As filed with the Securities and Exchange Commission on February 12, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1993
--------------------------------
MARKEL CORPORATION MARKEL CAPITAL TRUST I
(Exact name of Registrant as (Exact name of Registrant
specified in its charter) as specified in its trust agreement)
VIRGINIA DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
--------------------
6331 6719
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
54-0292420
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
4551 COX ROAD 4551 COX ROAD
GLEN ALLEN, VIRGINIA 23060 GLEN ALLEN, VIRGINIA 23060
(804) 747-0136 (804) 747-0136
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
---------------------------
Gregory B. Nevers Gregory B. Nevers
Corporate Counsel Corporate Counsel
Markel Corporation Markel Corporation
4551 Cox Road 4551 Cox Road
Glen Allen, Virginia 23060 Glen Allen, Virginia 23060
(Name, address, including zip code, and telephone number, including area code,
of agents for service)
---------------------------
COPIES TO:
Leslie A. Grandis Michael L. Fitzgerald
McGuire,Woods, Battle & Boothe, L.L.P. Brown & Wood, L.L.P.
One James Center One World Trade Center
Richmond, Virginia 23219 New York, New York 10048
---------------------------
Approximate Date of Commencement of Proposed Sale to the Public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
CALCULATION OF REGISTRATION FEE
Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
to be Registered Registered Per Unit(1) Offering Price(1) Fee(2)
- ---------------------------------------------------------------------------------------------------------------------
Series B Capital Securities of
Markel Capital Trust I . . . . . $150,000,000 100% $150,000,000 $45,454.55
- ---------------------------------------------------------------------------------------------------------------------
Series B Junior Subordinated
Deferrable Interest Debentures
of Markel Corporation(2) 100.00
- ---------------------------------------------------------------------------------------------------------------------
Markel Corporation Series B
Guarantee with respect to
Series B Capital Securities(3) 100.00
- ---------------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . $150,000,000 100% $150,000,000 $45,654.55
=====================================================================================================================
(1) Estimated solely for the purpose of computing the registration fee.
(2) No separate consideration will be received for the Series B Junior
Subordinated Deferrable Interest Debentures of Markel Corporation (the
"Junior Subordinated Debentures") distributed upon any liquidation of
Markel Capital Trust I.
(3) No separate consideration will be received for the Markel Corporation
Series B Guarantee.
(4) This Registration Statement is deemed to cover rights of holders of
Junior Subordinated Debentures under the Indenture, the rights of
holders of Series B Capital Securities of Markel Capital Trust I
under a Declaration of Trust, the rights of holders of such Capital
Securities under the Series B Guarantee and certain backup
undertakings as described herein.
(5) Such amount represents the liquidation amount of the Markel Capital
Trust I Series B Capital Securities to be exchanged hereunder and the
principal amount of Junior Subordinated Debentures that may be
distributed to holders of such Capital Securities upon any liquidation
of Markel Capital Trust I.
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 on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 12, 1997
MARKEL CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.71% SERIES B CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.71% SERIES A CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
MARKEL CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
--------------------
Markel Capital Trust I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus (as the same may be
amended or supplemented from time to time, the "Prospectus") and in the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $150,000,000 aggregate Liquidation Amount of its
8.71% Series B Capital Securities (the "New Capital Securities") which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like Liquidation Amount of its outstanding
8.71% Series A Capital Securities (the "Old Capital Securities"), of which
$150,000,000 aggregate Liquidation Amount is outstanding. Pursuant to the
Exchange Offer, Markel Corporation, a Virginia corporation (the "Company"), is
also offering to exchange (i) its guarantee of payments of cash distributions
and payments on liquidation of the Trust or redemption of the Old Capital
Securities (the "Old Guarantee") for a like guarantee in respect of the New
Capital Securities (the "New Guarantee") and (ii) all of its 8.71% Series A
Junior Subordinated Deferrable Interest Debentures due January 1, 2046 (the "Old
Junior Subordinated Debentures") for a like aggregate principal amount of its
8.71% Series B Junior Subordinated Deferrable Interest Debentures due January 1,
2046 (the "New Junior Subordinated Debentures"), which New Guarantee and New
Junior Subordinated Debentures also have been registered under the Securities
Act. The Old Capital Securities, the Old Guarantee and the Old Junior
Subordinated Debentures are collectively referred to herein as the "Old
Securities" and the New Capital Securities, the New Guarantee and the New Junior
Subordinated Debentures are collectively referred to herein as the "New
Securities."
The terms of the New Securities are identical in all material respects
to the respective terms of the Old Securities, except that the New Securities
have been registered under the Securities Act and therefore will not be subject
to certain restrictions on transfer applicable to the Old Securities, the New
Capital Securities will not contain the $100,000 minimum Liquidation Amount
transfer restriction, the New Capital Securities will not provide for any
increase in the Distribution rate thereon, the New Junior Subordinated
Debentures will not contain the $100,000 minimum principal amount transfer
restriction and (e) the New Junior Subordinated Debentures will not provide for
any increase in the interest rate thereon. See "Description of New Securities"
and "Description of Old Securities." The New Capital Securities are being
offered for exchange in order to satisfy certain obligations of the Corporation
and the Trust under the Registration Rights Agreement dated as of January 13,
1997 (the "Registration Rights Agreement") among the Corporation, the Trust and
the Initial Purchasers (as defined herein). In the event that the Exchange Offer
is consummated, any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer and the New Capital Securities issued in the
Exchange Offer will vote together as a single class for purposes of determining
whether holders of the requisite percentage in outstanding Liquidation Amount
thereof have taken certain actions or exercised certain rights under the Trust
Agreement.
(CONTINUED ON THE FOLLOWING PAGE)
This Prospectus and the Letter of Transmittal are first being mailed to
all holders of Old Capital Securities on , 1997.
SEE "RISK FACTORS" COMMENCING ON PAGE ___ FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD CAPITAL
SECURITIES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _________ __, 1997.
The New Capital Securities and the Old Capital Securities
(collectively, the "Capital Securities") represent beneficial interests in the
assets of the Trust. The Corporation is the owner of all of the beneficial
interests represented by common securities of the Trust (the "Common
Securities," and together with the Capital Securities, the "Trust Securities").
The Chase Manhattan Bank is the Property Trustee of the Trust. The Trust was
formed for the sole purpose of issuing the Trust Securities and investing the
proceeds thereof in the Junior Subordinated Debentures (as defined herein). The
Junior Subordinated Debentures will mature on January 1, 2046 (the "Stated
Maturity Date"). The Capital Securities will have a preference over the Common
Securities under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise. See "Description of New
Securities--Subordination of Common Securities."
As used herein, (i) "Indenture" means the Indenture, dated as of
January 13, 1997, as amended and supplemented from time to time, between the
Corporation and The Chase Manhattan Bank, as Debenture Trustee (the "Debenture
Trustee"), and (ii) "Declaration" means the Amended and Restated Declaration of
Trust relating to the Trust among the Corporation, as Sponsor, The Chase
Manhattan Bank as Property Trustee (the "Property Trustee"), Chase Manhattan
Bank Delaware, as Delaware Trustee, (the "Delaware Trustee"), and the
Administrative Trustees named therein (collectively, with the Property Trustee
and Delaware Trustee, the "Issuer Trustees"). In addition, as the context may
require, unless otherwise expressly stated, (i) the term "Capital Securities"
includes the Old Capital Securities and the New Capital Securities, (ii) the
term "Trust Securities" includes the Capital Securities and the Common
Securities, (iii) the term "Junior Subordinated Debentures" includes the Old
Junior Subordinated Debentures and the New Junior Subordinated Debentures and
(iv) the term "Guarantee" includes the Old Guarantee and the New Guarantee.
Holders of the New Capital Securities will be entitled to receive
cumulative cash distributions, accumulating from January 13, 1997 and payable
semi-annually in arrears on January 1 and July 1 of each year, commencing July
1, 1997, at the annual rate of 8.71% of the Liquidation Amount of $1,000 per New
Capital Security ("Distributions"). So long as no Debenture Event of Default (as
defined herein) has occurred and is continuing, the Company will have the right
to defer payments of interest on the Junior Subordinated Debentures at any time
and from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each deferral period (each, an "Extension Period"),
provided that no Extension Period may extend beyond the Stated Maturity Date.
Upon the termination of any such Extension Period and the payment of all amounts
then due, the Company may elect to begin a new Extension Period, subject to the
requirements set forth in the Indenture. If and for so long as interest payments
on the Junior Subordinated Debentures are so deferred, Distributions on the
Trust Securities will also be deferred and the Company will not be permitted,
subject to certain exceptions described herein, to declare or pay any cash
distributions with respect to the Company's capital stock (which includes common
and preferred stock) or to make any payment with respect to debt securities of
the Company that rank pari passu with or junior to the Junior Subordinated
Debentures. During an Extension Period, interest on the Junior Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Trust Securities are entitled will continue to accumulate) at the
rate of 8.71% per annum, compounded semi-annually, and holders of Trust
Securities will be required to accrue interest income for United States federal
income tax purposes. See "Description of Junior Subordinated Debentures --
Option to Extend Interest Payment Date" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
The Company, through the Guarantee, the Common Guarantee, the
Declaration, the Junior Subordinated Debentures and the Indenture (each as
defined herein), taken together, has guaranteed, or will guarantee, as the case
may be, fully, irrevocably and unconditionally all of the Trust's obligations
under the Trust Securities. See "Relationship Among the New Capital Securities,
the New Junior Subordinated Debentures and the New Guarantee -- Full and
Unconditional Guarantee." The Old Guarantee and the Common Guarantee currently
guarantee, and the New Guarantee will guarantee, payments of Distributions and
payments on liquidation or redemption of the Trust Securities, but in each case
only to the extent that the Trust holds funds on hand legally available therefor
and has failed to make such payments, as described herein. See "Description of
the Guarantee." If the Company fails to make a required payment on the Junior
Subordinated Debentures, the Trust will not have sufficient funds to make the
related payments, including Distributions, on the Trust Securities. The
Guarantee and the Common Guarantee will not cover any such payment when the
Trust does not have sufficient funds on hand legally available therefor. In such
event, a holder of Capital Securities may institute a legal proceeding directly
against the Company to enforce its rights in respect of such payment. See
"Description of New Junior Subordinated Debentures -- Enforcement of Certain
Rights by Holders of Capital Securities." The obligations of the Company under
the Guarantee and the Junior Subordinated Debentures will be unsecured and
subordinate and rank junior in right of payment to all Senior Indebtedness (as
defined in "Description of New Junior Subordinated Debentures --
Subordination"), which totaled approximately $120.3 million at December 31,
1996.
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated Maturity
Date upon repayment of the Junior Subordinated Debentures at a redemption price
equal to the principal amount of, plus accrued interest on, the Junior
Subordinated Debentures (the "Maturity Redemption Price"), (ii) in whole but not
in part, at any time, contemporaneously with the optional prepayment of the
Junior Subordinated Debentures upon the occurrence and continuation of a Special
Event (as defined herein), at a redemption price equal to the Special Event
Prepayment Price (as defined herein) (the "Special Event Redemption Price"), and
(iii) in whole or in part, on or after January 1, 2007, contemporaneously with
the optional prepayment by the Company of the Junior Subordinated Debentures, at
a redemption price equal to the Optional Prepayment Price (as defined herein)
(the "Optional Redemption Price"). Any of the Maturity Redemption Price, the
Special Event Redemption Price and the Optional Redemption Price may be referred
to herein as the "Redemption Price." See "Description of New Securities --
Redemption."
The New Junior Subordinated Debentures will be prepayable prior to the
Stated Maturity Date at the option of the Company (i) on or after January 1,
2007, in whole or in part, at a prepayment price (the "Optional Prepayment
Price") equal to 104.355% of the principal amount thereof on January 1, 2007,
declining ratably on each January 1 thereafter to 100% on or after January 1,
2017, plus accrued interest thereon to the date of prepayment, or (ii) prior to
January 1, 2007, in whole but not in part, upon the occurrence and continuation
of a Special Event, at a prepayment price (the "Special Event Prepayment Price")
equal to the greater of (a) 100% of the principal amount thereof or (b) the sum,
as determined by a Quotation Agent (as defined herein), of the present values of
the principal amount and premium payable with respect to an optional redemption
of New Junior Subordinated Debentures on January 1, 2007, together with
scheduled payments of interest on the New Junior Subordinated Debentures from
the prepayment date to and including January 1, 2007, discounted to the
prepayment date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) plus, in
either case, accrued interest thereon to the date of prepayment. Either of the
Optional Prepayment Price or the Special Event Prepayment Price may be referred
to herein as the "Prepayment Price." See "Description of New Junior Subordinated
Debentures -- Optional Prepayment" and " -- Conditional Right to Advance
Maturity and Special Event Prepayment."
The Company will have the right at any time to terminate the Trust and
cause a Like Amount of the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust, subject to the
Company having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of the Capital Securities.
Unless the Junior Subordinated Debentures are distributed to the holders of the
Trust Securities, in the event of a liquidation of the Trust under certain
circumstances described herein, after satisfaction of liabilities to creditors
of the Trust as required by applicable law, the holders of the Capital
Securities generally will be entitled to receive a Liquidation Amount of $1,000
per Capital Security plus accumulated and unpaid Distributions thereon to the
date of payment. See "Description of New Securities -- Liquidation of the Trust
and Distribution of Junior Subordinated Debentures" and "Certain Federal Income
Tax Consequences -- Receipt of Junior Subordinated Debentures or Cash Upon
Liquidation of the Trust."
The Trust is making the Exchange Offer of the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance of
the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither the Company nor the Trust has sought its own interpretive
letter and there can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject to the two immediately
following sentences, the Company and the Trust believe that New Capital
Securities issued pursuant to this Exchange Offer in exchange for Old Capital
Securities may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Capital Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Capital Securities. However, any holder of Old Capital Securities who
is an "affiliate" of the Company or the Trust or who intends to participate in
the Exchange Offer for the purpose of distributing New Capital Securities, or
any broker-dealer who purchased Old Capital Securities from the Trust to resell
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption under the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Capital Securities in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Capital Securities unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer
holds Old Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Capital
Securities for New Capital Securities, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old
Capital Securities for New Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Company or the
Trust, (ii) any New Capital Securities to be received by it are being acquired
in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Capital Securities, and (iv) if such
holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such New Capital Securities. In addition, the Company and the Trust may
require such holder, as a condition to such holder's eligibility to participate
in the Exchange Offer, to furnish to the Company and the Trust (or an agent
thereof) in writing information as to the number of "beneficial owners" (within
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended)
on behalf of whom such holder holds the Capital Securities to be exchanged in
the Exchange Offer. Each broker-dealer that receives New Capital Securities for
its own account pursuant to the Exchange Offer must acknowledge that it acquired
the Old Capital Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Capital Securities. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. Based on the position taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters referred to above, the
Company and the Trust believe that broker-dealers who acquired Old Capital
Securities for their own accounts, as a result of market-making activities or
other trading activities ("Participating Broker-Dealers"), may fulfill their
prospectus delivery requirements with respect to the New Capital Securities
received upon exchange of such Old Capital Securities (other than Old Capital
Securities which represent an unsold allotment from the original sale of the Old
Capital Securities) with a prospectus meeting the requirements of the Securities
Act, which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such New Capital Securities. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Capital
Securities received in exchange for Old Capital Securities where such Old
Capital Securities were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the Company
and the Trust have agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker- Dealer in
connection with resales of such New Capital Securities for a period ending 90
days after the Expiration Date (as defined herein) (subject to extension under
certain limited circumstances described below) or, if earlier, when all such New
Capital Securities have been disposed of by such Participating Broker-Dealer.
See "Plan of Distribution." However, a Participating Broker-Dealer who intends
to use this Prospectus in connection with the resale of New Capital Securities
received in exchange for Old Capital Securities pursuant to the Exchange Offer
must notify the Company or the Trust, or cause the Company or the Trust to be
notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at one of
the addresses set forth herein under "The Exchange Offer--Exchange Agent." Any
Participating Broker-Dealer who is an "affiliate" of the Company or the Trust
may not rely on such interpretive letters and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction. See "The Exchange Offer--Resales of New Capital
Securities."
In that regard, each Participating Broker-Dealer who surrenders Old
Capital Securities pursuant to the Exchange Offer will be deemed to have agreed,
by execution of the Letter of Transmittal, that, upon receipt of notice from the
Company or the Trust of the occurrence of any event or the discovery of any fact
which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable) pursuant to
this Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Company or the Trust has given notice that the sale of the New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Company or the Trust
gives such notice to suspend the sale of the New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable), it shall
extend the 90- day period referred to above during which Participating
Broker-Dealers are entitled to use this Prospectus in connection with the resale
of New Capital Securities by the number of days during the period from and
including the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the New Capital
Securities or to and including the date on which the Company or the Trust has
given notice that the sale of New Capital Securities (or the New Guarantee or
the New Junior Subordinated Debentures, as applicable) may be resumed, as the
case may be.
Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Old Capital Securities. The New Capital
Securities will be a new issue of securities for which there currently is no
market. Although the Initial Purchasers have informed the Company and the Trust
that they each currently intend to make a market in the New Capital Securities,
they are not obligated to do so, and any such market making may be discontinued
at any time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the New Capital Securities. The
Company and the Trust currently do not intend to apply for listing of the New
Capital Securities on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System.
Any Old Capital Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all the same rights and
will be subject to the same limitations applicable thereto under the Trust
Agreement (except for those rights which terminate upon consummation of the
Exchange Offer). Following consummation of the Exchange Offer, the holders of
Old Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Company nor the Trust will
have any further obligation to such holders (other than under certain limited
circumstances) to provide for registration under the Securities Act of the Old
Capital Securities held by them. To the extent that Old Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Capital Securities could be adversely affected. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on , 1997 (such time on such date being hereinafter
called the "Expiration Date"), unless the Exchange Offer is extended by the
Company or the Trust (in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is extended). Tenders of Old
Capital Securities may be withdrawn at any time on or prior to the Expiration
Date. The Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Old Capital Securities being tendered for exchange. However, the Exchange
Offer is subject to certain events and conditions which may be waived by the
Company or the Trust and to the terms and provisions of the Registration Rights
Agreement. Old Capital Securities may be tendered in whole or in part having an
aggregate Liquidation Amount of not less than $100,000 (100 Capital Securities)
or any integral multiple of $1,000 Liquidation Amount (one Capital Security) in
excess thereof. The Company has agreed to pay all expenses of the Exchange
Offer. See "The Exchange Offer--Fees and Expenses." Holders of the Old Capital
Securities whose Old Capital Securities are accepted for exchange will not
receive Distributions on such Old Capital Securities and will be deemed to
have waived the right to receive any Distributions on such Old Capital
Securities accumulated from and after January 13, 1997. See "The Exchange
Offer--Distributions on New Capital Securities."
Neither the Company nor the Trust will receive any cash proceeds from
the issuance of the New Capital Securities offered hereby. No dealer-manager is
being used in connection with this Exchange Offer. See "Use of Proceeds" and
"Plan of Distribution."
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-------------------
TABLE OF CONTENTS
Page
Available Information.....................................................
Incorporation of Certain Documents by Reference...........................
Summary...................................................................
Risk Factors..............................................................
Markel Corporation .......................................................
Use of Proceeds ..........................................................
Ratios of Earnings to Fixed Charges.......................................
Capitalization............................................................
Summary Financial Data ...................................................
Markel Capital Trust I ...................................................
The Exchange Offer........................................................
Description of New Securities ............................................
Description of New Junior Subordinated Debentures ........................
Description of The Guarantee .............................................
Description of Old Securities.............................................
Relationship Among the New Capital Securities, the
New Junior Subordinated Debentures and the New Guarantee................
Certain Federal Income Tax Consequences ..................................
ERISA Considerations......................................................
Plan of Distribution......................................................
Notice to Investors ......................................................
Certain Legal Matters.....................................................
Experts...................................................................
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information concerning the Trust can be inspected and copied at
prescribed rates at the Commission's Public Reference Room, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as the following Regional
Offices of the Commission: 7 World Trade Center, 13th Floor, New York, New York
10048; and, Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material may be obtained by mail from the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. If available, such reports and other information may
also be accessed through the Commission's electronic data gathering, analysis
and retrieval system ("EDGAR") via electronic means, including the Commission's
web site on the Internet (http://www.sec.gov).
No separate financial statements of the Trust have been included herein. The
Company does not consider that such financial statements would be material to
holders of the Capital Securities because (i) all of the voting securities of
the Trust are owned, directly or indirectly, by the Company, a reporting company
under the Exchange Act, (ii) the Trust has no independent operations and exists
for the sole purpose of issuing securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
Junior Subordinated Debentures issued by the Company, and (iii) the Company's
obligations described herein to provide certain indemnities in respect of, and
be responsible for, certain costs, expenses, debts and liabilities of the Trust
under the Indenture and any supplemental indenture thereto and pursuant to the
Declaration of the Trust, the guarantee issued with respect to Capital
Securities issued by the Trust, the Junior Subordinated Debentures purchased by
Markel Capital Trust I and the related Indenture, taken together, constitute a
full and unconditional guarantee of payments due on the Capital Securities. See
"Description of New Junior Subordinated Debentures" and "Description of the
Guarantee."
The Trust is not currently subject to the information reporting requirements of
the Exchange Act. The Trust will become subject to such requirements upon the
effectiveness of the Registration Statement, although it intends to seek and
expects to receive exemptions therefrom.
This Prospectus constitutes a part of a registration statement on Form S-4 (the
"Registration Statement") filed by the Company and the Trust with the Commission
under the Securities Act. This Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and reference is
hereby made to the Registration Statement and to the exhibits relating thereto
for further information with respect to the Company, the Trust and the New
Securities. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company pursuant to
Section 13 of the Exchange Act are incorporated by reference in this Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1995,
as amended by Amendment No. 1 filed April 9, 1996;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996;
(c) Current Report on Form 8-K filed on November 13, 1996;
(d) Current Report on Form 8-K filed on January 10, 1997; and
(e) Current Report on Form 8-K filed on February 6, 1997.
Such incorporation by reference shall not be deemed to specifically incorporate
by reference the information referred to in Item 402(a)(8) of Regulation S-K.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the New Securities offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in
this Prospectus or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus or any supplement thereto to the extent that a statement
contained herein or therein (or in any subsequently filed document that also is
or is deemed to be incorporated by reference herein or therein) modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all
of the provisions of such contract or other document. The Company will
provide without charge to each person to whom a copy of this Prospectus has
been delivered, upon the written or oral request of such person, a copy of any
or all of the documents referred to above which have been or may be
incorporated by reference herein (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference in such
documents). Requests for such copies should be directed to Markel Corporation,
Investor Relations Department, 4551 Cox Road, Glen Allen, Virginia 23060,
telephone (800) 446-6671.
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in or incorporated by reference into this
Prospectus.
Markel Capital Trust I
The Trust is a statutory business trust created under Delaware law by the filing
of a certificate of trust with the Delaware Secretary of State on December 30,
1996. The Trust is governed by an Amended and Restated Declaration of Trust (the
"Declaration") executed by the Company, as Sponsor, The Chase Manhattan Bank, as
Property Trustee, and The Chase Manhattan Bank Delaware, as Delaware Trustee and
the three individual Administrative Trustees named therein. The Trust's business
and affairs are conducted by the Issuer Trustees: the Property Trustee, the
Delaware Trustee, and the three individual Administrative Trustees who are
employees or officers of or affiliated with the Company. The Trust exists for
the exclusive purposes of (i) issuing and selling the Trust Securities, (ii)
using the proceeds from the sale of the Trust Securities to acquire the Junior
Subordinated Debentures issued by the Company and (iii) engaging in only those
other activities necessary, advisable or incidental thereto (such as registering
the transfer of the Trust Securities). Accordingly, the Junior Subordinated
Debentures will be the sole assets of the Trust, and payments under the Junior
Subordinated Debentures will be the sole revenue of the Trust. All of the Common
Securities are owned by the Company.
Markel Corporation
Markel Corporation is an insurance holding company which, through its
subsidiaries, markets and underwrites specialty insurance products and programs
to a variety of niche markets. The Company believes that its specialty product
focus and niche market strategy enable it to develop particular expertise and
specialized knowledge of its markets. Such specialization allows the Company to
provide added value to its customers and to compete on a basis other than price.
The year ended December 31, 1995 marked the Company's fourth consecutive year of
underwriting profitability and the ninth year of underwriting profitability in
the last ten years. The Company emphasizes quality service in all phases of its
operations and believes that this approach fosters strong relationships with its
producers and greater customer loyalty.
The Company's primary businesses are professional and products liability, excess
and surplus lines, specialty programs, specialty personal and commercial lines
and brokered excess and surplus lines. The Company's distribution channels
include retail and wholesale brokers, general agents, direct marketing,
including telemarketing and direct mail, and affinity groups. The Company offers
products and coverages designed to meet the needs of insureds in niche or
emerging markets or insureds with specialized exposures or risks that are not
adequately served by the standard markets. Significant products include
professional liability coverages for doctors, lawyers, architects, engineers and
other professionals, comprehensive programs for summer camps and other youth
recreation organizations, conference centers, child care centers, private
schools, martial arts schools, gymnastics schools, dance studios and horse
farms, and property and liability coverages for restaurants and bars, vacant
properties and hard-to- place property risks, yachts, jet skis and other
watercraft, mobile homes and other non-standard dwellings, taxi fleets and other
commercial vehicles. Each risk is generally considered on an individual basis,
and coverages typically include limit restrictions, deductibles, exclusions,
surcharges and other features which respond to distinctive risk characteristics.
The Company had earned premiums of $285.1 million and $225.1 million for the
year ended December 31, 1995 and for the nine months ended September 30, 1996,
respectively. As of September 30, 1996, the Company had total assets of
approximately $1.4 billion and shareholders' equity of $247.8 million.
THE EXCHANGE OFFER
The Exchange Offer................... Up to $150,000,000 aggregate Liquidation
Amount of New Capital Securities are
being offered in exchange for a like
aggregate Liquidation Amount of Old
Capital Securities. Old Capital
Securities may be tendered for exchange
in whole or in part in a Liquidation
Amount of $100,000 (100 Capital
Securities) or any integral multiple of
$1,000 (one Capital Security) in excess
thereof. The Company and the Trust are
making the Exchange Offer in order to
satisfy their obligations under the
Registration Rights Agreement relating
to the Old Capital Securities. For a
description of the procedures for
tendering Old Capital Securities, see
"The Exchange Offer--Procedures for
Tendering Old Capital Securities."
Expiration Date...................... 5:00 p.m., New York City time, on , 1997,
unless the Exchange Offer is extended by
the Company or the Trust (in which case
the Expiration Date will be the latest
date and time to which the Exchange Offer
is extended). See "The Exchange
Offer--Terms of the Exchange Offer."
Conditions to the Exchange Offer..... The Exchange Offer is subject to certain
conditions, which may be waived by the
Company and the Trust in their sole
discretion. The Exchange Offer is not
conditioned upon any minimum Liquidation
Amount of Old Capital Securities being
tendered. See "The Exchange
Offer--Conditions to the Exchange Offer."
Offer................................ The Company and the Trust reserve the
right in their sole and absolute
discretion, subject to applicable law,
at any time and from time to time, (i)
to delay the acceptance of the Old
Capital Securities for exchange, (ii)
to terminate the Exchange Offer if
certain specified conditions have not
been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer
and retain all Old Capital Securities
tendered pursuant to the Exchange Offer,
subject, however, to the right of
holders of Old Capital Securities to
withdraw their tendered Old Capital
Securities, or (iv) to waive any
condition or otherwise amend the terms
of the Exchange Offer in any respect.
See "The Exchange Offer--Terms of the
Exchange Offer."
Withdrawal Rights.................... Tenders of Old Capital Securities may be
withdrawn at any time on or prior to the
Expiration Date by delivering a written
notice of such withdrawal to the Exchange
Agent in conformity with certain
procedures set forth below under "The
Exchange Offer--Withdrawal Rights."
Procedures for Tendering
Old Capital Securities............... Tendering holders of Old Capital
Securities must complete and sign a
Letter of Transmittal in accordance
with the instructions contained therein
and forward the same by mail, facsimile
or hand delivery, together with any
other required documents, to the
Exchange Agent, either with the Old
Capital Securities to be tendered or in
compliance with the specified procedures
for guaranteed delivery of Old Capital
Securities. Certain brokers, dealers,
commercial banks, trust companies and
other nominees may also effect tenders by
book-entry transfer. Holders of Old
Capital Securities registered in the name
of a broker, dealer, commercial bank,
trust company or other nominee are urged
to contact such person promptly if
they wish to tender Old Capital
Securities pursuant to the Exchange
Offer. See "The Exchange
Offer--Procedures for Tendering Old
Capital Securities."
Letters of Transmittal and certificates
representing Old Capital Securities
should not be sent to the Company or the
Trust. Such documents should only be
sent to the Exchange Agent.
Resales of New Capital Securities.... The Company and the Trust are making
the Exchange Offer in reliance on the
position of the staff of the Division of
Corporation Finance of the Commission as
set forth in certain interpretive letters
addressed to third parties in other
transactions. However, neither the
Company nor the Trust has sought its own
interpretive letter and there can be no
assurance that the staff of the Division
of Corporation Finance of the Commission
would make a similar determination with
respect to the Exchange Offer as it has
in such interpretive letters to third
parties. Based on these
interpretations by the staff of the
Division of Corporation Finance of the
Commission, and subject to the two
immediately following sentences, the
Company and the Trust believe that
New Capital Securities issued pursuant
to this Exchange Offer in exchange for
Old Capital Securities may be offered
for resale, resold and otherwise
transferred by a holder thereof (other
than a holder who is a broker-dealer)
without further compliance with the
registration and prospectus delivery
requirements of the Securities Act,
provided that such New Capital
Securities are acquired in the ordinary
course of such holder's business and
that such holder is not
participating, and has no arrangement
or understanding with any person to
participate, in a distribution (within
the meaning of the Securities Act) of
such New Capital Securities. However,
any holder of Old Capital Securities who
is an "affiliate" of the Company or the
Trust or who intends to participate in
the Exchange Offer for the purpose of
distributing the New Capital
Securities, or any broker-dealer who
purchased the Old Capital Securities
from the Trust to resell pursuant to
Rule 144A or any other available
exemption under the Securities Act, (a)
will not be able to rely on the
interpretations of the staff of the
Division of Corporation Finance of
the Commission set forth in the
above-mentioned interpretive letters,
(b) will not be permitted or entitled to
tender such Old Capital Securities in
the Exchange Offer and (c) must comply
with the registration and prospectus
delivery requirements of the Securities
Act in connection with any sale or
other transfer of such Old Capital
Securities unless such sale is made
pursuant to an exemption from such
requirements. In addition, as described
below, if any broker-dealer holds Old
Capital Securities acquired for its own
account as a result of market-making
or other trading activities and
exchanges such Old Capital Securities for
New Capital Securities, then such
broker-dealer must deliver a prospectus
meeting the requirements of the
Securities Act in connection with
any resales of such New Capital
Securities.
Each holder of Old Capital Securities
who wishes to exchange Old Capital
Securities for New Capital Securities in
the Exchange Offer will be required to
represent that (i) it is not an
"affiliate" of the Company or the Trust,
(ii) any New Capital Securities to be
received by it are being acquired in
the ordinary course of its business,
(iii) it has no arrangement or
understanding with any person to
participate in a distribution (within
the meaning of the Securities Act) of
such New Capital Securities,
and (iv) if such holder is not a
broker-dealer, such holder is not
engaged in, and does not intend to
engage in, a distribution (within the
meaning of the Securities Act) of such
New Capital Securities. Each
broker-dealer that receives New Capital
Securities for its own account pursuant
to the Exchange Offer must acknowledge
that it acquired the Old Capital
Securities for its own account as the
result of market-making activities or
other trading activities and must agree
that it will deliver a prospectus
meeting the requirements of the
Securities Act in connection with any
resale of such New Capital Securities.
The Letter of Transmittal states that,
by so acknowledging and by delivering
a prospectus, a broker-dealer will not
be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. Based on the position
taken by the staff of the Division of
Corporation Finance of the Commission in
the interpretive letters referred to
above, the Company and the Trust believe
that Participating Broker-Dealers who
acquired Old Capital Securities for their
own accounts as a result of market-making
activities or other trading activities
may fulfill their prospectus delivery
requirements with respect to the New
Capital Securities received upon
exchange of such Old Capital Securities
(other than Old Capital Securities
which represent an unsold allotment
from the original sale of the Old
Capital Securities) with a prospectus
meeting the requirements of the
Securities Act, which may be the
prospectus prepared for an exchange
offer so long as it contains a
description of the plan of distribution
with respect to the resale of such New
Capital Securities. Accordingly, this
Prospectus, as it may be amended or
supplemented from time to time, may be
used by a Participating Broker-Dealer
in connection with resales of New
Capital Securities received in exchange
for Old Capital Securities where such
Old Capital Securities were acquired by
such Participating Broker- Dealer for
its own account as a result of
market-making or other trading
activities. Subject to certain provisions
set forth in the Registration Rights
Agreement and to the limitations
described below under "The Exchange
Offer--Resales of New Capital
Securities," the Company and the Trust
have agreed that this Prospectus, as it
may be amended or supplemented from time
to time, may be used by a Participating
Broker-Dealer in connection with resales
of such New Capital Securities for a
period ending 90-days after the
Expiration Date (subject to extension
under certain limited circumstances) or,
if earlier, when all such New Capital
Securities have been disposed of by
such Participating Broker-Dealer. See
"Plan of Distribution." Any Participating
Broker-Dealer who is an "affiliate" of
the Company or the Trust may not rely on
such interpretive letters and must
comply with the registration and
prospectus delivery requirements of
the Securities Act in connection with
any resale transaction. See "The
Exchange Offer--Resales of New Capital
Securities."
Exchange Agent....................... The exchange agent with respect to the
Exchange Offer is The Chase Manhattan
Bank (the "Exchange Agent"). The
addresses, and telephone and facsimile
numbers, of the Exchange Agent are set
forth in "The Exchange Offer--Exchange
Agent" and in the Letter of Transmittal.
Use of Proceeds...................... Neither the Company nor the Trust will
receive any cash proceeds from the
issuance of the New Capital Securities
offered hereby. See "Use of Proceeds."
Certain United States Federal
Income Tax Considerations; ERISA
Considerations....................... Holders of Old Capital Securities should
review the information set forth under
"Certain Federal Income Tax
Consequences" and "ERISA Considerations"
prior to tendering Old Capital Securities
in the Exchange Offer.
THE NEW CAPITAL SECURITIES
Securities Offered................... Up to $150,000,000 aggregate Liquidation
Amount of the Trust's New Capital
Securities which have been registered
under the Securities Act (Liquidation
Amount $1,000 per New Capital Security).
The New Capital Securities will be
issued, and the Old Capital Securities
were issued, under the Declaration. The
New Capital Securities and any Old
Capital Securities which remain
outstanding after consummation of the
Exchange Offer will vote together as a
single class for purposes of determining
whether holders of the requisite
percentage in outstanding Liquidation
Amount thereof have taken certain
actions or exercised certain rights
under the Trust Declaration. See
"Description of New Securities--Voting
Rights; Amendment of the Declaration."
The terms of the New Capital Securities
are identical in all material respects
to the terms of the Old Capital
Securities, except that the New
Capital Securities have been registered
under the Securities Act and will not be
subject to the $100,000 minimum
Liquidation Amount transfer
restriction and certain other
restrictions on transfer applicable to
the Old Capital Securities and will not
provide for any increase in the
Distribution rate thereon. See "The
Exchange Offer--Purpose of the Exchange
Offer," "Description of New
Securities" and "Description of Old
Securities."
Distribution Dates................... January 1 and July 1 of each year
commencing July 1, 1997.
Extension Periods.................... Distributions on Capital Securities
will be deferred for the duration of any
Extension Period elected by the Company
with respect to the payment of interest
on the New Junior Subordinated
Debentures. No Extension Period will
exceed 10 consecutive semi-annual
periods or extend beyond the Stated
Maturity Date. See "Description of New
Junior Subordinated Debentures -- Option
to Extend Interest Payment Date" and
"Certain Federal Income Tax
Consequences -- Interest Income and
Original Issue Discount."
Ranking.............................. The New Capital Securities will rank
pari passu, and payments thereon will
be made pro rata, with the Old Capital
Securities and the Common Securities
except as described under "Description
of New Securities -- Subordination of
Common Securities." The New Junior
Subordinated Debentures will rank pari
passu with the Old Junior Subordinated
Debentures and all other junior
subordinated debentures to be issued by
the Company ("Other Debentures"),
which will be issued and sold (if at
all) to other trusts to be established by
the Company (if any), in each case
similar to the Trust ("Other Trusts"),
and will be unsecured and subordinate and
junior in right of payment to all Senior
Indebtedness to the extent and in the
manner set forth in the Indenture. See
"Description of New Junior Subordinated
Debentures." The New Guarantee will rank
pari passu with the Old Guarantee and all
other guarantees (if any) to be issued by
the Company with respect to capital
securities (if any) issued by Other
Trusts ("Other Guarantees") and will
constitute an unsecured obligation of the
Company and will rank subordinate and
junior in right of payment to all Senior
Indebtedness to the extent and in the
manner set forth in the Guarantee
Agreement and, in the event of
bankruptcy or insolvency proceedings
involving the Company, will rank
subordinate and junior in right of
payment to all liabilities (other than
Other Guarantees) of the Company, but
senior to any obligations in respect of
any class of capital stock of the
Company. See "Description of the
Guarantee."
Redemption........................... The Trust Securities are subject to
mandatory redemption in a Like Amount,
(i) in whole but not in part, on the
Stated Maturity Date upon repayment of
the Junior Subordinated Debentures, (ii)
in whole but not in part, at any time
contemporaneously with the optional
prepayment of the Junior Subordinated
Debentures by the Company upon the
occurrence and continuation of a Special
Event and (iii) in whole or in part, on
or after January 1, 2007
contemporaneously with the optional
prepayment by the Company of the Junior
Subordinated Debentures, in each case at
the applicable Redemption Price. See
"Description of New Securities --
Redemption."
Ratings.............................. The New Capital Securities are expected
to be rated "BBB-" by Standard & Poor's
Ratings Service and by Duff & Phelps
Credit Rating Co., and "baa3" by Moody's
Investors Service, Inc.
Absence of Market for the Capital
Securities........................... The New Capital Securities will be a
new issue of securities for which there
currently is no market. Although
Donaldson, Lufkin & Jenrette
Securities Corporation and Smith Barney,
Inc. the initial purchasers of the Old
Capital Securities (the "Initial
Purchasers") have informed the Trust and
the Company that they each currently
intend to make a market in the Capital
Securities, the Initial Purchasers are
not obligated to do so, and any such
market making may be discontinued at any
time without notice. Accordingly, there
can be no assurance as to the development
or liquidity of any market for the New
Capital Securities. The Trust and the
Company do not intend to apply for
listing of the New Capital Securities on
any securities exchange or for quotation
through The Nasdaq Stock Market. See
"Plan of Distribution."
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS IN CONNECTION
WITH THE EXCHANGE OFFER AND THE NEW CAPITAL SECURITIES OFFERED HEREBY.
Holding Company Structure; Restrictions on Dividends
As a holding company, the Company's ability to meet debt service obligations and
pay operating expenses depends on receipt of sufficient funds from its direct
and indirect subsidiaries. The inability of the Company's direct and indirect
subsidiaries to pay dividends to the Company in an amount sufficient to meet
debt service obligations and pay operating expenses would have a material
adverse effect on the Company. The payment of dividends by the Company's
subsidiaries without prior regulatory approval is subject to restrictions set
forth in the insurance laws and regulations of Virginia, Illinois, Delaware, New
Jersey, California and Arizona, the states of domicile of the Company's
insurance subsidiaries. The Company currently does not expect such regulatory
requirements to impair its ability to meet interest payment obligations and to
pay operating expenses in the future. However, the Company can give no assurance
that dividends will be declared or paid by its subsidiaries. As of December 31,
1995, the Company's direct and indirect insurance subsidiaries had sufficient
capital and earnings to pay up to $36.2 million of dividends to the Company
during 1996 without prior regulatory approval.
Ranking of Subordinate Obligations Under the Guarantee and Junior Subordinated
Debentures
The obligations of the Company under the Guarantee issued by it for the benefit
of the holders of Capital Securities and the Junior Subordinated Debentures are
unsecured and subordinate and rank junior in right of payment to all present and
future Senior Indebtedness of the Company and rank pari passu with obligations
to or rights of the Company's other general unsecured creditors. In addition, in
the case of a bankruptcy or insolvency proceeding involving the Company, the
Company's obligations under the Guarantee will rank subordinate and junior in
right of payment to all liabilities (other than Other Guarantees) of the
Company, but senior to any obligation in respect of any class of capital stock
of the Company. No payment may be made of the principal of, or premium, if any,
or interest on the Junior Subordinated Debentures, or in respect of any
redemption, retirement, purchase or other acquisition of any of the Junior
Subordinated Debentures, at any time when (i) there is a default in the payment
of the principal of, or premium, if any, or interest on or otherwise in respect
of any Senior Indebtedness, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise, or (ii) any event of default with
respect to any Senior Indebtedness has occurred and is continuing, or would
occur as a result of such payment on the Junior Subordinated Debentures or any
redemption, retirement, purchase or other acquisition of any of the Junior
Subordinated Debentures, permitting the holders of such Senior Indebtedness (or
a trustee on behalf of the holders thereof) to accelerate the maturity thereof.
At December 31, 1996, the aggregate principal amount of outstanding Senior
Indebtedness of the Company was approximately $120.3 million. Because the
Company is a holding company, the right of the Company to participate in any
distribution of assets of any direct or indirect subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Capital Securities to benefit indirectly from such distribution)
is subject to the prior claims of creditors of that subsidiary, except to the
extent that the Company may itself be recognized as a creditor of that
subsidiary. At September 30, 1996, the direct and indirect subsidiaries of the
Company had total liabilities (excluding liabilities owed to the Company) of
approximately $1.0 billion. In addition, because many of the Company's
subsidiaries are insurance companies subject to regulatory control by various
state insurance departments, the ability of such subsidiaries to pay dividends
to the Company without prior regulatory approval is limited by applicable laws
and regulations. Accordingly, the Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of Junior Subordinated Debentures should look only to
the assets of the Company for payments on the Junior Subordinated Debentures.
None of the Indenture, the Guarantee, the Common Guarantee or the Declaration
places any limitation on the amount of secured or unsecured debt, including
Senior Indebtedness, or other obligations, that may be incurred by the Company
or any of its subsidiaries, either in the event of a highly leveraged
transaction or otherwise. See "Description of the Guarantee -- Status" and
"Description of the New Junior Subordinated Debentures -- Subordination."
The ability of the Trust to pay amounts due on the Capital Securities is solely
dependent upon the Company's making payments on the Junior Subordinated
Debentures as and when required.
Option to Extend Interest Payment Period; Tax Considerations
So long as no Debenture Event of Default (as defined herein) shall have occurred
and be continuing, the Company will have the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity Date. Upon any such deferral, semi-annual
Distributions on the Capital Securities by the Trust will be deferred (and the
amount of Distributions to which holders of the Capital Securities are entitled
will accumulate additional Distributions thereon at the rate of 8.71% per annum,
compounded semi-annually, but not exceeding the interest rate then accruing on
the Junior Subordinated Debentures) from the relevant payment date for such
Distributions during any such Extension Period.
The Company may extend any existing Extension Period, provided that such
extension does not cause such Extension Period to exceed 10 consecutive
semi-annual periods or to extend beyond the Stated Maturity Date. Upon the
termination of any Extension Period and the payment of all interest then accrued
and unpaid on the Junior Subordinated Debentures (together with interest thereon
at the annual rate of 8.71%, compounded semi-annually, to the extent permitted
by applicable law), the Company may elect to begin a new Extension Period,
subject to the above requirements. There is no limitation on the number of times
that the Company may elect to begin an Extension Period. See "Description of New
Securities -- Distributions" and "Description of New Junior Subordinated
Debentures -- Option to Extend Interest Payment Date."
Should the Company exercise its right to defer payments of interest on the
Junior Subordinated Debentures, each holder of Capital Securities will be
required to accrue income (as original issue discount ("OID")) in respect of the
deferred stated interest allocable to its Capital Securities for United States
federal income tax purposes, which will be allocated but not distributed to
holders of Capital Securities. As a result, during an Extension Period, each
holder of Capital Securities will recognize income for United States federal
income tax purposes in advance of the receipt of cash and will not receive the
cash related to such income from the Trust if the holder disposes of the Capital
Securities prior to the record date for the payment of Distributions thereafter.
See "Certain Federal Income Tax Consequences -- Interest Income and Original
Issue Discount" and " -- Sales of Capital Securities."
Should the Company elect to exercise its right to defer payments of interest on
the Junior Subordinated Debentures, the then current market price of the Capital
Securities is likely to be affected adversely. A holder that disposes of its
Capital Securities during an Extension Period, therefore, might not receive the
same return on its investment as a holder that continues to hold its Capital
Securities. In addition, the mere existence of the Company's right to defer
payments of interest on the Junior Subordinated Debentures may cause the market
price of the Capital Securities to be more volatile than the market prices of
other securities on which OID accrues that are not subject to such deferral
rights.
Conditional Right to Advance Maturity and Special Event Redemption
If a Tax Event (as defined herein) occurs, then the Company will have the right
(i) prior to the termination of the Trust, to advance the Stated Maturity Date
of the Junior Subordinated Debentures to the minimum extent required in order to
allow for the payments of interest in respect of the Junior Subordinated
Debentures to continue to be tax deductible, but in no event shall the resulting
maturity of the Junior Subordinated Debentures be less than 20 years from
January 13, 1997, or (ii) to terminate the Trust (if not previously terminated)
and advance the Stated Maturity Date of the Junior Subordinated Debentures to
the minimum extent required in order to allow for the payments of interest in
respect of the Junior Subordinated Debentures to continue to be tax deductible
for United States federal income tax purposes, but in no event shall the
resulting maturity of the Junior Subordinated Debentures be less than 40 years
from January 13, 1997. In either case, such maturity date shall be advanced only
if, in the opinion of counsel to the Company experienced in such matters, after
advancing the maturity date, interest paid on the Junior Subordinated Debentures
will be deductible for United States federal income tax purposes (the action
referred to in either clause (i) or (ii) above being referred to herein as a
"Tax Event Maturity Advancement").
If a Tax Event occurs and in the opinion of counsel to the Company experienced
in such matters, there would in all cases, after effecting a Tax Event Maturity
Advancement, be more than an insubstantial risk that an Adverse Tax Consequence
(as defined herein) would continue to exist, or, if an Investment Company Event
(as defined herein) occurs, then the Company will have the right, within 90 days
following the occurrence of such Tax Event or Investment Company Event, as the
case may be, to redeem the Junior Subordinated Debentures in whole (but not in
part) in the manner set forth under "Description of New Junior Subordinated
Debentures -- Conditional Right to Advance Maturity and Special Event
Prepayment," and therefore to cause a mandatory redemption of the Capital
Securities prior to the Stated Maturity Date (the circumstances under which the
Company has the right to so redeem the Junior Subordinated Debentures in
connection with a Tax Event being referred to herein as a "Conditional Tax
Redemption Event"). Each of a Conditional Tax Redemption Event or an Investment
Company Event are sometimes referred to herein as a "Special Event".
Possible Distribution of Junior Subordinated Debentures
The Company will have the right at any time to dissolve the Trust and, after
satisfaction of claims of creditors of the Trust as provided by applicable law,
to cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Securities. Under current United States federal income tax law, a
distribution of Junior Subordinated Debentures upon the dissolution of the Trust
would not be a taxable event to holders of the Capital Securities. If, however,
the Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of dissolution of the Trust,
the distribution of the Junior Subordinated Debentures may constitute a taxable
event to holders of Capital Securities. Moreover, upon the occurrence of a
Special Event, a dissolution of the Trust in which holders of the Capital
Securities receive cash would be a taxable event to such holders. See "Certain
Federal Income Tax Consequences -- Receipt of Junior Subordinated Debentures or
Cash Upon Liquidation of the Trust."
Possible Tax Law Changes Affecting the Capital Securities
On February 6, 1997, as part of the Clinton Administration's Fiscal 1998 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate issuers
a deduction for interest in respect of certain debt obligations, such as the New
Junior Subordinated Debentures, issued on or after the date "of first committee
action," if such debt obligations had a maximum term in excess of 15 years and
are not shown as indebtedness on the issuer's applicable consolidated balance
sheet. In addition, the Proposed Legislation would generally deny corporate
issuers a deduction for interest in respect of certain debt obligations, such as
the New Junior Subordinated Debentures, issued on or after the date "of first
committee action,", if such debt obligations have a weighted average maturity of
more than 40 years. The Proposed Legislation has not yet been introduced by any
member of the 105th Congress. If other Proposed Legislation is enacted by
Congress and if such enactment gave rise to a Tax Event, the Company would be
permitted to cause a redemption of the Trust Securities at the Special Event
Redemption Price by electing to prepay the Junior Subordinated Debentures at the
Special Event Prepayment Price. See "Description of New Securities --
Conditional Right to Advance Maturity and Special Event Redemption," "--
Description of New Junior Subordinated Debentures -- Conditional Right to
Advance Maturity and Special Event Prepayment" and Certain Federal Income Tax
Consequences -- Proposed Tax Legislation.
Possible Adverse Effect on Market Prices
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures distributed to the holders of Capital Securities
if a termination of the Trust were to occur. Accordingly, the Capital Securities
or the Junior Subordinated Debentures may trade at a discount from the price
that the investor paid to purchase the Capital Securities offered hereby.
Because holders of Capital Securities may receive Junior Subordinated Debentures
in liquidation of the Trust and because Distributions are otherwise limited to
payments on the Junior Subordinated Debentures, prospective purchasers of
Capital Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein. See "Description
of New Junior Subordinated Debentures."
Rights Under the Guarantee
The Chase Manhattan Bank will act as Guarantee Trustee and will hold the
Guarantee for the benefit of the holders of the Capital Securities. The Chase
Manhattan Bank will also act as Property Trustee and as Debenture Trustee under
the Indenture. Chase Manhattan Bank Delaware will act as Delaware Trustee
under the Declaration. The Old Guarantee guarantees, and the New Guarantee will
guarantee, as the case may be, to the holders of the Capital Securities the
following payments, to the extent not paid by the Trust: (i) any accumulated and
unpaid Distributions required to be paid on the Capital Securities, to the
extent that the Trust has funds on hand legally available therefor; (ii) the
applicable Redemption Price with respect to any Capital Securities called for
redemption, to the extent that the Trust has funds on hand at that time legally
available therefor; and (iii) upon a voluntary or involuntary termination and
liquidation of the Trust (unless the Junior Subordinated Debentures are
distributed to holders of the Capital Securities), the lesser of (a) the
aggregate of the Liquidation Amount and all accumulated and unpaid Distributions
to the date of payment, to the extent that the Trust has funds on hand at that
time legally available therefor and (b) the amount of assets of the Trust
remaining available for distribution to holders of the Capital Securities. The
obligations of the Company under the Guarantee are subordinated in the manner
set forth under " -- Ranking of Subordinate Obligations Under the Guarantee and
Junior Subordinated Debentures." The holders of a majority in Liquidation Amount
of the Capital Securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee. Any holder of the Capital Securities may
institute a legal proceeding directly against the Company to enforce its rights
under the Guarantee without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity. If the Company
defaults on its obligation to pay amounts payable under the Junior Subordinated
Debentures, the Trust will not have sufficient funds for the payment of
Distributions or amounts payable on redemption of the Capital Securities or
otherwise, and, in such event, holders of the Capital Securities will not be
able to rely upon the Guarantee for payment of such amounts. Instead, in the
event a Debenture Event of Default shall have occurred and be continuing and
such event is attributable to the failure of the Company to pay principal of
or premium, if any, or interest on the Junior Subordinated Debentures on the
payment date on which such payment is due and payable, then a holder of
Capital Securities may institute a legal proceeding directly against the
Company for enforcement of payment to such holder of the principal of or
premium, if any, or interest on such Junior Subordinated Debentures having
a principal amount equal to the Liquidation Amount of the Capital
Securities of such holder (a "Direct Action"). Notwithstanding any
payments made to a holder of Capital Securities by the Company in connection
with a Direct Action, the Company shall remain obligated to pay the principal
of and premium, if any, and interest on the Junior Subordinated
Debentures, and the Company shall be subrogated to the rights of the holder of
such Capital Securities with respect to payments on the Capital Securities to
the extent of any payments made by the Company to such holder in any Direct
Action. Except as described herein, holders of Capital Securities will not
be able to exercise directly any other remedy available to the holders of the
Junior Subordinated Debentures or to assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of New Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of Capital
Securities" and " -- Debenture Events of Default" and "Description of the
Guarantee." The Declaration will provide that each holder of Capital Securities
by acceptance thereof agrees to the provisions of the Indenture.
Limited Voting Rights
Holders of Capital Securities will generally have limited voting rights relating
only to the modification of the terms of the Capital Securities, the
dissolution, termination or liquidation of the Trust, and the exercise of the
Trust's rights as holder of the Junior Subordinated Debentures. Holders of
Capital Securities will not be entitled to vote to appoint, remove or replace,
or to increase or decrease the number of, the Issuer Trustees, which voting
rights are vested exclusively in the holder of the Common Securities, except as
described under "Description of New Securities -- Removal of Issuer Trustees."
The Issuer Trustees and the Company may amend the Declaration without the
consent of holders of Capital Securities to ensure that the Trust will be
classified for United States federal income tax purposes as a grantor trust even
if such action adversely affects the interests of such holders. See "Description
of New Securities -- Voting Rights; Amendment of the Declaration."
Trading Price
The Capital Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder which uses the accrual method of accounting
for tax purposes (and a cash method holder, if the Junior Subordinated
Debentures are deemed to have been issued with OID) and which disposes of its
Capital Securities between record dates for payments of distributions thereon
will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, possibly, OID), and to add such amount to its
adjusted tax basis in its share of the underlying Junior Subordinated Debentures
deemed disposed of. To the extent the selling price is less than the holder's
adjusted tax basis (which will include all accrued but unpaid interest), a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes. See "Certain Federal Income Tax Consequences --
Interest Income and Original Issue Discount" and " -- Sales of Capital
Securities."
Consequences of a Failure to Exchange Old Capital Securities
The Old Capital Securities have not been registered under the Securities Act or
any state securities laws and therefore may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Old Capital
Securities which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions). The Company and the Trust do not intend to register under
the Securities Act any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable). To the extent that Old Capital Securities are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered Old Capital
Securities could be adversely affected.
The New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Trust Agreement. See "Description of New
Securities--Voting Rights; Amendment of the Declaration."
The Old Capital Securities provide, among other things, that, if a registration
statement relating to the Exchange Offer has not been filed by June 7, 1997 and
declared effective by July 7, 1997, the Distribution rate borne by the Old
Capital Securities commencing on July 8, 1997 will increase by 0.25% per annum
until the Exchange Offer is consummated. Upon consummation of the Exchange
Offer, holders of Old Capital Securities will not be entitled to any increase in
the Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See
"Description of Old Securities."
Absence of Public Market
The Old Capital Securities were issued to, and the Company believes such
securities are currently owned by, a relatively small number of beneficial
owners. The Old Capital Securities have not been registered under the Securities
Act and will be subject to restrictions on transferability if they are not
exchanged for the New Capital Securities. Although the New Capital Securities
may be resold or otherwise transferred by the holders (who are not affiliates of
the Company or the Trust) without compliance with the registration requirements
under the Securities Act, they will constitute a new issue of securities with no
established trading market. Old Capital Securities may be transferred by the
holders thereof only in blocks having a Liquidation Amount of not less than
$100,000 (100 Old Capital Securities). New Capital Securities may be transferred
by the holders thereof in blocks having a Liquidation Amount of $1,000 (one New
Capital Security) or integral multiples thereof. The Company and the Trust have
been advised by the Initial Purchasers that the Initial Purchasers presently
intend to make a market in the New Capital Securities. However, the Initial
Purchasers are not obligated to do so and any market-making activity with
respect to the New Capital Securities may be discontinued at any time without
notice. In addition, such market-making activity will be subject to the limits
imposed by the Securities Act and the Exchange Act and may be limited during the
Exchange Offer. Accordingly, no assurance can be given that an active public or
other market will develop for the New Capital Securities or the Old Capital
Securities or as to the liquidity of or the trading market for the New Capital
Securities or the Old Capital Securities. If an active public market does not
develop, the market price and liquidity of the New Capital Securities may be
adversely affected.
If a public trading market develops for the New Capital Securities, future
trading prices will depend on many factors, including, among other things,
prevailing interest rates, the Company's results and the market for similar
securities. Depending on prevailing interest rates, the market for similar
securities and other factors, including the financial condition of the Company,
the New Capital Securities may trade at a discount.
Notwithstanding the registration of the New Capital Securities in the Exchange
Offer, holders who are "affiliates" (as defined under Rule 405 of the Securities
Act) of the Company or the Trust may publicly offer for sale or resell the New
Capital Securities only in compliance with the provisions of Rule 144 under the
Securities Act.
Each broker-dealer that receives New Capital Securities for its own account in
exchange for Old Capital Securities, where such Old Capital Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Capital Securities. See "Plan of
Distribution."
Exchange Offer Procedures
Issuance of the New Capital Securities in exchange for Old Capital Securities
pursuant to the Exchange Offer will be made only after a timely receipt by the
Trust of such Old Capital Securities, a properly completed and duly executed
Letter of Transmittal and all other required documents. Therefore, holders of
the Old Capital Securities desiring to tender such Old Capital Securities in
exchange for New Capital Securities should allow sufficient time to ensure
timely delivery. Neither the Company nor the Trust is under any duty to give
notification of defects or irregularities with respect to the tenders of Old
Capital Securities for exchange.
MARKEL CORPORATION
Markel Corporation is an insurance holding company which, through its
subsidiaries, markets and underwrites specialty insurance products and programs
to a variety of niche markets. The Company believes that its specialty product
focus and niche market strategy enable it to develop particular expertise and
specialized knowledge of its markets. Such specialization allows the Company to
provide added value to its customers and to compete on a basis other than price.
The year ended December 31, 1995 marked the Company's fourth consecutive year of
underwriting profitability and the ninth year of underwriting profitability in
the last ten years. The Company emphasizes quality service in all phases of its
operations and believes that this approach fosters strong relationships with its
producers and greater customer loyalty.
The Company's primary businesses are professional and products liability, excess
and surplus lines, specialty programs, specialty personal and commercial lines
and brokered excess and surplus lines. The Company's distribution channels
include retail and wholesale brokers, general agents, direct marketing,
including telemarketing and direct mail, and affinity groups. The Company offers
products and coverages designed to meet the needs of insureds in niche or
emerging markets or insureds with specialized exposures or risks that are not
adequately served by the standard markets. Significant products include
professional liability coverages for doctors, lawyers, architects, engineers and
other professionals, comprehensive programs for summer camps and other youth
recreation organizations, conference centers, child care centers, private
schools, martial arts schools, gymnastics schools, dance studios and horse
farms, and property and liability coverages for restaurants and bars, vacant
properties and hard-to- place property risks, yachts, jet skis and other
watercraft, mobile homes and other non-standard dwellings, taxi fleets and other
commercial vehicles. Each risk is generally considered on an individual basis,
and coverages typically include limit restrictions, deductibles, exclusions,
surcharges and other features which respond to distinctive risk characteristics.
The Company had earned premiums of $285.1 million and $225.1 million for the
year ended December 31, 1995 and for the nine months ended September 30, 1996,
respectively. As of September 30, 1996, the Company had total assets of
approximately $1.4 billion and shareholders' equity of $247.8 million.
USE OF PROCEEDS
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. In consideration for
issuing the New Capital Securities in exchange for Old Capital Securities as
described in this Prospectus, the Trust will receive Old Capital Securities in
like Liquidation Amount. The Old Capital Securities surrendered in exchange for
the New Capital Securities will be retired and canceled.
The proceeds to the Trust from the sale of the Old Capital Securities (without
giving effect to expenses payable by the Company) was $150,000,000. All of the
proceeds were used to purchase Junior Subordinated Debentures from the Company.
The Company intends to use the net proceeds from the sale of the Junior
Subordinated Debentures to reduce indebtedness and for general corporate
purposes, which may include, without limitation, investments in and advances of
credit to the Company's subsidiaries, other investments and possible future
acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to combined
fixed charges of the Company for the periods indicated:
Nine Months
Year Ended December 31, Ended
________________________________ September 30,
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges............................. 2.3 6.3 5.2 4.3 6.5 6.2
Ratio of Earnings to Fixed Charges, Excluding Net Realized
Gains from Sales of Investments and Gains from Sales of
Brokerage Programs............................................. 1.6 2.2 3.1 3.8 5.2 5.7
For purposes of computing the ratios of earnings to fixed charges for the
Company and its subsidiaries, earnings represent income before income taxes plus
fixed charges. Fixed charges have been calculated by adding gross interest
expense and that portion of rent expense deemed representative of the interest
factor in such rent expense. The Company's consolidated insurance company
subsidiaries are subject to certain regulatory restrictions on the payment of
dividends or advances to the Company. See "Risk Factors -- Holding Company
Structure; Restrictions on Dividends".
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company at
September 30, 1996, as adjusted to reflect the acquisition of Investors
Insurance Holding Corp. and related bank borrowings on October 31, 1996, and as
further adjusted to give effect to the issuance of the Old Capital Securities.
The following data should be read in conjunction with the financial information
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995, as amended, and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, which are incorporated herein by reference. See
"Incorporation of Certain Documents by Reference." The issuance of the New
Securities in the Exchange Offer will have no effect on the Capitalization of
the Company.
September 30, 1996
Actual as As Further
Adjusted (1) Adjusted (2)
(Dollars in thousands)
(Unaudited)
Borrowings under Revolving Line of Credit................................... $15,000 $15,000
Long-Term Debt (Net of Debt Issuance Costs of $372)......................... 99,678 99,678
Markel Corporation -- Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust Holding Solely Subordinated Debt Securities of
Markel Corporation........................................................ -- 150,000
Shareholders' Equity:
Common Stock................................................................ 23,970 23,970
Retained Earnings........................................................... 198,690 198,690
Net Unrealized Gains on Fixed Maturities and Equity Securities,
Net of Taxes................................................................ 25,158 25,158
------ ------
Total Shareholders' Equity.................................................. 247,818 247,818
------- -------
Total Capitalization........................................................ $362,496 $512,496
-------- --------
(1) As adjusted to reflect the acquisition of Investors Insurance Holding Corp.
on October 31, 1996 and the related $15 million of borrowings under the
Company's revolving line of credit.
(2) Reflects the issuance of the Old Capital Securities.
SUMMARY FINANCIAL DATA
The summary below should be read in connection with the financial information
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995, as amended and Quarterly Report on 10-Q for the quarter ended
September 30, 1996. Interim unaudited data for the nine months ended September
30, 1996 and 1995 reflect, in the opinion of management of the Company, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such data. Results for the nine months ended September 30,
1996 are not necessarily indicative of results which may be expected for any
other interim period or for the year ended December 31, 1996 as a whole.
Nine Months
Ended
Year Ended December 31, September 30,
----------------------- -------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(Dollars in millions, except per share data) (Unaudited)
Results of Operations
Gross premium volume............................ $406 $304 $313 $349 $402 $310 $318
Net premiums written............................ 152 156 222 257 298 229 240
Earned premiums................................. 152 153 193 243 285 210 225
Net investment income........................... 31 27 24 29 43 31 37
Net realized gains.............................. 8 8 16 4 12 8 3
Total operating revenues........................ 223 206 235 280 344 251 267
Operating income before interest and taxes...... 27 22 38 33 56 39 38
Gain on sale of brokerage programs.............. 2 23 -- -- -- -- --
Interest expense................................ 11 5 6 8 8 6 6
Income taxes.................................... 4 14 8 6 14 9 (10)
Net income...................................... 14 26 24 19 34 24 42
Primary Earnings per Share
Core operations................................. $2.61 $3.03 $3.31 $3.77 $5.15 $3.68 $4.18
Net realized gains.............................. 0.94 0.89 1.83 0.45 1.39 0.89 0.34
Nonrecurring items.............................. 0.28 1.90 0.00 0.00 0.00 0.00 3.25
Amortization expense............................ (1.15) (1.18) (0.91) (0.89) (0.39) (0.31) (0.27)
------ ------ ------ ------ ------ ------ ------
Net income...................................... $2.68 $4.64 $4.23 $3.33 $6.15 $4.26 $7.50
----- ----- ----- ----- ----- ----- -----
GAAP Underwriting Results
Loss ratio...................................... 66% 67% 62% 64% 65% 65% 67%
Expense ratio................................... 40% 30% 35% 33% 34% 34% 33%
Combined ratio.................................. 106% 97% 97% 97% 99% 99% 100%
Financial Position
Total investments (1)........................... $415 $434 $597 $612 $909 $889 $956
Reinsurance recoverable (2)..................... 55 419 300 226 180 186 166
Intangible assets............................... 71 60 53 45 42 42 40
Total assets.................................... 700 1,129 1,135 1,103 1,315 1,312 1,388
Unpaid losses and loss adjustment expenses
(2)............................................. 346 733 688 653 734 730 766
Unearned premium (2)............................ 64 90 128 147 171 178 187
Long-term debt.................................. 94 101 78 101 107 118 100
Total shareholders' equity (1).................. 83 109 151 139 213 194 248
(1) The change in accounting for net unrealized gains (losses) on fixed
maturities in accordance with provisions of Statement of Financial Accounting
Standards No. 115 affects 1993 and subsequent years.
(2) The gross reinsurance reporting provisions of Statement of Financial
Accounting Standards No. 113 affect 1992 and subsequent years.
MARKEL CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law by the filing
of a certificate of trust with the Delaware Secretary of State on December 30,
1996. The Trust is governed by the Declaration. The Trust exists for the
exclusive purposes of (i) issuing and selling the Trust Securities, which
represent undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Junior Subordinated
Debentures and (iii) engaging in only those other activities necessary,
advisable or incidental thereto. Accordingly, the Junior Subordinated Debentures
will be the sole assets of the Trust and payments under the Junior Subordinated
Debentures will be the sole revenues of the Trust. All of the Common Securities
are owned by the Company. The Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Capital Securities, except that
upon the occurrence and during the continuance of an Event of Default under the
Declaration resulting from a Debenture Event of Default, the rights of the
Company as holder of the Common Securities to payments in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated and rank junior to the rights of the holders of the Capital
Securities. See "Description of New Securities -- Subordination of Common
Securities." The Company has acquired Common Securities in a Liquidation Amount
equal to 3% of the total capital of the Trust. The Trust has a term of 50 years,
but may terminate earlier as provided in the Declaration. The Trust's business
and affairs are conducted by trustees (the "Issuer Trustees") appointed by the
Company as the holder of the Common Securities. The Issuer Trustees will be The
Chase Manhattan Bank as the Property Trustee (the "Property Trustee"), The Chase
Manhattan Bank Delaware as the Delaware Trustee (the "Delaware Trustee"), and
three individual trustees (the "Administrative Trustees"). The Chase Manhattan
Bank, as Property Trustee, will act as sole indenture trustee under the
Declaration. The Chase Manhattan Bank will also act as indenture trustee under
the Guarantee and the Indenture. See "Description of the Guarantee" and
"Description of New Junior Subordinated Debentures." The holder of the Common
Securities of the Trust or, if an Event of Default under the Declaration has
occurred and is continuing, the holders of a majority in Liquidation Amount of
the Capital Securities, will be entitled to appoint, remove or replace the
Property Trustee and/or the Delaware Trustee. In no event will the holders of
the Capital Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights will be vested exclusively in the
holder of the Common Securities. The duties and obligations of each Issuer
Trustee are governed by the Declaration. The Company will pay, directly or
indirectly, all fees, expenses, debts and obligations (other than, except to the
extent guaranteed by the Company, the Trust Securities) related to the Trust and
the offering and exchange of the Capital Securities, including all ongoing
costs, expenses and liabilities of the Trust. The principal executive office of
the Trust is c/o Markel Corporation, 4551 Cox Road, Glen Allen, Virginia 23060
((804) 747-0136). The Chase Manhattan Bank serves as the trustee under the
indenture for the Company's $100 million aggregate principal amount of 7.25%
Notes due November 1, 2003, and participates as a lender in the Company's
revolving credit facility. In addition, from time to time one or more affiliates
of The Chase Manhattan Bank may provide the Company with investment banking and
related financial services.
THE EXCHANGE OFFER
Purpose of the Exchange Offer
In connection with the sale of the Old Capital Securities, the Company and the
Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Company and the Trust agreed to file and to
use their reasonable efforts to cause to become effective with the Commission a
registration statement with respect to the exchange of the Old Capital
Securities for capital securities with terms identical in all material respects
to the terms of the Old Capital Securities. A copy of the Registration Rights
Agreement has been filed as an Exhibit to the Registration Statement of which
this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of the
Company and the Trust under the Registration Rights Agreement. The form and
terms of the New Capital Securities are the same as the form and terms of the
Old Capital Securities except that the New Capital Securities have been
registered under the Securities Act and will not be subject to the $100,000
minimum Liquidation Amount transfer restriction and certain other restrictions
on transfer applicable to the Old Capital Securities and will not provide for
any increase in the Distribution rate thereon. In that regard, the Old Capital
Securities provide, among other things, that, if a registration statement
relating to the Exchange Offer has not been filed by June 7, 1997 and declared
effective by July 7, 1997, the Distribution rate borne by the Old Capital
Securities commencing on July 8, 1997 will increase by 0.25% per annum until the
Exchange Offer is consummated. Upon consummation of the Exchange Offer, holders
of Old Capital Securities will not be entitled to any increase in the
Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities" and
"Description of Old Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders for
exchange from, holders of Old Capital Securities in any jurisdiction in which
the Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Old Capital Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person
whose Old Capital Securities are held of record by The Depository Trust Company
("DTC") who desires to deliver such Old Capital Securities by book-entry
transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange as soon as practicable
after the date hereof, the Old Guarantee for the New Guarantee and the Old
Junior Subordinated Debentures, in an amount corresponding to the Old Capital
Securities accepted for exchange, for a like aggregate principal amount of the
New Junior Subordinated Debentures. The New Guarantee and New Junior
Subordinated Debentures have been registered under the Securities Act.
Terms of the Exchange Offer
The Trust hereby offers, upon the terms and subject to the conditions set forth
in this Prospectus and in the accompanying Letter of Transmittal, to exchange up
to $150,000,000 aggregate Liquidation Amount of New Capital Securities for a
like aggregate Liquidation Amount of Old Capital Securities properly tendered on
or prior to the Expiration Date and not properly withdrawn in accordance with
the procedures described below. The Trust will issue, promptly after the
Expiration Date, an aggregate Liquidation Amount of up to $150,000,000 of New
Capital Securities in exchange for a like principal amount of outstanding Old
Capital Securities tendered and accepted in connection with the Exchange Offer.
Holders may tender their Old Capital Securities in whole or in part in a
Liquidation Amount of not less than $100,000 (100 Capital Securities) or any
integral multiple of $1,000 Liquidation Amount (one Capital Security) in excess
thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount of Old
Capital Securities being tendered. As of the date of this Prospectus,
$150,000,000 aggregate Liquidation Amount of the Old Capital Securities is
outstanding.
Holders of Old Capital Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Capital Securities which are
not tendered or are tendered but not accepted in connection with the Exchange
Offer will remain outstanding and be entitled to the benefits of the
Declaration, but will not be entitled to any further registration rights under
the Registration Rights Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities" and
"Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Capital Securities will be
returned, without expense, to the tendering holder thereof promptly after the
Expiration Date.
Holders who tender Old Capital Securities in connection with the Exchange Offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Old Capital Securities in connection with the Exchange Offer. The
Company will pay all charges and expenses, other than certain applicable taxes
described below, in connection with the Exchange Offer. See "--Fees and
Expenses."
NEITHER THE COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY ISSUER
TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO
ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL
SECURITIES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE
EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD CAPITAL SECURITIES TO
TENDER BASED ON SUCH HOLDERS OWN FINANCIAL POSITION AND REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on , 1997 unless
the Exchange Offer is extended by the Company or the Trust (in which case the
term "Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended).
The Company and the Trust expressly reserve the right in their sole and absolute
discretion, subject to applicable law, at any time and from time to time, (i) to
delay the acceptance of the Old Capital Securities for exchange, (ii) to
terminate the Exchange Offer (whether or not any Old Capital Securities have
theretofore been accepted for exchange) if the Trust determines, in its sole and
absolute discretion, that any of the events or conditions referred to under
"--Conditions to the Exchange Offer" have occurred or exist or have not been
satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain
all Old Capital Securities tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Old Capital Securities to withdraw their
tendered Old Capital Securities as described under "--Withdrawal Rights," and
(iv) to waive any condition or otherwise amend the terms of the Exchange Offer
in any respect. If the Exchange Offer is amended in a manner determined by the
Company and the Trust to constitute a material change, or if the Company and the
Trust waive a material condition of the Exchange Offer, the Company and the
Trust will promptly disclose such amendment by means of a prospectus supplement
that will be distributed to the holders of the Old Capital Securities, and the
Company and the Trust will extend the Exchange Offer to the extent required by
Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of
an extension will be made no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Company and the Trust may choose to
make any public announcement and subject to applicable law, the Company and
the Trust shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to
an appropriate news agency.
Acceptance for Exchange and Issuance of New Capital Securities
Upon the terms and subject to the conditions of the Exchange Offer, the Trust
will exchange, and will issue to the Exchange Agent, New Capital Securities for
Old Capital Securities validly tendered and not withdrawn promptly after the
Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old Capital
Securities tendered and accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of (i) Old Capital
Securities or a book-entry confirmation of a book-entry transfer of Old Capital
Securities into the Exchange Agent's account at DTC, (ii) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and (iii) any other documents required by the
Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-entry
transfer of Old Capital Securities into the Exchange Agent's account at DTC.
Subject to the terms and conditions of the Exchange Offer, the Trust will be
deemed to have accepted for exchange, and thereby exchanged, Old Capital
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the Exchange Agent of the Trust's acceptance of such
Old Capital Securities for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Trust for the purpose of receiving tenders of
Old Capital Securities, Letters of Transmittal and related documents, and as
agent for tendering holders for the purpose of receiving Old Capital Securities,
Letters of Transmittal and related documents and transmitting New Capital
Securities to validly tendering holders. Such exchange will be made promptly
after the Expiration Date. If for any reason whatsoever, acceptance for exchange
or the exchange of any Old Capital Securities tendered pursuant to the Exchange
Offer is delayed (whether before or after the Trust's acceptance for exchange of
Old Capital Securities) or the Trust extends the Exchange Offer or is unable to
accept for exchange or exchange Old Capital Securities tendered pursuant to the
Exchange Offer, then, without prejudice to the Trust's rights set forth herein,
the Exchange Agent may, nevertheless, on behalf of the Trust and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Old Capital Securities and such
Old Capital Securities may not be withdrawn except to the extent tendering
holders are entitled to withdrawal rights as described under "--Withdrawal
Rights."
Pursuant to the Letter of Transmittal, a holder of Old Capital Securities will
warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Old Capital Securities,
that the Trust will acquire good, marketable and unencumbered title to the
tendered Old Capital Securities, free and clear of all liens, restrictions,
charges and encumbrances, and the Old Capital Securities tendered for exchange
are not subject to any adverse claims or proxies. The holder also will warrant
and agree that it will, upon request, execute and deliver any additional
documents deemed by the Trust or the Exchange Agent to be necessary or desirable
to complete the exchange, sale, assignment, and transfer of the Old Capital
Securities tendered pursuant to the Exchange Offer.
Procedures for Tendering Old Capital Securities
VALID TENDER. Except as set forth below, in order for Old Capital Securities to
be validly tendered pursuant to the Exchange Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, must be received by the
Exchange Agent at one of its addresses set forth under "--Exchange Agent," and
either (i) tendered Old Capital Securities must be received by the Exchange
Agent, or (ii) such Old Capital Securities must be tendered pursuant to the
procedures for book-entry transfer set forth below and a book-entry confirmation
must be received by the Exchange Agent, in each case on or prior to the
Expiration Date, or (iii) the guaranteed delivery procedures set forth below
must be complied with.
If less than all of the Old Capital Securities are tendered, a tendering holder
should fill in the amount of Old Capital Securities being tendered in the
appropriate box on the Letter of Transmittal. The entire amount of Old Capital
Securities delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY
INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Exchange Agent will establish an account with respect
to the Old Capital Securities at DTC for purposes of the Exchange Offer within
two business days after the date of this Prospectus. Any financial institution
that is a participant in DTC's book-entry transfer facility system may make a
book-entry delivery of the Old Capital Securities by causing DTC to transfer
such Old Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. However, although delivery of
Old Capital Securities may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other required documents, must in any case be delivered to
and received by the Exchange Agent at its address set forth under "--Exchange
Agent" on or prior to the Expiration Date, or the guaranteed delivery procedure
set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES. Certificates for the Old Capital Securities need not be
endorsed and signature guarantees on the Letter of Transmittal are unnecessary
unless (a) a certificate for the Old Capital Securities is registered in a name
other than that of the person surrendering the certificate or (b) such holder
completes the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the Letter of Transmittal. In the case of (a) or (b) above,
such certificates for Old Capital Securities must be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or signature
on the bond power and on the Letter of Transmittal guaranteed by a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible
guarantor institution," including (as such terms are defined therein): (i) a
bank; (ii) a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association (an
"Eligible Institution"), unless surrendered on behalf of such Eligible
Institution. See Instruction 1 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Old Capital Securities
pursuant to the Exchange Offer and the certificates for such Old Capital
Securities are not immediately available or time will not permit all required
documents to reach the Exchange Agent on or prior to the Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, such
Old Capital Securities may nevertheless be tendered, provided that all of the
following guaranteed delivery procedures are complied with:
(1) such tenders are made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal, is
received by the Exchange Agent, as provided below, on or prior to the Expiration
Date; and
(3) the certificates (or a book-entry confirmation) representing all tendered
Old Capital Securities, in proper form for transfer, together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within three New York Stock Exchange trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by
facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a
book-entry confirmation with respect to such Old Capital Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees and any other
documents required by the Letter of Transmittal. Accordingly, the delivery of
New Capital Securities might not be made to all tendering holders at the same
time, and will depend upon when Old Capital Securities, book-entry confirmations
with respect to Old Capital Securities and other required documents are received
by the Exchange Agent.
The Trust's acceptance for exchange of Old Capital Securities tendered pursuant
to any of the procedures described above will constitute a binding agreement
between the tendering holder and the Trust upon the terms and subject to the
conditions of the Exchange Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents, validity,
eligibility (including time of receipt) and acceptance for exchange of any
tendered Old Capital Securities will be determined by the Company and the Trust,
in their sole discretion, whose determination shall be final and binding on all
parties. The Company and the Trust reserve the absolute right, in their sole and
absolute discretion, to reject any and all tenders determined by them not to be
in proper form or the acceptance of which, or exchange for, may, in the opinion
of counsel to the Company and the Trust, be unlawful. The Company and the Trust
also reserve the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer as set forth under "--Conditions to the
Exchange Offer" or any condition or irregularity in any tender of Old Capital
Securities of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.
The interpretation by the Company and the Trust of the terms and conditions of
the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Old Capital Securities will be
deemed to have been validly made until all irregularities with respect to such
tender have been cured or waived. Neither the Company, the Trust, any affiliates
or assigns of the Company or the Trust, the Exchange Agent nor any other person
shall be under any duty to give any notification of any irregularities in
tenders or incur any liability for failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or any
other document required by the Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and unless waived by the Company and the Trust,
proper evidence satisfactory to the Company and the Trust, in their sole
discretion, of such person's authority to so act must be submitted.
A beneficial owner of Old Capital Securities that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
Resales of New Capital Securities
The Trust is making the Exchange Offer for the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance of
the Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Company nor the Trust sought
its own interpretive letter and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporation Finance of the Commission, and subject to the two
immediately following sentences, the Company and the Trust believe that New
Capital Securities issued pursuant to this Exchange Offer in exchange for Old
Capital Securities may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Capital Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Capital Securities. However, any holder of Old Capital Securities who
is an "affiliate" of the Company or the Trust or who intends to participate in
the Exchange Offer for the purpose of distributing New Capital Securities, or
any broker-dealer who purchased Old Capital Securities from the Trust to resell
pursuant to Rule 144A or any other available exemption under the Securities Act,
(a) will not be able to rely on the interpretations of the staff of the Division
of Corporation Finance of the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted or entitled to tender such Old
Capital Securities in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Capital Securities unless
such sale is made pursuant to an exemption from such requirements. In addition,
as described below, if any broker-dealer holds Old Capital Securities acquired
for its own account as a result of market-making or other trading activities and
exchanges such Old Capital Securities for New Capital Securities, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an "affiliate" of the Company or the Trust, (ii)
any New Capital Securities to be received by it are being acquired in the
ordinary course of its business, (iii) it has no arrangement or understanding
with any person to participate in a distribution (within the meaning of the
Securities Act) of such New Capital Securities, and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and does not intend to engage in,
a distribution (within the meaning of the Securities Act) of such New Capital
Securities. In addition, the Company and the Trust may require such holder, as a
condition to such holder's eligibility to participate in the Exchange Offer, to
furnish to the Company and the Trust (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the meaning of Rule
13d-3 under the Exchange Act) on behalf of whom such holder holds the Capital
Securities to be exchanged in the Exchange Offer. Each broker-dealer that
receives New Capital Securities for its own account pursuant to the Exchange
Offer must acknowledge that it acquired the Old Capital Securities for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Capital Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Based on the position
taken by the staff of the Division of Corporation Finance of the Commission in
the interpretive letters referred to above, the Company and the Trust believe
that Participating Broker-Dealers who acquired Old Capital Securities for their
own accounts as a result of market-making activities or other trading activities
may fulfill their prospectus delivery requirements with respect to the New
Capital Securities received upon exchange of such Old Capital Securities (other
than Old Capital Securities which represent an unsold allotment from the
original sale of the Old Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be the prospectus prepared for an
exchange offer so long as it contains a description of the plan of distribution
with respect to the resale of such New Capital Securities. Accordingly, this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer during the period referred to below in
connection with resales of New Capital Securities received in exchange for Old
Capital Securities where such Old Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Company and the Trust have agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such New Capital
Securities for a period ending 90-days after the Expiration Date (subject to
extension under certain limited circumstances described below) or, if earlier,
when all such New Capital Securities have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of New Capital Securities received in exchange for Old Capital Securities
pursuant to the Exchange Offer must notify the Company or the Trust, or cause
the Company or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the space
provided for that purpose in the Letter of Transmittal or may be delivered to
the Exchange Agent at one of the addresses set forth herein under "--Exchange
Agent." Any Participating Broker-Dealer who is an "affiliate" of the Company or
the Trust may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal, that, upon receipt of notice from the
Company or the Trust of the occurrence of any event or the discovery of any fact
which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable) pursuant to
this Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Company or the Trust has given notice that the sale of the New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Company or the Trust
gives such notice to suspend the sale of the New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable), it shall
extend the 90-day period referred to above during which Participating
Broker-Dealers are entitled to use this Prospectus in connection with the resale
of New Capital Securities by the number of days during the period from and
including the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the New Capital
Securities or to and including the date on which the Company or the Trust has
given notice that the sale of New Capital Securities (or the New Guarantee or
the New Junior Subordinated Debentures, as applicable) may be resumed, as the
case may be.
Withdrawal Rights
Except as otherwise provided herein, tenders of Old Capital Securities may be
withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "--Exchange Agent" on
or prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Capital Securities to be withdrawn, the
aggregate principal amount of Old Capital Securities to be withdrawn, and (if
certificates for such Old Capital Securities have been tendered) the name of the
registered holder of the Old Capital Securities as set forth on the Old Capital
Securities, if different from that of the person who tendered such Old Capital
Securities. If Old Capital Securities have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such Old
Capital Securities, the tendering holder must submit the serial numbers shown on
the particular Old Capital Securities to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution, except in
the case of Old Capital Securities tendered for the account of an Eligible
Institution. If Old Capital Securities have been tendered pursuant to the
procedures for book-entry transfer set forth in "--Procedures for Tendering Old
Capital Securities," the notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawal of Old Capital
Securities, in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by written, telegraphic, telex or facsimile transmission.
Withdrawals of tenders of Old Capital Securities may not be rescinded. Old
Capital Securities properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be retendered at any subsequent time on
or prior to the Expiration Date by following any of the procedures described
above under "--Procedures for Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its sole
discretion, whose determination shall be final and binding on all parties.
Neither the Company, the Trust, any affiliates or assigns of the Company or the
Trust, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Old Capital Securities
which have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
Distributions on New Capital Securities
Holders of Old Capital Securities whose Old Capital Securities are accepted for
exchange will not receive Distributions on such Old Capital Securities and will
be deemed to have waived the right to receive any Distributions on such Old
Capital Securities accumulated from and after January 13, 1997. Accordingly,
holders of New Capital Securities as of the record date for the payment of
Distributions on July 1, 1997 will be entitled to receive Distributions
accumulated from and after January 13, 1997.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer, or any extension of
the Exchange Offer, the Company and the Trust will not be required to accept for
exchange, or to exchange, any Old Capital Securities for any New Capital
Securities, and, as described below, may terminate the Exchange Offer (whether
or not any Old Capital Securities have theretofore been accepted for exchange)
or may waive any conditions to or amend the Exchange Offer, if any of the
following conditions have occurred or exists or have not been satisfied:
(a) there shall occur a change in the current interpretation by the staff of
the Commission which permits the New Capital Securities issued pursuant to
the Exchange Offer in exchange for Old Capital Securities to be offered for
resale, resold and otherwise transferred by holders thereof (other than
broker-dealers and any such holder which is an "affiliate" of the Company or
the Trust within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such New Capital Securities are acquired in the
ordinary course of such holders' business and such holders have no arrangement
or understanding with any person to participate in the distribution of such New
Capital Securities; or
(b) any law, statute, rule or regulation shall have been adopted or enacted
which, in the judgment of the Company or the Trust, would reasonably be expected
to impair its ability to proceed with the Exchange Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration Statement
or proceedings shall have been initiated or, to the knowledge of the Company or
the Trust, threatened for that purpose any governmental approval has not been
obtained, which approval the Company or the Trust shall, in its sole discretion,
deem necessary for the consummation of the Exchange Offer as contemplated
hereby.
If the Company or the Trust determines in its sole and absolute discretion that
any of the foregoing events or conditions has occurred or exists or has not been
satisfied, it may, subject to applicable law, terminate the Exchange Offer
(whether or not any Old Capital Securities have theretofore been accepted for
exchange) or may waive any such condition or otherwise amend the terms of the
Exchange Offer in any respect. If such waiver or amendment constitutes a
material change to the Exchange Offer, the Company or the Trust will promptly
disclose such waiver or amendment by means of a prospectus supplement that will
be distributed to the registered holders of the Old Capital Securities and will
extend the Exchange Offer to the extent required by Rule 14e-1 under the
Exchange Act.
Exchange Agent
The Chase Manhattan Bank has been appointed as Exchange Agent for the Exchange
Offer. Delivery of the Letters of Transmittal and any other required documents,
questions, requests for assistance, and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent as follows:
By Mail In Person
- ------- ---------
The Chase Manhattan Bank The Chase Manhattan Bank
Transfer Department Institutional Trust Group Window
450 West 33rd Street 1 Chase Manhattan Plaza
8th Floor Floor 1-B
New York, New York 10001 New York, New York 10081
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
Fees and Expenses
The Company has agreed to pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket expenses
in connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Capital Securities, and in handling or tendering
for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Capital Securities in connection with the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
Neither the Company nor the Trust will make any payment to brokers, dealers or
other nominees soliciting acceptances of the Exchange Offer.
DESCRIPTION OF NEW SECURITIES
Description of New Capital Securities
Pursuant to the terms of the Declaration, the Trust has issued the Old Capital
Securities and the Common Securities and will issue the New Capital Securities.
The New Capital Securities will represent preferred beneficial interests in the
Trust and the holders of the New Capital Securities and the Old Capital
Securities will be entitled to a preference over the Common Securities in
certain circumstances with respect to Distributions and amounts payable on
redemption of the Trust Securities or liquidation of the Trust. See
"--Subordination of Common Securities." The Declaration has been qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). This
summary of certain provisions of the New Capital Securities and the Declaration
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Declaration, including the
definitions therein of certain terms.
The Capital Securities (including the Old Capital Securities and the New Capital
Securities) are limited to $150,000,000 aggregate Liquidation Amount at any one
time outstanding. The Capital Securities will rank PARI PASSU, and payments will
be made thereon PRO RATA, with the Old Capital Securities and the Common
Securities except as described under "--Subordination of Common Securities."
Legal title to the Junior Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the Capital Securities and
Common Securities. The New Guarantee will be a guarantee on a subordinated basis
but will not guarantee payment of Distributions or amounts payable on redemption
of the New Capital Securities or on liquidation of the Trust when the Trust does
not have funds on hand legally available for such payments. See "Description of
the Guarantee."
Distributions
Distributions on the New Capital Securities will be cumulative, will accumulate
from January 13, 1997 and will be payable semi-annually in arrears on January 1
and July 1 of each year, commencing July 1, 1997, at the annual rate of 8.71% of
the Liquidation Amount to the holders of the New Capital Securities on the
relevant record dates. The record dates will be the dates fifteen days prior to
the relevant Distribution Date (as defined herein). The amount of Distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which Distributions are payable on
the New Capital Securities is not a Business Day (as defined herein), payment of
the Distributions payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect to
any such delay), in each case with the same force and effect as if made on such
date (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). A "Business Day" shall mean any day other
than a Saturday or a Sunday, or a day on which banking institutions in New York,
New York are authorized or required by law or executive order to remain closed.
So long as no Debenture Event of Default shall have occurred and be continuing,
the Company will have the right under the Indenture to elect to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity Date. Upon any such election, semi-annual
Distributions on the New Capital Securities will be deferred by the Trust during
such Extension Period. Distributions to which holders of the New Capital
Securities are entitled during any such Extension Period will accumulate
additional Distributions thereon at the rate per annum of 8.71% thereof,
compounded semi-annually from the relevant Distribution Date, but not exceeding
the interest rate then accruing on the Junior Subordinated Debentures. The term
"Distributions," as used herein shall include any such additional Distributions.
During any such Extension Period, the Company may extend such Extension Period,
provided that such extension does not cause such Extension Period to exceed 10
consecutive semi-annual periods or to extend beyond the Stated Maturity Date.
Upon the termination of any such Extension Period and the payment of all amounts
then due, and subject to the foregoing limitations, the Company may elect to
begin a new Extension Period. The Company must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election of any
Extension Period or any extension thereof at least five Business Days prior to
the earlier of (i) the date the Distributions on the New Capital Securities
would have been payable except for the election to begin or extend such
Extension Period and (ii) the date the Administrative Trustees are required to
give notice to any securities exchange or to holders of the New Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. There is
no limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of New Junior Subordinated Debentures --
Option to Extend Interest Payment Date" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) or (ii) make any payment of principal of or
premium, if any, or interest on or repay, repurchase or redeem any debt
securities of the Company (including Other Debentures) that rank pari passu with
or junior in right of payment to the Junior Subordinated Debentures or (iii)
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company (including Other Guarantees) if
such guarantee ranks pari passu with or junior in right of payment to the Junior
Subordinated Debentures (other than (a) dividends or distributions in shares of,
or options, warrants or rights to subscribe for or purchase shares of, common
stock of the Company, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, (d) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class, or series of the Company's capital stock for another class or series
of the Company's capital stock, (e) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) purchases or issuances of common stock in connection with any of the
Company's stock option, stock purchase, stock loan or other benefit plans for
its directors, officers or employees or any of the Company's dividend
reinvestment plans, in each case as now existing or hereafter established or
amended).
Although the Company may in the future exercise its option to defer payments of
interest on the Junior Subordinated Debentures, the Company has no such current
intention.
The revenue of the Trust available for distribution to holders of the Capital
Securities will be limited to payments under the Junior Subordinated Debentures
in which the Trust will invest the proceeds from the issuance and sale of the
Trust Securities. See "Description of New Junior Subordinated Debentures." If
the Company does not make interest payments on the Junior Subordinated
Debentures, the Property Trustee will not have funds available to pay
Distributions on the Capital Securities. The payment of Distributions (if and to
the extent the Trust has funds on hand legally available for the payment of such
Distributions) will be guaranteed by the Company on a limited basis as set forth
herein under "Description of the Guarantee."
Conditional Right to Advance Maturity and Special Event Redemption
If a Tax Event (as defined herein) occurs, then the Company will have the right
(i) prior to the termination of the Trust, to advance the Stated Maturity Date
of the Junior Subordinated Debentures to the minimum extent required in order to
allow for payments of interest in respect of the Junior Subordinated Debentures
to continue to be tax deductible, but in no event shall the resulting maturity
of the Junior Subordinated Debentures be less than 20 years from January 13,
1997, or (ii) to terminate the Trust (if not previously terminated) and advance
the Stated Maturity Date of the Junior Subordinated Debentures to the minimum
extent required in order to allow for the payments of interest in respect of the
Junior Subordinated Debentures to continue to be tax deductible for United
States federal income tax purposes, but in no event shall the resulting maturity
of the Junior Subordinated Debentures be less than 40 years from January 13,
1997. In either case, such maturity date shall be advanced only if, in the
opinion of counsel to the Company experienced in such matters, after advancing
the maturity date, interest paid on the Junior Subordinated Debentures will be
deductible for federal income tax purposes (the action referred to in either
clause (i) or (ii) above being referred to herein as a "Tax Event Maturity
Advancement").
If a Tax Event occurs and in the opinion of counsel to the Company experienced
in such matters, there would in all cases, after effecting a Tax Event Maturity
Advancement, be more than an insubstantial risk that an Adverse Tax Consequence
(as defined herein) would continue to exist, or, if an Investment Company Event
(as defined herein) occurs, then the Company will have the right, within 90 days
following the occurrence of such Tax Event or Investment Company Event, as the
case may be, to redeem the Junior Subordinated Debentures in whole (but not in
part) in the manner set forth under "Description of New Junior Subordinated
Debentures -- Conditional Right to Advance Maturity and Special Event
Prepayment," and therefore to cause a mandatory redemption of the Capital
Securities prior to the Stated Maturity Date (the circumstances under which the
Company has the right to so redeem the Junior Subordinated Debentures in
connection with a Tax Event being referred to
herein as a "Conditional Tax Redemption Event"). Each of a Conditional Tax
Redemption Event or an Investment Company Event are sometimes referred to herein
as a "Special Event."
Redemption
Upon the repayment on the Stated Maturity Date or prepayment prior to the Stated
Maturity Date of the Junior Subordinated Debentures, the proceeds from such
repayment or prepayment shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days' notice of a date of redemption (the "Redemption Date") at
the applicable Redemption Price, which shall be equal to (i) in the case of the
repayment of the Junior Subordinated Debentures on the Stated Maturity Date, the
Maturity Redemption Price (equal to the principal of and accrued interest on the
Junior Subordinated Debentures), (ii) in the case of the optional prepayment of
the Junior Subordinated Debentures upon the occurrence and continuation of a
Special Event prior to January 1, 2007, the Special Event Redemption Price
(equal to the Special Event Prepayment Price in respect of the Junior
Subordinated Debentures) and (iii) in the case of the optional prepayment of the
Junior Subordinated Debentures on or after January 1, 2007, the Optional
Redemption Price (equal to the Optional Prepayment Price in respect of the
Junior Subordinated Debentures). See "Description of New Junior Subordinated
Debentures -- Optional Prepayment" and " -- Conditional Right to Advance
Maturity and Special Event Prepayment."
"Like Amount" means (i) with respect to a redemption of the Trust Securities,
Trust Securities having a Liquidation Amount equal to the principal amount of
Junior Subordinated Debentures to be paid in accordance with their terms and
(ii) with respect to a distribution of Junior Subordinated Debentures upon the
liquidation of the Trust, Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Trust Securities of the holder to
whom such Junior Subordinated Debentures are distributed.
The Company will have the option to prepay the Junior Subordinated Debentures,
(i) in whole or in part, on or after January 1, 2007, at the applicable Optional
Prepayment Price and (ii) in whole but not in part, at any time, upon the
occurrence of a Special Event prior to January 1, 2007, at the Special Event
Prepayment Price.
Liquidation of the Trust and Distribution of Junior Subordinated Debentures
The Company will have the right at any time to dissolve the Trust and cause the
Junior Subordinated Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Trust. Such right is conditioned on the
Administrative Trustees having received an opinion of counsel to the effect that
such distribution will not be a taxable event to holders of Capital Securities.
The Trust shall automatically dissolve and its affairs shall be wound up upon
the first to occur of: (i) certain events of bankruptcy, dissolution or
liquidation of the Company; (ii) the distribution of a Like Amount of the Junior
Subordinated Debentures to the holders of the Trust Securities, if the Company,
as Sponsor, has given written direction to the Property Trustee to dissolve the
Trust (which direction is optional and, except as described above, wholly within
the discretion of the Company, as Sponsor) and provided that the distribution is
conditioned on the receipt of an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Capital Securities; (iii)
redemption of all of the Trust Securities as described under " -- Redemption"
above; (iv) expiration of the term of the Trust; and (v) the entry of an order
for the dissolution of the Trust by a court of competent jurisdiction.
If a dissolution occurs as described in clause (i), (ii), (iv) or (v) of the
preceding paragraph, the Trust shall be liquidated by the Administrative
Trustees as expeditiously as the Administrative Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, to the holders of the Trust Securities a
Like Amount of the Junior Subordinated Debentures, unless such distribution is
determined by the Property Trustee not to be practicable, in which event such
holders will be entitled to receive out of the assets of the Trust legally
available for distribution to holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the Liquidation Amount plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If the Liquidation Distribution can be paid only in part because
the Trust has insufficient assets on hand legally available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Capital Securities and the Common Securities shall be paid on a pro
rata basis, except that if a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities. See " -- Subordination of Common Securities." If an early
dissolution occurs as described in clause (v) above, the Junior Subordinated
Debentures will be subject to optional prepayment, in whole but not in part, on
or after January 1, 2007.
If the Company elects not to prepay the Junior Subordinated Debentures prior to
maturity in accordance with their terms and either elects not to or is unable to
liquidate the Trust and distribute the Junior Subordinated Debentures to holders
of the Trust Securities, the Trust Securities will remain outstanding until the
repayment of the Junior Subordinated Debentures on the Stated Maturity Date.
After the liquidation date is fixed for any distribution of Junior Subordinated
Debentures to holders of the Trust Securities, (i) the Trust Securities will no
longer be deemed to be outstanding, (ii) each registered global certificate
representing Trust Securities and held by DTC or its nominee will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution and (iii) any
certificates representing Trust Securities not held by DTC or its nominee will
be deemed to represent Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of such Trust Securities, and bearing accrued
and unpaid interest in an amount equal to the accumulated and unpaid
Distributions on such Trust Securities until such certificates are presented to
the Administrative Trustees or their agent for cancellation, whereupon the
Company will issue to such holder, and the Debenture Trustee will authenticate,
a certificate representing such Junior Subordinated Debentures.
There can be no assurance as to the market prices for the Capital Securities or
the Junior Subordinated Debentures that may be distributed in exchange for the
Trust Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Capital Securities that an investor may purchase, or the Junior
Subordinated Debentures that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Capital Securities.
Redemption Procedures
If applicable, Trust Securities shall be redeemed at the applicable Redemption
Price with the proceeds from the contemporaneous repayment or prepayment of the
Junior Subordinated Debentures. Any redemption of Trust Securities shall be made
and the applicable Redemption Price shall be payable on the Redemption Date only
to the extent that the Trust has funds legally available for the payment of such
applicable Redemption Price. See also " -- Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Capital Securities,
then, by 12:00 noon, New York City time, on the Redemption Date, to the extent
funds are legally available, with respect to the Capital Securities held by DTC
or its nominees, the Property Trustee will deposit irrevocably with DTC funds
sufficient to pay the applicable Redemption Price. See " -- Form, Denomination,
Book-Entry Procedures and Transfer." With respect to the Capital Securities held
in certificated form, the Property Trustee, to the extent funds are legally
available, will irrevocably deposit with the paying agent for the Capital
Securities funds sufficient to pay the applicable Redemption Price and will give
such paying agent irrevocable instructions and authority to pay the applicable
Redemption Price to the holders thereof upon surrender of their certificates
evidencing the Capital Securities. See " -- Payment and Paying Agency" below.
Distributions payable on or prior to the Redemption Date shall be payable to the
holders of such Capital Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of the Capital Securities will cease, except the right of the holders of
the Capital Securities to receive the applicable Redemption Price, but without
interest on such Redemption Price, and the Capital Securities will cease to be
outstanding. In the event that any Redemption Date of Capital Securities is not
a Business Day, then the applicable Redemption Price payable on such date will
be paid on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of the applicable
Redemption Price is improperly withheld or refused and not paid either by the
Trust or by the Company pursuant to the Guarantee as described under
"Description of
the Guarantee," Distributions on Capital Securities called for redemption will
continue to accumulate at the then applicable rate, from the Redemption Date
originally established by the Trust to the date such applicable Redemption Price
is actually paid, in which case the actual payment date will be the Redemption
Date for purposes of calculating the applicable Redemption Price.
Subject to applicable law (including, without limitation, United States federal
securities law), the Company or its subsidiaries may at any time and from time
to time purchase outstanding Capital Securities by tender, in the open market or
by private agreement.
Notice of any redemption will be mailed at least 30 days but not more than 60
days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Company defaults in payment of the applicable
Prepayment Price on, or in the repayment of, the Junior Subordinated Debentures,
on and after the Redemption Date Distributions will cease to accrue on the Trust
Securities called for redemption.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, the Capital Securities
and the Common Securities, as applicable, shall be made pro rata based on the
Liquidation Amount of the Capital Securities and Common Securities; provided,
however, that if on any Distribution Date or Redemption Date a Debenture Event
of Default shall have occurred and be continuing, no payment of any Distribution
on, or applicable Redemption Price of, any of the Common Securities, and no
other payment on account of the redemption, liquidation or other acquisition of
the Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding Capital
Securities for all Distribution periods terminating on or prior thereto or, in
the case of Capital Securities called for redemption on a Redemption Date on or
prior thereto, the full amount of the Redemption Price therefor, shall have been
made or provided for, and all funds available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions on, or
Redemption Price of, the Capital Securities then due and payable.
In the case of any Event of Default, the Company as holder of the Common
Securities will be deemed to have waived any right to act with respect to such
Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Capital Securities and not on behalf of the
Company as holder of the Common Securities, and only the holders of the Capital
Securities will have the right to direct the Property Trustee to act on their
behalf.
Events of Default; Notice
The occurrence of a Debenture Event of Default (see "Description of New Junior
Subordinated Debentures -- Debenture Events of Default") constitutes an "Event
of Default" under the Declaration.
Within five Business Days after the occurrence of any Event of Default actually
known to the Property Trustee, the Property Trustee shall transmit notice of
such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Company, as Sponsor, unless such Event of
Default shall have been cured or waived. The Company, as Sponsor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Declaration.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described under
" -- Liquidation of the Trust and Distribution of Junior Subordinated
Debentures" and "-- Subordination of Common Securities" above.
Removal of Issuer Trustees
Unless a Debenture Event of Default shall have occurred and be continuing, any
Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities. No resignation or removal of an
Issuer Trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the provisions of the Declaration.
Merger or Consolidation of Issuer 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 such Issuer Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of such Issuer Trustee, shall be the successor of such Issuer
Trustee under the Declaration, provided such corporation shall be otherwise
qualified and eligible.
Mergers, Conversions, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge or convert with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other Person,
except as described below. The Trust may, at the request of the Company, as
Sponsor, with the consent of the Administrative Trustees but without the consent
of the Property Trustee, the Delaware Trustee or holders of the Capital
Securities, merge or convert with or into, consolidate, amalgamate, or be
replaced by or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to a trust organized as such under the
laws of any State; provided, that (i) such successor entity either (a) expressly
assumes all of the obligations of the Trust with respect to the Capital
Securities or (b) substitutes for the Capital Securities other securities having
substantially the same terms as the Capital Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Capital
Securities rank in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee with respect to the Junior Subordinated Debentures, (iii) the
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Capital Securities are then listed, if any, (iv) such
merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Capital Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Capital Securities (including
any Successor Securities) in any material respect (other than with respect to a
dilution of such holder's interest in the new entity), (vi) such successor
entity has a purpose identical to that of the Trust, (vii) prior to such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Company has received an opinion from independent counsel to the Trust
experienced in such matters to the effect that (a) such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Capital Securities (including any Successor Securities) in any material respect
(other than with respect to a dilution of such holder's interest in the new
entity), and (b) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such successor
entity will be required to register as an investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
(viii) the Company or any permitted successor or assignee owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee. Notwithstanding the foregoing, the Trust shall not, except
with the consent of holders of 100% in Liquidation Amount of the Trust
Securities, consolidate, amalgamate, merge or convert with or into, or be
replaced by or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge or convert with or into, or replace it
if such consolidation, amalgamation, merger, conversion, replacement,
conveyance, transfer or lease would cause the Trust or the successor entity not
to be classified as a grantor trust for United States federal income tax
purposes.
Voting Rights; Amendment of the Declaration
Except as provided below and under " -- Mergers, Conversions, Consolidations,
Amalgamations or Replacements of the Trust" above and "Description of the
Guarantee -- Amendments and Assignment" and as otherwise required by law and the
Declaration, the holders of the Capital Securities will have no voting rights.
The Declaration may be amended from time to time by the Company and the Issuer
Trustees, without the consent of the holders of the Trust Securities (i) to cure
any ambiguity, correct or supplement any provisions in the Declaration that may
be inconsistent with any other provision of the Declaration, or to add any other
provisions with respect to matters or questions arising under the Declaration,
which shall not be inconsistent with the other provisions of the Declaration, or
(ii) to modify, eliminate or add to any provisions of the Declaration to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities are outstanding or to ensure that the Trust will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of the holders of the
Trust Securities, and any amendments of the Declaration shall become effective
when notice thereof is given to the holders of the Trust Securities. The
Declaration may be amended by the Issuer Trustees and the Company (i) with the
consent of holders representing a majority (based upon Liquidation Amount) of
the outstanding Trust Securities, and (ii) upon receipt by the Issuer Trustees
of an opinion of counsel to the effect that such amendment or the exercise of
any power granted to the Issuer Trustees in accordance with such amendment will
not affect the Trust's status as a grantor trust for United States federal
income tax purposes or the Trust's exemption from status as an "investment
company" under the Investment Company Act; (it being understood that the New
Capital Securities and any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Declaration) provided that, without the consent of each
holder of Trust Securities, the Declaration may not be amended to (i) change the
amount or timing of any Distribution or other payment on or in respect of the
Trust Securities or otherwise adversely affect the amount of any Distribution or
other payment required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Property Trustee,
the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
execute any trust or power conferred on the Property Trustee with respect to the
Junior Subordinated Debentures, (ii) waive certain past defaults under the
Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Junior Subordinated
Debentures or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
a majority in Liquidation Amount of all outstanding Capital Securities;
provided, however, that where a consent under the Indenture would require the
consent of each holder of Junior Subordinated Debentures affected thereby, no
such consent shall be given by the Property Trustee without the prior approval
of each holder of the Capital Securities. The Issuer Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Capital Securities except by subsequent vote of such holders. The Property
Trustee shall notify each holder of Capital Securities of any notice of default
with respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of such holders of the Capital Securities, prior to taking
any of the foregoing actions, the Issuer Trustees shall obtain an opinion of
counsel experienced in such matters to the effect that the Trust will not be
classified as an association taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of Capital Securities may be given at a meeting
of such holders convened for such purpose or pursuant to written consent. The
Property Trustee will cause a notice of any meeting at which holders of Capital
Securities are entitled to vote, or of any matter upon which action by written
consent of such holders is to be taken, to be given to each holder of record of
Capital Securities in the manner set forth in the Declaration.
No vote or consent of the holders of Capital Securities will be required for the
Trust to redeem and cancel the Capital Securities in accordance with the
Declaration.
Notwithstanding that holders of the Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Issuer Trustees or any affiliate
of the Company or any Issuer Trustees shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer
The New Capital Securities initially will be represented by one or more Capital
Securities certificates in registered, global form (collectively, the "Global
Capital Securities"). The Global Capital Securities will be deposited upon
issuance with the Property Trustee as custodian for DTC, in New York, New York,
and registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Capital Securities may not be
exchanged for Capital Securities in certificated form except in the limited
circumstances described below. See " -- Exchange of Book-Entry Capital
Securities for Certificated Capital Securities".
Other Capital Securities will be issued only in registered, certificated (i.e.,
non-global) form. Other Capital Securities may not be exchanged for beneficial
interests in any Global Capital Securities except in the limited circumstances
described below. See " -- Exchange of Book-Entry Capital Securities for
Certificated Capital Securities".
Depositary Procedures
DTC has advised the Trust and the Company that DTC is a limited-purpose trust
company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Capital Securities, DTC will
credit the accounts of Participants designated by the Initial Purchasers with
portions of the Liquidation Amount of the Global Capital Securities and (ii)
ownership of such interests in the Global Capital Securities will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants and
the Indirect Participants (with respect to other owners of beneficial interests
in the Global Capital Securities).
Except as described below, owners of beneficial interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form and will
not be considered the registered owners or holders thereof under the Declaration
for any purpose.
Payments in respect of the Global Capital Security registered in the name of DTC
or its nominee will be payable by the Property Trustee to DTC in its capacity as
the registered holder under the Declaration. Under the terms of the Declaration,
the Property Trustee will treat the persons in whose names the Capital
Securities, including the Global Capital Securities, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, neither the Property Trustee nor any
agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Capital Securities, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's or Indirect Participant's records relating to
the beneficial ownership interests in the Global Capital Securities or (ii) any
other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Trust and the Company
that its current practice, upon receipt of any payment in respect of securities
such as the Capital Securities, is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in Liquidation Amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Capital
Securities will be governed by standing instructions and customary practices and
will be the responsibility of the Participants or the Indirect Participants and
will not be the responsibility of DTC, the Property Trustee, the Trust or the
Company. Neither the Trust or the Company nor the Property Trustee will be
liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of the Capital Securities, and the Trust or the Company and
the Property Trustee may conclusively rely on and will be protected in relying
on instructions from DTC or its nominee for all purposes.
Beneficial interests in the Global Capital Securities will trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants.
DTC has advised the Trust and the Company that it will take any action permitted
to be taken by a holder of Capital Securities only at the direction of one or
more Participants to whose account with DTC interests in the Global Capital
Securities are credited and only in respect of such portion of the Liquidation
Amount of the Capital Securities as to which such Participant or Participants
has or have given such direction. However, if there is an Event of Default under
the Declaration, DTC reserves the right to exchange the Global Capital
Securities for legended Capital Securities in certificated form and to
distribute such Capital Securities to its Participants.
The information in this section concerning DTC and its book-entry system has
been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A Global Capital Security is exchangeable for New Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Capital Security
and the Trust thereupon fails to appoint a successor Depositary within 90 days
or (y) has ceased to be a clearing agency registered under the Exchange Act,
(ii) the Company in its sole discretion elects to cause the issuance of the
Capital Securities in certificated form or (iii) there shall have occurred and
be continuing an Event of Default or any event which after notice or lapse of
time or both would be an Event of Default under the Declaration. In addition,
beneficial interests in a Global Capital Security may be exchanged for
certificated New Capital Securities upon request but only upon at least 20 days
prior written notice given to the Property Trustee by or on behalf of DTC in
accordance with customary procedures. In all cases, certificated New Capital
Securities delivered in exchange for any Global Capital Security or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures) and will bear the legend referred to in "Notice to
Investors", unless the Property Trustee determines otherwise in compliance with
applicable law.
Payment and Paying Agency
Payments in respect of the Capital Securities held in global form shall be made
to the Depositary, which shall credit the relevant accounts at the Depositary on
the applicable Distribution Dates or in respect of the Capital Securities that
are not held by the Depositary, such payments shall be made by check mailed to
the address of the holder entitled thereto as such address shall appear on the
register. The paying agent (the "Paying Agent") shall initially be the Property
Trustee and any co-paying agent chosen by the Property Trustee and acceptable to
the Administrative Trustees and the Company. The Paying Agent shall be permitted
to resign as Paying Agent upon 30 days written notice to the Property Trustee
and the Company. In the event that the Property Trustee shall no longer be the
Paying Agent, the Administrative Trustees shall appoint a successor (which shall
be a bank or trust company acceptable to the Administrative Trustees and the
Company) to act as Paying Agent.
Registrar and Transfer Agent
The Property Trustee will act as registrar and transfer agent for the Capital
Securities.
Registration of transfers of the New Capital Securities will be effected without
charge by or on behalf of the Trust but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Trust will not be required to register or cause to be registered
the transfer of the New Capital Securities after they have been called for
redemption.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically set
forth in the Declaration and, after such Event of Default, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Trust Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. The Property Trustee is not required to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties if repayment or adequate indemnity is not reasonably
assured to the Property Trustee. From time to time, the Property Trustee and/or
its affiliates extend credit and may provide investment banking and other
financial services to the Company. See " Markel Capital Trust I."
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the affairs
of and to operate the Trust in such a way that the Trust will not be deemed to
be an "investment company" required to be registered under the Investment
Company Act of 1940, as amended or classified as an association taxable as a
corporation for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the Company and
the Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of the Trust or the Declaration,
that the Company and the Administrative Trustees determine in their discretion
to be necessary or desirable for such purposes, as long as such action does not
materially adversely affect the interests of the holders of the Trust
Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any of
its assets.
DESCRIPTION OF NEW JUNIOR SUBORDINATED DEBENTURES
The Old Junior Subordinated Debentures were issued and the New Junior
Subordinated Debentures will be issued under an Indenture, as supplemented from
time to time (as so supplemented, the "Indenture"), between the Company and The
Chase Manhattan Bank, as trustee (the "Debenture Trustee"). The Indenture has
been qualified under the Trust Indenture Act. This summary of certain terms and
provisions of the Junior Subordinated Debentures and the Indenture does not
purport to be complete, and where reference is made to particular provisions of
the Indenture, such provisions, including the definitions of certain terms, some
of which are not otherwise defined herein, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a part
of the Indenture by the Trust Indenture Act.
Concurrently with the issuance of the Capital Securities, the Trust invested the
proceeds thereof, together with the consideration paid by the Company for the
Common Securities, in Old Junior Subordinated Debentures issued by the Company.
Pursuant to the Exchange Offer, the Company will exchange the Old Junior
Subordinated Debentures, in an amount corresponding to the Old Capital
Securities accepted for exchange, for a like aggregate principal amount of the
New Junior Subordinated Debentures as soon as practicable after the date hereof.
The New Junior Subordinated Debentures will bear interest at the annual rate of
8.71% of the principal amount thereof, payable semi-annually in arrears on
January 1 and July 1 of each year (each, an "Interest Payment Date"), commencing
July 1, 1997, to the person in whose name each Junior Subordinated
Debenture is registered, subject to certain exceptions, at the close of
business on the date fifteen days prior to the relevant Interest Payment Date.
It is anticipated that, until the liquidation, if any, of the Trust, each
Junior Subordinated Debenture will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Junior Subordinated Debentures is not a Business
Day, then payment of the interest payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment 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. Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the rate per annum of 8.71% thereof, compounded semi-annually. The term
"interest", as used herein, shall include semi-annual interest payments,
interest on semi-annual interest payments not paid on the applicable Interest
Payment Date and Additional Sums (as defined herein), as applicable.
The Junior Subordinated Debentures will be issued in denominations of $1,000 and
integral multiples thereof. The Junior Subordinated Debentures will mature on
January 1, 2046 (the "Stated Maturity Date"), except as described below.
The New Junior Subordinated Debentures will rank pari passu with the Old Junior
Subordinated Debentures and all Other Debentures and will be unsecured and
subordinate and rank junior in right of payment to the extent and in the manner
set forth in the Indenture to all Senior Indebtedness. See " -- Subordination"
below. The Company is a holding company and almost all of the operating assets
of the Company and its consolidated subsidiaries are owned by such subsidiaries.
The Company relies primarily on dividends from such subsidiaries to meet its
obligations. The Company is a legal entity separate and distinct from its
subsidiaries. The principal sources of the Company's income are dividends,
interest and fees from its subsidiaries. As a holding company, the Company's
ability to meet debt service obligations and pay operating expenses depends on
receipt of sufficient funds from its direct and indirect subsidiaries. The
inability of the Company's direct and indirect subsidiaries to pay dividends to
the Company in an amount sufficient to meet debt service obligations and pay
operating expenses would have a material adverse effect on the Company and the
Trust. The payment of dividends by the Company's subsidiaries without prior
regulatory approval is subject to restrictions set forth in the insurance laws
and regulations of Virginia, Illinois, Delaware, New Jersey, California and
Arizona, the states of domicile of the Company's insurance subsidiaries. The
Company currently does not expect such regulatory requirements to impair its
ability to meet interest payment obligations and to pay operating expenses in
the future. However, the Company can give no assurance that dividends will be
declared or paid by its subsidiaries. As of December 31, 1995, the Company's
direct and indirect insurance subsidiaries had sufficient capital and earnings
to pay up to $36.2 million of dividends to the Company during 1996 without prior
regulatory approval. In addition, payment of dividends to the Company by the
insurance subsidiaries is subject to ongoing review by insurance regulators and
is subject to various statutory limitations and in certain circumstances
requires approval by insurance regulatory authorities. Because the Company is a
holding company, the right of the Company to participate in any distribution of
assets of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise, is subject to the prior claims of creditors of the subsidiary, except
to the extent the Company may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of Junior Subordinated Debentures should look only to
the assets of the Company for payments on the Junior Subordinated Debentures. In
addition, because many of the Company's subsidiaries are insurance companies
subject to regulatory control by various state insurance departments, the
ability of such subsidiaries to pay dividends to the Company without prior
regulatory approval is limited by applicable laws and regulations. The Indenture
does not limit the incurrence or issuance of other secured or unsecured debt of
the Company, including Senior Indebtedness, or other obligations. See " --
Subordination" below.
Form, Registration and Transfer
If the Junior Subordinated Debentures are distributed to the holders of the
Trust Securities, the Junior Subordinated Debentures may be represented by one
or more global certificates registered in the name of Cede & Co. as the nominee
of DTC. The depositary arrangements for such Junior Subordinated Debentures are
expected to be substantially similar to those in effect for the Capital
Securities. For a description of DTC and the terms of the depositary
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters, see "Description of New Securities -- Form,
Denomination, Book-Entry Procedures and Transfer."
Payment and Paying Agents
Payment of principal of and premium, if any, and any interest on Junior
Subordinated Debentures will be made at the office of the Debenture Trustee in
The City of New York or at the office of such Paying Agent or Paying Agents as
the Company may designate from time to time, except that at the option of the
Company payment of any interest may be made, except in the case of Junior
Subordinated Debentures in global form, (i) by check mailed to the address of
the Person entitled thereto as such address shall appear in the register for
Junior Subordinated Debentures or (ii) by transfer to an account maintained by
the Person entitled thereto as specified in such register, provided that proper
transfer instructions have been received by the relevant Record Date. Payment of
any interest on any Junior Subordinated Debenture will be made to the Person in
whose name such Junior Subordinated Debenture is registered at the close of
business on the Record Date for such interest, except in the case of defaulted
interest. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent; however the Company will at all
times be required to maintain a Paying Agent in each Place of Payment for the
Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by the Company in trust, for the payment of the principal of and premium,
if any, or interest on any Junior Subordinated Debenture and remaining unclaimed
for two years after such principal and premium, if any, or interest has become
due and payable shall, at the request of the Company, be repaid to the Company
and the holder of such Junior Subordinated Debenture shall thereafter look, as a
general unsecured creditor, only to the Company for payment thereof.
Option to Extend Interest Payment Date
So long as no Debenture Event of Default has occurred and is continuing, the
Company will have the right under the Indenture at any time during the term of
the Junior Subordinated Debentures to defer the payment of interest at any time
or from time to time for a period not exceeding 10 consecutive, semi-annual
periods with respect to each Extension Period, provided that no Extension Period
may extend beyond the Stated Maturity Date. At the end of an Extension Period,
the Company must pay all interest then accrued and unpaid (together with
interest then accrued at the annual rate of 8.71%, compounded semi-annually, to
the extent permitted by applicable law). During an Extension Period, interest
will continue to accrue and holders of Junior Subordinated Debentures (and
holders of the Trust Securities while Trust Securities are outstanding) will be
required to accrue interest income for United States federal income tax purposes
prior to the receipt of cash attributable to such income. See "Certain Federal
Income Tax Consequences -- Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) or (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company (including any Other Debentures) that rank pari passu
with or junior in right of payment to the Junior Subordinated Debentures or
(iii) make any guarantee payments with respect to any guarantee by the Company
of the debt securities of any subsidiary of the Company (including any Other
Guarantees) if such guarantee ranks pari passu with or junior in right of
payment to the Junior Subordinated Debentures (other than (a) dividends or
distributions in shares of or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) as a result of a reclassification of the Company's capital stock
or the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock, (e) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, and (f) purchases or issuances of common
stock under any of the Company's stock option, stock purchase, stock loan or
other benefit plans for its directors, officers or employees or any of the
Company's dividend reinvestment plans, in each case as now existing or hereafter
established or amended).
Prior to the termination of any such Extension Period, the Company may further
extend such Extension Period, provided that such extension does not cause such
Extension Period to exceed 10 consecutive semi-annual periods or to extend
beyond the Stated Maturity Date. Upon the termination of any such Extension
Period and the payment of all amounts then due on any Interest Payment Date, the
Company may elect to begin a new Extension Period, subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. The Company must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election of any
Extension Period (or an extension thereof) at least five Business Days prior to
the earlier of (i) the date the Distributions on the Trust Securities would have
been payable except for the election to begin or extend such Extension Period or
(ii) the date the Administrative Trustees are required to give notice to any
securities exchange or to holders of Capital Securities of the record date or
the date such Distributions are payable, but in any event not less than five
Business Days prior to such record date. The Debenture Trustee shall give notice
of the Company's election to begin or extend a new Extension Period to the
holders of the Capital Securities. There is no limitation on the number of times
that the Company may elect to begin an Extension Period.
Optional Prepayment
The Junior Subordinated Debentures will be prepayable, in whole or in part, at
the option of the Company on or after January 1, 2007 (the "Initial Optional
Prepayment Date"), at a prepayment price (the "Optional Prepayment Price") equal
to the percentage of the outstanding principal amount of the Junior Subordinated
Debentures specified below, plus, in each case, accrued interest thereon to the
date of prepayment if redeemed during the 12-month period beginning January 1 of
the years indicated below:
Year Percentage
2007.................................................. 104.355%
2008.................................................. 103.920%
2009.................................................. 103.484%
2010.................................................. 103.049%
2011.................................................. 102.613%
2012.................................................. 102.178%
2013.................................................. 101.742%
2014.................................................. 101.307%
2015.................................................. 100.871%
2016.................................................. 100.436%
2017 and thereafter................................... 100.000%
Conditional Right to Advance Maturity and Special Event Prepayment
If a Tax Event (as defined herein) occurs, then the Company will have the right
(i) prior to the termination of the Trust, to advance the Stated Maturity Date
of the Junior Subordinated Debentures to the minimum extent required in order to
allow for the payments of interest in respect of the Junior Subordinated
Debentures to continue to be tax deductible, but in no event shall the resulting
maturity of the Junior Subordinated Debentures be less than 20 years from
January 13, 1997, or (ii) to terminate the Trust (if not previously terminated)
and advance the Stated Maturity Date of the Junior Subordinated Debentures to
the minimum extent required in order to allow for the payments of interest in
respect of the Junior Subordinated Debentures to continue to be tax deductible,
but in no event shall the resulting maturity of the Junior Subordinated
Debentures be less than 40 years from January 13, 1997. In either case, such
maturity date shall be advanced only if, in the opinion of counsel to the
Company experienced in such matters, after advancing the maturity date, interest
paid on the Junior Subordinated Debentures will be deductible for federal income
tax purposes (the action referred to in either clause (i) or (ii) above being
referred to herein as a "Tax Event Maturity Advancement").
If a Special Event (as defined below) shall occur and be continuing prior to the
Initial Optional Prepayment Date, the Company may, at its option, prepay the
Junior Subordinated Debentures in whole (but not in part) at any time within 90
days of the occurrence of such Special Event, at a prepayment price (the
"Special Event Prepayment Price") equal to the greater of (i) 100% of the
principal amount of such Junior Subordinated Debentures or (ii) the sum, as
determined by a Quotation Agent, of the present values of the principal amount
and premium payable with respect to an optional redemption of Junior
Subordinated Debentures on January 1, 2007, together with scheduled payments of
interest on the Junior Subordinated Debentures from the prepayment date to and
including the Initial Optional Prepayment Date discounted to the prepayment date
on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate, plus, in each case, accrued interest
thereon to the date of prepayment.
"Special Event" means a Conditional Tax Redemption Event (as defined under
"Description of the New Securities -- Conditional Right to Advance Maturity and
Special Event Redemption") or an Investment Company Event, as the case may be.
"Tax Event" means the receipt by the Company and the Trust of an opinion,
requested by the Company, 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 regulations thereunder of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative written decision or
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such pronouncement or
decision is made on or after January 13, 1997, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures, (ii) interest
payable by the Company on the Junior Subordinated Debentures is not, or within
90 days of the date of such opinion will not be, deductible by the Company, in
whole or in part, for United States federal income tax purposes, or (iii) the
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
(each of the circumstances referred to in clauses (i), (ii) and (iii) being an
"Adverse Tax Consequence").
"Investment Company Event" means that the Company and the Trust shall have
received an opinion, requested by the Company, of counsel experienced in
practice under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), to the effect that, as a result of the occurrence of a change in
law or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in Investment Company Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" which is required to be registered under the Investment Company Act,
which Change in Investment Company Act Law becomes effective on or after the
Issue Date.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the rate
per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such prepayment date, calculated on the third
Business Day preceding the prepayment date, plus in each case (a) 1.25% if such
prepayment date occurs on or prior to the first anniversary of the issuance of
the Capital Securities offered hereby and (b) 0.50% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security selected
by the Quotation Agent as having a maturity comparable to the remaining term to
the Stated Maturity Date of the Junior Subordinated Debentures that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Junior Subordinated Debentures.
"Quotation Agent" means the Reference Treasury Dealer appointed by the Company.
"Reference Treasury Dealer" means: (i) Donaldson, Lufkin & Jenrette Securities
Corporation and respective successors; provided, however, that if the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by
the Debenture Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any prepayment date, (i) the
average of the bid and asked prices for the Comparable Treasury Issue (expressed
in each case as a percentage of its principal amount) on the third Business Day
preceding such prepayment date, as set forth in the daily statistical release
(or any successor release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such Business Day, (A) the average of the Reference
Treasury Dealer Quotations for such prepayment date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Debenture
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any prepayment date, the average, as determined by the
Debenture Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such prepayment date.
"Additional Sums" means such additional amounts as may be necessary in order
that the amount of Distributions then due and payable by the Trust on the
outstanding Capital Securities and Common Securities shall not
be reduced as a result of any additional taxes, duties or other governmental
charges to which the Trust has become subject as a result of a Tax Event.
Notice of any prepayment will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of Junior Subordinated Debentures
to be prepaid at its registered address. Unless the Company defaults in payment
of the prepayment price, on and after the prepayment date interest ceases to
accrue on such Junior Subordinated Debentures called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums.
Certain Covenants of the Company
The Company will also covenant that it will not, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) or (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Company (including Other Debentures) that rank pari passu with
or junior in right of payment to the Junior Subordinated Debentures or (iii)
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company (including under Other
Guarantees) if such guarantee ranks pari passu or junior in right of payment to
the Junior Subordinated Debentures (other than (a) dividends or distributions in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, common stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholder's rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, (e) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) purchases or issuances of common stock in connection with any of the
Company's stock option, stock purchase, stock loan or other benefit plans for
its directors, officers or employees or any of the Company's dividend
reinvestment plans, in each case as now existing or hereafter established or
amended) if at such time (1) there shall have occurred any event of which the
Company has actual knowledge that (a) is, or with the giving of notice or the
lapse of time, or both, would be, a Debenture Event of Default and (b) in
respect of which the Company shall not have taken reasonable steps to cure, (2)
if such Junior Subordinated Debentures are held by the Trust, the Company shall
be in default with respect to its payment of any obligations under the Guarantee
or (3) the Company shall have given notice of its election of an Extension
Period, or any extension thereof, as provided in the Indenture and shall not
have rescinded such notice, and such Extension Period, or any extension thereof,
shall have commenced.
For so long as such Trust Securities remain outstanding, the Company will
covenant (i) to directly or indirectly maintain 100 percent ownership of the
Common Securities of such Markel Capital Trust; provided, however, that any
permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Common Securities, (ii) to use its reasonable
efforts to cause such Trust (a) to remain a statutory business trust, except in
connection with the distribution of Junior Subordinated Debentures to the
holders of Trust Securities in liquidation of such Trust, the redemption of all
of the Trust Securities of such Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of such Trust, and (b) to
continue not to be classified as an association taxable as a corporation or a
partnership for United States federal income tax purposes and (iii) to use its
reasonable efforts to cause each holder of Trust Securities to be treated as
owning an undivided beneficial interest in the Junior Subordinated Debentures.
Debenture Events of Default
The Indenture provides that any one or more of the following described events
with respect to the Junior Subordinated Debentures constitutes a "Debenture
Event of Default" (whatever the reason for such Debenture Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(i) failure for 30 days to pay any interest on the Junior
Subordinated Debentures or any Other Debentures, when due (subject to
the deferral of any due date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on the Junior
Subordinated Debentures or any Other Debentures when due whether
at maturity, upon redemption, by declaration of acceleration of
maturity or otherwise; or
(iii) failure to observe or perform in any material respect
certain other covenants contained in the Indenture for 90 days after
written notice to the Company from the Debenture Trustee or the
holders of at least 25% in aggregate outstanding principal amount of
Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the nonpayment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default except a default
in the payment of principal of or premium, if any, on or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and premium, if any, and principal due otherwise than by acceleration
has been deposited with the Debenture Trustee) or a default in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Junior Subordinated
Debenture.
The Indenture requires the annual filing by the Company with the Debenture
Trustee of a certificate as to the absence of certain defaults under the
Indenture.
The Indenture provides that the Debenture Trustee may withhold notice of an
Indenture Event of Default from the holders of a series of Junior Subordinated
Debentures (except an Indenture Event of Default in payment of principal of, or
of interest or premium on, the Junior Subordinated Debentures) if the Debenture
Trustee considers it in the interest of such holders to do so.
Enforcement of Certain Rights by Holders of Capital Securities
If a Debenture Event of Default shall have occurred and be continuing and shall
be attributable to the failure of the Company to pay principal of or interest or
premium, if any, on the Junior Subordinated Debentures on the due date, a holder
of Capital Securities may institute a Direct Action. The Company may not amend
the Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Capital Securities.
Notwithstanding any payments made to a holder of Capital Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of (or premium, if any) or interest on the Junior
Subordinated Debentures, and the Company shall be subrogated to the rights of
the holder of such Capital Securities with respect to payments on the Capital
Securities to the extent of any payments made by the Company to such holder in
any Direct Action.
The holders of the Capital Securities will not be able to exercise directly any
remedies, other than those set forth in the preceding paragraph, available to
the holders of the Junior Subordinated Debentures unless there shall have been
an Event of Default under the Declaration. See "Description of New Securities --
Events of Default; Notice".
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Company shall not consolidate with or merge into
any other Person or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to the
Company, unless: (i) in case the Company consolidates with or merges into
another Person or conveys or transfers its properties and assets substantially
as an entirety to any Person, the successor Person is organized under the laws
of the United States or any State or the District of Columbia, and such
successor Person expressly assumes the Company's obligations on the Junior
Subordinated Debentures; (ii) immediately after giving effect thereto, no
Debenture Event of Default, and no event which, after notice or lapse of time or
both, would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Junior Subordinated Debentures.
Modification of the Indenture
From time to time the Corporation and the Debenture Trustee may, without the
consent of the holders of Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interest of the holders of Junior
Subordinated Debentures) and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Company and the Debenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the Junior
Subordinated Debentures of all series affected by such modification at the time
outstanding, to modify the Indenture or any supplemental indenture or the rights
of the holders of the Junior Subordinated Debentures; provided that no such
modification shall (i) extend the fixed maturity of any Security, or reduce the
principal amount thereof (including in the case of a discounted Security the
amount payable thereon in the event of acceleration or the amount provable in
bankruptcy) or any redemption premium thereon, or reduce the rate or extend the
time of payment of interest thereon, or make the principal of, or interest or
premium on, the Junior Subordinated Debentures payable in any coin or currency
other than that provided in the Junior Subordinated Debentures, or impair or
affect the right of any holder of Junior Subordinated Debentures to institute
suit for the payment thereof or the right of prepayment, if any, at the option
of the holder, without the consent of the holder of each Security so affected,
or (ii) reduce the aforesaid percentage of Junior Subordinated Debentures the
consent of the holders of which is required for any such modification without
the consent of the holders of each Security affected.
Satisfaction and Discharge
The Indenture generally provides that when all Junior Subordinated Debentures
not previously delivered to the Debenture Trustee for cancellation (i) have
become due and payable or (ii) will become due and payable at maturity within
one year, and the Company deposits or causes to be deposited with the Debenture
Trustee funds, in trust, for the purpose and in an amount sufficient to pay and
discharge the entire indebtedness on the Junior Subordinated Debentures not
previously delivered to the Debenture Trustee for cancellation, for the
principal and interest to the date of the deposit or to the Stated Maturity
Date, as the case may be, then the Indenture will cease to be of further effect
(except as to the Company's obligations to pay all other sums due pursuant to
the Indenture and to provide the officers' certificates and opinions of counsel
described therein), and the Company will be deemed to have satisfied and
discharged the Indenture.
Subordination
In the Indenture, the Company has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Indebtedness to the extent provided in the
Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency,
debt restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Senior Indebtedness will
first be entitled to receive payment in full in respect of such Senior
Indebtedness before the holders of Junior Subordinated Debentures will be
entitled to receive or retain any payment in respect thereof.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full in respect
of such Senior Indebtedness before the holders of Junior Subordinated Debentures
will be entitled to receive or retain any payment in respect of the Junior
Subordinated Debentures.
No payments on account of principal or premium, if any, or interest, if any, in
respect of the Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Senior Indebtedness" means, with respect to the Company and its Subsidiaries:
(a) all liabilities, obligations and indebtedness for borrowed money, whether or
not evidenced by bonds, debentures, notes or other similar instruments, (b) all
obligations to pay the deferred purchase price of property or services (other
than trade payables due and arising in the ordinary course of business), (c) all
Capital Lease Obligations, (d) all debt of any other Person secured by a Lien on
any asset of the Company or any of its Subsidiaries, (e) all Contingent
Obligations, (f) all obligations, contingent or otherwise, relating to the face
amount of letters of credit, whether or not drawn, and banker's acceptances, but
excluding any obligation relating to an undrawn letter of credit if the undrawn
letter of credit is issued in connection with a liability for which a reserve
has been established by the Company or the applicable Subsidiary in accordance
with United States generally accepted accounting principles, and (g) all
obligations incurred pursuant to Hedging Agreements which are due and payable;
provided, that the term Senior Indebtedness shall not include the Junior
Subordinated Debentures, the Guarantees or other Qualified Debt Obligations.
"Qualified Debt Obligations" means, without duplication, (a) debt securities of
the Company, provided that the terms of any such debt security (i) permit the
deferral of principal and interest payments for a period of up to five years
(but not beyond the maturity date), as elected by the Company, (ii) have a
maturity for payment of principal of not less than ten (10) years after the date
of issuance, and (iii) include provisions making the debt security expressly
subordinate to all other debt of the Company; (b) preferred securities issued by
a Subsidiary, the sole purpose of which is to issue such preferred securities
and invest the proceeds thereof in debt securities of the type described in
clause (a) above, and which preferred securities are payable solely out of the
proceeds of payments on account of such debt securities; and (c) the obligations
recorded on the consolidated balance sheet of the Company and its Subsidiaries
with respect to debt securities of the type described in clause (a) above and
preferred securities of the type described in clause (b) above.
By reason of such subordination, in the event of an insolvency, creditors of the
Company who are holders of Senior Indebtedness, as well as certain general
creditors of the Company, may recover more, ratably, than the holders of the
Junior Subordinated Debentures. Additionally, the Company currently conducts
substantially all of its operations through subsidiaries, and the holders of
Junior Subordinated Debentures will be structurally subordinated to the
creditors of the Company's subsidiaries. See "Risk Factors -- Ranking of
Subordinate Obligations Under the Guarantee and the Junior Subordinated
Debentures."
The Indenture places no limitation on the amount of additional secured or
unsecured debt, including Senior Indebtedness, or other obligations, that may be
incurred by the Company. The Company expects from time to time to incur
additional indebtedness and obligations, including Senior Indebtedness.
Governing Law
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
Information Concerning the Debenture Trustee
Following the Exchange Offer and the qualification of the Indenture under the
Trust Indenture Act, the Debenture Trustee shall have and be subject to all the
duties and responsibilities specified with respect to an indenture trustee under
the Trust Indenture Act. Subject to such provisions, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the Indenture
at the request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
From time to time, the Debenture Trustee and/or its affiliates extend credit and
may provide investment banking and other financial services to the Company. See
"Markel Capital Trust I."
DESCRIPTION OF THE GUARANTEE
The Old Guarantee was executed and delivered by the Company concurrently with
the issuance by the Trust of the Old Capital Securities for the benefit of the
holders from time to time of the Old Capital Securities. As soon as practicable
after the date hereof, the Old Guarantee will be exchanged by the Company for
the New Guarantee for the benefit of the holders from time to time of the New
Capital Securities. The Chase Manhattan Bank will act as guarantee trustee
("Guarantee Trustee") under the Guarantee. The New Guarantee has been qualified
under the Trust Indenture Act. This summary of certain provisions of the
Guarantee does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of the Guarantee, including
the definitions therein of certain terms, and the Trust Indenture Act. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Capital Securities.
General
The Company will irrevocably agree to pay in full on a subordinated basis, to
the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the New Capital Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
Capital Securities, to the extent not paid by or on behalf of the Trust (the
"Guarantee Payments"), will be subject to the Guarantee: (i) any accumulated and
unpaid Distributions required to be paid on New Capital Securities, to the
extent the Trust has funds on hand at such time legally available therefor, (ii)
the Redemption Price with respect to any New Capital Securities called for
redemption, to the extent that the Trust has funds on hand at such time legally
available therefor, or (iii) upon a voluntary or involuntary termination and
liquidation of the Trust (unless the Junior Subordinated Debentures are
distributed to holders of the Capital Securities), the lesser of (a) the
Liquidation Distribution and (b) the amount of assets of the Trust remaining
available for distribution to holders of New Capital Securities. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Company to the holders of the New Capital Securities or
by causing the Trust to pay such amounts to such holders.
The New Guarantee will rank subordinate and junior in right of payment to all
Senior Indebtedness to the extent provided therein and, in the event of
bankruptcy or insolvency proceedings involving the Company, will rank
subordinate and junior in right of payment to all liabilities (other than Other
Guarantees) of the Company, but senior to any obligations in respect of any
class of capital stock of the Company. See " -- Status" below. Because the
Company is a holding company, the right of the Company to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Company may itself be recognized as a
creditor of that subsidiary. Accordingly, the Company's obligations under the
Guarantee will be effectively subordinated to all existing and future
liabilities of the Company's direct and indirect subsidiaries, and claimants
should look only to the assets of the Company for payments thereunder. See
"Description of New Junior Subordinated Debentures -- General." The New
Guarantee does not limit the incurrence or issuance of other secured or
unsecured debt of the Company, including Senior Indebtedness, whether under the
Indenture, any other indenture that the Company may enter into in the future or
otherwise.
The Company will, through the Guarantee, the Declaration, the Junior
Subordinated Debentures and the Indenture, taken together, fully, irrevocably
and unconditionally guarantee all of the Trust's obligations under the Capital
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Capital Securities. See "Relationship Among the New Capital Securities, the New
Junior Subordinated Debentures and the New Guarantee."
Status
The New Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Indebtedness
in the same manner as Junior Subordinated Debentures, except in the event of
bankruptcy or insolvency proceedings involving the Company, in which case the
New Guarantee will rank subordinate and junior in right of payment to all
liabilities (other than Other Guarantees) of the Company.
The New Guarantee will rank pari passu with the Old Guarantee and all Other
Guarantees issued by the Company. The Guarantee will constitute a guarantee of
payment and not of collection (i.e., the guaranteed party may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against any other person
or entity). The Guarantee will be held for the benefit of the holders of the
Capital Securities. The Guarantee will not be discharged except by payment of
the Guarantee Payments in full to the extent not paid by the Trust or upon
distribution to the holders of the Capital Securities of the Junior Subordinated
Debentures. The Guarantee does not place a limitation on the amount of
additional Senior Indebtedness that may be incurred by the Company. The Company
expects from time to time to incur additional indebtedness constituting Senior
Indebtedness.
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect the
rights of holders of the Capital Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of a majority of the Liquidation Amount of such outstanding Capital
Securities. The manner of obtaining any such approval will be as set forth under
"Description of New Securities -- Voting Rights; Amendment of the Declaration."
All guarantees and agreements contained in the Guarantee Agreement shall bind
the successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the holders of the Capital Securities then
outstanding.
Events of Default
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in Liquidation Amount of the Capital Securities will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust or power conferred upon the Guarantee Trustee
under the Guarantee.
Any holder of the Capital Securities may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity.
The Company, as guarantor, will be required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
Certain Covenants of the Company
In the New Guarantee the Company will covenant that, so long as any Capital
Securities remain outstanding, the Company shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) or (ii) make any payment of principal,
interest or premium, if any, on, or repay or repurchase or redeem any debt
securities of the Company (including any Other Debentures) that rank pari passu
with or junior in right of payment to the Junior Subordinated Debentures or
(iii) make any guarantee payments with respect to any guarantee by the Company
of the debt securities of any subsidiary of the Company (including Other
Guarantees) if such guarantee ranks pari passu or junior in right of payment to
the Junior Subordinated Debentures (other than (a) dividends or distributions in
shares of, or options, warrants, rights to subscribe for or purchase shares of,
common stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholder's rights, plan, or the issuance of
stock under any such plan in the future, or the redemption or repurchase of any
such rights pursuant thereto, (c) payments under the Guarantee, (d) as a result
of a reclassification of the Company's capital stock or the exchange or the
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (e) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, and (f) purchases or issuances of common stock in connection with any
of the Company's stock option, stock purchase, stock loan or other benefit plans
for its directors, officers or employees or any of the Company's dividend
reinvestment plans, in each case as now existing or hereafter established or
amended), if at such time (i) there shall have occurred any event of which the
Company has actual knowledge that (a) is, or with the giving of notice or the
lapse of time, or both, would be an event of default under the Guarantee and (b)
in respect of which the Company shall not have taken reasonable steps to cure,
(ii) if such Junior Subordinated Debentures are held by the Property Trustee,
the Company shall be in default with respect to its payment of any obligations
under the Guarantee or (iii) the Company shall have given notice of its election
of the exercise of its right to extend the interest payment period pursuant to
the Indenture and any such extension shall be continuing.
Termination
The Guarantee will terminate and be of no further force and effect upon full
payment of the applicable Redemption Price of the Capital Securities, upon full
payment of the Liquidation Amount payable upon liquidation of the Trust or upon
distribution of Junior Subordinated Debentures to the holders of the Capital
Securities. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the Capital Securities must
restore payment of any sums paid under the Capital Securities or the Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the continuance of a default with
respect to a Guarantee, will undertake to perform only such duties as are
specifically set forth in such Guarantee and, after default, must exercise the
same degree of care as a prudent individual would exercise in the conduct of his
or her own affairs. Subject to such provisions, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of Capital Securities, unless offered reasonable indemnity
against the costs, expenses and liabilities which might be incurred thereby. The
Guarantee Trustee is not required to expend or risk its own funds or otherwise
incur personal financial liability in the performance of its duties if it
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it.
From time to time the Guarantee Trustee and/or its affiliates extend credit and
may provide investment banking and other financial services to the Company. See
"Markel Capital Trust I."
Governing Law
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
DESCRIPTION OF OLD SECURITIES
The terms of the Old Securities are identical in all materials respects
to the New Securities, except that the Old Securities have not been registered
under the Securities Act, are subject to certain restrictions on transfer and
are entitled to certain rights under the applicable Registration Rights
Agreement (which rights will terminate upon consummation of the Exchange Offer,
except under limited circumstances), the New Capital Securities will not contain
the $100,000 minimum Liquidation Amount transfer restriction and certain other
restrictions on transfer applicable to Old Capital Securities, the New Capital
Securities will not provide for any increase in the Distribution rate thereon,
the New Junior Subordinated Debentures will not contain the $100,000 minimum
principal amount transfer restriction and the New Junior Subordinated Debentures
will not provide for any increase in the interest rate thereon. The Old
Securities provide that, in the event that a registration statement relating to
the Exchange Offer has not been filed by June 7, 1997 and been declared
effective by July 7, 1997, or, in certain limited circumstances, in the event a
shelf registration statement (the "Shelf Registration Statement") with respect
to the resale of the Old Capital Securities is not declared effective by July 7,
1997, then interest will accrue (in addition to the stated interest rate on the
Old Junior Subordinated Debentures) at the rate of 0.25% per annum on the
principal amount of the Old Junior Subordinated Debentures and Distributions
will accrue (in addition to the stated Distribution rate on the Old Capital
Securities) at the rate of 0.25% per annum on the Liquidation Amount of the Old
Capital Securities, for the period from the occurrence of such event until such
time as such required Exchange Offer is consummated or any required Shelf
Registration Statement is effective. The New Securities are not, and upon
consummation of the Exchange Offer the Old Securities will not be, entitled to
any such additional interest or Distributions. Accordingly, holders of Old
Capital Securities should review the information set forth under "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities" and
"Description of New Securities."
RELATIONSHIP AMONG THE NEW CAPITAL SECURITIES, THE
NEW JUNIOR SUBORDINATED DEBENTURES AND THE NEW GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the New Capital Securities
(to the extent the Trust has funds on hand legally available for the payment of
such Distributions) will be irrevocably guaranteed by the Company as and to the
extent set forth under "Description of the Guarantee." Taken together, the
Company's obligations under the New Junior Subordinated Debentures, the
Indenture, the Declaration and the New Guarantee will provide, in the aggregate,
a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the New Capital Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the New Capital
Securities. If and to the extent
that the Company does not make the required payments on the New Junior
Subordinated Debentures, the Trust will not have sufficient funds to make the
related payments, including Distributions, on the New Capital Securities. The
Guarantee will not cover any such payment when the Trust does not have
sufficient funds on hand legally available therefor. In such event, the remedy
of a holder of Capital Securities is to institute a Direct Action. The
obligations of the Company under the New Guarantee will be subordinate
and junior in right of payment to all Senior Indebtedness.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the New Capital Securities, primarily
because: (i) the aggregate principal amount or Prepayment Price of the New
Junior Subordinated Debentures will be equal to the sum of the Liquidation
Amount or Redemption Price, as applicable, of the New Capital Securities and
Common Securities; (ii) the interest rate and interest and other payment dates
on the New Junior Subordinated Debentures will match the Distribution rate and
Distribution and other payment dates for the Trust Securities; (iii) the Company
shall pay for all and any costs, expenses and liabilities of the Trust except
the Trust's obligations to holders of Trust Securities under such Trust
Securities; and (iv) the Declaration will provide that the Trust is not
authorized to engage in any activity that is not consistent with the limited
purposes thereof.
Enforcement of Rights of Holders of Capital Securities
A holder of any Capital Security may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Senior Indebtedness would not constitute
a default or Event of Default under the Declaration. However, in the event of
payment defaults under, or acceleration of, Senior Indebtedness, the
subordination provisions of the Indenture will provide that no payments may be
made in respect of the Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on Junior Subordinated
Debentures would constitute an Event of Default under the Declaration.
Limited Purpose of the Trust
The Capital Securities will represent preferred beneficial interests in the
Trust, and the Trust exists for the sole purpose of issuing and selling the
Trust Securities, using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures and engaging in only those other
activities necessary, advisable or incidental thereto. A principal difference
between the rights of a holder of a Capital Security and a holder of a Junior
Subordinated Debenture is that a holder of a Junior Subordinated Debenture will
be entitled to receive from the Company the principal amount of and premium, if
any, and interest on Junior Subordinated Debentures held, while a holder of
Capital Securities is entitled to receive Distributions from the Trust (or, in
certain circumstances, from the Company under the Guarantee) if and to the
extent the Trust has funds on hand legally available for the payment of such
Distributions.
Rights Upon Termination
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary termination and liquidation
of the Trust, the holders of the Trust Securities will be entitled to receive,
out of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of Securities -- Liquidation of the Trust and Distribution of
Junior Subordinated Debentures." Upon any voluntary or involuntary liquidation
or bankruptcy of the Company, the Property Trustee, as holder of the Junior
Subordinated Debentures, would be a subordinated creditor of the Company,
subordinated in right of payment to all Senior Indebtedness as set forth in the
Indenture, but entitled to receive payment in full of principal (and premium, if
any) and interest, before any stockholders of the Company receive payments or
distributions. Since the Company will be the guarantor under the Guarantee and
will agree to pay for all costs, expenses and liabilities of the Trust (other
than the Trust's obligations to the holders of its Trust Securities), the
positions of a holder of Capital Securities and a holder of Junior Subordinated
Debentures relative to other creditors and to stockholders of the Company in the
event of liquidation or bankruptcy of the Company are expected to be similar,
although, in the event of bankruptcy or insolvency proceedings involving the
Company, the Company's obligations under the Guarantee will rank subordinate and
junior in right of payment to all liabilities (other than Other Guarantees) of
the Company but senior to any obligations in respect of any class of capital
stock of the Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
In the opinion of McGuire, Woods, Battle & Boothe, L.L.P., counsel to the
Company and the Trust ("Tax Counsel"), the following is a summary of certain of
the material United States federal income tax consequences of the purchase,
ownership and disposition of Capital Securities held as capital assets by a
holder that purchased the Old Capital Securities upon initial issuance at their
original offering price. It does not deal with special classes of holders such
as banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, or persons that will hold the Capital Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of Capital
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the Capital Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder, the administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change, possibly on
a retroactive basis.
Exchange of Capital Securities
The exchange of Old Capital Securities for New Capital Securities should not be
a taxable event to holders for United States federal income tax purposes. The
exchange of Old Capital Securities for New Capital Securities pursuant to the
Exchange Offer should not be treated as an "exchange" for United States federal
income tax purposes because the New Capital Securities should not be considered
to differ materially in kind or extent from the Old Capital Securities and
because the exchange will occur by operation of the terms of the Old Capital
Securities. If, however, the exchange of the Old Capital Securities for the New
Capital Securities were treated as an exchange for United States federal income
tax purposes, such exchange should constitute a recapitalization for federal
income tax purposes. Accordingly, the New Capital Securities should have the
same issue price as the Old Capital Securities, and a holder should have the
same adjusted tax basis and holding period in the New Capital Securities as the
holder had in the Old Capital Securities immediately before the exchange.
Classification of the Junior Subordinated Debentures
In connection with the issuance of the Old Junior Subordinated Debentures, Tax
Counsel has rendered its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Junior Subordinated Debentures will be classified for
United States federal income tax purposes as indebtedness of the Company. An
opinion of Tax Counsel, however, is not binding on the Internal Revenue Service
(the "IRS") or the courts. Prospective investors should note that no rulings
have been or are expected to be sought from the IRS with respect to any of these
issues and no assurance can be given that the IRS will not take contrary
positions. Moreover, no assurance can be given that any of the opinions
expressed herein will not be challenged by the IRS or, if challenged, that such
a challenge would not be successful.
Classification of the Trust
In connection with the issuance of the Old Capital Securities, Tax Counsel has
rendered its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, the Trust will be classified for United States
federal income tax purposes as a grantor trust and not as an association taxable
as a corporation. Accordingly, for United States federal income tax purposes,
each holder of Capital Securities generally will be considered the owner of an
undivided interest in the Junior Subordinated Debentures, and each holder will
be required to include in its gross income any interest (or OID accrued) with
respect to its allocable share of those Junior Subordinated Debentures.
Interest Income and Original Issue Discount
Under recently issued Treasury regulations (the "Regulations") applicable to
debt instruments issued on or after August 13, 1996, a "remote" contingency that
stated interest will not be timely paid will be ignored in determining whether a
debt instrument is issued with OID. The Company believes that the likelihood of
its exercising its option to defer payments of interest is "remote" because
exercising that option would prevent the Company from declaring dividends on any
class of its equity securities. Accordingly, the Company intends to take the
position, based on the advice of Tax Counsel, that the Junior Subordinated
Debentures will not be considered to be issued with OID and, accordingly, stated
interest on the Junior Subordinated Debentures generally will be taxable to a
holder as ordinary income at the time it is paid or accrued in accordance with
such holder's method of accounting.
Under the Regulations, if the Company were to exercise its option to defer
payments of interest, the New Junior Subordinated Debentures would at that time
be treated as issued with OID, and all stated interest on the New Junior
Subordinated Debentures would thereafter be treated as OID as long as the New
Junior Subordinated Debentures remain outstanding. In such event, all of a
holder's taxable interest income with respect to the New Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income. Consequently, a
holder of New Capital Securities would be required to include in gross income
OID even though the Company would not make actual cash payments during an
Extension Period. Moreover, under the Regulations, if the option to defer the
payment of interest was determined not to be "remote", the Junior Subordinated
Debentures would be treated as having been originally issued with OID. In such
event, all of a holder's taxable interest income with respect to the Junior
Subordinated Debentures would be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of the Trust
The Company will have the right at any time to liquidate the Trust and cause the
New Junior Subordinated Debentures to be distributed to the holders of the Trust
Securities. Under current law, such a distribution, for United States federal
income tax purposes, would be treated as a nontaxable event to each holder, and
each holder would receive an aggregate tax basis in the New Junior Subordinated
Debentures equal to such holder's aggregate tax basis in its Capital Securities.
A holder's holding period in the New Junior Subordinated Debentures so received
in liquidation of the Trust would include the period during which the Capital
Securities were held by such holder. If, however, the Trust is characterized for
United States federal income tax purposes as an association taxable as a
corporation at the time of its dissolution, the distribution of the New Junior
Subordinated Debentures may constitute a taxable event to holders of Capital
Securities and a holder's holding period in New Junior Subordinated Debentures
would begin on the date such Junior Subordinated Debentures were received.
Under certain circumstances described herein (see "Description of New
Securities"), the Junior Subordinated Debentures may be redeemed for cash and
the proceeds of such redemption distributed to holders in redemption of their
Capital Securities. Under current law, such a redemption would, for United
States federal income tax purposes, constitute a taxable disposition of the
redeemed Capital Securities, and a holder could recognize gain or loss as if it
sold such redeemed Capital Securities for cash. See " -- Sales of Capital
Securities" below.
Sales of Capital Securities
A holder that sells Capital Securities will recognize gain or loss equal to the
difference between its adjusted tax basis in the Capital Securities and the
amount realized on the sale of such Capital Securities (other than with respect
to accrued and unpaid interest which has not yet been included in income, which
will be treated as ordinary income). A holder's adjusted tax basis in the
Capital Securities generally will be its initial purchase price increased by OID
(if any) previously includable in such holder's gross income to the date of
disposition and decreased by payments (if any) received on the Capital
Securities in respect of OID. Such gain or loss generally will be a capital gain
or loss and generally will be a long-term capital gain or loss if the Capital
Securities have been held for more than one year.
The Capital Securities may trade at a price that does not accurately reflect the
value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who uses the accrual method of accounting for
tax purposes (and a cash method holder, if the Junior Subordinated Debentures
are deemed to have been issued with OID) who disposes of such holder's Capital
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income (i.e.,
interest or, possibly, OID), and to add such amount to such holder's adjusted
tax basis in such holder's pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
Proposed Tax Legislation
On February 6, 1997, as part of the Clinton Administration's Fiscal 1998 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate issuers
a deduction for interest in respect of certain debt obligations, such as the New
Junior Subordinated Debentures, issued on or after the date "of first committee
action," if such debt obligations have a maximum term in excess of 15 years and
are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. In addition, the Proposed Legislation would generally deny
corporate issuers a deduction for interest in respect of certain debt
obligations, such as the New Junior Subordinated Debentures, issued on or after
the date "of first committee action," if such debt obligations have a weighted
average maturity of more than 40 years. The Proposed Legislation has not yet
been introduced by the 105th Congress. If the Proposed Legislation is enacted by
Congress and if such enactment gave rise to a Tax Event, the Company would be
permitted to cause a redemption of the Trust Securities at the Special Event
Redemption Price by electing to prepay the Junior Subordinated Debentures at the
Special Event Prepayment Price. See "Description of New Junior Subordinated
Debentures -- Special Event Prepayment."
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or which is a citizen or
individual resident (or is treated as a citizen or individual resident) of the
United States for federal income tax purposes, a corporation or partnership
created or organized (or treated as created or organized for federal income tax
purposes) in or under the laws of the United States or any political subdivision
thereof, or a trust or estate the income of which is includable in its gross
income for federal income tax purposes without regard to its source.
Notwithstanding the foregoing, for taxable years beginning after December 31,
1996 (or for the immediately preceding taxable year, if the trustee of a trust
so elects), a trust is a U.S. Holder for federal income tax purposes if, and
only if, (i) a court within the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more United
States trustees have the authority to control all substantial decisions of the
trust.
Under present United States federal income tax laws: (i) payments by the Trust
or any of its paying agents to any holder of a Capital Security who or which is
a United States Alien Holder will not be subject to United States federal
withholding tax; provided that, (a) the beneficial owner of the Capital Security
does not actually or constructively own 10 percent or more of the total combined
voting power of all classes of stock of the Company entitled to vote, (b) the
beneficial owner of the Capital Security is not a controlled foreign corporation
that is related to the Company through stock ownership, and (c) either (A) the
beneficial owner of the Capital Security certifies to the Trust or its agent,
under penalties of perjury, that it is not a United States holder and provides
its name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution"), and holds the Capital
Security in such capacity, certifies to the Trust or its agent, under penalties
of perjury, that such statement has been received from the beneficial owner by
it or by a Financial Institution between it and the beneficial owner and
furnishes the Trust or its agent with a copy thereof; and (ii) a United States
Alien Holder of a Capital Security will not be subject to United States federal
withholding tax on any gain realized upon the sale or other disposition of a
Capital Security.
Information Reporting to Holders
Generally, income on the New Capital Securities will be reported to holders on
Form 1099, which forms should be mailed to holders of New Capital Securities by
January 31 following each calendar year.
Backup Withholding
Payments made on, and proceeds from the sale of, the Capital Securities may be
subject to a "backup" withholding tax of 31 percent unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States federal income tax, provided the
required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP DISPOSITION AND EXCHANGE
OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Company, which is the obligor with respect to the Junior Subordinated
Debentures held by the Trust, and its affiliates and the Property Trustee may be
considered a "party in interest" (within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to many employee
benefit plans ("Plans") that are subject to ERISA. Any purchaser proposing to
acquire Capital Securities with assets of any Plan should consult with its
counsel. The purchase and/or holding of Capital Securities by a Plan that is
subject to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including individual
retirement arrangements and other plans described in Section 4975(e)(1) of
the Code) and with respect to which the Company, the Property Trustee or any
affiliate is a service provider (or otherwise is a party in interest or a
disqualified person)
may constitute or result in a prohibited transaction under ERISA or Section 4975
of the Code, unless such Capital Securities are acquired pursuant to and in
accordance with an applicable exemption, such as Prohibited Transaction Class
Exemption ("PTCE") 84-14 (an exemption for certain transactions determined by an
independent qualified professional asset manager), PTCE 91-38 (an exemption for
certain transactions involving bank collective investment funds), PTCE 90-1 (an
exemption for certain transactions involving insurance company pooled separate
accounts) or PTCE 95-60 (an exemption for transactions involving certain
insurance company general accounts) and PTCE 95-23 (an exemption for certain
transactions determined by an in-house manager). In addition, a Plan fiduciary
considering the purchase of Capital Securities should be aware that the assets
of the Trust may be considered "plan assets" for ERISA purposes. Therefore, a
Plan fiduciary should consider whether the purchase of
Capital Securities could result in a delegation of fiduciary authority to the
Property Trustee, and, if so, whether such a delegation of authority is
permissible under the Plan's governing instrument or any investment management
agreement with the Plan. In making such determination, a Plan fiduciary
should note that the Property Trustee is a U.S. bank qualified to be an
investment manager (within the meaning of section 3(38) of ERISA) to which such
a delegation of authority generally would be permissible under ERISA.
Further, prior to an Event of Default with respect to the Junior Subordinated
Debentures, the Property Trustee will have only limited custodial and
ministerial authority with respect to Trust assets.
Under the U.S. Department of Labor regulations defining "plan assets" for ERISA
purposes (the "Plan Assets Regulations"), the assets of the Trust may be
considered plan assets of Plans owning New Capital Securities unless the
aggregate investment in New Capital Securities by "benefit plan investors" is
not deemed "significant" or the New Capital Securities qualify as "publicly
offered securities" as defined in such Regulations. For this purpose, equity
participation by benefit plan investors will not be considered "significant" on
any date only if, immediately after the most recent acquisition of Capital
Securities, the aggregate interest in the New Capital Securities held by benefit
plan investors will be less than 25% of the value of the New Capital Securities.
For purposes of the Plan Asset Regulations, the term "benefit plan investor"
includes Plans and arrangements that are not subject to ERISA, as well as Plans
that are subject to ERISA, and entities whose assets include plan assets by
reason of a Plan's investment in that entity. Although it is possible that the
equity participation by benefit plan investors in New Capital Securities on any
date will not be "significant" for purposes of the Plan Assets Regulations, such
result cannot be assured.
The New Capital Securities may qualify as "publicly offered securities" under
the Plan Assets Regulations if at the time of the Exchange Offer they are also
"widely held" and "freely transferable." Under the Regulations, a class of
securities is "widely held" only if it is a class of securities that is owned by
100 or more investors independent of the issuer and of one another. Although it
is possible that at the time of the Exchange Offer the New Capital Securities
will be "widely held," such result cannot be assured. Whether a security is
"freely transferable" for purposes of the Regulations is a factual question to
be determined on the basis of all relevant facts and circumstances. If at the
time of the Exchange Offer the New Capital Securities qualify as "publicly
offered securities," the assets of the Trust should not be "plan assets" with
respect to Plans acquiring New Capital Securities. If at the time of the
Exchange Offer the New Capital Securities do not qualify as "publicly offered
securities," the "plan asset" considerations discussed in the preceding
paragraphs could be applicable in connection with the investment by Plans in the
New Capital Securities.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Capital Securities for its own account in
connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Capital Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by Participating Broker- Dealers during the period referred to below in
connection with resales of New Capital Securities received in exchange for Old
Capital Securities if such Old Capital Securities were acquired by such
Participating Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities. The Company and the Trust have agreed
that this Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection with resales of such
New Capital Securities for a period ending 90 days after the Expiration Date
(subject to extension under certain limited circumstances described herein) or,
if earlier, when all such New Capital Securities have been disposed of by such
Participating Broker-Dealer. However, a Participating Broker-Dealer who intends
to use this Prospectus in connection with the resale of New Capital Securities
received in exchange for Old Capital Securities pursuant to the Exchange Offer
must notify the Company or the Trust, or cause the Company or the Trust to be
notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at one of
the addresses set forth herein under "The Exchange Offer--Exchange Agent." See
"The Exchange Offer--Resales of New Capital Securities."
The Company or the Trust will not receive any cash proceeds from the issuance of
the New Capital Securities offered hereby. New Capital Securities received by
broker-dealers for their own accounts in connection with the Exchange Offer may
be sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the New
Capital Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or
the purchasers of any such New Capital Securities.
Any broker-dealer that resells New Capital Securities that were received by it
for its own account in connection with the Exchange Offer and any broker or
dealer that participates in a distribution of such New Capital Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act, and any
profit on any such resale of New Capital Securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
NOTICE TO INVESTORS
Because of the following restriction, purchasers are advised to consult legal
counsel prior to making any offer, resale or pledge or transfer of Capital
Securities. Each holder of the New Capital Securities, by its acceptance
thereof, will be deemed to have acknowledged, represented to and agreed with the
Trust and the Company as follows:
It (a) is not itself, and is not acquiring Capital Securities with "plan assets"
of, an employee benefit or other plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code") (each, a "Plan), or
an entity whose underlying assets include "plan assets" by reason of any Plan's
investment in the entity (a "Plan Asset Entity"), or (b) is acquiring and
holding the Capital Securities in a transaction that is not otherwise prohibited
by either ERISA or the Code. The Capital Securities will bear legends reflecting
the above restrictions.
CERTAIN LEGAL MATTERS
The validity of the New Junior Subordinated Debentures and the New Guarantee and
certain legal matters relating thereto will be passed upon by McGuire, Woods,
Battle & Boothe, L.L.P., Richmond, Virginia. Certain matters of Delaware law
relating to the validity of the New Capital Securities will be passed upon by
Richards, Layton & Finger, special Delaware counsel to the Company and the
Trust. McGuire, Woods, Battle & Boothe, L.L.P. will rely on Richards, Layton &
Finger as to matters of Delaware law and on Brown & Wood LLP as to matters of
New York law. In addition, McGuire, Woods, Battle & Boothe, L.L.P. will pass
upon certain United States federal income taxation matters for the Company and
the Trust.
EXPERTS
The consolidated financial statements and related financial statement schedules
of the Company appearing in the Company's Annual Report on Form 10-K, as
amended, for the year ended December 31, 1995, incorporated by reference herein
have been incorporated by reference herein in reliance upon the reports of KPMG
Peat Marwick LLP, independent certified public accountants and upon the
authority of such firm as experts in accounting and auditing. Such reports refer
to the Company's adoption of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting for
Certain Investments in Debt and Equity Securities," effective December 31, 1993.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 10 of the Virginia Stock Corporation Act allows, in general, for
indemnification, in certain circumstances, by a corporation of any person
threatened with or made a party to any action, suit or proceeding by reason of
the fact that he or she is, or was, a director, officer, employee or agent of
such corporation. Indemnification is also authorized with respect to a criminal
action or proceeding where the person had no reasonable cause to believe that
his conduct was unlawful. Article 9 of the Virginia Stock Corporation Act
provides limitations on damages payable by officers and directors, except in
cases of willful misconduct or knowing violation of criminal law or any federal
or state securities law.
Article VII of the Company's Amended and Restated Articles of Incorporation
provides for mandatory indemnification of directors and officers to the maximum
extent now or hereafter permitted by the Virginia Stock Corporation Act,
including indemnification against liability incurred in proceedings instituted
or threatened by third parties, or by or on behalf of the Company itself, unless
incurred as a result of gross negligence, willful misconduct or as a result of a
knowing violation of the criminal law.
The Company maintains a standard policy of officers' and directors' liability
insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
4.1 Indenture of Markel Corporation relating to the Junior Subordinated Debentures
4.2 Form of Certificate of New Junior Subordinated Debenture (included as Exhibit A to
Exhibit 4.1)
4.3 Certificate of Trust of Markel Capital Trust I
4.4 Declaration of Trust of Markel Capital Trust I
4.5 Amended and Restated Declaration of Trust for Markel Capital Trust I
4.6 Form of New Capital Security Certificate for Markel Capital Trust I (included as Exhibit
A-1 to Exhibit 4.5)
4.7 Form of New Guarantee of Markel Corporation relating to the New Capital Securities
4.8 Registration Rights Agreement
5.1 Opinion and consent of McGuire, Woods, Battle & Boothe, L.L.P. as to legality of the
New Junior Subordinated Debentures and the New Guarantee to be issued by Markel
Corporation*
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to legality of the
New Capital Securities to be issued by Markel Capital Trust I*
5.3 Opinion and consent of Brown & Wood, L.L.P. as to legality of the New Junior
Subordinated Debentures and the New Guarantee to be issued by Markel Corporation*
8 Opinion of McGuire, Woods, Battle & Boothe, L.L.P., special tax counsel, as to certain
federal income tax matters*
12.1 Computation of ratio of earnings to fixed charges
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included in Exhibit 5.1)*
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2)*
23.4 Consent of Brown & Wood, L.L.P. (included in Exhibit 5.3)*
24 Power of Attorney of certain officers and directors of Markel Corporation and Administrative Trustees
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under
the Indenture
25.2 Form T-1 Statement of Eligibility of The Chase
Manhattan Bank to act as trustee under the Amended
and Restated Declaration of Trust of Markel Capital
Trust I
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank under the New
Guarantee for the benefit of the holders of New Capital Securities of Markel Capital
Trust I
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
- --------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of a Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of each
undersigned Registrant pursuant to the provisions, or otherwise, each Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by each undersigned Registrant of
expenses incurred or paid by a director, officer of controlling person of each
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, each Registrant will, unless in the opinion of its
counsel the matter has been settled by the controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired or involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Markel
Corporation certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Richmond, and Commonwealth of Virginia, on the
12th day of February, 1997.
MARKEL CORPORATION
By /s/ STEVEN A. MARKEL*
-----------------------
(Steven A. Markel, Vice Chairman)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE DATE
/s/ ALAN I. KIRSHNER* Chairman and Chief Executive February 12, 1997
- --------------------- Officer and Director
(Alan I. Kirshner)
/s/ ANTHONY F. MARKEL* President and Chief Operating Officer February 12, 1997
- --------------------- and Director
(Anthony F. Markel)
/s/ STEVEN A. MARKEL* Vice Chairman and Director February 12, 1997
- ---------------------
(Steven A. Markel)
/s/ DARRELL D. MARTIN* Executive Vice President, Chief February 12, 1997
- --------------------- Financial Officer and Treasurer and
(Darrell D. Martin) Director
/s/ GARY L. MARKEL* Director February 12, 1997
- ---------------------
(Gary L. Markel)
/s/ LESLIE A. GRANDIS* Director February 12, 1997
- ---------------------
(Leslie A. Grandis)
/s/ STEWART M. KASEN* Director February 12, 1997
- ---------------------
(Stewart M. Kasen)
/s/ V. PREM WATSA* Director February 12, 1997
- ---------------------
(V. Prem Watsa)
* Pursuant to Power of Attorney
Pursuant to the requirements of the Securities Act of 1933, Markel
Capital Trust I certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Richmond, and Commonwealth of Virginia, on the
12th day of February, 1997.
MARKEL CAPITAL TRUST I
By: /s/ STEVEN A. MARKEL*
-----------------------------
Steven A. Markel
as Administrative Trustee
By: /s/ ANTHONY F. MARKEL*
-----------------------------
Anthony F. Markel
as Administrative Trustee
By: /s/ DARRELL D. MARTIN*
------------------------------
Darrell D. Martin
as Administrative Trustee
* Pursuant to Power of Attorney
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
4.1 Indenture of Markel Corporation relating to the
Junior Subordinated Debentures
4.2 Form of Certificate of New Junior Subordinated
Debenture (included as Exhibit A to Exhibit 4.1)
4.3 Certificate of Trust of Markel Capital Trust I
4.4 Declaration of Trust of Markel Capital Trust I
4.5 Amended and Restated Declaration of Trust for Markel
Capital Trust I
4.6 Form of New Capital Security Certificate for Markel
Capital Trust I (included as Exhibit A-1 to Exhibit
4.5)
4.7 Form of New Guarantee of Markel Corporation relating
to the New Capital Securities
4.8 Registration Rights Agreement
5.1 Opinion and consent of McGuire, Woods, Battle &
Boothe, L.L.P. as to legality of the New Junior
Subordinated Debentures and the New Guarantee to be
issued by Markel Corporation*
5.2 Opinion of Richards, Layton & Finger, special
Delaware counsel, as to legality of the New Capital
Securities to be issued by Markel Capital Trust I*
5.3 Opinion and consent of Brown & Wood, L.L.P. as to
legality of the New Junior Subordinated Debentures
and the New Guarantee to be issued by Markel
Corporation*
8 Opinion of McGuire, Woods, Battle & Boothe, L.L.P.,
special tax counsel, as to certain federal income tax
matters*
12.1 Computation of ratio of earnings to fixed charges
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of McGuire, Woods, Battle & Boothe, L.L.P.
(included in Exhibit 5.1)*
23.3 Consent of Richards, Layton & Finger (included in
Exhibit 5.2)*
23.4 Consent of Brown & Wood, L.L.P. (included in Exhibit
5.3)*
24 Power of Attorney of certain officers and directors
of Markel Corporation and Administrative Trustees
25.1 Form T-1 Statement of Eligibility of The Chase
Manhattan Bank to act as trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of The Chase
Manhattan Bank to act as trustee under the Amended
and Restated Declaration of Trust of Markel Capital
Trust I
25.3 Form T-1 Statement of Eligibility of The Chase
Manhattan Bank under the New Guarantee for the
benefit of the holders of New Capital Securities of
Markel Capital Trust I
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
- --------
* To be filed by amendment.