act which may then be applicable, in
connection with any obligation of ours to purchase debt securities at the option
of the holders. Any such obligation applicable to a series of debt securities
will be described in the related prospectus supplement.
Unless otherwise described in a prospectus supplement relating to any debt
securities, other than as described below under "-- Covenants Applicable to the
Senior Debt Securities -- Limitation on Liens on Stock of Designated
Subsidiaries," the indentures do not contain any provisions that would limit our
ability to incur indebtedness or that would afford holders of the debt
securities protection in the event of a sudden and significant decline in our
credit quality or a takeover, recapitalization or highly leveraged or similar
transaction involving us. Accordingly, we could in the future enter into
transactions that could increase the amount of indebtedness outstanding at that
time or otherwise affect our capital structure or credit rating. You should
refer to the prospectus supplement relating to a particular series of the debt
securities for information regarding to any deletions from, modifications of or
additions to the Events of Defaults described below or our covenants contained
in the indentures, including any addition of a covenant or other provisions
providing event risk or similar protection.
CONVERSION AND EXCHANGE
The terms, if any, on which debt securities of any series are convertible
into or exchangeable for common shares, preference shares or other securities
issued by us, property or cash, or a combination of any of the foregoing, will
be set forth in the related prospectus supplement. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at our option, in which the securities, property or cash to be
received by the holders of the debt securities would be calculated according to
the factors and at such time as described in the related prospectus supplement.
Any such conversion or exchange will comply with applicable Bermuda law, the
Memorandum and the Bye-Laws.
CONSOLIDATION, AMALGAMATION, MERGER AND SALE OF ASSETS
Unless otherwise described in a prospectus supplement, each indenture
provides that we may not (1) consolidate or amalgamate with or merge into any
Person or convey, transfer or lease our properties and assets as an entirety or
substantially as an entirety to any Person, or (2) permit any Person to
consolidate or amalgamate with or merge into us, or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to us,
unless (a) in the case of (1) above, such Person is a corporation organized and
existing under the laws of the United States, any state thereof or the District
of Columbia, Bermuda or any country which is, on the date of the indenture, a
member of the Organization of Economic Cooperation and Development and will
expressly assume, by supplemental indenture satisfactory in form to the trustee,
the due and punctual payment of the principal of, any premium and interest on
and any additional amounts with respect to all of the debt securities issued
thereunder, and the performance of our obligations under such indenture and the
debt securities issued thereunder, and provides for conversion or exchange
rights in accordance with the provisions of the debt securities of any series
that are convertible or exchangeable into common shares or other securities; (b)
immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of ours or of a Designated Subsidiary
as a result of such transaction as having been incurred by us or such subsidiary
at the time of such transaction, no Event of Default, and no event which after
notice or lapse of time or both would become an Event of Default, will have
happened and be continuing; and (c) certain other conditions are met.
EVENTS OF DEFAULT
Unless we provide other or substitute Events of Default in a prospectus
supplement, the following events will constitute an Event of Default under the
applicable indenture with respect to any series of debt securities issued
thereunder (whatever the reason for such Event of Default and whether it will be
31
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):
(1) default in the payment of any interest on any debt security of
such series, or any additional amounts payable with respect thereto, when
such interest becomes or such additional amounts become due and payable,
and continuance of such default for a period of 30 days;
(2) default in the payment of the principal of or any premium on any
debt security of such series, or any additional amounts payable with
respect thereto, when such principal or premium becomes or such additional
amounts become due and payable either at maturity, upon any redemption, by
declaration of acceleration or otherwise;
(3) default in the performance, or breach, of any covenant or warranty
of ours contained in the applicable indenture for the benefit of such
series or in the debt securities of such series, and the continuance of
such default or breach for a period of 60 days after there has been given
written notice as provided in such indenture;
(4) if any event of default as defined in any mortgage, indenture or
instrument under which there may be issued, or by which there may be
secured or evidenced, any of our Indebtedness for borrowed money (other
than Indebtedness which is non-recourse to us) happens and consists of
default in the payment of more than $100,000,000 in principal amount of
such Indebtedness when due (after giving effect to any applicable grace
period), and such default is not cured or such acceleration is not
rescinded or annulled within a period of 30 days after there has been given
written notice as provided in the applicable indenture;
(5) we shall fail within 60 days to pay, bond or otherwise discharge
any uninsured judgment or court order for the payment of money in excess of
$100,000,000, which is not stayed on appeal or is not otherwise being
appropriately contested in good faith; and
(6) certain events relating to our bankruptcy, insolvency or
reorganization.
If an Event of Default with respect to the debt securities of any series
(other than an Event of Default described in clause (6) of the preceding
paragraph) occurs and is continuing, either the trustee or the holders of at
least 25% in principal amount of the outstanding debt securities of such series
by written notice as provided in the applicable indenture may declare the
principal amount (or such lesser amount as may be provided for in the debt
securities of such series) of all outstanding debt securities of such series to
be due and payable immediately. At any time after a declaration of acceleration
has been made, but before a judgment or decree for payment of money has been
obtained by the trustee, and subject to applicable law and certain other
provisions of the applicable indenture, the holders of a majority in aggregate
principal amount of the debt securities of such series may, under certain
circumstances, rescind and annul such acceleration. An Event of Default
described in clause (6) of the preceding paragraph will cause the principal
amount and accrued interest (or such lesser amount as provided for in the debt
securities of such series) to become immediately due and payable without any
declaration or other act by the trustee or any holder.
Each indenture provides that, within 90 days after the occurrence of any
event which is, or after notice or lapse of time or both would become, an Event
of Default with respect to the debt securities of any series, the trustee will
transmit, in the manner set forth in such indenture and subject to the
exceptions described below, notice of such default to the holders of the debt
securities of such series unless such default has been cured or waived. However,
except in the case of a default in the payment of principal of, or premium, if
any, or interest, if any, on, or additional amounts or any sinking fund or
purchase fund installment with respect to, any debt security of such series, the
trustee may withhold such notice if and so long as our Board, executive
committee or a trust committee of directors and/or responsible officers of the
trustee in good faith determine that the withholding of such notice is in the
best interest of the holders of the debt securities of such series. In addition,
in the case of any default of the character described in clause (5) of the
second preceding paragraph, no such notice to holders will be given until at
least 30 days after the default occurs.
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If an Event of Default occurs and is continuing with respect to the debt
securities of any series, the trustee may in its discretion proceed to protect
and enforce its rights and the rights of the holders of the debt securities of
such series by all appropriate judicial proceedings. Each indenture provides
that, subject to the duty of the trustee during any default to act with the
required standard of care, the trustee will be under no obligation to exercise
any of its rights or powers under such indenture at the request or direction of
any of the holders of the debt securities, unless such holders shall have
offered to the trustee reasonable indemnity. Subject to such provisions for the
indemnification of the trustee, and subject to applicable law and certain other
provisions of the applicable indenture, the holders of a majority in aggregate
principal amount of the outstanding debt securities of any series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee, or exercising any trust or power conferred on
the trustee, with respect to debt securities of such series.
MODIFICATION AND WAIVER
We and the trustee may modify or amend either indenture with the consent of
the holders of not less than a majority in aggregate principal amount of the
outstanding debt securities of each series affected thereby; provided, however,
that no such modification or amendment may, without the consent of the holder of
each outstanding debt security affected thereby,
- change the stated maturity of the principal of, or any premium or
installment of interest on, or any additional amounts with respect to,
any debt security,
- reduce the principal amount of, or the rate (or modify the calculation of
such principal amount or rate) of interest on, or any additional amounts
with respect to, or any premium payable upon the redemption of, any debt
security,
- change our obligation to pay additional amounts with respect to any debt
security,
- change the redemption provisions of any debt security or, following the
occurrence of any event that would entitle a holder to require us to
redeem or repurchase any debt security at the option of the holder,
adversely affect the right of redemption or repurchase at the option of
such holder, of any affected debt security,
- change the place of payment or the coin or currency in which the
principal of, any premium or interest on or any additional amounts with
respect to, any debt security is payable,
- impair the right to institute suit for the enforcement of any payment on
or after the stated maturity of any debt security (or, in the case of
redemption, on or after the redemption date or, in the case of repayment
at the option of any holder, on or after the repayment date),
- reduce the percentage in principal amount of the outstanding debt
securities, the consent of whose holders is required in order to take
specific actions,
- reduce the requirements for quorum or voting by holders of debt
securities in the applicable section of each indenture,
- modify any of the provisions in the applicable indenture regarding the
waiver of past defaults and the waiver of certain covenants by the
holders of the debt securities except to increase any percentage vote
required or to provide that other provisions of such indenture cannot be
modified or waived without the consent of the holder of each debt
security affected thereby,
- make any change that adversely affects the right to convert or exchange
any debt security into or for our common shares or other debt securities
or other securities, cash or property in accordance with its terms,
- modify any of the provisions of the subordinated indenture relating to
the subordination of the subordinated debt securities in a manner adverse
to holders of the subordinated debt securities, or
- modify any of the above provisions.
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In addition, no supplemental indenture may directly or indirectly modify or
eliminate the subordination provisions of the subordinated indenture in any
manner which might terminate or impair the subordination of the subordinated
debt securities to Senior Indebtedness without the prior written consent of the
holders of the Senior Indebtedness.
We and the trustee may modify or amend either indenture and debt securities
of any series without the consent of any holder in order to, among other things:
- provide for our successor pursuant to a consolidation, amalgamation,
merger or sale of assets;
- add to our covenants for the benefit of the holders of all or any series
of debt securities or to surrender any right or power conferred upon us
by the applicable indenture;
- provide for a successor trustee with respect to debt securities of all or
any series;
- cure any ambiguity or correct or supplement any provision in either
indenture which may be defective or inconsistent with any other
provision, or to make any other provisions with respect to matters or
questions arising under either indenture which will not adversely affect
the interests of the holders of debt securities of any series;
- change the conditions, limitations and restrictions on the authorized
amount, terms or purposes of issue, authentication and delivery of debt
securities under either indenture;
- add any additional Events of Default with respect to all or any series of
debt securities;
- provide for conversion or exchange rights of the holders of any series of
debt securities; or
- make any other change that does not materially adversely affect the
interests of the holders of any debt securities then outstanding under
the applicable indenture. (Section 9.1)
The holders of at least a majority in aggregate principal amount of debt
securities of any series may, on behalf of the holders of all debt securities of
that series, waive compliance by us with certain restrictive provisions of the
applicable indenture. (Section 10.8) The holders of not less than a majority in
aggregate principal amount of the outstanding debt securities of any series may,
on behalf of the holders of all debt securities of that series, waive any past
default and its consequences under the applicable indenture with respect to debt
securities of that series, except a default (1) in the payment of principal of,
any premium or interest on or any additional amounts with respect to debt
securities of that series or (2) in respect of a covenant or provision of the
applicable indenture that cannot be modified or amended without the consent of
the holder of each debt security of any series. (Section 5.13)
Under each indenture, we are required to furnish the trustee annually a
statement as to performance by us of certain of our obligations under that
indenture and as to any default in such performance. We are also required to
deliver to the trustee, within five days after occurrence thereof, written
notice of any Event of Default or any event which after notice or lapse of time
or both would constitute an Event of Default. (Section 10.9)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
We may discharge certain obligations to holders of any series of debt
securities that have not already been delivered to the trustee for cancellation
and that either have become due and payable or will become due and payable
within one year (or scheduled for redemption within one year) by depositing with
the trustee, in trust, funds in U.S. dollars or in the Foreign Currency in which
such debt securities are payable in an amount sufficient to pay the entire
indebtedness on such debt securities with respect to principal and any premium,
interest and additional amounts to the date of such deposit (if such debt
securities have become due and payable) or with respect to principal, any
premium and interest to the maturity or redemption date thereof, as the case may
be. (Section 4.1)
Each indenture provides that, unless the provisions of Section 4.2 thereof
are made inapplicable to debt securities of or within any series pursuant to
Section 3.1 thereof, we may elect either (1) to defease
34
and be discharged from any and all obligations with respect to such debt
securities (except for, among other things, the obligation to pay additional
amounts, if any, upon the occurrence of certain events of taxation, assessment
or governmental charge with respect to payments on such debt securities and
other obligations to register the transfer or exchange of such debt securities,
to replace temporary or mutilated, destroyed, lost or stolen debt securities, to
maintain an office or agency with respect to such debt securities and to hold
moneys for payment in trust) ("defeasance") or (2) to be released from our
obligations with respect to such debt securities under certain covenants as
described in the related prospectus supplement, and any omission to comply with
such obligations will not constitute a default or an Event of Default with
respect to such debt securities ("covenant defeasance"). Defeasance or covenant
defeasance, as the case may be, will be conditioned upon the irrevocable deposit
by us with the Trustee, in trust, of an amount in U.S. dollars or in the Foreign
Currency in which such debt securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such debt
securities which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of, any premium and interest on such debt securities on the
scheduled due dates or any prior redemption date. (Section 4.2)
Such a trust may only be established if, among other things:
(1) the applicable defeasance or covenant defeasance does not result
in a breach or violation of, or constitute a default under or any material
agreement or instrument to which we are a party or by which we are bound,
(2) no Event of Default or event which with notice or lapse of time or
both would become an Event of Default with respect to the debt securities
to be defeased will have occurred and be continuing on the date of
establishment of such a trust after giving effect to such establishment
and, with respect to defeasance only, no bankruptcy proceeding will have
occurred and be continuing at any time during the period ending on the 91st
day after such date,
(3) with respect to registered securities and any bearer securities
for which the place of payment is within the United States, we have
delivered to the trustee an opinion of counsel (as specified in each
indenture) to the effect that the holders of such debt securities will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such defeasance or covenant defeasance and will be subject to
U.S. federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such opinion of counsel, in the case of
defeasance, must refer to and be based upon a letter ruling of the Internal
Revenue Service received by us, a Revenue Ruling published by the Internal
Revenue Service or a change in applicable U.S. federal income tax law
occurring after the date of the applicable indenture, and
(4) with respect to defeasance, we have delivered to the trustee an
officers' certificate as to solvency and the absence of intent of
preferring holders over our other creditors. (Section 4.2)
"Foreign Currency" means any currency, currency unit or composite currency,
including, without limitation, the euro, issued by the government of one or more
countries other than the United States of America or by any recognized
confederation or association of such governments. (Section 1.1)
"Government Obligations" means debt securities which are (1) direct
obligations of the United States of America or the government or the governments
which issued the Foreign Currency in which the debt securities of a particular
series are payable, for the payment of which its full faith and credit is
pledged or (2) obligations of a Person controlled or supervised by and acting as
an agency or instrumentality of the United States of America or such government
or governments which issued the Foreign Currency in which the debt securities of
such series are payable, the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of America
or such other government or governments, which, in the case of clauses (1) and
(2), are not callable or redeemable at the option of the issuer or issuers
thereof, and will also include a depository receipt issued by a bank or trust
company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal
35
of or any other amount with respect to any such Government Obligation held by
such custodian for the account of the holder of such depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian with respect to the Government
Obligation or the specific payment of interest on or principal of or any other
amount with respect to the Government Obligation evidenced by such depository
receipt. (Section 1.1)
If after we have deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to debt securities of any series,
(1) the holder of a debt security of that series is entitled to, and does, elect
pursuant to Section 3.1 of the applicable indenture or the terms of such debt
security to receive payment in a currency other than that in which such deposit
has been made in respect of such debt security, or (2) a Conversion Event (as
defined below) occurs in respect of the Foreign Currency in which such deposit
has been made, the indebtedness represented by such debt security will be deemed
to have been, and will be, fully discharged and satisfied through the payment of
the principal of, any premium and interest on, and any additional amounts with
respect to, such debt security as such debt security becomes due out of the
proceeds yielded by converting the amount or other properties so deposited in
respect of such debt security into the currency in which such debt security
becomes payable as a result of such election or such Conversion Event based on
(a) in the case of payments made pursuant to clause (1) above, the applicable
market exchange rate for such currency in effect on the second business day
prior to such payment date, or (b) with respect to a Conversion Event, the
applicable market exchange rate for such Foreign Currency in effect (as nearly
as feasible) at the time of the Conversion Event. (Section 4.2)
"Conversion Event" means the cessation of use of (1) a Foreign Currency
both by the government of the country or countries which issued such Foreign
Currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community or (2) any
currency unit or composite currency for the purposes for which it was
established. (Section 1.1)
In the event we effect covenant defeasance with respect to any debt
securities and such debt securities are declared due and payable because of the
occurrence of any Event of Default other than an Event of Default with respect
to any covenant as to which there has been covenant defeasance, the amount in
such Foreign Currency in which such debt securities are payable, and Government
Obligations on deposit with the trustee, will be sufficient to pay amounts due
on such debt securities at the time of the stated maturity or redemption date
but may not be sufficient to pay amounts due on such debt securities at the time
of the acceleration resulting from such Event of Default. However, we would
remain liable to make payment of such amounts due at the time of acceleration.
REDEMPTION
Unless otherwise described in a prospectus supplement, relating to any debt
securities, other than as described under "-- Certain Provisions of the Junior
Subordinated Debt Securities Issued to the Capital Trust," we may at our option,
redeem any series of debt securities, in whole or in part, at any time at the
redemption price. Unless otherwise described in a prospectus supplement, debt
securities will not be subject to sinking fund or other mandatory redemption or
to redemption or repurchase at the option of the holders upon a change of
control, a change in management, an asset sale or any other specified event. We
currently have no debt securities outstanding that are subject to redemption or
repurchase at the option of the holders. We will include appropriate risk factor
disclosure in any prospectus supplement prepared in connection with the issuance
of debt securities that are subject to redemption or repurchase at the option of
the holders.
Except as otherwise provided in the related prospectus supplement, in the
case of any series of subordinated debt securities issued to the Capital Trust,
if an Investment Company Event or a Tax Event (each, a "special event") shall
occur and be continuing, we may, at our option, redeem such series of junior
subordinated debt securities, in whole but not in part, at any time within 90
days of the occurrence of the special event, at a redemption price equal to 100%
of the principal amount of such junior
36
subordinated debt securities then outstanding plus accrued and unpaid interest
to the date fixed for redemption. (Section 11.8 of the junior subordinated
indenture)
For purposes of the junior subordinated indenture, "Investment Company
Event" means, in respect of a Capital Trust, the receipt by the Capital Trust of
an opinion of counsel experienced in such matters to the effect that, as a
result of the occurrence of a change in law or regulation or a change in the
interpretation or application of law or regulation by any legislative body,
court or governmental agency or regulatory authority, the Capital Trust is or
will be considered an investment company that is required to be registered under
the Investment Company Act, which change becomes effective on or after the date
of original issuance of the preferred securities of the Capital Trust. (Section
1.1 of the junior subordinated indenture)
"Tax Event" means, in respect of the Capital Trust, the receipt by the
Capital Trust or us of an opinion of counsel experienced in such matters to the
effect that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulation thereunder) of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of original issuance of the preferred securities of the Capital Trust, there is
more than an insubstantial risk that (i) the Capital Trust is, or will be within
90 days of the date of such opinion, subject to U.S. federal income tax with
respect to income received or accrued on the corresponding series of
subordinated debt securities, (ii) interest payable by us on such junior
subordinated debt securities is not, or within 90 days of the date of such
opinion will not be, deductible by us, in whole or in part, for U.S. federal
income tax purposes or (iii) the Capital Trust is, or will be within 90 days of
the date of such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges. (Section 1.1 of the junior
subordinated indenture)
Unless otherwise described in a prospectus supplement, notice of any
redemption will be mailed at least 30 days but not more than 60 days before the
redemption date to each holder of junior subordinated debt securities to be
redeemed at its registered address. Unless we default in payment of the
redemption price, on and after the redemption date interest we will cease to
accrue on the subordinated debt securities or portions thereof called for
redemption.
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global debt securities that will be deposited with, or on
behalf of, a depositary identified in the prospectus supplement relating to such
series.
The specific terms of the depositary arrangement with respect to a series
of the debt securities will be described in the prospectus supplement relating
to such series. We anticipate that the following provisions will apply to all
depositary arrangements.
Upon the issuance of a global security, the depositary for such global
security or its nominee will credit, on its book-entry registration and transfer
system, the respective principal amounts of the debt securities represented by
such global security. Such accounts will be designated by the underwriters or
agents with respect to such debt securities or by us if such debt securities are
offered and sold directly by us. Ownership of beneficial interests in a global
security will be limited to persons that may hold interests through
participants. Ownership of beneficial interests in such global security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the depositary or its nominee (with respect to interests
of participants) and on the records of participants (with respect to interests
of persons other than participants). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a global security.
37
So long as the depositary for a global security, or its nominee, is the
registered owner of such global security, such depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the debt
securities represented by such global security for all purposes under the
applicable indenture. Except as described below, owners of beneficial interests
in a global security will not be entitled to have the debt securities of the
series represented by such global security registered in their names and will
not receive or be entitled to receive physical delivery of the debt securities
of that series in definitive form.
Principal of, any premium and interest on, and any additional amounts with
respect to, the debt securities registered in the name of a depositary or its
nominee will be made to the depositary or its nominee, as the case may be, as
the registered owner of the global security representing such debt securities.
None of the trustee, any paying agent, the security registrar or us will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the global
security for such debt securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
We expect that the depositary for a series of the debt securities or its
nominee, upon receipt of any payment with respect to such debt securities, will
credit immediately participants' accounts with payments in amounts proportionate
to their respective beneficial interest in the principal amount of the global
security for such debt securities as shown on the records of such depositary or
its nominee. We also expect that payments by participants to owners of
beneficial interests in such global security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name,"
and will be the responsibility of such participants.
The indentures provide that if:
(1) the depositary for a series of the debt securities notifies us
that it is unwilling or unable to continue as depositary or if such
depositary ceases to be eligible under the applicable indenture and a
successor depositary is not appointed by us within 90 days of written
notice,
(2) we determine that the debt securities of a particular series will
no longer be represented by global securities and executes and delivers to
the trustee a company order to such effect or
(3) an Event of Default with respect to a series of the debt
securities has occurred and is continuing, the global securities will be
exchanged for the debt securities of such series in definitive form of like
tenor and of an equal aggregate principal amount, in authorized
denominations.
Such definitive debt securities will be registered in such name or names as
the depositary shall instruct the trustee. (Section 3.5) It is expected that
such instructions may be based upon directions received by the depositary from
participants with respect to ownership of beneficial interests in global
securities.
PAYMENT OF ADDITIONAL AMOUNTS
We will make all payments of principal of and premium, if any, interest and
any other amounts on, or in respect of, the debt securities of any series
without withholding or deduction at source for, or on account of, any present or
future taxes, fees, duties, assessments or governmental charges of whatever
nature imposed or levied by or on behalf of Bermuda or any other jurisdiction in
which we are organized (a "taxing jurisdiction") or any political subdivision or
taxing authority thereof or therein, unless such taxes, fees, duties,
assessments or governmental charges are required to be withheld or deducted by
(x) the laws (or any regulations or rulings promulgated thereunder) of a taxing
jurisdiction or any political subdivision or taxing authority thereof or therein
or (y) an official position regarding the application, administration,
interpretation or enforcement of any such laws, regulations or rulings
(including, without limitation, a holding by a court of competent jurisdiction
or by a taxing authority in a taxing jurisdiction or any political subdivision
thereof). If a withholding or deduction at source is required, we will, subject
to certain limitations and exceptions described below, pay to the holder of any
such debt security such additional amounts as may be necessary so that every net
payment of principal, premium, if any, interest
38
or any other amount made to such holder, after the withholding or deduction,
will not be less than the amount provided for in such debt security and the
applicable indenture to be then due and payable.
We will not be required to pay any additional amounts for or on account of:
(1) any tax, fee, duty, assessment or governmental charge of whatever
nature which would not have been imposed but for the fact that such holder
(a) was a resident, domiciliary or national of, or engaged in business or
maintained a permanent establishment or was physically present in, the
relevant taxing jurisdiction or any political subdivision thereof or
otherwise had some connection with the relevant taxing jurisdiction other
than by reason of the mere ownership of, or receipt of payment under, such
debt security, (b) presented such debt security for payment in the relevant
taxing jurisdiction or any political subdivision thereof, unless such debt
security could not have been presented for payment elsewhere, or (c)
presented such debt security for payment more than 30 days after the date
on which the payment in respect of such debt security became due and
payable or provided for, whichever is later, except to the extent that the
holder would have been entitled to such additional amounts if it had
presented such debt security for payment on any day within that 30-day
period;
(2) any estate, inheritance, gift, sale, transfer, personal property
or similar tax, assessment or other governmental charge;
(3) any tax, assessment or other governmental charge that is imposed
or withheld by reason of the failure by the holder or the beneficial owner
of such debt security to comply with any reasonable request by us addressed
to the holder within 90 days of such request (a) to provide information
concerning the nationality, residence or identity of the holder or such
beneficial owner or (b) to make any declaration or other similar claim or
satisfy any information or reporting requirement, which is required or
imposed by statute, treaty, regulation or administrative practice of the
relevant taxing jurisdiction or any political subdivision thereof as a
precondition to exemption from all or part of such tax, assessment or other
governmental charge; or
(4) any combination of items (1), (2) and (3).
In addition, we will not pay additional amounts with respect to any payment
of principal of, or premium, if any, interest or any other amounts on, any such
debt security to any holder who is a fiduciary or partnership or other than the
sole beneficial owner of such debt security to the extent such payment would be
required by the laws of the relevant taxing jurisdiction (or any political
subdivision or relevant taxing authority thereof or therein) to be included in
the income for tax purposes of a beneficiary or partner or settlor with respect
to such fiduciary or a member of such partnership or a beneficial owner who
would not have been entitled to such additional amounts had it been the holder
of the debt security. (Section 10.4)
NEW YORK LAW TO GOVERN
The indentures and the debt securities will be governed by, and construed
in accordance with, the laws of the State of New York applicable to agreements
made or instruments entered into and, in each case, performed in that state.
CERTAIN PROVISIONS APPLICABLE TO THE SENIOR DEBT SECURITIES
LIMITATION ON LIENS ON STOCK OF DESIGNATED SUBSIDIARIES
Under the senior indenture, we will covenant that, so long as any senior
debt securities are outstanding, we will not, nor will we permit any Subsidiary
to, create, assume, incur, guarantee or otherwise permit to exist any
Indebtedness secured by any mortgage, pledge, lien, security interest or other
encumbrance upon any shares of capital stock of any Designated Subsidiary
(whether such shares of stock are now owned or hereafter acquired) without
effectively providing concurrently that the senior debt
39
securities (and, if we so elect, any other Indebtedness of ours that is not
subordinate to the senior debt securities and with respect to which the
governing instruments require, or pursuant to which we are otherwise obligated,
to provide such security) will be secured equally and ratably with such
Indebtedness for at least the time period such other Indebtedness is so secured.
(Section 10.5 of the senior indenture)
For purposes of the senior indenture, "capital stock" of any Person means
any and all shares, interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated)
equity of such Person, including preferred stock, but excluding any debt
securities convertible into such equity. (Section 1.1 of the senior indenture)
The term "Designated Subsidiary" means any present or future consolidated
Subsidiary of ours, the consolidated net worth of which constitutes at least 10%
of our consolidated net worth. As of December 31, 2001, our only Designated
Subsidiary was Renaissance Reinsurance Ltd. (Section 1.1 of the senior
indenture)
The term "Indebtedness" means, with respect to any Person:
(1) the principal of and any premium and interest on (a) indebtedness
of such Person for money borrowed and (b) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable;
(2) all Capitalized Lease Obligations of such Person;
(3) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
obligations under any title retention agreement (but excluding trade
accounts payable arising in the ordinary course of business);
(4) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (1) through (3)
above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit);
(5) all obligations of the type referred to in clauses (1) through (4)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable as obligor,
guarantor or otherwise;
(6) all obligations of the type referred to in clauses (1) through (5)
of other Persons secured by any mortgage, pledge, lien, security interest
or other encumbrance on any property or asset of such Person (whether or
not such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured; and
(7) any amendments, modifications, refundings, renewals or extensions
of any indebtedness or obligation described as Indebtedness in clauses (1)
through (6) above. (Section 1.1)
LIMITATIONS ON DISPOSITION OF STOCK OF DESIGNATED SUBSIDIARIES
The senior indenture also provides that, so long as any senior debt
securities are outstanding and except in a transaction otherwise governed by
such indenture, we will not issue, sell, assign, transfer or otherwise dispose
of any shares of, securities convertible into, or warrants, rights or options to
subscribe for or purchase shares of, capital stock (other than preferred stock
having no voting rights of any kind) of any Designated Subsidiary, and will not
permit any Designated Subsidiary to issue (other than to us or another
Designated Subsidiary) any shares (other than director's qualifying shares) of,
or securities convertible into, or warrants, rights or options to subscribe for
or purchase shares of, capital stock (other than preferred stock having no
voting rights of any kind) of any Designated Subsidiary, if, after giving effect
to
40
any such transaction and the issuance of the maximum number of shares issuable
upon the conversion or exercise of all such convertible securities, warrants,
rights or options, we would own, directly or indirectly, less than 80% of the
shares of capital stock of such Designated Subsidiary (other than preferred
stock having no voting rights of any kind); provided, however, that (1) any
issuance, sale, assignment, transfer or other disposition permitted by us may
only be made for at least a fair market value consideration as determined by our
Board pursuant to a resolution adopted in good faith and (2) the foregoing will
not prohibit any such issuance or disposition of securities if required by any
law or any regulation or order of any governmental or insurance regulatory
authority.
Notwithstanding the foregoing, (1) we may merge or consolidate any
Designated Subsidiary into or with another direct or indirect subsidiary of
ours, the shares of capital stock of which we own at least 70%, and (2) we may,
subject to the provisions described under "Consolidation, Amalgamation, Merger
and Sale of Assets" above, sell, assign, transfer or otherwise dispose of the
entire capital stock of any Designated Subsidiary at one time for at least a
fair market value consideration as determined by our Board pursuant to a
resolution adopted in good faith. (Section 10.6 of the senior indenture)
CERTAIN PROVISIONS APPLICABLE TO SUBORDINATED DEBT SECURITIES
SUBORDINATION OF THE SUBORDINATED DEBT SECURITIES
The subordinated debt securities will, to the extent set forth in the
subordinated indenture, be subordinate in right of payment to the prior payment
in full of all Senior Indebtedness. (Section 16.1 of the subordinated
indenture). As of April 15, 2002, we had an aggregate of $183,500,000 of
outstanding Senior Indebtedness. None of our debt is secured. In the event of:
(1) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to us or to our creditors, as
such, or to our assets, or
(2) any voluntary or involuntary liquidation, dissolution or other
winding up of ours, whether or not involving insolvency or bankruptcy, or
(3) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of ours, then and in any such event
the holders of Senior Indebtedness will be entitled to receive payment in
full of all amounts due or to become due on or in respect of all Senior
Indebtedness, or provision will be made for such payment in cash, before
the holders of the subordinated debt securities are entitled to receive or
retain any payment on account of principal of, or any premium or interest
on, or any additional amounts with respect to, subordinated debt
securities, and to that end the holders of Senior Indebtedness will be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or
securities, including any such payment or distribution which may be payable
or deliverable by reason of the payment of any other Indebtedness of ours
being subordinated to the payment of subordinated debt securities, which
may be payable or deliverable in respect of subordinated debt securities in
any such case, proceeding, dissolution, liquidation or other winding up
event. (Section 16.3 of the subordinated indenture)
By reason of such subordination, in the event of our liquidation or
insolvency, holders of Senior Indebtedness and holders of other obligations of
ours that are not subordinated to Senior Indebtedness may recover more, ratably,
than the holders of subordinated debt securities.
Subject to the payment in full of all Senior Indebtedness, the rights of
the holders of subordinated debt securities will be subrogated to the rights of
the holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of ours applicable to such Senior Indebtedness until the
principal of, any premium and interest on, and any additional amounts with
respect to, subordinated debt securities have been paid in full. (Section 16.4
of the subordinated indenture)
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No payment of principal (including redemption and sinking fund payments) of
or any premium or interest on or any additional amounts with respect to the
subordinated debt securities, or payments to acquire such securities (other than
pursuant to their conversion), may be made (1) if any Senior Indebtedness of
ours is not paid when due and 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 (2) if the maturity of any Senior Indebtedness of ours has been
accelerated because of a default. (Section 16.2 of the subordinated indenture)
The subordinated indenture does not limit or prohibit us from incurring
additional Senior Indebtedness, which may include Indebtedness that is senior to
subordinated debt securities, but subordinate to our other obligations. The
senior debt securities will constitute Senior Indebtedness under the
subordinated indenture.
The term "Senior Indebtedness" means all Indebtedness of ours outstanding
at any time, except:
(1) the subordinated debt securities,
(2) Indebtedness as to which, by the terms of the instrument creating
or evidencing the same, it is provided that such Indebtedness is
subordinated to or ranks equally with the subordinated debt securities,
(3) Indebtedness of ours to an Affiliate of ours,
(4) interest accruing after the filing of a petition initiating any
bankruptcy, insolvency or other similar proceeding unless such interest is
an allowed claim enforceable against us in a proceeding under federal or
state bankruptcy laws,
(5) trade accounts payable, and
(6) any Indebtedness, including all other debt securities and
guarantees in respect of those debt securities, initially issued to (x) the
Capital Trust or (y) any trust, partnership or other entity affiliated with
us which is a financing vehicle of ours or any Affiliate of ours in
connection with an issuance by such entity of preferred securities or other
securities which are similar to the preferred securities described under
"Description of the Trust Preferred Securities" below.
Such Senior Indebtedness will continue to be Senior Indebtedness and be
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
(Sections 1.1 and 16.8 of the subordinated indenture)
The subordinated indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of subordinated debt
securities, may be changed prior to such issuance. Any such change would be
described in the related prospectus supplement.
CERTAIN PROVISIONS OF THE JUNIOR SUBORDINATED DEBT
SECURITIES ISSUED TO THE CAPITAL TRUST
OPTION TO EXTEND INTEREST PAYMENT DATE
Unless provided otherwise in the related prospectus supplement, we will
have the right at any time and from time to time during the term of any series
of junior subordinated debt securities issued to the Capital Trust to defer
payment of interest for such number of consecutive interest payment periods as
may be specified in the related prospectus supplement (referred to as an
"extension period"), subject to the terms, conditions and covenants, if any,
specified in such prospectus supplement, provided that such extension period may
not extend beyond the stated maturity of such series of junior subordinated debt
securities. Certain U.S. federal income tax consequences and special
considerations applicable to such junior subordinated debt securities will be
described in the related prospectus supplement. (Section 3.11 of the junior
subordinated indenture).
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OPTION TO EXTEND MATURITY DATE
Unless provided otherwise in the related prospectus supplement, we will
have the right to:
(1) change the stated maturity of the principal of the junior
subordinated debt securities of any series issued to the Capital Trust upon
the liquidation of the Capital Trust and the exchange of the junior
subordinated debt securities for the preferred securities of the Capital
Trust, or
(2) extend the stated maturity of the principal of the junior
subordinated debt securities of any series, provided that (1) we are not in
bankruptcy, otherwise insolvent or in liquidation, (2) we have not
defaulted on any payment on such junior subordinated debt securities and no
deferred interest payments have accrued,
(3) the Capital Trust is not in arrears on payments of distributions
on its preferred securities and no deferred distributions have accumulated,
(4) the junior subordinated debt securities of such series are rated
investment grade by Standard & Poor's Ratings Services, Moody's Investors
Service, Inc. or another nationally recognized statistical rating
organization, and
(5) the extended stated maturity is no later than the 49th anniversary
of the initial issuance of the preferred securities of the Capital Trust.
If we exercise our right to liquidate the Capital Trust and exchange the
junior subordinated debt securities for the preferred securities of the Capital
Trust as described above, any changed stated maturity of the principal of the
junior subordinated debt securities shall be no earlier than the date that is
five years after the initial issue date of the preferred securities and no later
than the date 30 years (plus an extended term of up to an additional 19 years if
the conditions described above are satisfied) after the initial issue date of
the preferred securities of the Capital Trust. (Section 3.14 of the junior
subordinated indenture)
PAYMENT OF ADDITIONAL AMOUNTS
If junior subordinated debt securities issued to the Capital Trust in
connection with the issuance of preferred securities and common securities by
the Capital Trust provide for the payment by us of certain taxes, assessments or
other governmental charges imposed on the holder of any such debt security, we
will pay to the holder of any such debt security such additional amounts as
provided in the related junior subordinated indenture. (Section 10.4 of the
junior subordinated indenture)
CERTAIN COVENANTS
We will covenant, as to each series of our junior subordinated debt
securities issued to the Capital Trust in connection with the issuance of
preferred securities and common securities by the Capital Trust, that we will
not, and will not permit any of our Subsidiaries to, (1) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of our outstanding capital stock or (2)
make any payment of principal, or interest or premium, if any, on or repay,
repurchase or redeem any debt security of ours that ranks junior in interest to
the junior subordinated debt securities of such series or make any guarantee
payments with respect to any guarantee by us of the debt securities of any
Subsidiary of ours if such guarantee ranks junior in interest to the junior
subordinated debt securities of such series (other than (a) dividends or
distributions in our common shares, (b) redemptions or purchases of any rights
outstanding under a shareholder rights plan of ours, or the declaration of a
dividend of such rights or the issuance of shares under such plan in the future,
(c) payments under any preferred securities guarantee of ours and (d) purchases
of common shares related to the issuance of common shares under any of our
benefit plans for our directors, officers or employees) if at such time (i)
there shall have occurred any event of which we have actual knowledge that (A)
with the giving of notice or lapse of time or both, would constitute an Event of
Default under the applicable junior subordinated indenture and (B) in respect of
which we shall not have taken reasonable steps to cure, (ii) we shall be in
default with respect to our payment of obligations under the preferred
43
securities guarantee relating to such preferred securities or (iii) we shall
have given notice of our election to begin an Extension Period as provided in
the applicable junior subordinated indenture with respect to the junior
subordinated debt securities of such series and shall not have rescinded such
notice, or such Extension Period, or any extension thereof, shall be continuing.
(Section 10.10 of the junior subordinated indenture)
In the event our junior subordinated debt securities are issued to the
Capital Trust in connection with the issuance of preferred securities and common
securities of the Capital Trust, for so long as such series of junior
subordinated debt securities remain outstanding, we will also covenant:
(1) to maintain directly or indirectly 100% ownership of the common
securities of the Capital Trust; provided, however, that any permitted
successor of ours under the applicable junior subordinated indenture may
succeed to our ownership of such common securities,
(2) not to voluntarily dissolve, wind-up or liquidate such trust,
except in connection with the distribution of our junior subordinated debt
securities to the holders of preferred securities and common securities in
liquidation of the Capital Trust, the redemption of all of the preferred
securities and common securities of the Capital Trust, or certain mergers,
consolidations or amalgamations, each as permitted by the restated trust
agreement of the Capital Trust, and
(3) to use our reasonable efforts, consistent with the terms of the
related trust agreement, to cause the Capital Trust to remain classified as
a grantor trust for United States Federal income tax purposes. (Section
10.12 of the junior subordinated indenture)
EVENTS OF DEFAULT
If an Event of Default with respect to a series of junior subordinated debt
securities issued to the Capital Trust has occurred and is continuing and such
event is attributable to a default in the payment of interest or principal on
the related junior subordinated debt securities on the date such interest or
principal is otherwise payable, a holder of preferred securities of the Capital
Trust may institute a legal proceeding directly against us, which we refer to in
this prospectus as a "Direct Action," for enforcement of payment to such holder
of the principal of or interest on such related junior subordinated debt
securities having a principal amount equal to the aggregate liquidation amount
of the related preferred securities of such holder. We may not amend the
applicable junior subordinated indenture to remove the foregoing right to bring
a Direct Action without the prior written consent of the holders of all of the
preferred securities of such trust. If the right to bring a Direct Action is
removed, the Capital Trust may become subject to the reporting obligations under
the Exchange Act. We will have the right under the junior subordinated indenture
to set-off any payment made to such holder of preferred securities by us, in
connection with a Direct Action. (Section 3.12 of the junior subordinated
indenture) The holders of preferred securities will not be able to exercise
directly any other remedy available to the holders of the related junior
subordinated debt securities.
The holders of the preferred securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the junior subordinated debt securities unless there
shall have been an event of default under the applicable restated trust
agreement. See "Description of the Trust Preferred Securities -- Events of
Default; Notice." (Section 5.8 of the trust-issued subordinated indenture)
INFORMATION CONCERNING THE TRUSTEE
We may from time to time borrow from, maintain deposit accounts with and
conduct other banking transactions with Bankers Trust Company and its affiliates
in the ordinary course of business.
Under each indenture, Bankers Trust Company is required to transmit annual
reports to all holders regarding its eligibility and qualifications as trustee
under the applicable indenture and related matters.
44
DESCRIPTION OF THE WARRANTS TO PURCHASE
COMMON SHARES OR PREFERENCE SHARES
The following statements with respect to the common share warrants and
preference share warrants are summaries of, and subject to, the detailed
provisions of a share warrant agreement to be entered into by us and a share
warrant agent to be selected at the time of issue. The particular terms of any
warrants offered by any prospectus supplement, and the extent to which the
general provisions described below may apply to the offered securities, will be
described in the prospectus supplement.
GENERAL
The share warrants, evidenced by share warrant certificates, may be issued
under the share warrant agreement independently or together with any other
securities offered by any prospectus supplement and may be attached to or
separate from such other offered securities. If share warrants are offered, the
related prospectus supplement will describe the designation and terms of the
share warrants, including without limitation the following:
- the offering price, if any;
- the designation and terms of the common shares or preference shares
purchasable upon exercise of the share warrants;
- if applicable, the date on and after which the share warrants and the
related offered securities will be separately transferable;
- the number of common shares or preference shares purchasable upon
exercise of one share warrant and the initial price at which such shares
may be purchased upon exercise;
- the date on which the right to exercise the share warrants shall commence
and the date on which such right shall expire;
- a discussion of certain U.S. federal income tax considerations;
- the call provisions, if any;
- the currency, currencies or currency units in which the offering price,
if any, and exercise price are payable;
- the antidilution provisions of the share warrants; and
- any other terms of the share warrants.
The common shares or preference shares issuable upon exercise of the share
warrants will, when issued in accordance with the share warrant agreement, be
fully paid and nonassessable.
EXERCISE OF STOCK WARRANTS
Stock warrants may be exercised by surrendering to the share warrant agent
the share warrant certificate with the form of election to purchase on the
reverse thereof duly completed and signed by the warrantholder, or its duly
authorized agent (such signature to be guaranteed by a bank or trust company, by
a broker or dealer which is a member of the National Association of Securities
Dealers, Inc. or by a member of a national securities exchange), indicating the
warrantholder's election to exercise all or a portion of the share warrants
evidenced by the certificate. Surrendered share warrant certificates shall be
accompanied by payment of the aggregate exercise price of the share warrants to
be exercised, as set forth in the related prospectus supplement, in lawful money
of the United States, unless otherwise provided in the related prospectus
supplement. Upon receipt thereof by the share warrant agent, the share warrant
agent will requisition from the transfer agent for the common shares or the
preference shares, as the case may be, for issuance and delivery to or upon the
written order of the exercising warrantholder, a certificate representing the
number of common shares or preference shares purchased. If less than all of the
share
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warrants evidenced by any share warrant certificate are exercised, the share
warrant agent shall deliver to the exercising warrantholder a new share warrant
certificate representing the unexercised share warrants.
ANTIDILUTION AND OTHER PROVISIONS
The exercise price payable and the number of common shares or preference
shares purchasable upon the exercise of each share warrant and the number of
share warrants outstanding will be subject to adjustment in certain events,
including the issuance of a stock dividend to holders of common shares or
preference shares, respectively, or a combination, subdivision or
reclassification of common shares or preference shares, respectively. In lieu of
adjusting the number of common shares or preference shares purchasable upon
exercise of each share warrant, we may elect to adjust the number of share
warrants. No adjustment in the number of shares purchasable upon exercise of the
share warrants will be required until cumulative adjustments require an
adjustment of at least 1% thereof. We may, at our option, reduce the exercise
price at any time. No fractional shares will be issued upon exercise of share
warrants, but we will pay the cash value of any fractional shares otherwise
issuable. Notwithstanding the foregoing, in case of our consolidation, merger,
or sale or conveyance of our property as an entirety or substantially as an
entirety, the holder of each outstanding share warrant shall have the right to
the kind and amount of shares of stock and other securities and property
(including cash) receivable by a holder of the number of common shares or
preference shares into which such share warrants were exercisable immediately
prior thereto.
NO RIGHTS AS SHAREHOLDERS
Holders of share warrants will not be entitled, by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice as
shareholders with respect to any meeting of shareholders for the election of our
directors or any other matter, or to exercise any rights whatsoever as our
shareholders.
DESCRIPTION OF THE WARRANTS TO PURCHASE DEBT SECURITIES
The following statements with respect to the debt warrants are summaries
of, and subject to, the detailed provisions of a debt warrant agreement to be
entered into by us and a debt warrant agent to be selected at the time of issue.
The debt warrant agreement may include or incorporate by reference standard
warrant provisions substantially in the form of the Standard Debt Securities
Warrant Provisions filed as an exhibit to the registration statement of which
this prospectus forms a part. The particular terms of any warrants offered by
any prospectus supplement, and the extent to which the general provisions
described below may apply to the offered securities, will be described in the
prospectus supplement.
GENERAL
The debt warrants, evidenced by debt warrant certificates, may be issued
under the debt warrant agreement independently or together with any other
securities offered by any prospectus supplement and may be attached to or
separate from such other offered securities. If debt warrants are offered, the
related prospectus supplement will describe the designation and terms of the
debt warrants, including without limitation the following:
- the offering price, if any;
- the designation, aggregate principal amount and terms of the debt
securities purchasable upon exercise of the debt warrants;
- if applicable, the date on and after which the debt warrants and the
related offered securities will be separately transferable;
- the principal amount of debt securities purchasable upon exercise of one
debt warrant and the price at which such principal amount of debt
securities may be purchased upon exercise;
46
- the date on which the right to exercise the debt warrants shall commence
and the date on which such right shall expire;
- a discussion of certain U.S. federal income tax considerations;
- whether the warrants represented by the debt warrant certificates will be
issued in registered or bearer form;
- the currency, currencies or currency units in which the offering price,
if any, and exercise price are payable;
- the antidilution provisions of the debt warrants; and
- any other terms of the debt warrants.
Warrantholders will not have any of the rights of holders of debt
securities, including the right to receive the payment of principal of, any
premium or interest on, or any additional amounts with respect to, the debt
securities or to enforce any of the covenants of the debt securities or the
applicable indenture except as otherwise provided in the applicable indenture.
EXERCISE OF DEBT WARRANTS
Debt warrants may be exercised by surrendering the debt warrant certificate
at the office of the debt warrant agent, with the form of election to purchase
on the reverse side of the debt warrant certificate properly completed and
executed (with signature(s) guaranteed by a bank or trust company, by a broker
or dealer which is a member of the National Association of Securities Dealers,
Inc. or by a member of a national securities exchange), and by payment in full
of the exercise price, as set forth in the related prospectus supplement. Upon
the exercise of debt warrants, we will issue the debt securities in authorized
denominations in accordance with the instructions of the exercising
warrantholder. If less than all of the debt warrants evidenced by the debt
warrant certificate are exercised, a new debt warrant certificate will be issued
for the remaining number of debt warrants.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Capital Trust will be governed by the terms of the restated trust
agreement. Under the restated trust agreement of the Capital Trust, the Capital
Trust may issue, from time to time, only one series of preferred securities. The
preferred securities will have the terms set forth in the restated trust
agreement or made a part of the restated trust agreement by the Trust Indenture
Act, and described in the related prospectus supplement. These terms will mirror
the terms of the junior subordinated debt securities purchased by the Capital
Trust using the proceeds from the sale of its preferred securities and its
common securities. The junior subordinated debt securities issued to the Capital
Trust will be guaranteed by us on a subordinated basis and are referred to as
the "corresponding junior subordinated debt securities" relating to the Capital
Trust. See "Use of Proceeds."
The following summary sets forth the material terms and provisions of the
restated trust agreement and the preferred securities to which any prospectus
supplement relates. Because this summary is not complete, you should refer to
the form of restated trust agreement and to the Trust Indenture Act for complete
information regarding the terms and provisions of that agreement and of the
preferred securities, including the definitions of some of the terms used below.
The form of restated trust agreement filed as an exhibit to the registration
statement of which this prospectus forms a part is incorporated by reference in
this summary. Whenever we refer to particular sections or defined terms of a
restated trust agreement, such sections or defined terms are incorporated herein
by reference.
ISSUANCE, STATUS AND GUARANTEE OF PREFERRED SECURITIES
Under the terms of the restated trust agreement for the Capital Trust, the
Administrative Trustees will issue the preferred securities on behalf of the
Capital Trust. The preferred securities will represent
47
preferred beneficial interests in the Capital Trust and the holders of the
preferred securities will be entitled to a preference in certain circumstances
as regards distributions and amounts payable on redemption or liquidation over
the common securities of the Capital Trust, as well as other benefits under the
corresponding restated trust agreement. The preferred securities of the Capital
Trust will rank equally, and payments will be made on the preferred securities
pro rata, with the common securities of the Capital Trust except as described
under "-- Subordination of Common Securities." The Property Trustee will hold
legal title to the corresponding junior subordinated debt securities in trust
for the benefit of the holders of the related preferred securities and common
securities. The common securities and the preferred securities of the Capital
Trust are collectively referred to as the "trust securities" of the Capital
Trust.
We will issue a guarantee agreement for the benefit of the holders of the
Capital Trust's preferred securities (the "preferred securities guarantee" for
those preferred securities). Under each preferred securities guarantee, we will
guarantee on a subordinated basis payment of distributions on the related
preferred securities and amounts payable on redemption or liquidation of such
preferred securities, but only to the extent that the Capital Trust has funds on
hand to make such payments. See "Description of the Trust Preferred Securities
Guarantee."
DISTRIBUTIONS
Distributions on the preferred securities will be cumulative, will
accumulate from the original issue date and will be payable on the dates as
specified in the related prospectus supplement. In the event that any date on
which distributions are payable on the preferred securities is not a Business
Day, payment of the distribution payable on such date will be made on the next
succeeding day that is a Business Day (and without any additional distributions
or other payment in respect of any such delay), except that, if such Business
Day is in the next succeeding calendar year, payment of such distribution shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on the date such payment was originally payable
(each date on which distributions are payable in accordance with the foregoing,
a "distribution date"). (Section 4.1) A "Business Day" is 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 or a
day on which the corporate trust office of the Property Trustee or the trustee
for the corresponding junior subordinated debt securities is closed for
business. (Section 1.1)
Distributions on each preferred security will be payable at a rate
specified in the related prospectus supplement. The amount of distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months unless otherwise specified in the related prospectus supplement.
Distributions to which holders of preferred securities are entitled will
accumulate additional distributions at the rate per annum if and as specified in
the related prospectus supplement. (Section 4.1) References to "distributions"
include any such additional distributions unless otherwise stated.
If provided in the applicable prospectus supplement, we have the right
under the subordinated indenture to defer the payment of interest at any time or
from time to time on any series of corresponding junior subordinated debt
securities for an Extension Period which will be specified in the related
prospectus supplement. No Extension Period may extend beyond the stated maturity
of the corresponding junior subordinated debt securities. See "Description of
the Debt Securities -- Option to Extend Interest Payment Date." As a consequence
of any such extension, distributions on the corresponding preferred securities
would be deferred (but would continue to accumulate additional distributions at
the rate per annum set forth in the prospectus supplement for such preferred
securities) by the Capital Trust which issued such preferred securities during
any such Extension Period. (Section 4.1)
The funds of the Capital Trust available for distribution to holders of its
preferred securities will be limited to payments under the corresponding junior
subordinated debt securities in which the Capital Trust will invest the proceeds
from the issuance and sale of its trust securities. If we do not make interest
payments on those corresponding junior subordinated debt securities, the
Property Trustee will not have funds available to pay distributions on the
related preferred securities. The payment of distributions (if and
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to the extent the Capital Trust has funds legally available for the payment of
such distributions and cash sufficient to make such payments) is guaranteed by
us on a limited basis as set forth herein under "Description of the Trust
Preferred Securities Guarantee."
Distributions on the preferred securities will be payable to the holders
thereof as they appear on the register of the Capital Trust on the relevant
record dates. As long as the preferred securities remain in book-entry form, the
record dates will be fifteen (15) Business Days prior to the relevant
distribution dates. Subject to any applicable laws and regulations and the
provisions of the applicable restated trust agreement, each distribution payment
will be made as described under "Global Preferred Securities." In the event any
preferred securities are not in book-entry form, the relevant record date for
such preferred securities will be the date at least 15 days prior to the
relevant distribution date, as specified in the related prospectus supplement.
(Section 4.1)
REDEMPTION OR EXCHANGE
Mandatory Redemption. Upon any repayment or redemption, in whole or in
part, of any corresponding junior subordinated debt securities held by the
Capital Trust, whether at stated maturity, upon earlier redemption or otherwise,
the proceeds from such repayment or redemption shall simultaneously be applied
by the Property Trustee, upon not less than 30 nor more than 60 days notice to
holders of trust securities, to redeem, on a pro rata basis, preferred
securities and common securities having an aggregate stated liquidation amount
equal to the aggregate principal amount of the corresponding junior subordinated
debt securities so repaid or redeemed. The redemption price per trust security
will be equal to the stated liquidation amount thereof plus accumulated and
unpaid distributions thereon to the date of redemption, plus the related amount
of premium, if any, and any additional amounts paid by us upon the concurrent
repayment or redemption of the corresponding junior subordinated debt securities
(the "redemption price"). (Section 4.2) If less than all of any series of
corresponding junior subordinated debt securities are to be repaid or redeemed
on a redemption date, then the proceeds from such repayment or redemption shall
be allocated to the redemption pro rata of the related preferred securities and
the common securities. (Section 4.2)
We will have the right to redeem any series of corresponding junior
subordinated debt securities (1) at any time, in whole but not in part, upon the
occurrence of a Special Event and subject to the further conditions described
under "Description of the Debt Securities -- Redemption," or (2) as may be
otherwise specified in the applicable prospectus supplement.
Special Event Redemption or Distribution of Corresponding Junior
Subordinated Debt Securities. If a Special Event relating to the preferred
securities and common securities of the Capital Trust shall occur and be
continuing, we have the right to redeem the corresponding junior subordinated
debt securities, in whole but not in part, and thereby cause a mandatory
redemption of such preferred securities and common securities, in whole but not
in part, at the redemption price within 90 days following the occurrence of the
Special Event. At any time, we have the right to dissolve the Capital Trust and
after satisfaction of the liabilities of creditors of the Capital Trust as
provided by applicable law, cause such corresponding junior subordinated debt
securities to be distributed to the holders of such preferred securities and
common securities in liquidation of the Capital Trust. If we do not elect to
redeem the corresponding junior subordinated debt securities upon the occurrence
of a Special Event, the applicable preferred securities will remain outstanding,
and in the event a Tax Event has occurred and is continuing, Additional Sums may
be payable on the corresponding junior subordinated debt securities. "Additional
Sums" means the additional amounts as may be necessary in order that the amount
of distributions then due and payable by the Capital Trust on the outstanding
preferred securities and common securities of the Capital Trust shall not be
reduced as a result of any additional taxes, duties and other governmental
charges to which the Capital Trust has become subject as a result of a Tax
Event. (Section 1.1)
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Except with respect to certain other circumstances, on and after the date
on which junior subordinated debentures are distributed to holders of Trust
Preferred Securities in connection with the dissolution and liquidation of the
Capital Trust as a result of an early termination event:
(1) the trust securities will no longer be deemed to be outstanding,
(2) certificates representing a like amount of junior subordinated
debt will be issued to the holders of trust securities certificates, upon
surrender of such certificates to the administrative trustees or their
agent for exchange,
(3) we will use our reasonable efforts to have the junior subordinated
debt listed or traded on such stock exchange, interdealer quotation system
and/or other self-regulatory organization as the trust preferred securities
are then listed or traded,
(4) any trust securities certificates not so surrendered for exchange
will be deemed to represent a like amount of junior subordinated debt,
accruing interest at the rate provided for in the junior subordinated debt
from the last distribution date on which a distribution was made on such
trust securities certificates until such certificates are so surrendered
(and until such certificates are so surrendered, no payments of interest or
principal will be made to holders of trust securities certificates with
respect to such junior subordinated debt) and
(5) all rights of security holders holding trust securities will
cease, except the right of such securityholders to receive junior
subordinated debt upon surrender of trust securities certificates. (Section
9.4(d))
An early termination event, within the meaning of this section, means (1)
the occurrence of our dissolution or bankruptcy event, (2) the direction of the
property trustee to dissolve the trust and exchange the trust securities for
junior subordinated debt, (3) the redemption of the trust securities in
connection with the redemption of all junior subordinated debt or (4) a court
order to dissolve the Capital Trust.
There can be no assurance as to the market prices for the preferred
securities or the corresponding junior subordinated debt securities that may be
distributed in exchange for preferred securities if a dissolution and
liquidation of the Capital Trust were to occur. Accordingly, the preferred
securities that you may purchase, or the corresponding junior subordinated debt
securities that you may receive on dissolution and liquidation of the Capital
Trust, may trade at a discount to the price that you paid to purchase the
preferred securities.
REDEMPTION PROCEDURES
Preferred securities redeemed on each redemption date shall be redeemed at
the redemption price with the applicable proceeds from the contemporaneous
redemption of the corresponding junior subordinated debt securities. Redemptions
of the preferred securities shall be made and the redemption price shall be
payable on each redemption date only to the extent that the Capital Trust has
funds on hand available for the payment of such redemption price. See also
"-- Subordination of Common Securities."
If the Capital Trust gives a notice of redemption (which notice will be
irrevocable) in respect of its preferred securities, then, by 12:00 noon, New
York City time, on the redemption date, to the extent funds are available, the
Property Trustee will deposit irrevocably with the depositary for the preferred
securities funds sufficient to pay the applicable redemption price and will give
the depositary irrevocable instructions and authority to pay the redemption
price to the holders of such preferred securities. If such preferred securities
are no longer in book-entry form, the Property Trustee, to the extent funds are
available, will irrevocably deposit with the paying agent for such preferred
securities funds sufficient to pay the applicable redemption price and will give
such paying agent irrevocable instructions and authority to pay the redemption
price to the holders thereof upon surrender of their certificates evidencing
such preferred securities. Notwithstanding the foregoing, distributions payable
on or prior to the redemption date for any preferred securities called for
redemption shall be payable to the holders of such preferred securities on the
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relevant record dates for the related distribution dates. If notice of
redemption shall have been given and funds deposited as required, then
immediately prior to the close of business on the date of such deposit, all
rights of the holders of such preferred securities so called for redemption will
cease, except the right of the holders of such preferred securities to receive
the redemption price, but without interest, and such preferred securities will
cease to be outstanding. In the event that any date on which any redemption
price is payable is not a Business Day, then payment of the redemption price
payable on such date will be made on the next succeeding day which 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 each case with the
same force and effect as if made on such date. In the event that payment of the
redemption price in respect of preferred securities called for redemption is
improperly withheld or refused and not paid either by the Capital Trust or by us
pursuant to the preferred securities guarantee as described under "Description
of the Trust Preferred Securities Guarantee," distributions on such preferred
securities will continue to accumulate at the then applicable rate, from the
redemption date originally established by the Capital Trust for such preferred
securities to the date such redemption price is actually paid, in which case the
actual payment date will be the date fixed for redemption for purposes of
calculating the redemption price.
Subject to applicable law (including, without limitation, U.S. federal
securities law), we or our subsidiaries may at any time and from time to time
purchase outstanding preferred securities by tender, in the open market or by
private agreement.
Payment of the redemption price on the preferred securities shall be made
to the applicable recordholders as they appear on the register for such
preferred securities on the relevant record date, which shall be fifteen (15)
Business Days prior to the relevant redemption date; provided, however, that in
the event that any preferred securities are not in book-entry form, the relevant
record date for such preferred securities shall be a date at least 15 days prior
to the redemption date, as specified in the applicable prospectus supplement.
If less than all of the preferred securities and common securities issued
by the Capital Trust are to be redeemed on a redemption date, then the aggregate
liquidation amount of such preferred securities and common securities to be
redeemed shall be allocated pro rata to the preferred securities and the common
securities based upon the relative liquidation amounts of such classes. The
particular preferred securities to be redeemed shall be selected on a pro rata
basis not more than 60 days prior to the redemption date by the Property Trustee
from the outstanding preferred securities not previously called for redemption,
or by such other method as the Property Trustee shall deem fair and appropriate.
The Property Trustee shall promptly notify the trust registrar in writing of the
preferred securities selected for redemption and, in the case of any preferred
securities selected for partial redemption, the liquidation amount thereof to be
redeemed. For all purposes of each restated trust agreement, unless the context
otherwise requires, all provisions relating to the redemption of preferred
securities shall relate, in the case of any preferred securities redeemed or to
be redeemed only in part, to the portion of the liquidation amount of preferred
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 before the redemption date to each holder of trust securities to be
redeemed at its registered address. Unless each we default in payment of the
redemption price on the corresponding junior subordinated debt securities, on
and after the redemption date interest will cease to accrue on such subordinated
debt securities or portions thereof (and distributions will cease to accrue on
the related preferred securities or portions thereof) called for redemption.
(Section 4.2)
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the redemption price of, the Capital
Trust's preferred securities and common securities, as applicable, shall be made
pro rata based on the liquidation amount of such preferred securities and common
securities; provided, however, that if on any distribution date or redemption
date an event of default under the corresponding junior subordinated debt
securities shall have occurred and be continuing, no payment of any distribution
on, or redemption price of, any of the Capital Trust's common
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securities, and no other payment on account of the redemption, liquidation or
other acquisition of such common securities, shall be made unless payment in
full in cash of all accumulated and unpaid distributions on all of the Capital
Trust's outstanding preferred securities for all distribution periods
terminating on or prior thereto, or in the case of payment of the redemption
price the full amount of such redemption price on all of the Capital Trust's
outstanding preferred securities then called for redemption, 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 Trust's preferred securities then due and
payable.
In the case of any Event of Default under the restated trust agreement
resulting from an event of default under the corresponding junior subordinated
debt securities, the holder of the Capital Trust's common securities will be
deemed to have waived any right to act with respect to any such Event of Default
under the applicable restated trust agreement until the effect of all such
Events of Default with respect to such preferred securities have been cured,
waived or otherwise eliminated. Until any such Events of Default under the
applicable restated trust agreement with respect to the preferred securities
have been so cured, waived or otherwise eliminated, the Property Trustee shall
act solely on behalf of the holders of such preferred securities and not on
behalf of the holder of the Capital Trust's common securities, and only the
holders of such preferred securities will have the right to direct the Property
Trustee to act on their behalf. (Section 4.3)
LIQUIDATION DISTRIBUTION UPON DISSOLUTION OF THE CAPITAL TRUST
Pursuant to the restated trust agreement, the Capital Trust shall
automatically dissolve upon expiration of its term and shall dissolve on the
first to occur of:
(1) certain events of our bankruptcy, dissolution or liquidation;
(2) the distribution to the holders of its trust securities of
corresponding junior subordinated debt securities having an aggregate
principal amount equal to the aggregate stated liquidation amount of the
trust securities, if we, as Depositor, have given written direction to the
Property Trustee to dissolve the Capital Trust (which direction is optional
and wholly within our discretion, as Depositor);
(3) the redemption of all of the Capital Trust's trust securities in
connection with the redemption of all the junior subordinated debt; or
(4) the entry of an order for the dissolution of the Capital Trust by
a court of competent jurisdiction. (Section 9.2)
If an early dissolution occurs as described in clause (1), (2) or (4) above
or upon the date designated for automatic dissolution of the Capital Trust, the
Capital Trust shall be liquidated by the Capital Trustees as expeditiously as
the Capital Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Capital Trust as provided by
applicable law, to the holders of such trust securities corresponding junior
subordinated debt securities having an aggregate principal amount equal to the
aggregate stated liquidation amount of the trust securities. However, if such
distribution is determined by the Property Trustee not to be practical, such
holders will be entitled to receive out of the assets of the Capital Trust
available for distribution to holders, after satisfaction of liabilities to
creditors of the Capital Trust as provided by applicable law, an amount equal
to, in the case of holders of preferred securities, 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 Capital Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by the Capital Trust on its
preferred securities shall be paid on a pro rata basis. Holders of the Capital
Trust's common securities will be entitled to receive distributions upon any
such liquidation pro rata with the holders of its preferred securities, except
that if an event of default under the corresponding junior subordinated debt
securities has occurred and is continuing, the preferred securities shall have a
priority over the common securities. (Section 9.4)
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EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under
each restated trust agreement with respect to the applicable preferred
securities (whatever the reason for such 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):
(1) the occurrence of an event of default in respect of the
corresponding junior subordinated debt securities (see "Description of the
Debt Securities -- Events of Default"); or
(2) default by the Property Trustee in the payment of any distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(3) default by the Property Trustee in the payment of any redemption
price of any trust security when it becomes due and payable; or
(4) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Capital Trustees in such restated trust
agreement (other than a covenant or warranty a default in the performance
of which or the breach of which is dealt with in clause (2) or (3) above),
and continuation of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the defaulting
Capital Trustee or Trustees by the holders of at least 25% in aggregate
liquidation preference of the outstanding preferred securities of the
Capital Trust, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" under such restated trust agreement; or
(5) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the holder of the common
securities of the Capital Trust to appoint a successor Property Trustee
within 60 days thereof. (Section 1.1)
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 Trust's preferred
securities, the Administrative Trustees and to us, as Depositor, unless such
Event of Default shall have been cured or waived. We, as Depositor, 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 each restated trust agreement.
(Sections 8.15 and 8.16)
If an event of default under the corresponding junior subordinated debt
securities has occurred and is continuing, the preferred securities shall have a
preference over the common securities upon dissolution of the Capital Trust as
described above. See "-- Liquidation Distribution Upon Dissolution of Capital
Trust." The existence of an Event of Default under the restated trust agreement
does not entitle the holders of preferred securities to accelerate the maturity
thereof.
REMOVAL OF CAPITAL TRUSTEES
Unless an event of default under the corresponding junior subordinated debt
securities shall have occurred and be continuing, any Capital Trustee may be
removed at any time by the holder of the common securities. If an event of
default under the corresponding junior subordinated debt securities 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 preferred securities. In no event will the holders of the preferred
securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
holder of the common securities. No resignation or removal of a Capital 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 applicable restated trust agreement. (Section 8.10)
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CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the property of the
Capital Trust may at the time be located, the holder of the common securities
and the Administrative Trustees shall have power to appoint one or more persons
either to act as a co-trustee, jointly with the Property Trustee, of all or any
part of the property of the Capital Trust, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the applicable restated trust agreement. In case an
event of default under the corresponding junior subordinated debt securities has
occurred and is continuing, the Property Trustee alone shall have power to make
such appointment. (Section 8.9)
MERGER OR CONSOLIDATION OF CAPITAL 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 may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Capital Trustee shall
be a party shall be the successor of the Capital Trustee under each restated
trust agreement, provided such corporation shall be otherwise qualified and
eligible. (Section 8.12)
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE CAPITAL TRUST
The Capital Trust may not merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other entity, except
as described below or as described in "Liquidation Distribution Upon Dissolution
of the Capital Trust." The Capital Trust may, at our request, with the consent
of only the Administrative Trustees and without the consent of the holders of
the preferred securities, merge with or into, convert into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the laws
of any State, provided, that
(1) such successor entity either (a) expressly assumes all of the
obligations of the Capital Trust with respect to the preferred securities
or (b) substitutes for the preferred securities other securities having
substantially the same terms as the preferred securities so long as such
successor securities rank the same as the preferred securities rank in
priority with respect to distributions and payments upon liquidation,
redemption and otherwise,
(2) we expressly appoint a trustee of such successor entity possessing
the same powers and duties as the Property Trustee as the holder of the
corresponding junior subordinated debt securities,
(3) the successor securities are listed or traded, or any successor
securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the preferred securities
are then listed or traded, if any,
(4) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the preferred securities
(including any successor securities) to be downgraded by any nationally
recognized statistical rating organization,
(5) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the preferred securities
(including any successor securities) in any material respect,
(6) such successor entity has a purpose substantially identical to
that of the Capital Trust,
(7) prior to such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, we have received an opinion
from independent counsel to the Capital Trust experienced in such matters
to the effect that (a) such merger, conversion, consolidation,
54
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the
preferred securities (including any successor securities) in any material
respect, and (b) following such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the
Capital Trust nor any successor entity will be required to register as an
"investment company" under the Investment Company Act, and
(8) we or any permitted successor or assignee own all of the common
securities of such successor entity and guarantee the obligations of such
successor entity under the successor securities at least to the extent
provided by the preferred securities guarantee.
Notwithstanding the foregoing, the Capital Trust shall not, except with the
consent of holders of 100% in liquidation amount of the preferred securities,
consolidate, amalgamate, merge with or into, convert into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, convert into, or replace it if such consolidation, amalgamation,
merger, replacement, conveyance, transfer or lease would cause the Capital Trust
or the successor entity to be classified as other than a grantor trust for
United States Federal income tax purposes. (Section 9.5)
VOTING AND PREEMPTIVE RIGHTS
Except as provided below and under "Description of the Trust Preferred
Securities Guarantee -- Amendments and Assignment" and as otherwise required by
law and the applicable restated trust agreement, the holders of the preferred
securities will have no voting rights. Holders of the preferred securities have
no preemptive or similar rights. (Section 6.1)
AMENDMENT OF RESTATED TRUST AGREEMENTS
Each restated trust agreement may be amended from time to time by us and
the Capital Trustees, without the consent of the holders of the trust
securities:
(1) to cure any ambiguity, correct or supplement any provisions in
such restated trust agreement that may be inconsistent with any other
provision, or to make any other provisions with respect to matters or
questions arising under such restated trust agreement, which shall not be
inconsistent with the other provisions of such restated trust agreement, or
(2) to modify, eliminate or add to any provisions of such restated
trust agreement to such extent as shall be necessary to ensure that the
Capital Trust will be classified for U.S. federal income tax purposes as a
grantor trust at all times that any trust securities are outstanding or to
ensure that the Capital Trust will not be required to register as an
"investment company" under the Investment Company Act;
provided, however, that in the case of clause (1), such action shall not
adversely affect in any material respect the interests of any holder of trust
securities. Any such amendments of a restated trust agreement shall become
effective when notice thereof is given to the holders of trust securities of the
Capital Trust.
Each restated trust agreement may be amended by us and the Capital Trustees
with the consent of holders representing not less than a majority (based upon
liquidation amounts) of the outstanding trust securities, and receipt by the
Capital Trustees of an opinion of counsel to the effect that such amendment or
the exercise of any power granted to the Capital Trustees in accordance with
such amendment will not affect the Capital Trust's status as a grantor trust for
U.S. federal income tax purposes or the Capital Trust's exemption from status as
an "investment company" under the Investment Company Act. However, without the
consent of each holder of trust securities, such restated trust agreement may
not be amended to:
(1) 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
55
(2) restrict the right of a holder of trust securities to institute
suit for the enforcement of any such payment on or after such date.
(Section 10.2)
So long as any corresponding junior subordinated debt securities are held
by the Property Trustee, the Capital Trustees shall not:
(1) direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or executing any trust or power
conferred on the Property Trustee with respect to such corresponding junior
subordinated debt securities,
(2) waive any past default that is waivable under Section 5.13 of the
subordinated indenture (as described in "Description of the Debt
Securities -- Modification and Waiver"),
(3) exercise any right to rescind or annul a declaration that the
principal of all the subordinated debt securities shall be due and payable,
or
(4) consent to any amendment, modification or termination of the
subordinated indenture or such corresponding junior subordinated debt
securities, where such consent shall be required,
without, in each case, obtaining the prior approval of the holders of a majority
in aggregate liquidation amount of all outstanding preferred securities.
However, where a consent under the subordinated indenture would require the
consent of each holder of corresponding junior subordinated debt securities
affected thereby, no such consent shall be given by the Property Trustee without
the prior consent of each holder of the corresponding preferred securities. The
Capital Trustees shall not revoke any action previously authorized or approved
by a vote of the holders of the preferred securities except by subsequent vote
of the holders of the preferred securities. The Property Trustee shall notify
each holder of preferred securities of any notice of default with respect to the
corresponding junior subordinated debt securities. In addition to obtaining the
foregoing approvals of the holders of the preferred securities, prior to taking
any of the foregoing actions, the Capital Trustees shall obtain an opinion of
counsel experienced in such matters to the effect that the Capital Trust will
not be classified as a corporation for United States Federal income tax purposes
on account of such action. (Section 6.1)
Any required approval or action of holders of preferred securities may be
given or taken at a meeting of holders of preferred securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a notice
of any meeting at which holders of preferred securities are entitled to vote to
be given to each holder of record of preferred securities in the manner set
forth in each restated trust agreement. (Sections 6.2, 6.3 and 6.6)
No vote or consent of the holders of preferred securities will be required
for the Capital Trust to redeem and cancel its preferred securities in
accordance with the applicable restated trust agreement.
Notwithstanding that holders of preferred securities are entitled to vote
or consent under any of the circumstances described above, any of the preferred
securities that are owned by us, the Capital Trustees or any affiliate of ours
or any Capital Trustees, shall, for purposes of such vote or consent, be treated
as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The preferred securities of the Capital Trust may be issued in whole or in
part in the form of one or more global preferred securities that will be
deposited with, or on behalf of, the depositary identified in the prospectus
supplement.
The specific terms of the depositary arrangement with respect to the
preferred securities of the Capital Trust will be described in the related
prospectus supplement. We anticipate that the following provisions will
generally apply to depositary arrangements.
56
Upon the issuance of a global preferred security, and the deposit of such
global preferred security with or on behalf of the depositary, the depositary
for such global preferred security or its nominee will credit, on its book-entry
registration and transfer system, the respective aggregate liquidation amounts
of the individual preferred securities represented by such global preferred
securities to the accounts of participants. Such accounts shall be designated by
the underwriters or agents with respect to such preferred securities or by us if
such preferred securities are offered and sold directly by us. Ownership of
beneficial interests in a global preferred security will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in such global preferred security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the depositary or its nominee (with respect to interests of participants) and
the records of participants (with respect to interests of persons who hold
through participants). The laws of some states require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a global preferred security.
So long as the depositary for a global preferred security, or its nominee,
is the registered owner of such global preferred security, such depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the preferred securities represented by such global preferred security for all
purposes under the restated trust agreement governing such preferred securities.
Except as provided below, owners of beneficial interests in a global preferred
security will not be entitled to have any of the individual preferred securities
represented by such global preferred security registered in their names, will
not receive or be entitled to receive physical delivery of any such preferred
securities in definitive form and will not be considered the owners or holders
thereof under the restated trust agreement.
Payments of any liquidation amount, premium or distributions in respect of
individual preferred securities registered in the name of a depositary or its
nominee will be made to the depositary or its nominee, as the case may be, as
the registered owner of the global preferred security representing such
preferred securities. None of RenaissanceRe, the Property Trustee, any paying
agent, or the securities registrar for such preferred securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the global
preferred security representing such preferred securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
We expect that the depositary or its nominee, upon receipt of any payment
in respect of a global preferred security representing the Capital Trust's
preferred securities, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interest in the
aggregate liquidation amount of such global preferred security for such
preferred securities as shown on the records of such depositary or its nominee.
We also expect that payments by participants to owners of beneficial interests
in such global preferred security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name" and will be the responsibility of such participants.
Unless otherwise specified in the applicable prospectus supplement, the
restated trust agreement of the Capital Trust will provide that (1) if we advise
the Capital Trustees in writing that the depositary is no longer willing or able
to act as depositary and we fail to appoint a qualified successor within 90
days, (2) we at our option advise the Capital Trustees in writing that we elect
to terminate the book-entry system through the depositary or (3) after the
occurrence of an event of default under the corresponding junior subordinated
debt securities, owners of preferred securities representing at least a majority
of liquidation amount of such preferred securities advise the Property Trustee
in writing that the continuation of a book-entry system through the depositary
is no longer in their best interests, then the global preferred securities will
be exchanged for preferred securities in definitive form in accordance with the
instructions of the depositary. It is expected that such instructions may be
based upon directions received by the depositary from participants with respect
to ownership of beneficial interests in global preferred securities. Individual
preferred securities so issued will be issued in authorized denominations.
57
PAYMENT AND PAYING AGENCY
Payments in respect of the preferred securities shall be made to the
depositary, which shall credit the relevant accounts at the depositary on the
applicable distribution dates or, if the Capital Trust's preferred securities
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 of the Capital Trust. Unless otherwise specified in the applicable
prospectus supplement, the paying agent shall initially be the Property Trustee
and any copaying agent chosen by the Property Trustee and acceptable to us and
the Administrative Trustees. The paying agent shall be permitted to resign as
paying agent upon 30 days' written notice to us and the Property Trustee. In the
event 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 us) to act as paying
agent. (Section 5.9)
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable prospectus supplement, the
Property Trustee will act as registrar and transfer agent for the preferred
securities.
Registration of transfers of preferred securities will be effected without
charge by or on behalf of the Capital Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Capital Trust will not be required to register or cause to be
registered the transfer of their preferred securities after such preferred
securities have been called for redemption. (Section 5.4)
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee undertakes to perform only those duties specifically
set forth in each restated trust agreement, provided that it must exercise the
same degree of care as a prudent person would exercise 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 applicable restated
trust agreement at the request of any holder of preferred securities unless it
is offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. If in performing its duties under the restated trust
agreement, the Property Trustee is required to decide between alternative causes
of action, construe ambiguous provisions in the applicable restated trust
agreement or is unsure of the application of any provision of the applicable
restated trust agreement, and the matter is not one on which holders of
preferred securities are entitled under such restated trust agreement to vote,
then the Property Trustee shall take such action as is directed by us. If it is
not so directed, the Property Trustee 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.
ADMINISTRATIVE TRUSTEES
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Capital Trust in such a way that the Capital 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 for United States Federal income tax purposes and so that the
corresponding junior subordinated debt securities will be treated as our
indebtedness for United States Federal income tax purposes. In this connection,
we and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of the Capital Trust
or each restated trust agreement, that we 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 related preferred securities.
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DESCRIPTION OF THE TRUST PREFERRED SECURITIES GUARANTEE
Concurrently with any issuance by the Capital Trust of its preferred
securities, we will execute and deliver a preferred securities guarantee for the
benefit of the holders from time to time of such preferred securities. Bankers
Trust Company will act as indenture trustee ("Guarantee Trustee") under the
preferred securities guarantee for the purposes of compliance with the Trust
Indenture Act, and the preferred securities guarantee will be qualified as an
indenture under the Trust Indenture Act.
The following summary sets forth the material terms and provisions of the
preferred securities guarantee. Because the following summary of certain
provisions of the preferred securities guarantees is not complete, you should
refer to the form of preferred securities guarantee and the Trust Indenture Act
for more complete information regarding the provisions of the preferred
securities guarantee, including the definitions of some of the terms used below.
The form of the preferred securities guarantee has been filed as an exhibit to
the registration statement of which this prospectus forms a part and is
incorporated by reference in this summary. Whenever we refer to particular
sections or defined terms of a preferred securities guarantee, such sections or
defined terms are incorporated herein by reference. Reference in this summary to
preferred securities means the Capital Trust's preferred securities to which a
preferred securities guarantee relates. The Guarantee Trustee will hold the
preferred securities guarantee for the benefit of the holders of the Capital
Trust's preferred securities.
GENERAL
We will irrevocably agree to pay in full on a subordinated basis, to the
extent described herein, the Guarantee Payments (as defined below) (without
duplication of amounts theretofore paid by or on behalf of the Capital Trust) to
the holders of the preferred securities, as and when due, regardless of any
defense, right of setoff or counterclaim that the Capital Trust may have or
assert other than the defense of payment. The following payments with respect to
the preferred securities, to the extent not paid by or on behalf of the Capital
Trust (the "Guarantee Payments"), will be subject to the preferred securities
guarantee:
(1) any accrued and unpaid distributions required to be paid on such
preferred securities, to the extent that the Capital Trust has funds on
hand available for payment at such time,
(2) the redemption price, including all accrued and unpaid
distributions to the redemption date, with respect to any preferred
securities called for redemption, to the extent that the Capital Trust has
funds on hand available for payment at such time, and
(3) upon a voluntary or involuntary dissolution, winding up or
liquidation of the Capital Trust (unless the corresponding junior
subordinated debt securities are distributed to holders of such preferred
securities), the lesser of (a) the Liquidation Distribution, to the extent
the Capital Trust has funds available for payment at such time and (b) the
amount of assets of the Capital Trust remaining available for distribution
to holders of preferred securities.
Our obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by us to the holders of the applicable preferred
securities or by causing the Capital Trust to pay such amounts to such holders.
(Section 5.1)
Each preferred securities guarantee will be an irrevocable guarantee on a
subordinated basis of the Capital Trust's payment obligations under the
preferred securities, but will apply only to the extent that the Capital Trust
has funds sufficient to make such payments. (Section 5.1, 6.2) Each preferred
securities guarantee is, to that extent, a guarantee of payment and not a
guarantee of collection. (Section 5.5). As of April 15, 2002, there was an
aggregate of $183,500,000 of our Senior Indebtedness outstanding to which the
preferred securities guarantees would be subordinated.
If we do not make interest payments on the corresponding junior
subordinated debt securities held by the Capital Trust, the Capital Trust will
not be able to pay distributions on the preferred securities and will not have
funds legally available for payment. Each preferred securities guarantee will
rank subordinate
59
and junior in right of payment to all other Indebtedness of ours (including all
debt securities), except those ranking equally or subordinate by their terms.
See "-- Status of the Preferred Securities Guarantees."
Because we are a holding company, our rights and the rights of our
creditors (including the holders of preferred securities who are creditors of
ours by virtue of the preferred securities guarantee) and shareholders, to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise would be subject to the
prior claims of the subsidiary's creditors, except to the extent that we may
ourselves be a creditor with recognized claims against the subsidiary. The right
of creditors of ours (including the holders of preferred securities who are
creditors of ours by virtue of the preferred securities guarantee) to
participate in the distribution of stock owned by us in certain of our
subsidiaries may also be subject to approval by certain insurance regulatory
authorities having jurisdiction over such subsidiaries. Except as otherwise
provided in the applicable prospectus supplement, the preferred securities
guarantees do not limit our ability to incur or issue other secured or unsecured
debt, whether under an indenture or otherwise.
Our obligations described herein and in any accompanying prospectus
supplement, through the applicable preferred securities guarantee, the
applicable restated trust agreement, the subordinated indenture and any
supplemental indentures thereto and the expense agreement described below, taken
together, constitute a full, irrevocable and unconditional guarantee by us of
payments due on the preferred 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
Capital Trust's obligations under the preferred securities. See "The Capital
Trust," "Description of the Trust Preferred Securities," and "Description of the
Debt Securities."
STATUS OF THE PREFERRED SECURITIES GUARANTEES
Each preferred securities guarantee will constitute an unsecured obligation
of ours and will rank subordinate and junior in right of payment to all other
Indebtedness of ours, except those ranking equally or subordinate by their
terms. (Section 6.2)
Each preferred securities guarantee will rank equally with all other
similar preferred securities guarantees issued by us on behalf of holders of
preferred securities of any trust, partnership or other entity affiliated with
us which is a financing vehicle of ours. (Section 6.3). Each preferred
securities guarantee will constitute a guarantee of payment and not of
collection. This means that the guaranteed party may institute a legal
proceeding directly against us to enforce its rights under the preferred
securities guarantee without first instituting a legal proceeding against any
other person or entity (Section 5.4). Each preferred securities guarantee will
not be discharged except by payment of the Guarantee Payments in full to the
extent not paid by the Capital Trust or upon distribution to the holders of the
preferred securities of the corresponding junior subordinated debt securities.
None of the preferred securities guarantees places a limitation on the amount of
additional Indebtedness that may be incurred by us. We expect from time to time
to incur additional Indebtedness that will rank senior to the preferred
securities guarantees.
PAYMENT OF ADDITIONAL AMOUNTS
We will make all Guarantee Payments pursuant to the preferred securities
guarantee without withholding or deduction at source for, or on account of, any
present or future taxes, fees, duties, assessments or governmental charges of
whatever nature imposed or levied by or on behalf of Bermuda (a "taxing
jurisdiction") or any political subdivision or taxing authority thereof or
therein, unless such taxes, fees, duties, assessments or governmental charges
are required to be withheld or deducted by (x) the laws (or any regulations or
rulings promulgated thereunder) of a taxing jurisdiction or any political
subdivision or taxing authority thereof or therein or (y) an official position
regarding the application, administration, interpretation or enforcement of any
such laws, regulations or rulings (including, without limitation, a holding by a
court of competent jurisdiction or by a taxing authority in a taxing
jurisdiction or any political
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subdivision thereof). If a withholding or deduction at source is required, we
will, subject to certain limitations and exceptions described below, pay to the
holders of the related preferred securities such additional amounts as may be
necessary so that every Guarantee Payment pursuant to the preferred securities
guarantee made to such holder, after such withholding or deduction, will not be
less than the amount provided for in such preferred securities guarantee to be
then due and payable.
We will not be required to pay any additional amounts for or on account of:
(1) any tax, fee, duty, assessment or governmental charge of whatever
nature which would not have been imposed but for the fact that such holder
(a) was a resident, domiciliary or national of, or engaged in business or
maintained a permanent establishment or was physically present in, the
relevant taxing jurisdiction or any political subdivision thereof or
otherwise had some connection with the relevant taxing jurisdiction other
than by reason of the mere ownership of preferred securities, or receipt of
payment under such preferred securities guarantee, (b) presented such
preferred security for payment in the relevant taxing jurisdiction or any
political subdivision thereof, unless such preferred security could not
have been presented for payment elsewhere, or (c) presented such preferred
security for payment more than 30 days after the date on which the payment
in respect of such preferred security became due and payable or provided
for, whichever is later, except to the extent that the holder would have
been entitled to such additional amounts if it had presented such preferred
security for payment on any day within that 30-day period;
(2) any estate, inheritance, gift, sale, transfer, personal property
or similar tax, assessment or other governmental charge;
(3) any tax, assessment or other governmental charge that is imposed
or withheld by reason of the failure by the holder or the beneficial owner
of such preferred security to comply with any reasonable request by us or
the Capital Trust addressed to the holder within 90 days of such request
(a) to provide information concerning the nationality, residence or
identity of the holder or such beneficial owner or (b) to make any
declaration or other similar claim or satisfy any information or reporting
requirement, which is required or imposed by statute, treaty, regulation or
administrative practice of the relevant taxing jurisdiction or any
political subdivision thereof as a precondition to exemption from all or
part of such tax, assessment or other governmental charge; or
(4) any combination of items 1, 2 and 3. (Section 5.8)
In addition, we will not pay any additional amounts with respect to the
preferred securities guarantee to any holder who is a fiduciary or partnership
or other than the sole beneficial owner of such preferred security to the extent
such payment would be required by the laws of the relevant taxing jurisdiction
(or any political subdivision or relevant taxing authority thereof or therein)
to be included in the income for tax purposes of a beneficiary or partner or
settlor with respect to such fiduciary or a member of such partnership or a
beneficial owner who would not have been entitled to such additional amounts had
it been the holder of the preferred securities.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related preferred securities (in which case no vote
will be required), no preferred securities guarantee may be amended without the
prior approval of the holders of not less than a majority of the aggregate
liquidation amount of such outstanding preferred securities. (Section 8.2). All
guarantees and agreements contained in each preferred securities guarantee shall
bind our successors, assigns, receivers, trustees and representatives and shall
inure to the benefit of the holders of the related preferred securities then
outstanding. (Section 8.1)
EVENTS OF DEFAULT
An event of default under the preferred securities guarantee will occur
upon the failure of ours to perform any of our payment obligations thereunder.
The holders of not less than a majority in aggregate
61
liquidation amount of the related preferred 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 such preferred securities guarantee or to
direct the exercise of any trust or power conferred upon the Guarantee Trustee
under such preferred securities guarantee. (Section 5.4)
If the Guarantee Trustee fails to enforce a preferred securities guarantee,
any holder of the preferred securities may institute a legal proceeding directly
against us to enforce its rights under such preferred securities guarantee
without first instituting a legal proceeding against the Capital Trust, the
Guarantee Trustee or any other person or entity. (Section 5.4)
We, as guarantor, are required to file annually with the Guarantee Trustee
a certificate as to whether or not we are in compliance with all the conditions
and covenants applicable to us under the preferred securities guarantee.
(Section 2.4)
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by us in performance of any preferred securities guarantee, undertakes
to perform only such duties as are specifically set forth in each preferred
securities guarantee and, after default with respect to any preferred securities
guarantee, 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. (Section 3.1).
Subject to this provision, the Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by any preferred securities guarantee at
the request of any holder of any preferred securities unless it is offered
reasonable indemnity against the costs, expenses, and liabilities that might be
incurred thereby. (Section 3.2)
TERMINATION OF THE PREFERRED SECURITIES GUARANTEES
Each preferred securities guarantee will terminate and be of no further
force and effect upon (1) full payment of the redemption price of the related
preferred securities, (2) the distribution of the corresponding junior
subordinated debt securities to the holders of the related preferred securities
or (3) upon full payment of the amounts payable upon liquidation of the Capital
Trust. Each preferred securities guarantee will continue to be effective or will
be reinstated, as the case may be, if at any time any holder of the related
preferred securities must restore payment of any sums paid with respect to such
preferred securities or such preferred securities guarantee. (Section 7.1)
NEW YORK LAW TO GOVERN
Each preferred securities guarantee will be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and performed in that state. (Section 8.5)
THE EXPENSE AGREEMENT
Pursuant to the expense agreement entered into by us under the restated
trust agreement, we will irrevocably and unconditionally guarantee to each
person or entity to whom the Capital Trust becomes indebted or liable, the full
payment of any costs, expenses or liabilities of the Capital Trust, other than
obligations of the Capital Trust to pay to the holders of the preferred
securities or other similar interests in the Capital Trust of the amounts due
such holders pursuant to the terms of the preferred securities or such other
similar interests, as the case may be.
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DESCRIPTION OF THE SHARE PURCHASE CONTRACTS
AND THE SHARE PURCHASE UNITS
We may issue share purchase contracts, obligating holders to purchase from
us, and obligating us to sell to the holders, a specified number of our common
shares or preference shares at a future date or dates. The price per share may
be fixed at the time the share purchase contracts are issued or may be
determined by reference to a specific formula set forth in the share purchase
contracts and to be described in the applicable prospectus supplement. The share
purchase contracts may be issued separately or as a part of share purchase units
consisting of a share purchase contract and, as security for the holder's
obligations to purchase the shares under the share purchase contracts, either:
(1) senior debt securities or our subordinated debt securities,
(2) debt obligations of third parties, including U.S. Treasury
securities, or
(3) preferred securities of the Capital Trust.
The applicable prospectus supplement will specify the securities that will
secure the holder's obligations to purchase shares under the applicable share
purchase contract. Unless otherwise described in a prospectus supplement, the
securities related to the share purchase contracts securing the holders'
obligations to purchase our common shares or preference shares will be pledged
to a collateral agent, for our benefit, under a pledge agreement. The pledged
securities will secure the obligations of holders of share purchase contracts to
purchase our common shares or preference shares under the related share purchase
contracts. The rights of holders of share purchase contracts to the related
pledged securities will be subject to our security interest in those pledged
securities. That security interest will be created by the pledge agreement. No
holder of share purchase contracts will be permitted to withdraw the pledged
securities related to such share purchase contracts from the pledge arrangement
except upon the termination or early settlement of the related share purchase
contracts. Subject to that security interest and the terms of the purchase
contract agreement and the pledge agreement, each holder of a share purchase
contract will retain full beneficial ownership of the related pledged
securities.
The share purchase contracts may require us to make periodic payments to
the holders of the share purchase units or vice versa, and such payments may be
unsecured or prefunded on some basis. The share purchase contracts may require
holders to secure their obligations in a specified manner and in certain
circumstances we may deliver newly issued prepaid share purchase contracts upon
release to a holder of any collateral securing such holder's obligations under
the original share purchase contract.
The applicable prospectus supplement will describe the terms of any share
purchase contracts or share purchase units and, if applicable, prepaid share
purchase contracts.
Except as described in a prospectus supplement, the collateral agent will,
upon receipt of distributions on the pledged securities, distribute those
payments to us or a purchase contract agent, as provided in the pledge
agreement. The purchase contract agent will in turn distribute payments it
receives as provided in the share purchase contract.
CERTAIN TAX CONSIDERATIONS
The following statements under "Taxation of RenaissanceRe Holdings Ltd.,
Renaissance Reinsurance and Glencoe -- Bermuda" and "Taxation of
Shareholders -- Bermuda Taxation", to the extent they constitute statements of
Bermuda law, are the opinion of Conyers Dill & Pearman, Hamilton, Bermuda. The
following statements of U.S. federal tax law under "Taxation of RenaissanceRe
Holdings Ltd., Renaissance Reinsurance and Glencoe -- United States" and
"Taxation of Shareholders -- United States Taxation of U.S. and Non-U.S.
Shareholders", to the extent they constitute statements of U.S. federal tax law,
are the opinion of Willkie Farr & Gallagher, New York, New York. The opinions of
these firms do not address, and do not include, opinions as to whether we have,
or Renaissance Reinsurance or Glencoe has, a permanent establishment in the
United States, any factual or accounting matters, determinations or conclusions
such as to whether we, Renaissance Reinsurance or Glencoe is engaged in a U.S.
trade or business, Related Person Insurance Income (RPII) amounts and
computations and components thereof
63
(for example, amounts or computations of income or expense items or reserves
entering into RPII computations) or facts relating to our business or
activities, and the business or activities of Renaissance Reinsurance or
Glencoe, all of which are matters and information determined and provided by us.
The following discussion is based upon current law and describes the material
U.S. federal and Bermuda tax consequences at the date of this prospectus and is
for general information only. The tax treatment of a holder of preference shares
or common shares, or a person treated as a holder of preference shares or common
shares for U.S. federal income, state, local or non-U.S. tax purposes may vary
depending on the holder's particular tax situation. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could be
retroactive and could affect the tax consequences to holders of preference
shares or common shares. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES
TO THEM OF OWNING PREFERENCE SHARES.
TAXATION OF RENAISSANCERE HOLDINGS LTD., RENAISSANCE REINSURANCE AND GLENCOE
BERMUDA
We, Renaissance Reinsurance, Top Layer Re, DaVinci and Glencoe have each
received from the Minister of Finance of Bermuda an assurance under the Exempted
Undertakings Tax Protection Act 1966 of Bermuda, to the effect that in the event
of there being enacted in Bermuda any legislation imposing tax computed on
profits or income, or computed on any capital asset, gain or appreciation, or
any tax in the nature of estate duty or inheritance tax, then the imposition of
any such tax shall not be applicable to us, Renaissance Reinsurance, Top Layer
Re, DaVinci or Glencoe or to any of our operations or the shares, debentures or
other obligations of us, Renaissance Reinsurance, Top Layer Re, DaVinci or
Glencoe until March 28, 2016. These assurances are subject to the proviso that
they are not construed so as to prevent the application of any tax or duty to
such persons as are ordinarily resident in Bermuda or to prevent the application
of any tax payable in accordance with the provisions of The Land Tax Act 1967 of
Bermuda or otherwise payable in relation to the land leased to Renaissance
Reinsurance, Top Layer Re, DaVinci or Glencoe. We, Renaissance Reinsurance, Top
Layer Re, DaVinci and Glencoe are required to pay certain annual Bermuda
government fees. Additionally, Renaissance Reinsurance, Top Layer Re, DaVinci
and Glencoe are required to pay certain insurance registration fees as an
insurer under the Insurance Act. Under rates in effect as of April 15, 2002,
Renaissance Reinsurance, Top Layer Re, DaVinci and Glencoe pay total government
and insurance fees of $32,445, $6,260, $23,225 and $8,235 per year,
respectively. Currently there is no Bermuda withholding tax on dividends that
may be paid by Renaissance Reinsurance, Top Layer Re, Da Vinci or Glencoe to us.
UNITED STATES
We believe that, to date, we, Renaissance Reinsurance and Glencoe have
operated and, in the future, will continue to operate our or their businesses in
a manner that will not cause any of us or them to be treated as being engaged in
a U.S. trade or business. On this basis, we do not expect, nor do we expect
Renaissance Reinsurance or Glencoe to be required to pay U.S. corporate income
tax. However, whether a corporation is engaged in a U.S. trade or business is
considered a factual question. Because there are no definitive standards
provided by the U.S. Internal Revenue Code, existing or proposed regulations
thereunder or judicial precedent, and as the determination is inherently factual
and not a legal issue on which counsel can opine, there is considerable
uncertainty as to activities that constitute being engaged in a U.S. trade or
business. As a result, there can be no assurance that the U.S. Internal Revenue
Service (IRS) could not successfully contend that we, Renaissance Reinsurance or
Glencoe is engaged in such a trade or business.
If the IRS so contended, we would be subject to U.S. corporate income tax
on that portion of our net income treated as effectively connected with a U.S.
trade or business, as well as the U.S. corporate branch profits tax, or
Renaissance Reinsurance or Glencoe, unless exempted from tax by the income tax
treaty between the United States and Bermuda, discussed below, would be subject
to U.S. corporate income tax on that portion of its respective net income
treated as effectively connected with a U.S. trade or business, as well as the
U.S. corporate branch profits tax. The U.S. corporate income tax is currently
imposed at the
64
rate of 35% on net corporate profits and the U.S. corporate branch profits tax
is imposed at the rate of 30% on a corporation's after-tax profits deemed
distributed as a dividend.
Even though we will take the position that we, Renaissance Reinsurance and
Glencoe are not engaged in U.S. trades or businesses, Renaissance Reinsurance
and Glencoe have filed and intend to continue to file U.S. federal income tax
returns to avoid having all deductions disallowed in the event that either
Renaissance Reinsurance or Glencoe were held to be engaged in a U.S. trade or
business. In addition, filing U.S. tax returns will allow Renaissance
Reinsurance and Glencoe to claim benefits under the income tax treaty without
penalty.
Even if the IRS were to contend successfully that Renaissance Reinsurance
or Glencoe was engaged in a U.S. trade or business, the United States-Bermuda
income tax treaty could preclude the United States from taxing Renaissance
Reinsurance or Glencoe on its net premium income, except to the extent that such
income were attributable to a permanent establishment maintained by Renaissance
Reinsurance or Glencoe in the United States. Although we believe that neither
Renaissance Reinsurance nor Glencoe has a permanent establishment in the United
States, we cannot assure you that the IRS will not successfully contend that
either of them has such a permanent establishment and therefore is subject to
taxation. In addition, benefits of the income tax treaty are only available to
Renaissance Reinsurance and Glencoe if more than 50% of their shares is
beneficially owned, directly or indirectly, by individuals who are Bermuda
residents or U.S. citizens or residents. Although we believe we meet and we will
attempt to monitor compliance with this beneficial ownership test, there can be
no assurance that the beneficial ownership test will continue to be satisfied or
that we will be able to establish its satisfaction to the IRS. Furthermore,
income tax treaty benefits will also not be available if the income of
Renaissance Reinsurance or Glencoe is used in substantial part, directly or
indirectly, to make disproportionate distributions to, or to meet certain
liabilities to, persons who are neither residents of the United States or
Bermuda nor U.S. citizens. This limitation could apply if premiums paid for
ceded reinsurance by Renaissance Reinsurance or Glencoe to persons who are
neither residents of the United States or Bermuda nor U.S. citizens exceed 50%
of gross premiums received by Renaissance Reinsurance or Glencoe. We believe
that this limitation also will not apply, but there can be no assurance that
this will be so in the future. Finally, it should be noted that although the
income tax treaty (assuming the limitations previously discussed do not apply)
clearly applies to premium income, it is uncertain whether the income tax treaty
applies to other income such as investment income.
If Renaissance Reinsurance or Glencoe were considered to be engaged in a
U.S. trade or business and were held not to be entitled to the benefits of the
permanent establishment clause of the income tax treaty or RenaissanceRe were
considered to be engaged in a U.S. trade or business, and, thus, subject to U.S.
income taxation, our results of operations and cash flows could be materially
adversely affected.
U.S. Internal Revenue Code section 842 requires that foreign insurance
companies carrying on an insurance business within the United States have a
certain minimum amount of effectively connected net investment income,
determined in accordance with a formula that depends, in part, on the amount of
U.S. risk insured or reinsured by Renaissance Reinsurance or Glencoe. If
Renaissance Reinsurance or Glencoe is considered to be engaged in the conduct of
an insurance business in the United States and such company (i) is not entitled
to the benefits of the income tax treaty in general (because we fail to satisfy
one of the limitations on treaty benefits discussed above) or (ii) is entitled
to the benefits of the income tax treaty in general, but the income tax treaty
is interpreted not to apply to investment income, then section 842 could subject
a significant portion of the investment income of such company to U.S. income
tax.
The United States also imposes an excise tax on insurance and reinsurance
premiums paid to foreign insurers or reinsurers with respect to risks located in
the United States. Insurance and reinsurance premiums paid to foreign insurers
or reinsurers with respect to risks located outside the United States should not
be subject to this excise tax. The rate of tax currently applicable to
reinsurance premiums paid to foreign reinsurers such as Renaissance Reinsurance,
with respect to risks located in the United States, is 1% of gross premiums.
Congress has in the past, however, considered legislation that would increase
the excise tax rate on reinsurance premiums paid to foreign reinsurers to 4%.
Although no such legislation has
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to date been enacted, hearings on the subject were held in 1993, and it is
uncertain whether, or in what form, such legislation may ultimately be enacted.
The rate of tax currently applicable to insurance premiums paid to foreign
insurers such as Glencoe with respect to risks located in the United States is
4% of gross premiums.
TAXATION OF SHAREHOLDERS
BERMUDA TAXATION
Currently, there is no Bermuda withholding tax on dividends paid by us.
UNITED STATES TAXATION OF U.S. AND NON-U.S. SHAREHOLDERS
Classification of Renaissance Reinsurance and Glencoe as
non-CFCs. Although Renaissance Reinsurance and Glencoe were classified as
"controlled foreign corporations" ("CFCs") in prior years, we believe that they
no longer meet the requirements for such classification. Further, our Amended
and Restated Bye-Laws contain certain "Excess Share" provisions, which are
designed to prevent any person (other than certain of our founding institutional
shareholders) from becoming a 10% shareholder, and, accordingly, reduce the
likelihood that we may be deemed to be a CFC in the future. However, there can
be no assurance that such provisions will operate as intended.
Each prospective investor should consult its own tax advisor to determine
whether its ownership interest in us would cause it to become a 10% shareholder
of us, Renaissance Reinsurance and Glencoe or of any subsidiary that may be
created by us or Renaissance Reinsurance and to determine the impact of such a
classification of such investor.
Related Person Insurance Income ("RPII") Rules. Certain special subpart F
provisions of the U.S. Internal Revenue Code will apply to persons who, through
their ownership of our preference and common shares, are indirect shareholders
of Renaissance Reinsurance or Glencoe if both (A) 25% or more of the value or
voting power of the shares of Renaissance Reinsurance or Glencoe is owned or
deemed owned (directly or indirectly through foreign entities) by U.S. persons,
as is expected to be the case after this offering; and (B)(i) 20% or more of
either the voting power or the value of the shares of Renaissance Reinsurance or
Glencoe is owned directly or indirectly by U.S. persons or persons related to
them who are insured or reinsured by Renaissance Reinsurance or Glencoe; and
(ii) Renaissance Reinsurance or Glencoe has RPII, determined on a gross basis,
equal to 20% or more of its gross insurance income. RPII is income (investment
income and premium income) from the direct or indirect insurance or reinsurance
of (i) the risk of any U.S. person who owns shares of Renaissance Reinsurance or
Glencoe (directly or indirectly through foreign entities) or (ii) the risk of a
person related to such a U.S. person.
Renaissance Reinsurance or Glencoe may be considered to indirectly reinsure
the risk of a holder of shares that is a U.S. person, and thus generate RPII, if
an unrelated company that insured such risk in the first instance reinsures the
risk with Renaissance Reinsurance or Glencoe.
We do not expect Renaissance Reinsurance or Glencoe, respectively, to
knowingly enter into reinsurance or insurance arrangements where the ultimate
risk insured is that of a holder of shares that is a U.S. person or person
related to such a U.S. person. It is possible that Treasury Regulations of the
U.S. Internal Revenue Code might be adopted clarifying that the indirect
reinsurance described in the preceding paragraph constitutes RPII only if the
unrelated insurer is fronting for a reinsurer in which the insured (or a person
related to the insured) owns shares. Absent adoption of such Treasury
Regulations or other authority, there can be no assurance that the IRS will not
require a holder of shares that is a U.S. person or person related to such a
U.S. person to demonstrate that we have not indirectly (albeit unknowingly)
reinsured risks of such a shareholder. If the IRS requires a shareholder that is
a U.S. person or person related to such a U.S. person to demonstrate that the
risks reinsured by us were not risks of related parties, while we will cooperate
in providing information regarding our shareholders and the insurance and
reinsurance arrangements of Renaissance Reinsurance and Glencoe, we may not be
in a position to identify the names of many of our shareholders or the names of
the persons whose risks we
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indirectly reinsure. Therefore, each prospective investor should consult with
his own tax advisor to evaluate the risk that the IRS would take this position
and the tax consequences that might arise.
Notwithstanding the foregoing discussion, it is anticipated (although not
assured) that less than 20% of the gross insurance income of Renaissance
Reinsurance or Glencoe for any taxable year will constitute RPII. However, there
can be no assurance that the IRS will not assert that 20% or more of the income
of Renaissance Reinsurance or Glencoe constitutes RPII or that a taxpayer will
be able to meet its burden of proving otherwise. If 20% or more of the gross
insurance income of Renaissance Reinsurance or Glencoe for any taxable year
constitutes RPII and 20% or more of the voting power or value of the stock of
Renaissance Reinsurance or Glencoe is held, directly or indirectly, by U.S.
insureds or reinsureds or by persons related thereto, each direct and indirect
U.S. holder of our preference shares and common shares will be taxable currently
on its allocable share of the RPII of Renaissance Reinsurance or Glencoe. In
that case, RPII will be taxable to each U.S. holder of our preference shares and
common shares regardless of whether such holder is a U.S. shareholder and
regardless of whether such holder is an insured or related to an insured. For
this purpose, all of the RPII of Renaissance Reinsurance or Glencoe would be
allocated solely to U.S. holders, but not in excess of a holder's ratable share,
based on the extent of its interest in us, of the total income of Renaissance
Reinsurance or Glencoe.
Under proposed Treasury Regulations, RPII that is taxed to a U.S. holder
will increase such holder's tax basis in the shares to which it is allocable.
Dividends distributed by Renaissance Reinsurance or Glencoe to us and by us to
U.S. persons who are not U.S. shareholders will, under such regulations, be
deemed to come first out of taxed RPII and to that extent will not constitute
income to the holder. This will be the result whether the dividend is
distributed in the same year in which the RPII is taxed or a later year. The
untaxed dividend will decrease the holder's tax basis in such holder's of common
shares or preference shares as well.
Computation of RPII. In an effort to determine how much RPII Renaissance
Reinsurance and Glencoe have earned in each fiscal year, we monitor the
percentage of gross premiums that are received by Renaissance Reinsurance and
Glencoe from U.S. persons and persons related to U.S. persons. Beyond that, we
will use our reasonable best efforts to secure such additional information
relevant to determining the amount of such income that is RPII as we believe
advisable, but there can be no assurance that such information will be
sufficient to enable a holder of preference shares or common shares to clearly
establish such amount. For any year that we determine that the gross RPII of
Renaissance Reinsurance or Glencoe is 20% or more of our gross insurance income
for the year, we may also seek information from our shareholders as to whether
beneficial owners of our preference shares and common shares at the end of the
year are U.S. persons, so that RPII may be apportioned among such persons. To
the extent we are unable to determine whether a beneficial owner of shares is a
U.S. person, we may assume that such owner is not a U.S. person for purposes of
apportioning RPII, thereby increasing the per share RPII amount for all known
U.S. holders of our preference shares and common shares.
Disposition of Preference Shares and Common Shares by U.S. Persons
Generally. U.S. persons will, upon the sale or exchange of preference shares or
common shares, generally recognize gain or loss for federal income tax purposes
equal to the excess of the amount realized upon such sale or exchange over such
person's U.S. federal income tax basis for the shares disposed. Different rules
would apply if Renaissance Reinsurance or Glencoe were classified as CFC's.
Section 953(c)(7)of the U.S. Internal Revenue Code generally provides that
Section 1248 also will apply to the sale or exchange by a U.S. shareholder of
shares in a foreign corporation is characterized as a CFC under the RPII rules
if the foreign corporation would be taxed as an insurance company if it were a
domestic corporation, regardless of whether the U.S. shareholder is a 10% U.S.
shareholder or whether the corporation qualifies for either the RPII 20%
ownership exception or the RPII 20% gross income exception. Although existing
Treasury Department regulations do not address the question, proposed Treasury
Regulations issued in April 1991 create some ambiguity as to whether Section
1248 and the requirement to file Form 5471 would apply when the foreign
corporation (such as us) has a foreign insurance subsidiary that is a CFC for
RPII purposes and that would be taxed as an insurance company if
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it were a domestic corporation. We believe that Section 1248 and the requirement
to file Form 5471 will not apply to a less than 10% U.S. shareholder because we
are not directly engaged in the insurance business. There can be no assurance,
however, that the IRS will interpret the regulations in this manner or that the
Treasury Department will not amend the regulations to provide that Section 1248
and the requirement to file Form 5471 will apply to dispositions of our
preference shares or common shares.
If the IRS or U.S. Treasury Department were to make Section 1248 and the
Form 5471 filing requirement applicable to the sale of our preference shares or
common shares, we would notify shareholders that Section 1248 of the U.S.
Internal Revenue Code and the requirement to file Form 5471 will apply to
dispositions of our preference shares or common shares. Thereafter, we will send
a notice after the end of each calendar year to all persons who were
shareholders during the year notifying them that Section 1248 and the
requirement to file Form 5471 apply to dispositions of our preference shares or
common shares by U.S. shareholders. We will attach to this notice a copy of Form
5471 completed with all of our information and instructions for completing the
shareholder information.
Redemption of Preference Shares. A redemption of preference shares will be
treated under Section 302 of the U.S. Internal Revenue Code as a dividend if we
have sufficient earnings and profits, unless the redemption satisfies the test
set forth in Section 302(b) enabling the redemption to be treated as a sale or
exchange, subject to the discussion herein relating to the potential application
of the "RPII" and "passive foreign investment company" rules. The redemption
will satisfy this test only if it (1) is "substantially disproportionate," (2)
constitutes a "complete termination of the holder's stock interest" in us or (3)
is "not essentially equivalent to a dividend," each within the meaning of
Section 302(b). In determining whether any of these tests are met, shares
considered to be owned by the U.S. shareholder by reason of certain constructive
ownership rules set forth in the U.S. Internal Revenue Code, as well as shares
actually owned, must generally be taken into account. Because the determination
as to whether any of the alternative tests of Section 302(b) of the U.S.
Internal Revenue Code is satisfied with respect to a particular holder of
preference shares will depend on the facts and circumstances as of the time the
determination is made, U.S. shareholders are advised to consult their own tax
advisors to determine their tax treatment in light of their own particular
investment circumstances.
Passive Foreign Investment Companies. Sections 1291 through 1297 of the
U.S. Internal Revenue Code contain special rules applicable with respect to
foreign corporations that are "passive foreign investment companies" ("PFICs").
In general, a foreign corporation will be a PFIC if 75% or more of its income
constitutes passive income or 50% or more of its assets produce passive income.
If we were to be characterized as a PFIC, U.S. holders of preference shares or
common shares would be subject to a penalty tax at the time of their sale of (or
receipt of an "excess distribution" with respect to) its shares. In general, a
U.S. holder of preference shares or common shares receives an "excess
distribution" if the amount of the distribution is more than 125% of the average
distribution with respect to the preference shares or common shares during the
three preceding taxable years (or the taxpayer's holding period if it is less
than three years). In general, the penalty tax is equivalent to an interest
charge on taxes that are deemed due during the taxpayer's holding period but not
paid, computed by assuming that the excess distribution or gain (in the case of
a sale) with respect to the preference shares or common shares was received
ratably throughout the holding period. The interest charge is equal to the
applicable rate imposed on underpayments of U.S. federal income tax for such
period.
The U.S. Internal Revenue Code contains an express exception for income
"derived in the active conduct of an insurance business by a corporation which
is predominantly engaged in an insurance business." This exception is intended
to ensure that income derived by a bona fide insurance company is not treated as
passive income, except to the extent such income is attributable to financial
reserves in excess of the reasonable needs of the insurance business. In our
view, we, Renaissance Reinsurance and Glencoe, taken together, are predominantly
engaged in an insurance business and do not have financial reserves in excess of
the reasonable needs of our respective insurance business. The U.S. Internal
Revenue Code contains a look-through rule which states that, for purposes of
determining whether a foreign corporation is a PFIC, such foreign corporation
shall be treated as if it "received directly its proportionate share of the
income" and as if it "held its proportionate share of the assets" of any other
corporation in
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which it owns at least 25% of the stock. Under the look-through rule, we would
be deemed to own the assets and to have received the income of Renaissance
Reinsurance and Glencoe directly for the purposes of determining whether we
qualify for the insurance exception described above.
Other. Dividends paid by us to U.S. corporate shareholders will not be
eligible for the dividends received deduction provided by section 243 of the
U.S. Internal Revenue Code.
Except as discussed below with respect to backup withholding, dividends
paid by us will not be subject to a U.S. withholding tax.
Persons who are not citizens of or domiciled in the United States will not
be subject to U.S. estate tax with respect to preference shares and common
shares.
Information reporting to the IRS by paying agents and custodians located in
the United States will be required with respect to payments of dividends on the
preference shares and common shares to U.S. persons. In addition, a holder of
preference shares or common shares may be subject to backup withholding at the
rate of 30.5% (which rate is scheduled to be reduced periodically through 2006)
with respect to dividends paid to such persons, unless such corporation comes
within certain other exempt categories and, when required, demonstrates this
fact, or provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. The backup withholding tax is not
an additional tax and may be credited against a holder's regular U.S. federal
income tax liability.
Subject to certain exceptions, persons that are not U.S. persons will be
subject to U.S. federal income tax on dividend distributions with respect to,
and gain realized from the sale or exchange of, preference shares or common
shares if such dividends or gains are effectively connected with the conduct of
a U.S. trade or business.
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PLAN OF DISTRIBUTION
DISTRIBUTIONS BY RENAISSANCERE AND THE CAPITAL TRUST
We and/or the Capital Trust may sell offered securities in any one or more
of the following ways from time to time:
(1) through agents;
(2) to or through underwriters;
(3) through dealers; or
(4) directly to purchasers.
The prospectus supplement with respect to the offered securities will set
forth the terms of the offering of the offered securities, including the name or
names of any underwriters, dealers or agents; the purchase price of the offered
securities and the proceeds to us and/or the Capital Trust from such sale; any
underwriting discounts and commissions or agency fees and other items
constituting underwriters' or agents' compensation; any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
and any securities exchange on which such offered securities may be listed. Any
initial public offering price, discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
The distribution of the offered securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
Offers to purchase offered securities may be solicited by agents designated
by us from time to time. Any such agent involved in the offer or sale of the
offered securities in respect of which this prospectus is delivered will be
named, and any commissions payable by us and/or the Capital Trust to such agent
will be set forth, in the applicable prospectus supplement. Unless otherwise
indicated in such prospectus supplement, any such agent will be acting on a
reasonable best efforts basis for the period of its appointment. Any such agent
may be deemed to be an underwriter, as that term is defined in the Securities
Act, of the offered securities so offered and sold.
If offered securities are sold by means of an underwritten offering, we
and/or the Capital Trust will execute an underwriting agreement with an
underwriter or underwriters, and the names of the specific managing underwriter
or underwriters, as well as any other underwriters, and the terms of the
transaction, including commissions, discounts and any other compensation of the
underwriters and dealers, if any, will be set forth in the prospectus supplement
which will be used by the underwriters to make resales of the offered
securities. If underwriters are utilized in the sale of the offered securities,
the offered securities will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at varying
prices determined by the underwriters at the time of sale.
Our offered securities may be offered to the public either through
underwriting syndicates represented by managing underwriters or directly by the
managing underwriters. If any underwriter or underwriters are utilized in the
sale of the offered securities, unless otherwise indicated in the prospectus
supplement, the underwriting agreement will provide that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of offered securities will be obligated to
purchase all such offered securities of a series if any are purchased.
We and/or the Capital Trust may grant to the underwriters options to
purchase additional offered securities, to cover over-allotments, if any, at the
public offering price (with additional underwriting discounts or commissions),
as may be set forth in the prospectus supplement relating thereto. If we and/or
the Capital Trust grants any over-allotment option, the terms of such
over-allotment option will be set forth in the prospectus supplement relating to
such offered securities.
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If a dealer is utilized in the sales of offered securities in respect of
which this prospectus is delivered, we and/or the Capital Trust will sell such
offered securities to the dealer as principal. The dealer may then resell such
offered securities to the public at varying prices to be determined by such
dealer at the time of resale. Any such dealer may be deemed to be an
underwriter, as such term is defined in the Securities Act, of the offered
securities so offered and sold. The name of the dealer and the terms of the
transaction will be set forth in the related prospectus supplement.
Offers to purchase offered securities may be solicited directly by us
and/or the Capital Trust and the sale thereof may be made by us and/or the
Capital Trust directly to institutional investors or others, who may be deemed
to be underwriters within the meaning of the Securities Act with respect to any
resale thereof. The terms of any such sales will be described in the related
prospectus supplement.
Offered securities may also be offered and sold, if so indicated in the
applicable prospectus supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or more firms ("remarketing firms"), acting as principals
for their own accounts or as agents for us and/or the Capital Trust. Any
remarketing firm will be identified and the terms of its agreements, if any,
with us and/or the Capital Trust and its compensation will be described in the
applicable prospectus supplement. Remarketing firms may be deemed to be
underwriters, as such term is defined in the Securities Act, in connection with
the offered securities remarketed thereby.
Agents, underwriters, dealers and remarketing firms may be entitled under
relevant agreements entered into with us and/or the Capital Trust to
indemnification by us and/or the Capital Trust against certain civil
liabilities, including liabilities under the Securities Act that may arise from
any untrue statement or alleged untrue statement of a material fact or any
omission or alleged omission to state a material fact in this prospectus, any
supplement or amendment hereto, or in the registration statement of which this
prospectus forms a part, or to contribution with respect to payments which the
agents, underwriters or dealers may be required to make.
If so indicated in the prospectus supplement, we and/or the Capital Trust
will authorize underwriters or other persons acting as our and/or the Capital
Trust's agents to solicit offers by certain institutions to purchase offered
securities from us and/or the Capital Trust, pursuant to contracts providing for
payments and delivery on a future date. Institutions with which such contracts
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and others,
but in all cases such institutions must be approved by us and/or the Capital
Trust. The obligations of any purchaser under any such contract will be subject
to the condition that the purchase of the offered securities shall not at the
time of delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject. The underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
Disclosure in the prospectus supplement of our and/or the Capital Trust's
use of delayed delivery contracts will include the commission that underwriters
and agents soliciting purchases of the securities under delayed contracts will
be entitled to receive in addition to the date when we will demand payment and
delivery of the securities under the delayed delivery contracts. These delayed
delivery contracts will be subject only to the conditions that we describe in
the prospectus supplement.
Each series of offered securities will be a new issue and, other than the
full voting common shares, which are listed on the New York Stock Exchange, will
have no established trading market. We and/or the Capital Trust may elect to
list any series of offered securities on an exchange, and in the case of the
common shares, on any additional exchange, but, unless otherwise specified in
the applicable prospectus supplement, neither we nor the Capital Trust shall be
obligated to do so. No assurance can be given as to the liquidity of the trading
market for any of the offered securities.
Underwriters, dealers, agents and remarketing firms may be customers of,
engage in transactions with, or perform services for, us and our subsidiaries in
the ordinary course of business.
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WHERE YOU CAN FIND MORE INFORMATION
GENERAL
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act of 1933, as amended, relating to
the common shares, preference shares, depositary shares, debt securities,
warrants, share purchase contracts, share purchase units, trust preferred
securities and preferred securities guarantee described in this prospectus. This
prospectus is a part of the registration statement, but the registration
statement also contains additional information and exhibits.
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended. Accordingly, we file annual, quarterly and current
reports, proxy statements and other reports with the Commission. You can read
and copy the registration statement and the reports that we file with the
Commission at the Commission's public reference rooms at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549. Copies of such material can also be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
Our filings with the commission are also available from the Commission's
Web Site at http://www.sec.gov. Please call the Commission's toll-free telephone
number at 1-800-SEC-0330 if you need further information about the operation of
the Commission's public reference rooms. Our common shares are listed on the New
York Stock Exchange and our reports can also be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, 17th Floor, New York, New York 10005.
THE CAPITAL TRUST
There are no separate financial statements of the Capital Trust in this
prospectus. We do not believe the financial statements would be helpful to the
holders of the preferred securities of the Capital Trust because:
- We, a reporting company under the Exchange Act, will directly or
indirectly own all of the voting securities of the Capital Trust;
- The Capital Trust has no independent operations or proposals to engage in
any activity other than issuing securities representing undivided
beneficial interests in the assets of the Capital Trust and investing the
proceeds in subordinated debt securities issued by us; and
- The obligations of the Capital Trust under the preferred securities will
be fully and unconditionally guaranteed by us. See "Description of the
Trust Preferred Securities Guarantee."
The Capital Trust is not currently subject to the information reporting
requirements of the Exchange Act and it is anticipated that it will not become
subject to those requirements upon the effectiveness of the registration
statement of which this prospectus is a part.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We file annual, quarterly and special reports, proxy statements and other
information with the Commission. The Commission allows us to "incorporate by
reference" the information we file with it, which means that we can disclose
important information to you by referring to those documents. The information
incorporated by reference is an important part of this prospectus. Any statement
contained in a document which is incorporated by reference in this prospectus is
automatically updated and superseded if information contained in this
prospectus, or information that we later file with the Commission, modifies or
replaces this information. All documents we file pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, after the initial filing of our
registration statement on February 25, 2002 and prior to effectiveness of that
registration statement and after the date of this prospectus and until we sell
all the
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securities shall be deemed to be incorporated by reference into this prospectus.
We incorporate by reference the following previously filed documents:
(1) Our Annual Report on Form 10-K for the year ended December 31,
2001;
(2) The description of our common shares set forth in our registration
statement filed under the Exchange Act on Form 8-A on July 24, 1995,
including any amendment or report for the purpose of updating such
description; and
(3) The description of our 8.10% Series A Preference Shares set forth
in our registration statement filed under the Exchange Act on Form 8-A on
November 16, 2001, including any amendment or report for the purpose of
updating such description.
To receive a free copy of any of the documents incorporated by reference in
this Prospectus (other than exhibits) call or write us at the following address:
RenaissanceRe Holdings Ltd., Attn: Stephen H. Weinstein, Secretary, P.O. Box
2527, Hamilton, HMGX, Bermuda, (441) 295-4513.
LEGAL OPINIONS
Certain legal matters with respect to the United States of America, New
York and Delaware law with respect to the validity of the offered securities
will be passed upon for us by Willkie Farr & Gallagher, New York, New York.
Certain legal matters with respect to Bermuda law will be passed upon for us by
Conyers Dill & Pearman, Hamilton, Bermuda. The description of U.S. tax laws will
be passed upon by Willkie Farr & Gallagher. The description of Bermuda tax laws
will be passed upon by Conyers Dill & Pearman. Additional legal matters may be
passed on for any underwriters, dealers or agents by counsel which we will name
in the applicable prospectus supplement.
EXPERTS
Ernst & Young, independent auditors, have audited our consolidated
financial statements (and schedules) included in our Annual Report on Form 10-K
for the year ended December 31, 2001, as set forth in their reports, which are
incorporated by reference in this prospectus. Our financial statements (and
schedules) are incorporated by reference in reliance on Ernst & Young's reports,
given on their authority as experts in accounting and auditing.
ENFORCEMENT OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
We are a Bermuda company. In addition, certain of our directors and
officers as well as certain of the experts named in this prospectus, reside
outside the United States, and all or a substantial portion of our assets and
their assets are located outside the United States. Therefore, it may be
difficult for investors to effect service of process within the United States
upon those persons or to recover against us or those persons on judgments of
courts in the United States, including judgments based on civil liabilities
provisions of the U.S. federal securities laws.
We have been advised by Conyers Dill & Pearman, our Bermuda counsel, 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. We also have been advised by Conyers Dill & Pearman that there is doubt
as to whether the courts of Bermuda would enforce (1) judgments of United States
courts based on the civil liability provisions of the United States federal
securities laws obtained in actions against us or our directors and officers,
and (2) original actions brought in Bermuda against us or our officers and
directors based solely upon the United States federal securities laws. A Bermuda
court may, however, impose civil liability on us or our directors or officers in
a suit brought in the Supreme Court of Bermuda 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 under
the U.S. federal securities laws, would not be allowed in Bermuda courts to the
extent that they are contrary to public policy.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY SUPPLEMENT. NEITHER WE NOR RENAISSANCERE
CAPITAL TRUST II HAS AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. WE AND RENAISSANCERE CAPITAL TRUST II ARE OFFERING THESE SECURITIES
ONLY IN STATES WHERE THE OFFER IS PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS. OUR BUSINESS, FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities registered hereby, other than
underwriting discounts and commissions:
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 98 of the Companies Act of 1981 of Bermuda (the "Act") provides
generally that a Bermuda company may indemnify its directors, officers and
auditors against any liability that 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.
We have adopted provisions in our Bye-Laws that provide that we shall
indemnify our officers and directors to the maximum extent permitted under the
Act, except where such liability arises from fraud, dishonesty, willful
negligence or default.
We have entered into employment agreements with all of our executive
officers which each contain provisions pursuant to which we have agreed to
indemnify the executive as required by the Bye-Laws and maintain customary
insurance policies providing for indemnification.
We have purchased insurance on behalf of our directors and officers for
liabilities arising out of their capacities as such.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
See Exhibit Index included herewith which is incorporated herein by
reference.
ITEM 17. UNDERTAKINGS
The undersigned registrants hereby undertake:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually
II-1
or in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with the Commission by
the registrants pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration
statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, 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.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of our annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrants hereby undertake that:
(a) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective; and
(b) For the purpose of determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers or persons
controlling the registrants pursuant to the provisions set forth or described in
Item 15 of this registration statement, or otherwise, the registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a registrant of expenses
incurred or paid by a director, officer or controlling person of such registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Securities Act of 1933, as amended,
and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
RenaissanceRe Holdings Ltd. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Pembroke, Bermuda, on the 6th day of May 2002.
RENAISSANCERE HOLDINGS LTD.
By: /s/ JAMES N. STANARD
------------------------------------
James N. Stanard
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons, in
the capacities and on the dates indicated.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
RenaissanceRe Capital Trust II certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Pembroke, Bermuda, on the 6th day of
May 2002.
RENAISSANCERE CAPITAL TRUST II
By: RenaissanceRe Holdings Ltd., as
Depositor
By: /s/ JOHN M. LUMMIS
------------------------------------
John M. Lummis
Executive Vice President and
Chief Financial Officer
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* To be filed, if necessary, subsequent to the effectiveness of this
registration statement by an amendment to this registration statement or
incorporated by reference pursuant to a Current Report on Form 8-K in
connection with an offering of securities.
** Previously filed.