As filed with the Securities and Exchange Commission on February 12, 2002
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ARCH CAPITAL GROUP LTD.
(Exact name of registrant as specified in its charter)
Bermuda N/A
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
Craig Appin House National Registered Agents, Inc.
8 Wesley Street 440 9th Avenue, 5th Floor
Hamilton HM 11 Bermuda New York, NY 10001
(441) 296-8240 (800) 767-1553
(Address, including zip code, and telephone number, including (Name, address,
including zip code, and telephone area code, of registrant's principal
executive office) number, including area code, of agent for service))
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Copy to:
Immanuel Kohn, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005-1702
(212) 701-3000
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Approximate date of commencement of proposed sale to the public: From time
to time after the registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Proposed
maximum Amount of
Title of each class of aggregate offering price(1) registration fee(2)
securities to be registered
Unsecured debt securities
Preference shares, par value U.S. $0.01 per
preference share
Common shares, par value U.S. $0.01 per
common share
Common shares, par value U.S. $0.01 per
common share, as may be issued from time
to time upon conversion or exchange of the
preference shares and unsecured
debt securities being registered
Units consisting of two or more of the above
Total $500,000,000 $46,000
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(1) There are being registered under this registration statement such
indeterminate number of common shares of the registrant, such indeterminate
number of preference shares of the registrant and such indeterminate
principal amount of unsecured debt securities of the
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registrant as shall have an aggregate initial offering price not to exceed
$500,000,000. If any debt securities are issued at an original issue
discount, then the securities registered shall include such additional
unsecured debt securities as may be necessary such that the aggregate
initial public offering price of all securities issued pursuant to this
registration statement will equal $500,000,000. In addition, pursuant to
Rule 416 under the Securities Act of 1933, this registration statement will
cover such indeterminate number of shares of common stock of the registrant
that may be issued in respect of stock splits, stock dividends and similar
transactions. Any securities registered under this registration statement
may be sold separately or as units with other securities registered under
this registration statement. The proposed maximum initial offering price
per security will be determined from time to time by the registrant in
connection with the sale of the securities registered under this
registration statement.
(2) The estimated registration fee for the common shares, preference shares and
unsecured debt securities has be been calculated pursuant to Rule 457(o).
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this registration statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers to buy these
securities in any jurisdiction where the offer is not permitted.
PRELIMINARY PROSPECTUS
Subject to Completion, February 12, 2002
$500,000,000
Arch Capital Group Ltd.
Common Shares
Preference Shares
Unsecured Debt Securities
We may offer from time to time:
o Common shares
o Preference shares
o Unsecured debt securities
A prospectus supplement, which must accompany this prospectus, will describe the
securities we are offering and selling, as well as the specific terms of the
securities. Those terms may include, among others, as applicable:
o Maturity o Redemption terms
o Interest rate o Conversion terms
o Dividend rate o Listing on a securities exchange
o Sinking fund terms o Amount payable at maturity
o Ranking o Liquidation preference
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The securities may be offered in amounts, at prices and on terms determined at
the time of offering. The securities may be sold directly to you through agents
which we may select or through underwriters and dealers which we may select. If
we use agents, underwriters or dealers to sell the securities, we will name them
and describe their compensation in a prospectus supplement.
We will provide the specific terms of the securities of the securities in
supplements to this prospectus. You should read this prospectus and the
prospectus supplement carefully before you invest in the securities. This
prospectus may not be used to consummate sales of securities unless accompanied
by a prospectus supplement.
Our common shares are traded on the Nasdaq National Market under the symbol
"ACGL." The closing price of our common shares was $26.62 per share on February
11, 2002.
, 2002
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TABLE OF CONTENTS
Page
About This Prospectus.........................................................4
Cautionary Note Regarding Forward Looking Statements..........................5
Where You Can Find More Information...........................................5
Arch Capital Group Ltd........................................................7
Use of Proceeds...............................................................7
Ratio of Earnings to Fixed Charges and Preference Share Dividends.............7
General Description of the Offered Securities.................................8
Description of Share Capital..................................................8
Description of Debt Securities................................................8
Description of Preference Shares.............................................21
Description of Common Shares.................................................22
Plan of Distribution.........................................................24
Legal Matters................................................................25
Experts......................................................................25
No person has been authorized to give any information or to make any
representation not contained or incorporated by reference in this prospectus or
the accompanying prospectus supplement and, if given or made, such information
or representation must not be relied upon as having been authorized by us or any
underwriter, dealer or agent. Neither this prospectus nor the accompanying
prospectus supplement constitutes an offer to sell or a solicitation of an offer
to buy securities 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 any person to whom it is unlawful to make such offer or
solicitation.
In this prospectus and in the accompanying prospectus supplement, unless
the context requires otherwise, "we," "us" and "our" refer to Arch Capital Group
Ltd. and its subsidiaries.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission (the "SEC") utilizing a "shelf"
registration process, relating to our shares, preference shares and unsecured
debt securities.
Under this shelf process, we may sell the securities described in this
prospectus in one or more offerings for up to an aggregate initial offering
price of $500,000,000. This prospectus provides you with a general description
of the securities that we may offer. This prospectus does not contain all of the
information set forth in the registration statement as permitted by the rules
and regulations of the SEC. For additional information regarding Arch Capital
and the offered securities, please refer to the registration statement. Each
time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with additional information described under the heading "Where You Can
Find More Information."
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We have obtained consent for the issue and transfer of shares to and between
persons regarded as non-resident in Bermuda for exchange control purposes
without specific consent under the Exchange Control Act of 1972 and regulations
thereunder. Issues and transfers of shares to any person regarded as resident in
Bermuda for exchange control purposes require specific prior approval under the
Exchange Control Act of 1972.
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Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This prospectus and the documents
incorporated herein by reference may include forward-looking statements that
reflect our current views with respect to future events and financial
performance. All statements other than statements of historical fact included or
incorporated by reference in this prospectus are forward-looking statements.
Forward-looking statements involve the our current assessment of risks and
uncertainties, including statements regarding anticipated future financial
results and prospects for the insurance and reinsurance markets generally.
Actual events and results and prospects for the insurance and reinsurance
markets may differ materially from those expressed or implied in these
statements. In addition to risks and uncertainties related to the our business
described in filings by us with the Securities Exchange Commission which are
incorporated herein by reference or in the prospectus supplement relating to
specific offerings of securities, the matters described in this prospectus are
subject to various risks and uncertainties including, but not limited to, the
risks relating to the successful implementation of our new business plan and
integration of new management personnel into our existing structure and
conditions in the insurance and reinsurance markets. The foregoing review of
important factors should not be construed as exhaustive and should be read in
conjunction with other cautionary statements that are included herein or
elsewhere. We undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
WHERE YOU CAN FIND MORE INFORMATION
As required by law, we file reports, proxy statements and other information
with the SEC (SEC file number: 0-26456). These reports, proxy statements and
other information contain additional information about us. You can inspect and
copy these materials at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. You can obtain information about
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet website that contains reports, proxy and information
statements and other information regarding companies that file electronically
with the SEC. The SEC's Internet address is http://www.sec.gov. You can also
inspect these materials at the offices of the Nasdaq Stock Market, 1735 K
Street, N.W. Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information by referring
you to another document filed separately with the SEC. Information incorporated
by reference is considered part of this prospectus, except to the extent that
the information is superseded by information in this prospectus. This prospectus
incorporates by reference the following:
o Our annual report on Form 10-K/A for the year ended December 31, 2000.
o Our quarterly report on Form 10-Q/A for the quarter ended March 31,
2001, our quarterly report on Form 10-Q for the quarter ended June 30,
2001 and our quarterly report on Form 10-Q for the quarter ended
September 30, 2001.
o Our current reports on Form 8-K filed on March 15, 2001, July 6, 2001
(as amended on August 7, 2001), November 8, 2001 and January 4, 2002
(as amended on January 7, 2002) and our current report on Form 8-K/A
filed on May 14, 2001.
o Our proxy statement on Schedule 14A for our annual meeting of
shareholders held on June 7, 2001 (other than the sections entitled
"Execution Compensation -- Report of the Compensation and Stock Awards
Committees of the Board of Directors," "Performance Graph," "Report of
the Audit Committee of the Board of Directors" and "Audit Fees").
o Our proxy statement on Schedule 14A for our special general meeting of
shareholders scheduled to be held on March 7, 2002.
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o The description of the common shares contained in our registration
statement on Form 8-A filed on November 7, 2000 pursuant to Section 12
of the Exchange Act, including any amendment or report filed for the
purpose of updating such description.
We are also incorporating by reference the information contained in all
other documents that we file with the SEC between the date of the initial filing
of the registration statement of which this prospectus is a part and the
effectiveness of the registration statement, as well as between the date of this
prospectus and the time that all of the securities registered under the
registration statement are sold. The information contained in any of these
documents will be considered part of this prospectus from the date these
documents are filed.
Any statement contained in this prospectus or in a document incorporated or
deemed to be incorporated by reference herein will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this prospectus.
If you would like to receive a copy of any document incorporated by
reference into this prospectus (which will not include any of the exhibits to
the document other than those exhibits that are themselves specifically
incorporated by reference into this prospectus), you should call or write to
Arch Capital Group Ltd., Clarendon House, 2 Church Street, Hamilton, HM 12
Bermuda, Attention: Secretary (telephone (441) 295-1422). We will provide these
documents, without charge, by first class mail.
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ARCH CAPITAL GROUP LTD.
Arch Capital Group Ltd. ("ACGL"), a Bermuda public limited company with
more than $1 billion in equity capital, provides insurance and reinsurance on a
worldwide basis through its wholly owned subsidiaries.
On November 8, 2000, following the approval by its shareholders, Arch
Capital Group (U.S.) Inc. ("Arch-U.S.") completed an internal reorganization
that resulted in Arch-U.S. becoming a wholly owned subsidiary of ACGL, which was
formed in September 2000 in connection with this reorganization. Arch-U.S. is a
Delaware company formed in March 1995 under the original name of "Risk Capital
Holdings." Arch-U.S. commenced operations in September 1995 following the
completion of its initial public offering. Prior to May 5, 2000, Arch-U.S.
provided reinsurance and other forms of capital for insurance companies through
its wholly owned subsidiary, Arch Reinsurance Company ("Arch Re"), a Nebraska
corporation formed in 1995 under the original name of "Risk Capital Reinsurance
Company." On May 5, 2000, Arch-U.S. sold the reinsurance operations of Arch Re
to Folksamerica Reinsurance Company in an asset sale.
On November 20, 2001, investors led by Warburg Pincus investment funds and
Hellman & Friedman investment funds and certain members of management purchased
from us, for $763.15 million in cash, 35,687,735 series A convertible preference
shares and 3,776,025 class A warrants. The purpose of this investment was to
provide a significant infusion of capital to launch a new underwriting
initiative to meet current and future demand in the global insurance and
reinsurance markets. We have also made several additions to our reinsurance
team, including Paul Ingrey, formerly Chairman of F&G Re; Dwight Evans, formerly
Executive Vice President, North American Property for St. Paul Re and F&G Re;
and Marc Grandisson, Vice President and Actuary of the reinsurance division of
Berkshire Hathaway. In early 2002, Constantine "Dinos" Iordanou, formerly Senior
Executive Vice President of group operations worldwide of Zurich Financial
Services, having previously been CEO of Zurich North America, became president
of our worldwide insurance and reinsurance group and a member of our board of
directors.
In connection with these investments, we have scheduled a special meeting
of our shareholders for March 7, 2002 at which one of the proposals to be voted
upon will be the issuance of common shares upon conversion or exercise of these
new securities in excess of the maximum amount of common shares that is
permitted under Nasdaq Stock Market rules to be issued without shareholder
approval, and the provision for voting power of the preference shares in excess
of the maximum amount that is permitted under Nasdaq Stock Market rules without
shareholder approval. At this special meeting, our shareholders are also being
asked to approve, among other proposals, amendments to our bye-law limiting
voting power of specified shareholders to 9.9% of the voting power of our shares
and our bye-law concerning election of subsidiary directors.
ACGL has its registered office at Clarendon House, 2 Church Street,
Hamilton HM 11 Bermuda and its principal executive offices will be location at
Craig Appin House, 8 Wesley Street, Hamilton HM 11, Bermuda.
USE OF PROCEEDS
Except as may otherwise be described in the prospectus supplement relating
to an offering of securities, the net proceeds from the sale of the securities
included in this prospectus will be used for general corporate purposes. Any
specific allocation of the net proceeds of an offering of securities to a
specific purpose will be determined at the time of such offering and will be
described in the related prospectus supplement.
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERENCE SHARE DIVIDENDS
Because we have, and for the previous five fiscal years have had, no fixed
charges, the ratio of earnings to fixed charges and the ratio of earnings to
combined fixed charges and preference share dividends are not applicable.
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GENERAL DESCRIPTION OF THE OFFERED SECURITIES
We may offer from time to time under this prospectus, separately or
together:
o common shares,
o preference shares and
o unsecured senior or subordinated debt securities.
The aggregate initial offering price of the offered securities will not
exceed $500,000,000.
DESCRIPTION OF SHARE CAPITAL
The authorized share capital of the company consists of 200,000,000 common
shares, par value U.S.$0.01 per share, and 50,000,000 preference shares, par
value U.S.$0.01 per share. As of February 7, 2002, there were 15,733,332 common
shares outstanding and 35,687,735 preference shares outstanding.
DESCRIPTION OF DEBT SECURITIES
General
We may issue debt securities from time to time in one or more series, under
one or more indentures, each dated as of a date on or prior to the issuance of
the debt securities to which it relates. Senior debt securities and subordinated
debt securities may be issued pursuant to separate indentures, a senior
indenture and a subordinated indenture, respectively, in each case between us
and a trustee qualified under the Trust Indenture Act. The form of such
indentures have been filed as an exhibit to the registration statement of which
this prospectus is a part, subject to such amendments or supplements as may be
adopted from time to time. The senior indenture and the subordinated indenture,
as amended or supplemented from time to time, are sometimes referred to
individually as an "indenture" and collectively as the "indentures." Each
indenture will be subject to and governed by the Trust Indenture Act. The
aggregate principal amount of debt securities which may be issued under each
indenture will be unlimited and each indenture will set forth the specific terms
of any series of debt securities or provide that such terms shall be set forth
in, or determined pursuant to, an authorizing resolution, as defined in the
applicable prospectus supplement, and/or a supplemental indenture, if any,
relating to such series.
The statements made below relating to the debt securities and the
indentures are summaries of the anticipated provisions thereof, do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the applicable indenture and any
applicable U.S. federal income tax considerations as well as any applicable
modifications of or additions to the general terms described below in the
applicable prospectus supplement. The applicable prospectus supplement may also
state that any of the terms set forth herein are inapplicable to such series of
debt securities.
Terms
The debt securities will be our unsecured obligations.
The senior debt securities will rank equal in right of payment with all our
other unsecured and unsubordinated indebtedness.
The subordinated debt securities will be subordinated in right of payment
to the prior payment in full of all our senior indebtedness, which is defined in
the section called "-- Ranking of Debt Securities" below.
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The specific terms of each series of debt securities will be set forth in
the applicable prospectus supplement relating thereto, including the following,
as applicable:
(1) the title of such debt securities and whether such debt securities are
senior debt securities or subordinated debt securities and, if
subordinated debt securities, the specific subordination provisions
applicable thereto;
(2) the aggregate principal amount of such debt securities and any limit
on such aggregate principal amount;
(3) the price (expressed as a percentage of the principal amount thereof)
at which such debt securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof;
(4) if convertible into common shares or preference shares, the terms on
which such debt securities are convertible, including the initial
conversion price, the conversion period, any events requiring an
adjustment of the applicable conversion price and any requirements
relating to the reservation of such common shares or preference shares
for purposes of conversion;
(5) the date(s), or the method for determining such date or dates, on
which the principal of such debt securities will be payable and, if
applicable, the terms on which such maturity may be extended;
(6) the rate(s) (which may be fixed or floating), or the method by which
such rate or rates shall be determined, at which such debt securities
will bear interest, if any;
(7) the date(s), or the method for determining such date or dates, from
which any such interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which such dates shall be determined, the
persons to whom such interest shall be payable, and the basis upon
which interest shall be calculated if other than that of a 360-day
year of twelve 30-day months;
(8) the place(s) where the principal of and interest, if any, on such debt
securities will be payable, where such debt securities may be
surrendered for registration of transfer or exchange and where notices
or demands to or upon us in respect of such debt securities and the
applicable indenture may be served;
(9) the period(s), if any, within which, the price or prices at which and
the other terms and conditions upon which such debt securities may,
pursuant to any optional or mandatory redemption provisions, be
redeemed, as a whole or in part, at our option;
(10) our obligation, if any, to redeem, repay or purchase such debt
securities pursuant to any sinking fund (as defined in the applicable
indenture) or analogous provision or at the option of a holder
thereof, and the period or periods within which, the price or prices
at which and the other terms and conditions upon which such debt
securities will be redeemed, repaid or purchased, as a whole or in
part, pursuant to such obligations;
(11) if other than U.S. dollars, the currency or currencies in which the
principal of and interest, if any, on such debt securities are
denominated and payable, which may be a foreign currency or units of
two or more foreign currencies or a composite currency or currencies,
and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of or interest, if any, on
such debt securities may be determined with reference to an index,
formula or other method
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(which index, formula or method may, but need not be, based on the
yield on or trading price of other securities, including United States
Treasury securities, or on a currency, currencies, currency unit or
units, or composite currency or currencies) and the manner in which
such amounts shall be determined;
(13) whether the principal of or interest, if any, on the debt securities
of the series are to be payable, at our election or a holder thereof,
in a currency or currencies, currency unit or units or composite
currency or currencies other than that in which such debt securities
are denominated or stated to be payable and the period or periods
within which, and the terms and conditions upon which, such election
may be made;
(14) provisions, if any, granting special rights to the holders of debt
securities of the series upon the occurrence of such events as may be
specified;
(15) any deletions from, modifications of or additions to the events of
default or our covenants with respect to debt securities of the
series, whether or not such events of default or covenants are
consistent with the events of default or covenants described herein;
(16) whether debt securities of the series are to be issuable initially in
temporary global form and whether any debt securities of the series
are to be issuable in permanent global form and, if so, whether
beneficial owners of interests in any such security in permanent
global form may exchange such interests for debt securities of such
series and of like tenor of any authorized form and denomination and
the circumstances under which any such exchanges may occur, if other
than in the manner provided in the applicable indenture, and, if debt
securities of the series are to be issuable as a global security, the
identity of the depository for such series;
(17) the applicability, if any, of the defeasance and covenant defeasance
provisions of the applicable indenture to the debt securities of the
series;
(18) if exchangeable into another series of debt securities, the terms on
which such debt securities are exchangeable; and
(19) any other terms of the series of debt securities and any additions,
deletions or modifications to the applicable indenture.
If the applicable prospectus supplement provides, the debt securities may
be issued at a discount below their principal amount and provide for less than
the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof. In such cases, all material U.S. federal
income tax considerations will be described in the applicable prospectus
supplement.
The applicable prospectus supplement will contain information with respect
to any deletions from, modifications of or additions to the events of default or
covenants described below.
Denomination, Interest, Registration and Transfer
We will issue the debt securities of each series only in registered form,
without coupons, in denominations of $1,000, or in such other currencies or
denominations as may be set forth in the applicable indenture or specified in,
or pursuant to, an authorizing resolution and/or supplemental indenture, if any,
relating to such series of debt securities.
The principal of and interest, if any, on any series of debt securities
will be payable at the corporate trust office of the trustee, the address of
which will be stated in the applicable prospectus supplement. However, at our
option, interest payments may be made by check mailed to the address of the
person entitled thereto as it appears in the applicable register for such debt
securities.
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Subject to certain limitations imposed upon debt securities issued in
book-entry form, the debt securities of any series:
o will be exchangeable for any authorized denomination of other debt
securities of the same series and of a like aggregate principal amount
and tenor upon surrender of such debt securities at the trustee's
corporate trust office or at the office of any registrar designated by
us for such purpose; and
o may be surrendered for registration of transfer or exchange thereof at
the corporate trust office of the trustee or at the office of any
registrar designated by us for such purpose.
No service charge will be made for any registration of transfer or
exchange, but we may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with certain transfers and
exchanges. We may act as registrar and may change any registrar without notice.
Certain Covenants
The applicable prospectus supplement will describe any material covenants
in respect of a series of debt securities that are not described in this
prospectus.
Unless otherwise indicated in the applicable prospectus supplement, senior
debt securities and the subordinated debt securities will include the provisions
described below.
Merger, Amalgamation, Consolidation or Sale of Assets
We may not (1) consolidate or amalgamate with or merge into any other
person or convey, transfer, sell or lease our properties and assets
substantially as an entirety to any person, (2) permit any person to consolidate
with or merge into us or (3) permit any person to convey, transfer, sell or
lease that person's properties and assets substantially as an entirety to us
unless:
o in the case of (1) and (2) above, if we are not the surviving person,
the surviving person assumes the payment of the principal of, premium,
if any, and interest on the debt securities and the performance of our
other covenants under the applicable indenture, and
o in all cases, immediately after giving effect to the transaction, no
event of default, and no event that, after notice or lapse of time or
both, would become an event of default, will have occurred and be
continuing.
Ranking of Debt Securities
General
We currently conduct substantially all of our operations through our
subsidiaries and our subsidiaries generate substantially all of our operating
income and cash flow. As a result, distributions and advances from our
subsidiaries will be the principal source of funds necessary to meet our debt
service obligations. Contractual provisions or laws, as well as our
subsidiaries' financial condition and operating and regulatory requirements, may
limit our ability to obtain cash from our subsidiaries that we require to pay
our debt service obligations. In addition, holders of the debt securities will
have a junior position to the claims of creditors of our subsidiaries on their
assets and earnings.
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Senior debt securities
The senior debt securities will be our unsecured unsubordinated obligations
and will:
o rank equal in right of payment with all our other unsecured and
unsubordinated indebtedness;
o be effectively subordinated in right of payment to all our secured
indebtedness to the extent of the value of the assets securing such
indebtedness; and
o be effectively subordinated to all of our subsidiaries' indebtedness.
Except as otherwise set forth in the applicable senior indenture or
specified in an authorizing resolution and/or supplemental indenture, if any,
relating to a series of senior debt securities to be issued, there will be no
limitations in any senior indenture on the amount of additional indebtedness
which may rank equal with the senior debt securities or on the amount of
indebtedness, secured or otherwise, which may be incurred by any of our
subsidiaries.
Subordinated debt securities
The subordinated debt securities will be our unsecured subordinated
obligations. Unless otherwise provided in the applicable prospectus supplement,
the payment of principal of, interest on and all other amounts owing in respect
of the subordinated debt securities will be subordinated in right of payment to
the prior payment in full in cash of principal of, interest on and all other
amounts owing in respect of all of our senior indebtedness. Upon any payment or
distribution of our assets of any kind or character, whether in cash, property
or securities, to creditors upon any total or partial liquidation, dissolution,
winding up, reorganization, assignment for the benefit of creditors or
marshaling of our assets or in a bankruptcy, reorganization, insolvency,
receivership or other similar proceeding relating to us or our property, whether
voluntary or involuntary, all principal of, interest on and all other amounts
due or to become due shall be paid, first, to all senior indebtedness in full in
cash, or such payment duly provided for to the satisfaction of the holders of
senior indebtedness, before any payment or distribution of any kind or character
is made on account of any principal of, interest on or other amounts owing in
respect of the subordinated debt securities, or for the acquisition of any of
the subordinated debt securities for cash, property or otherwise.
If any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any senior indebtedness, no payment of
any kind or character shall be made by or on behalf of us or any other person on
our or their behalf with respect to any principal of, interest on or other
amounts owing in respect of the subordinated debt securities or to acquire any
of the subordinated debt securities for cash, property or otherwise.
If any other event of default occurs and is continuing with respect to any
senior indebtedness, as such event of default is defined in the instrument
creating or evidencing such senior indebtedness, permitting the holders of such
senior indebtedness then outstanding to accelerate the maturity thereof and if
the representative (as defined in the applicable indenture) for the respective
issue of senior indebtedness gives written notice of the event of default to the
trustee (a "default notice"), then, unless and until all events of default have
been cured or waived or have ceased to exist or the trustee receives notice from
the representative for the respective issue of senior indebtedness terminating
the blockage period (as defined below), during the 179 days after the delivery
of such default notice (the "blockage period"), neither we nor any other person
on its behalf shall:
(1) make any payment of any kind or character with respect to any
principal of, interest on or other amounts owing in respect of the
subordinated debt securities; or
(2) acquire any of the subordinated debt securities for cash, property or
otherwise.
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Notwithstanding anything herein to the contrary, in no event will a
blockage period extend beyond 179 days from the date the payment on the
subordinated debt securities was due and only one such blockage period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any blockage period with
respect to the senior indebtedness shall be, or be made, the basis for
commencement of a second blockage period by the representative of such senior
indebtedness whether or not within a period of 360 consecutive days unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such blockage period that, in either case, would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
The subordinated indentures will not restrict the amount of our or our
subsidiaries' senior indebtedness or other indebtedness. As a result of the
foregoing provisions, in the event of our insolvency, holders of the
subordinated debt securities may recover ratably less than our general
creditors.
"senior indebtedness," unless otherwise specified in one or more applicable
supplemental indentures or approved pursuant to a board resolution in accordance
with the applicable indenture, means, with respect to us,
(1) the principal (including redemption payments), premium, if any,
interest and other payment obligations in respect of (A) our
indebtedness for money borrowed and (B) our indebtedness evidenced by
securities, debentures, bonds, notes or other similar instruments
issued by us, including any such securities issued under any deed,
indenture or other instrument to which we are a party (including, for
the avoidance of doubt, indentures pursuant to which senior debt
securities have been or may be issued);
(2) all of our obligations issued or assumed as the deferred purchase
price of property, all of our conditional sale obligations, all of our
hedging agreements and agreements of a similar nature thereto and all
agreements relating to any such agreements, and all of our obligations
under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business);
(3) all of our obligations for reimbursement on any letter of credit,
banker's acceptance, security purchase facility or similar credit
transaction;
(4) all obligations of the type referred to in clauses (1) through (3)
above of other persons for the payment of which we are responsible or
liable as obligor, guarantor or otherwise;
(5) all obligations of the type referred to in clauses (1) through (4)
above of other persons secured by any lien on any of our property or
asset (whether or not such obligation is assumed by us) and
(6) any deferrals, amendments, renewals, extensions, modifications and
refundings of all obligations of the type referred to in clauses (1)
through (5) above, in each case whether or not contingent and whether
outstanding at the date of effectiveness of the applicable indenture
or thereafter incurred,
except, in each case, for the subordinated debt securities and any such other
indebtedness or deferral, amendment, renewal, extension, modification or
refunding that contains express terms, or is issued under a deed, indenture or
other instrument, which contains express terms, providing that it is subordinate
to or ranks equal with the subordinated debt securities.
Such senior indebtedness shall continue to be senior indebtedness and be
entitled to the benefits of the subordination provisions of the applicable
indenture irrespective of any amendment, modification or waiver of any term of
such senior indebtedness and notwithstanding that no express written
subordination agreement may have been entered into between the holders of such
senior indebtedness and the trustee or any of the holders.
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Discharge
Under the terms of the indenture, we will be discharged from any and all
obligations in respect of the debt securities of any series and the applicable
indenture (except in each case for certain obligations to register the transfer
or exchange of debt securities, replace stolen, lost or mutilated debt
securities, maintain paying agencies and hold moneys for payment in trust) if we
deposit with the applicable trustee, in trust, moneys or U.S. government
obligations in an amount sufficient to pay all the principal of, and interest
on, the debt securities of such series on the dates such payments are due in
accordance with the terms of such debt securities.
In addition, unless the applicable prospectus supplement and supplemental
indenture provide otherwise, we may elect either (1) to defease and be
discharged from any and all obligations with respect to such debt securities
("defeasance") or (2) to be released from our obligations with respect to such
debt securities under certain covenants in the applicable indenture, and any
omission to comply with such obligations will not constitute a default or an
event of default with respect to such debt securities ("covenant defeasance"):
(1) by delivering all outstanding debt securities of such series to the
trustee for cancellation and paying all sums payable by it under such
debt securities and the indenture with respect to such series; or
(2) after giving notice to the trustee of our intention to defease all of
the debt securities of such series, by irrevocably depositing with the
trustee or a paying agent
(a) in the case of any debt securities of any series denominated in
U.S. dollars, cash or U.S. government obligations sufficient to
pay all principal of and interest on such debt securities; and
(b) in the case of any debt securities of any series denominated in
any currency other than U.S. dollars, an amount of the applicable
currency in which the debt securities are denominated sufficient
to pay all principal of and interest on such debt securities.
Such a trust may only be established if, among other things:
(1) the applicable defeasance or covenant defeasance does not result in a
breach or violation of, or constitute a default under or any material
agreement or instrument to which we are a party or by which we are
bound;
(2) no event of default or event which with notice or lapse of time or
both would become an event of default with respect to the debt
securities to be defeased will have occurred and be continuing on the
date of establishment of such a trust after giving effect to such
establishment and, with respect to defeasance only, no bankruptcy
proceeding with respect to us will have occurred and be continuing at
any time during the period ending on the 91st day after such date; and
(3) we have delivered to the trustee an opinion of counsel (as specified
in the applicable supplemental indenture) to the effect that the
holders will not recognize income, gain or loss for United States
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to United States federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such defeasance or covenant defeasance had not
occurred, and such opinion of counsel, in the case of defeasance, must
refer to and be based upon a letter ruling of the Internal Revenue
Service received by us, a Revenue Ruling published by the Internal
Revenue Service or a change in applicable United States federal income
tax law occurring after the date of the applicable supplemental
indenture.
In the event we effect covenant defeasance with respect to any debt
securities and such debt securities are declared due and payable because of the
occurrence of any event of default, other than an event of default with re-
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spect to any covenant as to which there has been covenant defeasance, the
government obligations on deposit with the trustee will be sufficient to pay
amounts due on such debt securities at the time of the stated maturity but may
not be sufficient to pay amounts due on such debt securities at the time of the
acceleration resulting from such event of default.
Modification and Waiver
We, when authorized by a board resolution, and the trustee may modify,
amend and/or supplement the applicable indenture and the applicable debt
securities with the consent of the holders of not less than a majority in
principal amount of the outstanding debt securities of all series affected
thereby (voting as a single class); provided, however, that such modification,
amendment or supplement may not, without the consent of each holder of the debt
securities affected thereby:
(1) change the stated maturity of the principal of or any installment of
interest with respect to the debt securities;
(2) reduce the principal amount of, or the rate of interest on, the debt
securities;
(3) change the currency of payment of principal of or interest on the debt
securities;
(4) change the redemption provisions, if any, of any debt securities in
any manner adverse to the holders of such series of debt securities;
(5) impair the right to institute suit for the enforcement of any payment
on or with respect to the debt securities; (6) reduce the above-stated
percentage of holders of the debt securities of any series necessary
to modify or amend the indenture relating to such series;
(7) modify the foregoing requirements or reduce the percentage of
outstanding debt securities necessary to waive any covenant or past
default;
(8) in the case of any subordinated indenture, modify the subordination
provisions thereof in a manner adverse to the holders of subordinated
debt securities of any series then outstanding; or
(9) in the case of any convertible debt securities, adversely affect the
right to convert the debt securities into common shares or preference
shares in accordance with the provisions of the applicable indenture.
Holders of not less than a majority in principal amount of the outstanding
debt securities of all series affected thereby (voting as a single class) may
waive certain past defaults and may waive compliance by us with any provision of
the indenture relating to such debt securities (subject to the immediately
preceding sentence); provided, however, that:
(1) without the consent of each holder of debt securities affected
thereby, no waiver may be made of a default in the payment of the
principal of or interest on any debt security; and
(2) only the holders of a majority in principal amount of debt securities
of a particular series may waive compliance with a provision of the
indenture relating to such series or the debt securities of such
series having applicability solely to such series.
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We, when authorized by a board resolution, and the trustee may amend or
supplement the indentures or waive any provision of such indentures and the debt
securities without the consent of any holders of debt securities in some
circumstance, including:
o to cure any ambiguity, omission, defect or inconsistency;
o to make any change that does not, in the good faith opinion of our
board of directors and the trustee, adversely affect the interests of
holders of such debt securities in any material respect.
o to provide for the assumption of our obligations under the applicable
indenture by a successor upon any merger, consolidation or asset
transfer permitted under the applicable indenture;
o to provide any security for or guarantees of such debt securities;
o to add events of default with respect to such debt securities;
o to add covenants that would benefit the holders of such debt
securities or to surrender any rights or powers we have under the
applicable indenture;
o to make any change necessary for the registration of the debt
securities under the Securities Act or to comply with the Trust
Indenture Act of 1939, or any amendment thereto, or to comply with any
requirement of the SEC in connection with the qualification of the
applicable indenture under the Trust Indenture Act of 1939; provided,
however, that such modification or amendment does not, in the good
faith opinion of our board of directors and the trustee, adversely
affect the interests of the holders of such debt securities in any
material respect;
o to provide for uncertificated debt securities in addition to or in
place of certificated debt securities;
o to add to or change any of the provisions of the applicable indenture
to such extent as shall be necessary to permit or facilitate the
issuance of the debt securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons;
o to change or eliminate any of the provisions of the applicable
indenture, provided, however, that any such change or elimination
shall become effective only when there is no debt security outstanding
of any series created prior to the execution of such supplemental
indenture which is entitled to the benefit of such provision;
o to establish the form or terms of debt securities of any series as
permitted by the applicable indenture; or
o to evidence and provide for the acceptance of appointment by a
successor trustee with respect to the debt securities of one or more
series and to add to or change any of the provisions of the applicable
indenture as shall be necessary to provide for or facilitate the
administration of the trusts under the applicable indenture by more
than one trustee, pursuant to the requirements of the applicable
indenture.
Events of Default and Notice Thereof
The following events are "events of default" with respect to any series of
debt securities issued thereunder:
(1) failure to pay interest on any debt securities of such series within
60 days of when due or principal of any debt securities of such series
when due (including any sinking fund installment);
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(2) failure to perform any other agreement contained in the debt
securities of such series or the indenture relating to such series
(other than an agreement relating solely to another series of debt
securities) for 60 days after notice; and
(3) certain events of bankruptcy, insolvency or reorganization with
respect to us.
Additional or different events of default, if any, applicable to the series
of debt securities in respect of which this prospectus is being delivered will
be specified in the applicable prospectus supplement.
The trustee under such indenture shall, within 90 days after the occurrence
of any default (the term "default" to include the events specified above without
grace or notice) with respect to any series of debt securities actually known to
it, give to the holders of such debt securities notice of such default;
provided, however, that, except in the case of a default in the payment of
principal of or interest on any of the debt securities of such series or in the
payment of a sinking fund installment, the trustee for such series shall be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the holders of such debt
securities; and provided, further, that in the case of any default of the
character specified in clause (2) above with respect to debt securities of such
series, no such notice to holders of such debt securities will be given until at
least 30 days after the occurrence thereof. We shall certify to the trustee
quarterly as to whether any default exists.
In the case of an event of default, other than an event of default
resulting from bankruptcy, insolvency or reorganization, with respect to any
series of debt securities shall occur and be continuing, the trustee for such
series or the holders of at least 25% in aggregate principal amount of the debt
securities of such series then outstanding, by notice in writing to us (and to
the trustee for such series if given by the holders of the debt securities of
such series), will be entitled to declare all unpaid principal of and accrued
interest on such debt securities then outstanding to be due and payable
immediately.
In the case of an event of default resulting from certain events of
bankruptcy, insolvency or reorganization, all unpaid principal of and accrued
interest on all debt securities of such series then outstanding shall be due and
payable immediately without any declaration or other act on the part of the
trustee for such series or the holders of any debt securities of such series.
Such acceleration may be annulled and past defaults (except, unless
theretofore cured, a default in payment of principal of or interest on the debt
securities of such series) may be waived by the holders of a majority in
principal amount of the debt securities of such series then outstanding upon the
conditions provided in the applicable indenture.
No holder of the debt securities of any series issued thereunder may pursue
any remedy under such indenture unless the trustee for such series shall have
failed to act after, among other things, notice of an event of default and
request by holders of at least 25% in principal amount of the debt securities of
such series of which the event of default has occurred and the offer to the
trustee for such series of indemnity satisfactory to it; provided, however, that
such provision does not affect the right to sue for enforcement of any overdue
payment on such debt securities.
Conversion and Exchange Rights
The terms and conditions, if any, upon which the debt securities of any
series will be convertible into common shares or preference shares or upon which
the senior debt securities of any series will be exchangeable into another
series of debt securities will be set forth in the prospectus supplement
relating thereto. Such terms will include the conversion or exchange price (or
manner of calculation thereof), the conversion or exchange period, provisions as
to whether conversion or exchange will be at the option of the holders of such
series of debt securities or at our option or automatic, the events requiring an
adjustment of the conversion or exchange price and provisions affecting
conversion or exchange in the event of the redemption of such series of debt
securities.
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The Trustee
The trustee for each series of debt securities will be named in the
prospectus supplement relating to each issuance of debt securities. Each
indenture will contain certain limitations on a right of the trustee, as our
creditor, to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
trustee will be permitted to engage in other transactions; provided, however,
that if it acquires any conflicting interest, it must eliminate such conflict or
resign.
The holders of a majority in principal amount of all outstanding debt
securities of a series (or if more than one series is affected thereby, of all
series so affected, voting as a single class) will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy or
power available to the trustee for such series or all such series so affected.
In case an event of default shall occur (and shall not be cured) under any
indenture relating to a series of debt securities and is actually known to a
responsible officer of the trustee for such series, such trustee shall exercise
such of the rights and powers vested in it by such indenture and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of his own affairs. Subject to such
provisions, the trustee will not be under any obligation to exercise any of its
rights or powers under the applicable indenture at the request of any of the
holders of debt securities unless they shall have offered to the trustee
security and indemnity satisfactory to it.
Governing Law
The indentures and the debt securities will be governed by the laws of the
State of New York.
Global Securities; Book-Entry System
We may issue the debt securities of any series in whole or in part in the
form of one or more global securities to be deposited with, or on behalf of, a
depository (the "depository") identified in the prospectus supplement relating
to such series. Global securities, if any, issued in the United States are
expected to be deposited with The Depository Trust Company ("DTC"), as
depository. Global securities will be issued in fully registered form and may be
issued in either temporary or permanent form. Unless and until it is exchanged
in whole or in part for the individual debt securities represented thereby, a
global security may not be transferred except as a whole by the depository for
such global security to a nominee of such depository or by a nominee of such
depository to such depository or another nominee of such depository or by such
depository or any nominee of such depository to a successor depository or any
nominee of such successor.
The specific terms of the depository arrangement with respect to any series
of debt securities will be described in the prospectus supplement relating to
such series. We expect that unless otherwise indicated in the applicable
prospectus supplement, the following provisions will apply to depository
arrangements.
Upon the issuance of a global security, the depository for such global
security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual debt securities
represented by such global security to the accounts of persons that have
accounts with such depository ("participants"). Such accounts will be designated
by the underwriters, dealers or agents with respect to such debt securities or
by us if such debt securities are offered directly by us. Ownership of
beneficial interests in such global security will be limited to participants or
persons that may hold interests through participants.
We expect that, pursuant to procedures established by DTC, ownership of
beneficial interests in any global security with respect to which DTC is the
depository will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC or its nominee (with respect to
beneficial interests of participants) and records of participants (with respect
to beneficial interests of persons who hold through participants). Neither we
nor the trustee will have any responsibility or liability for any aspect of the
records of DTC or for maintaining,
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supervising or reviewing any records of DTC or any of its participants relating
to beneficial ownership interests in the debt securities. The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and laws may impair the ability
to own, pledge or transfer beneficial interest in a global security.
So long as the depository for a global security or its nominee is the
registered owner of such global security, such depository or such nominee, as
the case may be, will be considered the sole owner or holder of the debt
securities represented by such global security for all purposes under the
applicable indenture. Except as described below or in the applicable prospectus
supplement, owners of beneficial interest in a global security will not be
entitled to have any of the individual debt securities represented by such
global security registered in their names, will not receive or be entitled to
receive physical delivery of any such debt securities in definitive form and
will not be considered the owners or holders thereof under the applicable
indenture. Beneficial owners of debt securities evidenced by a global security
will not be considered the owners or holders thereof under the applicable
indenture for any purpose, including with respect to the giving of any
direction, instructions or approvals to the trustee thereunder. Accordingly,
each person owning a beneficial interest in a global security with respect to
which DTC is the depository must rely on the procedures of DTC and, if such
person is not a participant, on the procedures of the participant through which
such person owns its interests, to exercise any rights of a holder under the
applicable indenture. We understand that, under existing industry practice, if
it requests any action of holders or if an owner of a beneficial interest in a
global security desires to give or take any action which a holder is entitled to
give or take under the applicable indenture, DTC would authorize the
participants holding the relevant beneficial interest to give or take such
action, and such participants would authorize beneficial owners through such
participants to give or take such actions or would otherwise act upon the
instructions of beneficial owners holding through them.
Payments of principal of, and any interest on, individual debt securities
represented by a global security registered in the name of a depository or its
nominee will be made to or at the direction of the depository or its nominee, as
the case may be, as the registered owner of the global security under the
applicable indenture. Under the terms of the applicable indenture, we and the
trustee may treat the persons in whose name debt securities, including a global
security, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither we nor the trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of debt securities (including principal and interest). We believe, however, that
it is currently the policy of DTC to immediately credit the accounts of relevant
participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant global security as shown on the
records of DTC or its nominee. We also expect that payments by participants to
owners of beneficial interests in such global security held through such
participants will be governed by standing instructions and customary practices,
as is the case with securities held for the account of customers in bearer form
or registered in street name, and will be the responsibility of such
participants. Redemption notices with respect to any debt securities represented
by a global security will be sent to the depository or its nominee. If less than
all of the debt securities of any series are to be redeemed, we expect the
depository to determine the amount of the interest of each participant in such
debt securities to be redeemed to be determined by lot. None of us, the trustee,
any paying agent or the registrar for such debt securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the global
security for such debt securities or for maintaining any records with respect
thereto.
Neither we nor the trustee will be liable for any delay by the holders of a
global security or the depository in identifying the beneficial owners of debt
securities and we and the trustee may conclusively rely on, and will be
protected in relying on, instructions from the holder of a global security or
the depository for all purposes. The rules applicable to DTC and its
participants are on file with the SEC.
If a depository for any debt securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by us within 90 days, we will issue individual debt securities in exchange for
the global security representing such debt securities. In addition, we may at
any time and in our sole discretion, subject to any limitations described in the
prospectus supplement relating to such debt securities, determine not to have
any of such debt securities represented by one or more global securities and in
such event we will issue individual debt securities in exchange for the global
security or securities representing such debt securities. Individual debt
securities so issued will be issued in denominations of $1,000 and integral
multiples thereof.
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All moneys paid by us to a paying agent or a trustee for the payment of the
principal of or interest on any debt security which remain unclaimed at the end
of two years after such payment has become due and payable will be repaid to us,
and the holder of such debt security thereafter may look only to us for payment
thereof.
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DESCRIPTION OF PREFERENCE SHARES
Our bye-laws allow the board to authorize the issuance of preference shares
in one or more series, and may fix the rights and preferences of those shares,
including as to dividends, voting (which shall be subject to the limitations
described below under "Description of Common Shares -- Voting Limitation"),
redemption, conversion rights and otherwise.
Issuances of preference shares are subject to the applicable rules of the
Nasdaq National Market or other organizations on whose systems the stock of the
company may then be quoted or listed. Depending upon the terms of preference
shares established by our board of directors, any or all series of preference
shares could have preferences over the common shares with respect to dividends
and other distributions and upon liquidation of the company. Issuance of any
such shares with voting powers, or issuance of additional shares of common
shares, would dilute the voting power of the outstanding common shares.
Terms
The terms of each series of preference shares will be described in any
prospectus supplement related to such series of preference shares.
The board of directors in approving the issuance of a series of preference
shares has authority to determine, and the applicable prospectus supplement may
set forth with respect to such series, the following terms, among others:
o The number of shares constituting that series and the distinctive
designation of that series;
o The dividend rate on the shares of that series, whether dividends
shall be cumulative and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares
of that series;
o The voting rights for shares of the series, if any, in addition to the
voting rights provided by law, and the terms of such voting rights;
o The conversion or exchange privileges for shares of the series, if any
(including, without limitation, conversion into common shares), and
the terms and conditions of such conversion or exchange, including
provisions for adjustment of the conversion or exchange rate in such
events as the board shall determine;
o Whether or not the shares of that series shall be redeemable and, if
so, the terms and conditions of such redemption, including the manner
of selecting shares for redemption if less than all shares are to be
redeemed, the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
o Any sinking fund for the redemption or purchase of shares of that
series and the terms and amount of such sinking fund;
o The right of the shares of that series to the benefit of conditions
and restrictions upon the creation of indebtedness of Arch Capital or
any of our subsidiaries, upon the issue of any additional shares
(including additional shares of such series or any other series) and
upon the payment of dividends or the making of other distributions on,
and the purchase, redemption or other acquisition by us or any of our
subsidiaries of, any of our outstanding shares;
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o The rights of the shares of that series in the event of our voluntary
or involuntary liquidation, dissolution or winding up, and the
relative rights of priority, if any, of payment of shares of that
series; and
o Any other relative participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Material U.S. federal income tax considerations pertaining to an investment
in our preference shares will be described in the applicable prospectus
supplement.
DESCRIPTION OF COMMON SHARES
Holders of the common shares have no preemptive, redemption, conversion or
sinking fund rights. Subject to the voting restrictions described below, holders
of common shares are entitled to one vote per share on all matters submitted to
a vote of holders of common shares and do not have any cumulative voting rights.
In the event of a liquidation, dissolution, or winding up of the company, the
holders of common shares are entitled to share equally and ratably in the assets
of the company, if any, remaining after the payment of all debts and liabilities
of the company and the liquidation preference of any outstanding preference
shares. All outstanding common shares are fully paid and non-assessable. The
board is permitted to authorize the issuance of additional common shares.
Issuances of common shares are subject to the applicable rules of the
Nasdaq National Market or other organizations on whose systems the stock of the
company may then be quoted or listed.
American Stock Transfer & Trust Company is the transfer agent and registrar
of our common shares.
Voting Limitation
Our bye-laws contain a provision limiting the voting rights of any person
who owns (directly, indirectly or constructively under the United States
Internal Revenue Code) shares with more than 9.9% of the total voting power of
all shares entitled to vote generally at an election of directors to 9.9% of
such voting power. This provision does not restrict the ability of any person
holding shares of the company that were either (1) converted from shares of Arch
Delaware owned on September 8, 2000 or (2) issued upon exercise of warrants
owned by such person on September 8, 2000 which were assumed by the company,
from voting such shares except with respect to the election of directors. This
provision is intended to prevent the company from being characterized as a
controlled foreign corporation which could cause U.S. persons owning 10% or more
of our shares to suffer adverse U.S. tax consequences.
The bye-laws of the company also contain a provision limiting the rights of
any group (within the meaning of the Exchange Act) that owns shares with more
than 9.9% of the total voting power of all shares entitled to vote generally at
an election of directors to 9.9% of such voting power. This provision does not
restrict (a) the ability of any such group holding shares of the company that
were converted from shares of Arch Delaware owned on September 8, 2000 or
acquired upon exercise of warrants owned by such person on September 8, 2000
which were assumed by the company or (b) any person or group that the board of
directors, by the affirmation vote of at least 75% of the existing board, may
exempt from this provision, from voting such shares.
One of the proposals to be voted upon at our special general meeting
scheduled to occur on March 7, 2002 would change these voting limitations so
that the limitation would apply only to votes conferred (directly or indirectly
or by attribution) by our shares directly, indirectly or constructively owned
(within the meaning of section 958 of the Code) by any U.S. person, as defined
in section 7701(a)(30) of the Code. If the votes so conferred on such U.S.
person would represent more than 9.9% of the voting power of all shares entitled
to vote generally at an election of directors, the votes so conferred would, in
general, be reduced by whatever amount is necessary so that after the reduction
the votes so conferred on such U.S. person constitutes 9.9% of the total voting
power of all shares of the company entitled to vote generally at any election of
directors.
-22-
Material U.S. federal income tax considerations pertaining to an investment
in our common shares will be described in the applicable prospectus supplement.
The description of the common shares contained in our registration
statement on Form 8-A filed on November 7, 2000 pursuant to Section 12 of the
Exchange Act, including any amendment or report filed for the purpose of
updating such description is incorporated by reference herein.
-23-
PLAN OF DISTRIBUTION
We may sell the securities in any of three ways: (1) through underwriters
or dealers; (2) directly to a limited number of institutional purchasers or to a
single purchaser; or (3) through agents. Any such dealer or agent, in addition
to any underwriter, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933, as amended and any discounts or commissions they receive
from us and any profit on the resale of the offered securities by them may be
treated as underwriting discounts and commissions under the Securities Act. The
terms of the offering of the securities with respect to which this prospectus is
being delivered will be set forth in the applicable prospectus supplement and
will include:
o the name or names of any underwriters, dealers or agents;
o the purchase price of such securities and the proceeds to us from such
sale;
o any underwriting discounts and other items constituting underwriters'
compensation;
o the public offering price; and
o any discounts or concessions which may be allowed or reallowed or paid
to dealers and any securities exchanges on which the securities may be
listed.
If underwriters are used in the sale of securities, such securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by one or more
underwriters acting alone. Unless otherwise set forth in the applicable
prospectus supplement, the obligations of the underwriters to purchase the
securities described in the applicable prospectus supplement will be subject to
certain conditions precedent, and the underwriters will be obligated to purchase
all such securities if any are so purchased by them. Any public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
The securities may be sold directly by us or through agents designated by
us from time to time. Any agents involved in the offer or sale of the securities
in respect of which this prospectus is being delivered, and any commissions
payable by us to such agents, will be set forth in the applicable prospectus
supplement. Unless otherwise indicated in the applicable prospectus supplement,
any such agent will be acting on a best efforts basis for the period of its
appointment.
If dealers are utilized in the sale of any securities, we will sell the
securities to the dealers, as principals. Any dealer may resell the securities
to the public at varying prices to be determined by the dealer at the time of
resale. The name of any dealer and the terms of the transaction will be set
forth in the prospectus supplement with respect to the securities being offered.
Securities may also be offered and sold, if so indicated in the applicable
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms, which we refer to herein as the "remarketing firms,"
acting as principals for their own accounts or as our agents, as applicable. Any
remarketing firm will be identified and the terms of its agreement, if any, with
us and its compensation will be described in the applicable prospectus
supplement. Remarketing firms may be deemed to be underwriters, as that term is
defined in the Securities Act of 1933, as amended, in connection with the
securities remarketed thereby.
-24-
If so indicated in the applicable prospectus supplement, we will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase the securities to which this prospectus and the
applicable prospectus supplement relates from us at the public offering price
set forth in the applicable prospectus supplement, plus, if applicable, accrued
interest, pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. Such contracts will be subject only
to those conditions set forth in the applicable prospectus supplement, and the
applicable prospectus supplement will set forth the commission payable for
solicitation of such contracts.
Underwriters will not be obligated to make a market in any securities. No
assurance can be given regarding the activity of trading in, or liquidity of,
any securities.
Agents, dealers, underwriters and remarketing firms may be entitled, under
agreements entered into with us to indemnification by us against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribution to payments they may be required to make in respect thereof.
Agents, dealers, underwriters and remarketing firms may be customers of, engage
in transactions with, or perform services for, us in the ordinary course of
business.
Each series of securities will be a new issue and, other than the common
shares, which are listed on the Nasdaq National Market, will have no established
trading market. We may elect to list any series of securities on an exchange,
and in the case of the common shares, on any additional exchange, but, unless
otherwise specified in the applicable prospectus supplement, we shall not be
obligated to do so. No assurance can be given as to the liquidity of the trading
market for any of the securities.
The place, time of delivery and other terms of the offered securities will
be described in the prospectus supplement.
LEGAL MATTERS
The validity of the common shares and the preference shares will be passed
upon for us by Conyers Dill & Pearman, Hamilton, Bermuda. Certain legal matters
with respect to the debt securities will be passed upon for us by Cahill Gordon
& Reindel, New York, New York.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K/A for the year ended December 31, 2000 have been
so incorporated in reliance on the report of PricewaterhouseCoopers, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
-25-
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, incurred in connection with the
distribution of the securities being registered (all amounts are estimated
except the SEC registration fee).
SEC registration fee.......................... $ 46,000
Printing and engraving expenses............... 75,000
Legal fees and expenses....................... 500,000
Accounting fees and expenses.................. 150,000
Trustees and transfer agents fees............. 75,000
Miscellaneous................................. 29,000
--------
Total................................... $875,000
========
Item 15. Indemnification of Directors and Officers.
Under Bermuda law, a company is permitted to indemnify any officer or
director, out of the funds of the company, against (a) any liability incurred by
him or her in defending any proceedings, whether civil or criminal, in which
judgment is given in his or her favor, or in which he or she is acquitted, or in
connection with any application under relevant Bermuda legislation in which
relief from liability is granted to him or her by the court and (b) any loss or
liability resulting from negligence, default, breach of duty or breach of trust,
save for his or her fraud and dishonesty.
Our bye-laws provide for us to indemnify our officers, directors and
employees to the fullest extent permitted by law.
Our bye-laws also provide that expenses (including attorneys' fees)
incurred by one of our officers or directors in defending any civil, criminal,
administrative or investigative action, suit or proceeding will be paid by us in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by us pursuant to Bermuda law.
Our bye-laws also provide that our officers and directors will not be
personally liable to us or our shareholders for monetary damages for any breach
of fiduciary duty as a director or officer, except to the extent that such
limitation is prohibited by Bermuda Law.
Item 16. Exhibits.
See Exhibit Index immediately preceding the Exhibits.
II-1
Item 17. Undertakings.
THE UNDERSIGNED REGISTRANTS HEREBY UNDERTAKE:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of the prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(5) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of a registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497 (h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
II-2
(6) For the purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Greenwich, State of Connecticut on February 12, 2002.
ARCH CAPITAL GROUP LTD.
By: /s/ Peter A. Appel
---------------------------------------------
Peter A. Appel
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been duly signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
*
-------------------------------- Chairman and Director February 12, 2002
Robert Clements
/s/ Peter A. Appel
-------------------------------- President and Chief Executive Officer February 12, 2002
Peter A. Appel (Principal Executive Officer) and Director
*
-------------------------------- Executive Vice President and Chief February 12, 2002
John D. Vollaro Financial Officer (Principal
Financial and Accounting Officer)
* Vice Chairman and Director February 12, 2002
--------------------------------
John M. Pasquesi
*
-------------------------------- Director February 12, 2002
John L. Bunce, Jr.
*
-------------------------------- Director February 12, 2002
Michael P. Esposito, Jr..
S-1
Signature Title Date
--------- ----- ----
*
-------------------------------- Director February 12, 2002
Paul B. Ingrey
*
-------------------------------- Director February 12, 2002
Constantine Ioradnou
*
-------------------------------- Director February 12, 2002
Kewsong Lee
*
-------------------------------- Director February 12, 2002
James J. Meenaghan
*
-------------------------------- Director February 12, 2002
Robert F. Works
*By: /s/ Peter A. Appel
--------------------------
Attorney-in-fact
S-2
EXHIBITS
Exhibit
Number Description
------ -----------
1.1* Form of Underwriting Agreement (Equity).
1.2* Form of Underwriting Agreement (Debt securities).
3.1 Memorandum of Association of Arch Capital Group Ltd. (Incorporated by
reference to Arch Capital Group Ltd.'s registration statement on Form S-4
(File No. 333-45418), as filed with the SEC on September 26, 2000.)
3.2 Bye-laws of Arch Capital Group Ltd. (Incorporated by reference to Arch
Capital Group Ltd.'s registration statement on Form S-4 (File No.
333-45418), as filed with the SEC on September 26, 2000.)
3.3 Form of Amended and Restated Bye-law 45 and Bye-law 75. (Incorporated by
reference to the current report on Form 8-K of Arch Capital Group Ltd. as
filed with the SEC on January 4, 2002.)
3.4 Certificate of Designations of Series A Convertible Preference Shares.
(Incorporated by reference to the current report on Form 8-K of Arch
Capital Group Ltd. as filed with the SEC on January 4, 2002.)
4.1 Specimen Common Share Certificate. (Incorporated by reference to the annual
report on Form 10-K/A of Arch Capital Group Ltd. for the year ended
December 31, 2000, as filed with the SEC on August 10, 2001.)
4.2 Form of Senior Indenture.
4.3* Form of Senior Debt Security.
4.4 Form of Subordinated Indenture.
4.5* Form of Subordinated Debt Security.
5.1* Opinion of Conyers Dill & Pearman.
5.2* Opinion of Cahill Gordon & Reindel.
23.1* Consent of Conyers Dill & Pearman (included as part of Exhibit 5.1).
23.2* Consent of Cahill Gordon & Reindel (included as part of Exhibit 5.2).
23.3 Consent of PricewaterhouseCoopers.
24.1 Power of Attorney.
25(a)* Form T-1 Statement of Eligibility of Trustee (Senior Indenture and
Subordinated Indenture).
--------------------------------------
* To be filed as an amendment or as an exhibit to an Exchange Act report of
the Registrant(s) and incorporated herein by reference.