-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kx4vDqwH3bHA3t3wetpyuFPqOEma3qka8AhUaUmI2mxl5KO9Nw9Foe1iF5j+rQJd swsKUAOj307fwfSa3FjkoA== 0000950109-98-003542.txt : 19980605 0000950109-98-003542.hdr.sgml : 19980605 ACCESSION NUMBER: 0000950109-98-003542 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19980601 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TERRA NOVA INSURANCE UK HOLDINGS PLC CENTRAL INDEX KEY: 0000946674 STANDARD INDUSTRIAL CLASSIFICATION: 6331 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-53999 FILM NUMBER: 98634779 BUSINESS ADDRESS: STREET 1: TERRA NOVA HOUSE STREET 2: 41-43 MINCING LAND CITY: LONDON EC3R 7SP ENGL STATE: X0 BUSINESS PHONE: 1712833000 MAIL ADDRESS: STREET 1: TERRA NOVA HOUSE STREET 2: 41-43 MINCING LAND CITY: LONDON EC3R 7SP GREA STATE: X0 ZIP: 00000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TERRA NOVA BERMUDA HOLDING LTD CENTRAL INDEX KEY: 0000935937 STANDARD INDUSTRIAL CLASSIFICATION: 6331 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53999-01 FILM NUMBER: 98634780 BUSINESS ADDRESS: STREET 1: RICHMOND HOUSE 2ND FLOOR STREET 2: 12 PAR-LA-VILLE ROAD CITY: HAMILTON HM 11 BERMU STATE: D0 BUSINESS PHONE: 4112927731 MAIL ADDRESS: STREET 1: RICHMOND HOUSE 2ND FLOOR STREET 2: 12 PAR-LA-VILLE ROAD CITY: HAMILTON HM 11 BERMU STATE: D0 F-4 1 FORM F-4 AND FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1998 REGISTRATION NO. 333-________ ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- FORMS F-4 AND S-4* REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------
TERRA NOVA INSURANCE TERRA NOVA (BERMUDA) (UK) HOLDINGS PLC HOLDINGS LTD. (Exact name of Registrant as specified in its charter) (Exact name of Registrant as specified in its charter) ENGLAND AND WALES 6331 NOT APPLICABLE BERMUDA 6331 NOT APPLICABLE (State or other (Primary Standard (I.R.S. Employer (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Identification No.) jurisdiction of Industrial Identification incorporation or Classification incorporation or Classification No.) organization) Code Number) organization) Code Number) NOT APPLICABLE NOT APPLICABLE (Translation of Registrant's (Translation of Registrant's name into English) name into English) ------------------------ TERRA NOVA HOUSE RICHMOND HOUSE, 2ND FLOOR 41-43 MINCING LAN 12 PAR-LA-VILLE ROAD LONDON EC3R 7SP, GREAT BRITAIN HAMILTON, HM 08, BERMUDA (171) 283-3000 (441) 292-7731 (Address, including zip code, and telephone number, including (Address, including zip code, and telephone number, area code, of Registrant's principal executive offices) including area code, of Registrant's principal executive offices) ------------------------ CT CORPORATION SYSTEM 1633 BROADWAY NEW YORK, NEW YORK 10019 (212) 664-1666 (Name, address, including zip code, telephone number, including area code, of agents ----------------------- Copies of Correspondence to: JEAN M. WAGGETT EDWARD A. PERELL SENIOR VICE PRESIDENT, GENERAL COUNSEL DEBEVOISE & PLIMPTON AND SECRETARY 875 THIRD AVENUE TERRA NOVA (BERMUDA) HOLDINGS LTD. NEW YORK, NEW YORK 10022 RICHMOND HOUSE, 2ND FLOOR (212) 909-6000 12 PAR-LA-VILLE ROAD HAMILTON, HM 08, BERMUDA (441) 292-7731
--------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. --------------------- If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] 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(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. [_]
--------------------- CALCULATION OF REGISTRATION FEE ================================================================================================================================== Title of Each Class of Amount To Be Proposed Maximum Proposed Maximum Securities to Be Registered(1) Offering Price Per Aggregate Offering Amount of Registration Registered Unit (1) Price (1) Fee(1) ---------------------------------------------------------------------------------------------------------------------------------- $100,000,000 7% Senior Notes due 2008 principal amount 100% $100,000,000 $29,500 - - ----------------------------------------------------------------------------------------------------------------------------------- Guarantee of 7% Senior Notes due 2008 N/A N/A N/A (2) ===================================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933. (2) Pursuant to Rule 457(n) under the Securities Act of 1933, no registration fee is payable with respect to the Guarantee. __________________________ The Issuer and the Guarantor hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Issuer and the Guarantor shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - - ---------------------- * This Registration Statement constitutes a filing on Form F-4 for the Exchange Notes and on Form S-4 for the Guarantee. ============================================================================== INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. ***** SUBJECT TO COMPLETION, DATED MAY 29, 1998 PROSPECTUS TERRA NOVA INSURANCE (UK) HOLDINGS PLC OFFER TO EXCHANGE 7% SENIOR NOTES DUE 2008, WHICH WILL BE FULLY AND UNCONDITIONALLY GUARANTEED BY TERRA NOVA (BERMUDA) HOLDINGS LTD. AND WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OLD NOTES (AS DEFINED BELOW) ---------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _____________, 1998, UNLESS EXTENDED. AS DESCRIBED HEREIN, WITHDRAWAL RIGHTS WITH RESPECT TO THE EXCHANGE OFFER ARE EXPECTED TO EXPIRE AT THE EXPIRATION OF THE EXCHANGE OFFER. Terra Nova Insurance (UK) Holdings plc, a public limited company organized under the laws of England and Wales ("UK Holdings" or the "Issuer"), hereby offers (the "Exchange Offer"), upon the terms and subject to the conditions set forth in this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange up to $100.0 million aggregate principal amount of its 7% Senior Notes due 2008 (the "Exchange Notes") which will be fully and unconditionally guaranteed on a senior basis by Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings"), and which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which this Prospectus is a part, for an identical principal amount of its issued and outstanding 7% Senior Notes due 2008 (the "Old Notes"). The Exchange Notes and the Old Notes are collectively referred to herein as the "Senior Notes." The Old Notes were originally issued and sold in a transaction that was exempt from registration under the Securities Act and resold inside the United States to certain qualified institutional buyers in reliance on, and subject to the restrictions imposed pursuant to, Rule 144A under the Securities Act ("Rule 144A"). The terms of the Exchange Notes are identical in all material respects to the terms of the Old Notes, except that (i) the offer and sale of the Exchange Notes has been registered under the Securities Act and therefore the Exchange Notes are not subject to certain restrictions on transfer applicable to the Old Notes, will not bear legends restricting the transferability thereof and will not be entitled to registration rights or other rights under the Registration Rights Agreement (as defined herein), and (ii) the Exchange Notes will not provide for any increase in the interest rate pursuant to the Registration Rights Agreement, which rights and provisions will terminate as to all of the Senior Notes upon the consummation of the Exchange Offer. The Exchange Notes will be issued under the same Indenture (as defined herein) as the Old Notes, and the Exchange Notes and the Old Notes will constitute a single series of debt securities under the Indenture. In the event the Exchange Offer is consummated, any Old Notes which remain outstanding after consummation of the Exchange Offer and the Exchange Notes issued in the Exchange Offer will vote together as a single class for purposes of determining whether holders of a requisite percentage in outstanding principal amount of Senior Notes have taken certain actions or exercised certain rights under the Indenture. See "Description of Exchange Notes" and "The Exchange Offer." The Exchange Notes will mature on May 15, 2008. Interest on the Exchange Notes will accrue from May 18, 1998, the issue date of the Old Notes, and is payable semiannually on November 15 and May 15 of each year, commencing on November 15, 1998. The Exchange Notes will be redeemable, in whole or in part, at the option of the Issuer and at any time, at a redemption price equal to the sum of: (i) the principal amount of the Exchange Notes being redeemed, plus accrued and unpaid interest thereon to the redemption date, and (ii) the Make-Whole Amount (as defined under "Description of Exchange Notes--Optional Redemption"), if any. The Exchange Notes also may be redeemed under circumstances described under "Description of Exchange Notes--Tax Redemption" at 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the redemption date. The Exchange Notes will not be subject to any mandatory sinking fund payment. The Exchange Notes and the guarantee (the "Guarantee") of the Exchange Notes by Bermuda Holdings will constitute unsecured senior obligations of the Issuer and Bermuda Holdings, respectively. The Exchange Notes and the Guarantee will rank pari passu in right of payment with all other senior indebtedness of the Issuer and Bermuda Holdings, respectively, including indebtedness of approximately $75 million pursuant to the Issuer's 7.2% Senior Notes due 2007 (the "1997 Senior Notes") which are fully and unconditionally guaranteed by a guarantee of Bermuda Holdings, as well as any Old Notes not tendered for exchange pursuant to the Exchange Offer. See "Description of Exchange Notes--General" and "-- Guarantee." As of the date hereof, there is no outstanding indebtedness of either the Issuer or Bermuda Holdings which will be subordinate to the Exchange Notes. Because the Issuer and Bermuda Holdings are holding companies, in order for them to make interest and principal payments on the Exchange Notes, they will be dependent on the payment of dividends by their respective insurance company subsidiaries. As a consequence, the Exchange Notes and the Guarantee will be effectively subordinated to all existing and future liabilities of such insurance company subsidiaries, which at March 31, 1998 consisted principally of insurance liabilities and aggregated approximately $2 billion. ____________ SEE "RISK FACTORS" COMMENCING ON PAGE 13 FOR DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF THE OLD NOTES PRIOR TO TENDERING THEIR OLD NOTES IN THE EXCHANGE OFFER. ____________ UNTIL _________, 1998 (180 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ____________ THE DATE OF THIS PROSPECTUS IS ____________, 1998. 2 The Issuer is making the Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the "Commission") as set forth in certain no-action letters addressed to third parties in other transactions (including Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5, 1991), K-III Communications Corporation (available May 14, 1993) and Shearman & Sterling (available July 2, 1993)). However, neither the Issuer nor Bermuda Holdings has sought its own no-action letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offer as it has in such no-action letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Issuer believes that the Exchange Notes issued pursuant to this Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer or an "affiliate" of the Issuer or Bermuda Holdings within the meaning of Rule 405 of the Securities Act) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and that such holder is not participating, and has no arrangement or understanding with any Person to participate, in a distribution (within the meaning of the Securities Act) of such Exchange Notes. Any holder of Old Notes who is an "affiliate" of the Issuer or Bermuda Holdings or who intends to participate in the Exchange Offer for the purpose of distributing Exchange Notes, or any broker-dealer who purchased Old Notes from the Issuer or Bermuda Holdings to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other available exception under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above- mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Notes in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirement of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds Old Notes acquired for its own account as a result of market-making or other trading activities and exchanges such Old Notes for Exchange Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such Exchange Notes. Each holder of Old Notes who wishes to exchange Old Notes for Exchange Notes in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Issuer or Bermuda Holdings, (ii) any Exchange Notes to be received by it are being acquired in the ordinary course of its business, and (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Notes for its account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. A broker- dealer that acquired Old Notes in a transaction other than as part of its market-making or other trading activities will not be able to participate in the Exchange Offer. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the no-action letters referred to above, the Issuer believes that broker-dealers who acquired Old Notes for their own account as a result of market-making activities or other trading activities ("Participating Broker- Dealers"), may fulfill their prospectus delivery requirements with respect to the Exchange Notes received upon exchange of such Old Notes (other than Old Notes which represent an unsold allotment from the original sale of the Old Notes) with a prospectus meeting the requirements of the Securities Act, which may be a prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such Exchange Notes. Subject to certain provisions set forth in the Registration Rights Agreement, the Issuer and Bermuda Holdings have agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such Exchange Notes for a period ending 180 days after the Expiration Date referred to below or, if earlier, when all such Exchange Notes have been disposed of by such Participating Broker-Dealer. See "Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of the Issuer or Bermuda Holdings may not rely on such no-action letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. See "The Exchange Offer--Resales of the Exchange Notes." 3 The Exchange Notes will be a new issue of securities for which there currently is no market and there can be no assurance as to the liquidity of any markets that may develop for the Exchange Notes or the ability of the holders to sell their Exchange Notes, as the case may be. Neither the Issuer nor Bermuda Holdings currently intends to apply for listing of the Exchange Notes on any securities exchange other than on the New York Stock Exchange, Inc. or for quotation through the National Association of Securities Dealers Automated Quotation System. Any Old Notes not tendered and accepted in the Exchange Offer will remain outstanding, will continue to accrue interest and will be entitled to all the same rights and will be subject to the same limitations applicable thereto under the Indenture (except for those rights which terminate upon consummation of the Exchange Offer). Following consummation of the Exchange Offer, the holders of Old Notes will continue to be subject to the existing restrictions upon transfer thereof, and neither the Issuer nor Bermuda Holdings will have any further obligation to such holders to provide for registration under the Securities Act of the Old Notes held by such holders. To the extent that Old Notes are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered Old Notes could be adversely affected. See "Prospectus Summary-- Certain Consequences of a Failure to Exchange Old Notes." THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. Old Notes may be tendered for exchange on or prior to 5:00 p.m., New York City time, ___________, 1998 (such time on such date being hereinafter called the "Expiration Date"), unless the Exchange Offer is extended by the Issuer (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). Tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange. However, the Exchange Offer is subject to certain events and conditions and to the terms and provisions of the Registration Rights Agreement. Old Notes may be tendered in whole or in part in a principal amount of $1,000 and integral multiples thereof. See "The Exchange Offer--Fees and Expenses." Each Exchange Note will bear interest from the most recent date to which interest has been paid or duly provided for on the Old Note surrendered in exchange for such Exchange Note or, if no such interest has been paid or duly provided for on such Old Note, from May 18, 1998. Holders of the Old Notes whose Old Notes are accepted for exchange will not receive accrued interest on such Old Notes. Any waiver, extension or termination of the Exchange Offer will be publicly announced by the Issuer or Bermuda Holdings through a release to the Dow Jones News Service and as otherwise required by applicable law or regulations. The Exchange Notes will be represented by one or more global receipts (each a "Global Receipt") deposited with, or on behalf of, The Depository Trust Company, as Depositary, and the Exchange Notes are expected to trade in the Depositary's Same-Day Funds Settlement System. Secondary market trading activity, if any, for the Exchange Notes will therefore settle in immediately available funds. See "Description of Depositary Agreement." The Issuer intends to list the Exchange Notes on the New York Stock Exchange, Inc. Neither the Issuer nor Bermuda Holdings will receive any proceeds from the Exchange Offer. The Issuer and Bermuda Holdings have agreed to pay all expenses of the Exchange Offer. No dealer manager is being utilized in connection with the Exchange Offer. THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION. 4 AVAILABLE INFORMATION Bermuda Holdings is subject to the periodic reporting and other information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Issuer is exempt from such requirements, but summary financial information of the Issuer will be provided in the reports filed by Bermuda Holdings, as permitted by the rules and regulations of the Commission. Under current law, for as long as the Senior Notes or Bermuda Holdings' Class A Ordinary Shares, par value $5.80 per share, are listed on the New York Stock Exchange, Inc., Bermuda Holdings will be required to file with the Commission annual, quarterly and current financial information on Forms 10-K, 10-Q and 8-K. Such reports and other information filed by Bermuda Holdings pursuant to the Exchange Act may be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's regional offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048, and such material is contained on the worldwide web site maintained by the Commission at http:\\www.sec.gov. Copies of such material may also be obtained at prescribed rates by writing to the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, reports and other material concerning Bermuda Holdings can be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. Whether or not required by the Exchange Act or the rules and regulations of the Commission thereunder, so long as any Senior Notes are outstanding, Bermuda Holdings has agreed to furnish to the holders of Senior Notes all financial information that would be required to be contained in a filing with the Commission on Form 10-K, 10-Q or 8-K if Bermuda Holdings were required to file such Form, including a "Management's Discussion and Analysis of Results of Operations and Financial Condition" and, with respect to the annual financial statements only, a report thereon by Bermuda Holdings' independent public accountants. In addition, whether or not required by the Exchange Act or the rules and regulations of the Commission thereunder, Bermuda Holdings will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to investors who request it in writing. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by Bermuda Holdings with the Commission are incorporated into this Prospectus by reference: (1) Bermuda Holdings' Annual Report on Form 10-K for the year ended December 31, 1997; (2) Bermuda Holdings' Quarterly Report on Form 10-Q for the quarter ended March 31, 1998; and (3) Bermuda Holdings' Current Report on Form 8-K, dated May 28, 1998. Any documents filed by Bermuda Holdings pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the termination of the offering of the Exchange Notes and the Guarantee offered hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Prospectus, shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. BERMUDA HOLDINGS WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE FOREGOING DOCUMENTS). ANY SUCH REQUEST SHOULD BE DIRECTED TO JEAN M. WAGGETT, ESQ., TERRA NOVA (BERMUDA) HOLDINGS LTD., RICHMOND HOUSE, 2ND FLOOR, 12 PAR-LA-VILLE ROAD, HAMILTON HM 08, BERMUDA (TELEPHONE: 441-292-7731)). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY __________, 1998. ENFORCEABILITY OF CIVIL LIABILITIES The Issuer is a public limited company incorporated under the laws of England and Wales, and Bermuda Holdings is a company incorporated under the laws of Bermuda. All of the directors and executive officers of the Issuer, all of the executive officers of Bermuda Holdings, five of the eleven directors of Bermuda Holdings, and the experts named herein are non-residents of the United States, and all or a substantial portion of the assets of the Issuer, Bermuda Holdings and such persons are located outside the United States. It may not be possible for investors to effect service of process within the United States upon such persons or to enforce against any of them, the Issuer or Bermuda Holdings judgments of courts of the United States predicated upon the civil liability provisions of the federal or state securities laws of the United States. The Issuer and Bermuda Holdings have been advised by their respective counsel, Clifford Chance and Conyers, Dill & Pearman, that there is doubt as to the enforceability in the United Kingdom and in Bermuda, in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated solely upon such securities laws. Bermuda Holdings has been informed by Conyers, Dill & Pearman that the United States and Bermuda do not have a treaty providing for reciprocal recognition and enforcement of judgments of U.S. courts in civil and commercial matters and that a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would, therefore, not be automatically enforceable in Bermuda. Bermuda Holdings has also been advised by Conyers, Dill & Pearman that a final and conclusive judgment obtained in federal or state courts in the United States under which a sum of money is payable as compensatory damages (i.e., not being a sum claimed by a revenue authority for taxes or other charges of a similar nature by a governmental authority, or in respect of a fine or penalty or multiple or punitive damages) may be the subject of an action on a debt in the Supreme Court of Bermuda under the common law doctrine of obligation. Such an action should be successful upon proof that the sum of money is due and payable, without having to prove the facts supporting the underlying judgment, as long as: (i) the court that gave the judgment was competent to hear the action in accordance with private international law principles as applied by the courts in Bermuda; and (ii) the judgment was not contrary to public policy in Bermuda, was not obtained by fraud or in proceedings contrary to the natural justice of Bermuda, and was not based on an error in Bermuda law. A Bermuda court may impose civil liability on Bermuda Holdings or its directors or officers in a suit brought in the Supreme Court of Bermuda against Bermuda Holdings or such persons with respect to a violation of U.S. federal securities laws, provided that the facts surrounding such violation constitute or give rise to a cause of action under Bermuda law. Bermuda Holdings and the Issuer have each appointed CT Corporation System, New York, New York, as its agent to receive service of process in actions brought against it, arising out of or in connection with U.S. federal or state securities laws or out of violations of such laws, in any federal or state court in the United States relating to the transactions covered by this Prospectus. CURRENCY In this Prospectus, references to "U.S. dollars," "$" or "cents" are to U.S. currency, and references to "pounds," "sterling," "(Pounds)", "pence" or "p" are to U.K. currency. Bermuda Holdings publishes its consolidated financial statements in U.S. dollars, which is its functional currency. 2 - - -------------------------------------------------------------------------------- PROSPECTUS SUMMARY The following summary is qualified by the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus or incorporated herein by reference. Unless the context requires otherwise and except as provided below, all references in this Prospectus to the "Company" refer to Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings"), a Bermuda holding corporation, and all of its direct and indirect subsidiaries, including its principal subsidiaries, the Issuer, Terra Nova Insurance Company Limited ("Terra Nova"), Terra Nova (Bermuda) Insurance Company Ltd. ("Terra Nova (Bermuda)"), Compagnie de Reassurance d'Ile de France ("Corifrance"). Octavian Syndicate Management Limited ("Octavian") and Terra Nova Capital Limited ("Terra Nova Capital"), through which it conducts substantially all of its operations. Unless otherwise noted, all financial data and ratios included herein have been prepared in accordance with United States generally accepted accounting principles ("GAAP"). COMPANY OVERVIEW OVERVIEW AND MARKETS The Company is a specialty property, casualty, marine, aviation and auto insurance and reinsurance company operating on a worldwide basis through subsidiaries in the London company market and Lloyd's of London (together the "London Market"), in the Bermuda Market, in Paris, France and through branch offices in Toronto, Canada and Brussels, Belgium. Terra Nova, the Company's predecessor and principal subsidiary, was established in 1969 and is believed by management to be one of the largest London Market companies (as defined below). The Company had gross premiums written of $338.2 million for the three months ended March 31, 1998, and had shareholders' equity of $506.0 million at March 31, 1998. The London Market is one of the world's largest insurance and reinsurance marketplaces and attracts business from clients throughout the world who seek flexible and innovative protection for a wide variety of risks. The London Market is composed of Lloyd's and companies with underwriting offices in proximity to Lloyd's ("London Market companies"). The Bermuda Market, comprised of both captive and independent companies, in recent years has become one of the world's largest insurance and reinsurance markets in which international business is written. BUSINESS, PROFITABILITY AND FINANCIAL STRENGTH The Company's principal lines of business consist of classes of (i) non- marine property coverage written largely on a reinsurance basis, (ii) non-marine casualty coverage written both on a primary and a reinsurance basis, (iii) marine and aviation coverage written both on a primary and a reinsurance basis and (iv) auto business written largely on a primary basis, accounting for approximately 38.3%, 18.3%, 33.5%, and 9.9%, respectively, of the Company's gross premiums written for 1997. Additionally, of the Company's gross premiums written for 1997, approximately 51.0% consisted of reinsurance business and approximately 34.5%, 33.5%, and 32.0% were attributable to clients from the U.S., Europe and the rest of the world, respectively. The Company and Terra Nova have a demonstrated history of profits, having been profitable in every year of their combined 28-year existence, except for 1980 and 1992. The weighted average combined and operating ratios of the Company were 99.4% and 74.4%, respectively, for the period from 1995 through 1997. For the three months ended March 31, 1998, the Company had a combined and operating ratio of 99.5% and 82.7%, respectively. The Company's income from continuing operations before income taxes, interest expense, depreciation, amortization and minority interests ("EBITDA") was $108.5 million for 1997 and $35.3 million for the three months ended March 31, 1998. At March 31, 1998, approximately 94.0% of the Company's $1.5 billion investment portfolio consisted of fixed maturity debt securities and cash and cash equivalents, with the balance consisting of equity securities. Of the fixed maturity debt securities, 89.9% were rated "A" or better by Standard & Poor's Corporation ("S&P") and Moody's Investors Service, Inc. ("Moody's"). The Company currently has no investments in high yield fixed income securities, real estate or mortgages. - - -------------------------------------------------------------------------------- 3 - - -------------------------------------------------------------------------------- STRATEGY/STRATEGIC INITIATIVES The Company seeks to enhance its record of profitable growth through its operating and growth strategies. The key elements of its operating strategy consist of: . FLEXIBLE OPERATING STRUCTURE. The Company, with subsidiaries in the London company market, Lloyd's, the Bermuda Market and the Continental European Market, and having offices in London, Bermuda, Paris, Toronto and Brussels, believes that it has a significant competitive advantage through its presence in many of the principal markets where insurance and reinsurance business is transacted. By writing business in many of the major international markets, the Company is able to diversify the risk of its portfolio geographically and, at the same time, take advantage of differences in rates and deductibles throughout the world. Having developed an expertise in writing specific classes of non-marine property, non-marine casualty and marine businesses which may react differently to varying market conditions, the Company may shift its mix of business to those lines where the Company believes the potential for profitable results is greater, while continuing to maintain a smaller presence in less profitable lines in anticipation of market improvements. . LOW OPERATING COSTS. Through an international brokerage system, the Company has access not only to the London and Bermuda Markets, but also to other international insurance and reinsurance centers. By using this variable cost distribution system and operating through a centralized administration organization in London, the Company is able to minimize its fixed overhead costs and therefore better control expense levels as market conditions for writing insurance and reinsurance fluctuate. In addition, with operations in Bermuda, the Company is able to take advantage of Bermuda's favorable tax regime. . SIGNIFICANT LEVELS OF INVESTMENT INCOME. With a $1.5 billion conservatively managed investment portfolio as of March 31, 1998, the Company has been able to generate significant and consistent levels of investment income that have helped to stabilize profits. Of the $1.5 billion of invested assets at March 31, 1998, $766.5 million were held by Terra Nova and $491.6 million were held by Terra Nova (Bermuda), with the balance held by other group companies. The impact of investment income on the Company's results is evidenced by the weighted average operating ratio of the Company over the last three years of 74.4%. The key elements of the Company's growth strategy include: . CAPITAL GROWTH. With an expected pro forma total capitalization as of March 31, 1998 of $669.2 million after giving effect to the offering of the Old Notes and the Debt Tender (as defined herein), the Company expects to continue to increase its business writings in selected areas and to pursue strategic acquisitions which management believes will enhance the Company's presence in targeted markets or provide products for the group as a whole. . EXPECTED FURTHER PARTICIPATION IN THE OCTAVIAN SYNDICATES. In 1997 the Company provided $293.9 million of capacity to Octavian, representing 47% of the Octavian Syndicates, total underwriting capacity for the 1997 year of account. This capacity provided the Company with $204.3 million of gross written premiums for 1997. In 1998, the Company has provided $372.8 million of capacity to Octavian, representing approximately 60% of the Octavian Syndicates' total underwriting capacity for the 1998 year of account. Based on the Octavian Syndicates' recent utilization of capacity, the Company estimates that this capacity will provide the Company with gross premiums written of between $260 and $300 million in 1998. The Company expects to increase the capacity available to the Octavian Syndicates for the 1998 year of account. In addition to providing additional capacity to the Octavian Syndicates, the Company may increase its involvement in Lloyd's in the future, through acquiring the rights to manage additional syndicates or employing additional underwriters. The number of syndicates managed by Octavian increased to eight for the 1998 year of account. . GROWTH IN CONTINENTAL EUROPE. On September 8, 1997, the Company acquired Compagnie de Reassurance d'Ile de France, Corifrance, based in Paris. Corifrance is a French reinsurance company which transacts business internationally, although mainly outside the United States. Its premium volume in 1997 was $24 million, of which $2.4 million was reflected in the Company's financial statements for the year ended December 31, 1997. RECENT DEVELOPMENTS On May 4, 1998, William O. Bailey retired as Chairman, President and Chief Executive Officer of the Company. On the same day, John J. Dwyer was appointed Chairman and Nigel H.J. Rogers was appointed Chief Executive Officer of the Company. - - -------------------------------------------------------------------------------- 4 - - -------------------------------------------------------------------------------- RELATED TRANSACTION On April 20, 1998, the Issuer commenced a tender offer to purchase all of its 10 3/4% Senior Notes due 2005 (the "1995 Senior Notes"). Concurrently with the tender offer, the Issuer commenced a related consent solicitation to eliminate substantially all of the restrictive covenants relating to the 1995 Senior Notes. The offer to purchase the outstanding 1995 Senior Notes and the related consent solicitation are hereafter referred to as the "Debt Tender." As of May 1, 1998, all of the outstanding 1995 Senior Notes had been tendered. At the closing of the Debt Tender on May 18, 1998, the Issuer purchased all of the outstanding 1995 Senior Notes. - - -------------------------------------------------------------------------------- 5 ________________________________________________________________________________ ORGANIZATION The Company and its principal subsidiaries are currently organized as follows: [CHART APPEARS HERE] ________________________________________________________________________________ 6 - - -------------------------------------------------------------------------------- THE EXCHANGE OFFER The Exchange Offer......................... Up to $100.0 million aggregate principal amount of Exchange Notes are being offered in exchange for a like aggregate principal amount of Old Notes. The Issuer is making the Exchange Offer in order to satisfy its obligations under the Registration Rights Agreement, dated as of May 18, 1998, by and among the Issuer, Bermuda Holdings and the Initial Purchaser (the "Registration Rights Agreement") relating to the Old Notes. For a description of the procedures for tendering Old Notes, see "The Exchange Offer--Procedures for Tendering Old Notes." Expiration Date............................ 5:00 p.m., New York City time, on ________, 1998 (such time on such date being hereinafter called the "Expiration Date") unless the Exchange Offer is extended by the Issuer or Bermuda Holdings (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). Any waiver, extension or termination of the Exchange Offer will be publicly announced by the Issuer or Bermuda Holdings through a release to the Dow Jones News Service and as otherwise required by applicable law or regulations. See "The Exchange Offer--Terms of the Exchange Offer; Period for Tendering Old Notes." Certain Conditions to the Exchange Offer... The Exchange Offer is subject to certain conditions. The Issuer reserves the right, subject to applicable law, at any time and from time to time, (i) to delay the acceptance of the Old Notes for exchange, (ii) to amend or terminate the Exchange Offer if certain specified conditions have not been satisfied, as set forth under "The Exchange Offer--Certain Conditions to the Exchange Offer," (iii) to extend the Expiration Date of the Exchange Offer and retain all Old Notes tendered pursuant to the Exchange Offer, subject, however, to the right of holders of Old Notes to withdraw their tendered Old Notes, or (iv) to amend the terms of the Exchange Offer in any manner deemed by it to be advantageous to the holders of the Old Notes. See "The Exchange Offer--Terms of the Exchange Offer; Period for Tendering Old Notes." Withdrawal Rights.......................... Tenders of Old Notes may be withdrawn at any time prior to the Expiration Date by delivering a written notice of such withdrawal to the Exchange Agent in conformity with certain procedures set forth below under "The Exchange Offer-- Withdrawal Rights." Procedures for Tendering Old Notes......... Tendering holders of Old Notes must complete and sign a Letter of Transmittal in accordance with the instructions contained herein and therein and forward the same by mail, facsimile or hand delivery, together with any other required documents, to the Exchange Agent (as defined below) at the address set forth herein and effect a tender of Old Notes pursuant to the procedures for book-entry transfers as provided for herein by the Expiration Date, either with a timely confirmation of book-entry transfer (a "Book-Entry Confirmation") or in compliance with the specified procedures for guaranteed delivery of Old Notes. Certain brokers, dealers, commercial banks, trust companies and other nominees may also effect tenders by book-entry transfer. Holders of Old Notes in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Old Notes pursuant to the Exchange Offer. See "The Exchange Offer-- Procedures for Tendering Old Notes." Letters of Transmittal and Book-Entry Confirmations should not be sent to the Issuer or Bermuda Holdings. Such documents should only be sent to the Exchange Agent. Questions regarding how to tender and requests for information should be directed to the Exchange Agent. See "The Exchange Offer--Exchange Agent." Guaranteed Delivery Procedures............. Holders of Old Notes who wish to tender their Old Notes and who cannot deliver Book-Entry Confirmations, a Letter of Transmittal or any other document required by the Letter of Transmittal to the Exchange Agent - - -------------------------------------------------------------------------------- 7 - - -------------------------------------------------------------------------------- prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures." Resales of Exchange Notes........ The Issuer is making the Exchange Offer in reliance on the position of the staff of the Division Corporation Finance of the Commission as set forth in certain no-action letters addressed to third parties in other transactions (including Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5, 1991), K-III Communications Corporation (available May 14, 1993) and Shearman & Sterling (available July 2, 1993)). However, neither the Issuer nor Bermuda Holdings has sought its own no-action letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offer as it has in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Issuer believes that Exchange Notes issued pursuant to this Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker- dealer or an "affiliate" of the Issuer or Bermuda Holdings within the meaning of Rule 405 of the Securities Act) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and that such holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such Exchange Notes. However, any holder of Old Notes who is an "affiliate" of the Issuer or Bermuda Holdings or who intends to participate in the Exchange Offer for the purpose of distributing the Exchange Notes, or any broker-dealer who purchased the Old Notes from the Issuer or Bermuda Holdings to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Notes in the Exchange Offer and (c) must comply with registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds Old Notes acquired for its own account as a result of market-making or other trading activities and exchanges such Old Notes for Exchange Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such Exchange Notes. Each holder of Old Notes who wishes to exchange Old Notes for Exchange Notes in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Issuer or Bermuda Holdings within the meaning of Rule 405 under the Securities Act, (ii) any Exchange Notes to be received by it are being acquired in the ordinary course of its business, and (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus - - -------------------------------------------------------------------------------- 8 - - -------------------------------------------------------------------------------- meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. A broker- dealer that acquired Old Notes in a transaction other than as part of its market-making or other trading activities will not be able to participate in the Exchange Offer. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the no-action letters referred to above, the Issuer believes that broker-dealers who acquired Old Notes for their own accounts as a result of market-making activities or other trading activities ("Participating Broker-Dealers") may fulfill their prospectus delivery requirements with respect to the Exchange Notes received upon exchange of such Old Notes with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such Exchange Notes. Subject to certain provisions set forth in the Registration Rights Agreement and the limitations described below under "The Exchange Offer--Resale of Exchange Notes," the Issuer and Bermuda Holdings have agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such Exchange Notes for a period ending 180 days after the Expiration Date (subject to extension under certain limited circumstances) or, if earlier, when all such Exchange Notes have been disposed of by such Participating Broker-Dealer. See "Plan of Distribution." Any Participating Broker- Dealer who is an "affiliate" of the Issuer or Bermuda Holdings may not rely on such no-action letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. See "The Exchange Offer--Resales of Exchange Notes." Acceptance of Old Notes for Exchange... Subject to the terms and conditions of the Exchange Offer, including the reservation of certain rights by the Issuer and Bermuda Holdings, the Issuer will accept for exchange any and all Old Notes which are properly tendered in the Exchange Offer, and not withdrawn, prior to the Expiration Date. Subject to such terms and conditions, the Exchange Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Acceptance of Old Notes for Exchange." Exchange Agent......................... The exchange agent with respect to the Exchange Offer is The Chase Manhattan Bank (the "Exchange Agent"). The address and telephone and facsimile numbers of the Exchange Agent are set forth in "The Exchange Offer--Exchange Agent" and in the Letter of Transmittal. Use of Proceeds........................ Neither the Issuer nor Bermuda Holdings will receive any cash proceeds from the issuance of the Exchange Notes offered hereby. See "Use of Proceeds." Certain United States Federal Income Tax Considerations................ Holders of Old Notes should review the information set forth under "Certain Tax Consequences of the Exchange Offer" prior to tendering Old Notes in the Exchange Offer. - - -------------------------------------------------------------------------------- 9 - - -------------------------------------------------------------------------------- THE EXCHANGE NOTES Securities Offered..................... Up to $100.0 million principal amount of 7% Senior Notes due 2008. The Exchange Notes will be issued and the Old Notes were issued under an Indenture dated as of May 18, 1998 (the"Indenture") between the Issuer, Bermuda Holdings and The Chase Manhattan Bank (the "Trustee"). The Exchange Notes and any Old Notes which remain outstanding after consummation of the Exchange Offer will constitute a single series of debt securities under the Indenture and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount thereof have taken certain actions or exercised certain rights under the Indenture. See "Description of Exchange Notes--General." The terms of the Exchange Notes are identical in all material respects to the terms of the Old Notes, except that (i) the offer and sale of the Exchange Notes have been registered under the Securities Act and therefore the Exchange Notes are not subject to certain restrictions on transfer applicable to the Old Notes, will not bear legends relating thereto and will not be entitled to registration rights or other rights under the Registration Rights Agreement, and (ii) the Exchange Notes will not provide for any increase in the interest rate thereof, which rights and provision will terminate as to all of the Senior Notes upon the consummation of the Exchange Offer. See "Description of Old Notes" and "Description of Exchange Notes." Maturity Date.......................... May 15, 2008. Interest............................... Interest on the Exchange Notes will accrue at the rate of 7% per annum and is payable semi-annually on November 15 and May 15 of each year, commencing on November 15, 1998. Each Exchange Note will bear interest from May 18, 1998, the issue date for the Old Notes. Holders of the Old Notes whose Old Notes are accepted for exchange will not receive accrued interest on such Old Notes and will be deemed to have waived the right to receive any interest on such Old Notes accrued, from and after May 18, 1998. Guarantee.............................. The Exchange Notes will be fully and unconditionally guaranteed on a senior basis by Bermuda Holdings. See "Description of Exchange Notes-- Guarantee." Ranking................................ The Exchange Notes and the Guarantee will constitute unsecured senior obligations of the Issuer and Bermuda Holdings, respectively, and will rank pari passu in right of payment with all other senior indebtedness, if any, of the Issuer and Bermuda Holdings, respectively. Because the Issuer and Bermuda Holdings are holding companies, the Exchange Notes and the Guarantee will be effectively subordinated to all existing and future liabilities of their respective insurance company subsidiaries. See "Risk Factors--Holding Company Structure; Dividend Restrictions." Optional Redemption.................... The Exchange Notes are redeemable at the option of the Issuer at any time in whole or in part, at a redemption price equal to the sum of (i) the principal amount of the Exchange Notes being redeemed, plus accrued and unpaid interest thereon to the redemption date, and (ii) the Make-Whole Amount, if any. See "Description of Exchange Notes--Optional Redemption." - - -------------------------------------------------------------------------------- 10 - - -------------------------------------------------------------------------------- Tax Redemption......................... The Exchange Notes are redeemable at the option of the Issuer, under certain circumstances, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, in the event that withholding of taxes is required by any Relevant Jurisdiction (as defined herein) with respect to interest payments to United States holders of the Exchange Notes. See "Description of Exchange Notes--Tax Redemption." Listing................................ The Issuer intends to list the Exchange Notes on the New York Stock Exchange, Inc. Absence of Market for the Exchange Notes.................................. The Exchange Notes will be a new issue of securities for which there currently is no market and there can be no assurance as to the liquidity of any market that may develop for the Exchange Notes or the ability of the holders to sell their Exchange Notes, as the case may be. The Issuer and Bermuda Holdings currently do not intend to apply for listing of the Exchange Notes on any securities exchange other than the New York Stock Exchange, Inc. or for quotation through the National Association of Securities Dealers Automated Quotation System. Use of Proceeds........................ Neither the Issuer nor Bermuda Holdings will receive any cash proceeds from the issuance of the Exchange Notes offered hereby. The net proceeds received from the issuance and sale of the Old Notes, together with the available cash of the Issuer, were used to fund the Debt Tender. See "Use of Proceeds." Book-Entry; Form....................... The Exchange Notes will initially be issued as one or more global notes without coupons in bearer form (the "Global Note"), which will be deposited with Chase Manhattan Bank Luxembourg S.A., as custodian thereof (the "Custodian"), for the benefit of The Chase Manhattan Bank, as depositary (the "Depositary"), pursuant to the Depositary Agreement (as defined herein). The Depositary will issue one or more global receipts representing the Exchange Notes, which will be delivered and registered in the name of DTC or its nominee. Beneficial interests in the Exchange Notes will be shown on, and transfers thereof effective only through, the records maintained in book- entry form by DTC and its participants. See "Description of Exchange Notes-- General" and "Description of Depositary Agreement--General." CERTAIN CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES The sale of the Old Notes was not registered under the Securities Act or any state securities laws and therefore the Old Notes may not be offered, sold or otherwise transferred, except in compliance with the registration requirements of the Securities Act and any other applicable securities laws, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case in compliance with certain other conditions and restrictions, including the Issuer's, Bermuda Holdings' and the Trustee's right in certain cases to require the delivery of opinions of counsel, certifications and other information prior to any such transfer. Old Notes which remain outstanding after consummation of the Exchange Offer will continue to bear a legend reflecting such restrictions on transfer. In addition, upon consummation of the Exchange Offer, holders of Old Notes which remain outstanding will not be entitled to any rights to have the resale of such Old Notes registered under the Securities Act or to any similar rights under the Registration Rights Agreement. Neither the Issuer nor Bermuda Holdings currently intends to register under the Securities Act the resale of any Old Notes which remain outstanding after consummation of the Exchange Offer. To the extent that Old Notes are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered Old Notes could be adversely affected. In addition, although the Old Notes are eligible for trading in the Depositary's Same-Day - - -------------------------------------------------------------------------------- 11 - - -------------------------------------------------------------------------------- Funds Settlement System, to the extent that Old Notes are tendered and accepted in connection with the Exchange Offer, any trading market for Old Notes which remain outstanding after the Exchange Offer could be adversely affected. The Exchange Notes and any Old Notes which remain outstanding after consummation of the Exchange Offer will constitute a single series of debt securities under the Indenture and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount thereof have taken certain actions or exercised certain rights under the Indenture. See "Description of Exchange Notes-- General." The Old Notes provide that, in the event the Exchange Offer is not consummated or a Shelf Registration Statement (as defined herein) is not declared effective on or prior to November 18, 1998, then the annual interest rate borne by the Old Notes shall be increased to 7.25%. If the Exchange Offer is not consummated or a Shelf Registration Statement is not declared effective by February 18, 1999, then the annual interest rate borne by the Old Notes shall be increased to 7.5%. Upon consummation of the Exchange Offer or the effectiveness of such Shelf Registration Statement, the interest rate borne by the Old Notes will return to 7%. - - -------------------------------------------------------------------------------- 12 RISK FACTORS In addition to the other information contained in this Prospectus the following should be considered carefully in evaluating an investment in the Exchange Notes offered hereby. HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS The Issuer is a holding company whose primary assets are the capital stock of Terra Nova, Octavian and Terra Nova Capital, and Bermuda Holdings is a holding company whose primary assets are the capital stock of the Issuer and Terra Nova (Bermuda) and a loan that has been extended to Terra Nova SAS, the direct parent of Corifrance. Accordingly, substantially all of the Issuer's cash flow is derived from dividends from Terra Nova and substantially all of the Bermuda Holdings' cash flow is derived from dividends from the Issuer and Terra Nova (Bermuda) and interest paid on the Terra Nova SAS loan. The payment of dividends and other payments by Terra Nova and Terra Nova (Bermuda) is subject to restrictions under U.K. law and Bermuda law, respectively. Under U.K. company law, Terra Nova may not declare or pay a dividend except from its distributable profits, which is its accumulated realized profits (so far as not previously used by distribution or capitalization) less its accumulated realized losses (so far as not previously written off in a reduction or reorganization of capital). U.K. insurance company law and regulation require an insurance company, such as Terra Nova, to maintain a minimum level of solvency and provide that such a company may only pay a dividend to the extent that the dividend would not reduce such company's net assets below its minimum level of solvency. In addition, before Terra Nova may declare or pay any dividend, it is required to give 14 days' advance notice to the U.K. HM Treasury - - -- Insurance Directorate Department of Trade and Industry (the "Treasury"), which may direct that no such declaration or payment be made. Under Bermuda insurance law, Terra Nova (Bermuda) is prohibited from declaring or paying any dividends during any financial year if it is in breach of its "minimum solvency margin" or "minimum liquidity ratio" or if the declaration or payment of such dividends would cause it to fail to meet such margin or ratio. Furthermore, if Terra Nova (Bermuda) fails to meet its minimum solvency margin or minimum liquidity ratio on the last day of any financial year, it will be prohibited, without the approval of the Minister of Finance of Bermuda (the "Minister"), from declaring or paying any dividends during the next financial year. In addition, under The Companies Act 1981, a company may not pay a dividend or make a distribution out of contributed surplus if there are reasonable grounds for believing that (a) the company is, or would be, after the payment unable to pay its liabilities as they become due, or (b) the realizable value of the company's assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts. There can be no assurance as to the exact amount of dividend payments, if any, which the Treasury will permit Terra Nova to make in the future or as to what the standards for dividend payments by Terra Nova or Terra Nova (Bermuda) will be in the future. Moreover, the surplus of each of Terra Nova and Terra Nova (Bermuda) will be affected by the value of its respective investment portfolio, which is sensitive to interest rate changes. Because the Issuer and Bermuda Holdings are holding companies, the Exchange Notes and the Guarantee are effectively subordinated to all existing and future liabilities of their respective insurance company subsidiaries which at March 31, 1998 consisted principally of insurance liabilities of an aggregate $2.0 billion calculated in accordance with GAAP. ABILITY TO SERVICE INTEREST AND PRINCIPAL PAYMENTS ON THE SENIOR NOTES The Issuer expects to satisfy its interest payment obligations with respect to the Senior Notes from dividend payments made by Terra Nova as well as capital subscriptions and other payments from Bermuda Holdings. Similarly, Bermuda Holdings' ability to satisfy its obligations under the Guarantee or to make capital subscriptions and other payments to the Issuer is based on dividend payments by the Issuer or Terra Nova (Bermuda). Neither the Issuer nor Bermuda Holdings intends to establish a sinking fund with respect to the Senior Notes. To the extent dividends or other monies received by the Issuer or Bermuda Holdings are insufficient to make, directly or through the Guarantee, interest payments on the Senior Notes and principal payments on the Senior Notes at maturity or upon the occurrence of an Event of Default (as defined herein), the Company anticipates that it may have to borrow additional funds or sell some of its assets. There can be no assurance that such actions could be effected on satisfactory terms, in a timely manner or at all, that they would enable the Issuer or Bermuda Holdings to make any of the foregoing payments on the Senior Notes or that any such actions would be permitted under the Indenture. 13 LEVERAGE As of March 31, 1998, after adjustment to give effect to the issuance and sale of the Senior Notes and the Debt Tender, the Company had outstanding indebtedness of approximately $175 million and shareholders' equity of $494.2 million. The indenture pursuant to which the 1997 Notes were issued, and the Indenture (collectively, the "Indentures") permit the Company to incur additional indebtedness. Management believes that cash flow from operations, together with other available sources of liquidity, will be adequate to permit the Issuer to make required payments of principal and interest on its indebtedness and to fund the working capital requirements of its operating subsidiaries, although there can be no assurance that this will be the case. To the extent that cash flow from operations is insufficient to satisfy the Company's cash requirements, the Company may seek to obtain funds from additional borrowings, sell a portion of the Company's business, investment securities or other assets, engage in other transactions, raise additional equity capital or acquire other businesses that would provide cash flow (in all such cases to the extent permitted by the Indentures). There can be no assurance that such actions could be effected on satisfactory terms, in a timely manner or at all, that they would enable the Issuer or Bermuda Holdings to make any of the payments due on the Senior Notes or that any such actions would be permitted under the Indentures. The Company's leverage could make the Company vulnerable to changes in general economic conditions and impair the Company's ability to obtain additional financing for working capital, acquisitions or general corporate purposes. In addition, as noted above, Bermuda Holdings and the Issuer are dependent on dividend payments from subsidiaries to meet their obligations, including obligations under the Senior Notes. CYCLICALITY OF INSURANCE AND REINSURANCE INDUSTRY; INDUSTRY DEVELOPMENTS The property, casualty and marine insurance and reinsurance industry has a history of being highly cyclical. Demand for reinsurance is influenced significantly by underwriting results of primary property, casualty and marine insurers and prevailing general economic and market conditions, all of which affect liability retention decisions of primary insurers and reinsurance premium rates. The supply of insurance and reinsurance is related directly to prevailing prices and levels of surplus capacity which, in turn, fluctuate in response to changes in rates of return on investments being realized in the property, casualty and marine insurance and reinsurance industry. As a result of the catastrophe losses suffered during the late 1980s and the early 1990s and the contraction in reinsurance capacity caused by the withdrawal of a number of the Company's competitors, property catastrophe reinsurance rates hardened significantly and retentions increased sharply during the period 1991 through 1993. In 1994 through 1997, property catastrophe reinsurance rates fell from the strong levels of 1993. Management believes, in light of its experience with the Company's renewals for 1998 business that premium rates can be expected to decline in 1998 in the absence of a major catastrophe event, but that rates and retention levels in the near future are likely to remain higher than those experienced in 1992. Premium rates for U.S. casualty insurance and reinsurance have generally declined since 1990, primarily because of more predictable forms of coverage, such as claims made, and the effects of lower inflationary expectations. This has resulted in more competitive conditions which have continued in 1998. Since the substantial rate and deductible increases for marine insurance in the 1992 and 1993 underwriting years, prices generally stabilized in 1994 and 1995 and fell in 1996 and 1997. Management believes that increased competition will lead generally to a further decline in rates in 1998. Increased deductibles play an important role in reducing the number of very small claims. In the past, this business was characterized by large volumes of very small claims, arising from very low levels of deductibles which had remained unchanged for a number of years, during which repair costs rose due to inflation and currency fluctuations. There can be no assurance that rates and/or underwriting terms and conditions will not deteriorate further or at other times in the future as a result of additional capital provided by recent or future market entrants or for other reasons. Consolidations within the insurance industry may also reduce the demand for reinsurance, which may adversely affect rates and/or underwriting terms and conditions. COMPETITION The property and casualty insurance and reinsurance industry is highly competitive. The Company competes for its business in the United States and internationally with other Lloyd's syndicates, other London Market companies, other 14 domestic Bermuda reinsurers, domestic United States insurers and reinsurers and other international insurers and reinsurers, many of whom are larger and have greater financial resources than the Company. Additionally, other well- capitalized insurers and reinsurers could start writing, or increase their writing of, the classes of business in which the Company is primarily engaged. Competition in the classes of business which the Company writes is based on many factors, including the perceived overall financial strength of the insurer or reinsurer, claims paying ability rating, premiums charged and other terms and conditions, services provided, reputation and perceived technical ability and experience of staff. Management of the Company believes that its principal competitive strengths are its management and operational flexibility, its expertise in risk assessment and underwriting skills and its relationships with Lloyd's brokers, other leading brokers and reinsurance intermediaries. Ratings have become an increasingly important factor in establishing the competitive position of insurance and reinsurance companies. The Company carries A, A and A+ claims paying ability ratings by S&P, A.M. Best and Duff & Phelps, respectively, which is lower than those held by some of its principal competitors. S&P and Duff & Phelps ratings range from a high "AAA" to a low "CCC", while A.M. Best ratings range from a high "A++" to a low "C-." Claims paying ability ratings are based upon a review of publicly available information and communications between rating agency analysts and the insurance company's management. Such ratings are the opinion of the rating agency giving the rating and are not directed toward the protection of investors. ADEQUACY OF LOSS RESERVES The Company establishes loss reserves for the ultimate payment of all losses and loss adjustment expenses (LAE) incurred with respect to its business. The loss and LAE liabilities consist of two components: case reserves and incurred but not reported (IBNR) reserves. Case reserves are estimates of future loss payments with respect to insured events which have been reported to the insurer. These reports may be made formally by the cedent or informally by other means, such as evaluation of claims by attorneys. The Company determines case reserves on a contract by contract basis. The amount reserved is the amount expected to be ultimately paid and is not discounted or otherwise adjusted for the time value of money. IBNR reserves are actuarially determined and reflect (i) the estimated ultimate loss amount which will be paid by the insurer and (ii) an estimate of possible changes in the value of those claims which have already been reported to the insurer. The particular method of setting IBNR reserves depends upon the class of business involved. The specific techniques involve the use of projections and models based on the Company's or the relevant market's experience and exposure. IBNR reserves reflect a margin for the uncertainty involved as determined by sensitivity tests. While management believes that the Company's reserves for losses and LAE are adequate, there can be no assurances that the Company's ultimate losses and LAE will not deviate, perhaps substantially, from the estimates reflected in its financial statements. If the Company's reserves should prove to be inadequate, the Company will be required to increase reserves, which could have a material adverse effect on the Company's financial condition. REGULATION Terra Nova is a U.K. insurance company authorized by the Treasury to carry on insurance business (including reinsurance) in the U.K. and is subject to regulation and supervision in the U.K. by the Treasury. The Insurance Companies Act 1982, as amended, imposes on U.K. insurance companies numerous requirements, including capital, solvency, liquidity and management standards and auditing and reporting requirements, and further grants to the Treasury powers to supervise, investigate and intervene in the affairs of U.K. insurance companies. As is often the practice of the Treasury in connection with a substantial change of control of a U.K. insurance company, Terra Nova is currently subject to a Notice of Requirements issued by the Secretary of State for Trade and Industry, the predecessor to the Treasury, on May 22, 1995 (as modified by notices dated April 3 and 4, 1996) which, among other things, (i) requires 14 days' advance notice of the declaration or payment of dividends, which declaration or payment may be limited or prohibited by the Treasury, (ii) requires Terra Nova to give notice and, in some instances, obtain Treasury consent, prior to entering into certain transactions with connected persons and (iii) imposes restrictions, subject to obtaining Treasury consent, on the type of investments which Terra Nova can make. Each of Terra Nova Capital and Octavian are subject to regulation and supervision by Lloyd's, including the imposition of capital, solvency and management standards. Terra Nova (Bermuda) is a registered Bermuda insurance company and is subject to regulation and supervision in Bermuda. The Insurance Act 1978, as amended, imposes on Bermuda insurance companies capital, solvency and liquidity standards and auditing and reporting requirements. 15 Neither Terra Nova nor Terra Nova (Bermuda) is registered or licensed as an insurance company in any jurisdiction in the United States. Nevertheless, each state of the United States regulates to an extent the sale of insurance by foreign insurers such as Terra Nova and Terra Nova (Bermuda). The administration of insurance laws and regulations in the United States is vested in state agencies that have broad powers and are concerned primarily with the protection of policyholders. The status of foreign insurance companies within the insurance regulatory framework in the United States has been subject to increased scrutiny by the National Association of Insurance Commissioners (the "NAIC"), state legislatures and insurance regulators, as well as the U.S. Congress. While it is not possible to predict the future impact of changing law or regulation on the Company's operations, such changes could have a material adverse effect on the Company and the insurance industry in general. TAX MATTERS The Company believes that neither Terra Nova nor Terra Nova (Bermuda) will be subject to U.S. tax, other than U.S. excise tax on premiums of Terra Nova (Bermuda) with respect to risks located in the United States and withholding tax on certain U.S. source income, because neither engages in a trade or business in the United States. However, since definitive identification of activities that constitute being engaged in a U.S. trade or business is not provided by the Internal Revenue Code (the "Code") or Treasury Regulations or court decisions, there can be no assurance that the Internal Revenue Service (the "Service") will not contend that Terra Nova (Bermuda) or Terra Nova is engaged in a U.S. trade or business. If Terra Nova (Bermuda) were considered to be engaged in a U.S. trade or business, it would be subject to U.S. federal income tax at regular corporate rates on income attributable to its U.S. trade or business, except to the extent provided by the income tax treaty between the U.S. and Bermuda (the "Bermuda Treaty"), and might also be subject to a 30% "branch profits" tax. There can be no assurance that Terra Nova (Bermuda) is entitled, or in the future will be entitled, to benefits under the Bermuda Treaty. However, if Terra Nova (Bermuda) were so entitled and were considered to be engaged in a U.S. trade or business, it would not be subject to U.S. federal income tax at regular corporate rates except on income attributable to a U.S. permanent establishment. Terra Nova (Bermuda) might, however, be subject to the U.S. branch profits tax if it were engaged in a U.S. trade or business, even if it did not have a permanent establishment in the United States. Although the Company believes that Terra Nova (Bermuda) does not have a U.S. permanent establishment, there can be no assurance that the Service will not contend otherwise. If any subsidiary of UK Holdings were considered to be engaged in a U.S. trade or business, that entity would be subject to U.S. federal income tax at regular corporate rates on income attributable to its U.S. trade or business and might also be subject to branch profits tax, except to the extent provided by the income tax treaty between the U.S. and U.K. (the "U.K. Treaty"). The Company believes that the subsidiaries of UK Holdings will be qualified residents of the U.K. entitled to benefits under the U.K. Treaty and that, accordingly, even if any of those entities were considered to be engaged in a U.S. trade or business, it would be subject to U.S. federal income tax at regular corporate rates only on income attributable to a U.S. permanent establishment and would not be subject to the branch profits tax. Although the Company believes that none of the subsidiaries of UK Holdings has a U.S. permanent establishment, there can be no assurance that the Service will not contend otherwise. The Issuer also believes that its French subsidiary, Corifrance, will likely be entitled to the benefits of the Income Tax Convention between the United States and France, with the result that Corifrance will not be subject to income tax arising from the conduct of a U.S. trade or business unless such income is effectively connected with a U.S. permanent establishment of Corifrance. Corifrance does not believe that it maintains a permanent establishment in the U.S. If the Company or any of its subsidiaries were considered to be subject to U.S. federal income tax in any of the ways described above, the Company's results of operations could be materially adversely affected. ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES There is no existing market for the Exchange Notes and there can be no assurance as to the liquidity of any markets that may develop for the Exchange Notes or the ability of the holders to sell their Exchange Notes, as the case may be. Future trading prices of the Exchange Notes will depend on many factors including, among other things, general economic conditions, government legislation or regulation, prevailing interest rates, the Issuer's and Bermuda Holdings' operating results, and the market for similar securities. 16 ENFORCEMENT OF JUDGMENTS All of the directors and executive officers of the Issuer, all of the executive officers of Bermuda Holdings, five of the eleven directors of Bermuda Holdings, and the experts named herein are non-residents of the United States, and all or a substantial portion of the assets of the Issuer, Bermuda Holdings and most such persons are located outside the United States. It may not be possible for investors to effect service of process within the United States upon such persons or to enforce against any of them, the Issuer or Bermuda Holdings judgments of courts of the United States predicated upon the civil liability provisions of the federal or state securities laws of the United States. The Issuer and Bermuda Holdings have been advised by their respective counsel, Clifford Chance and Conyers, Dill & Pearman, that there is doubt as to the enforceability in the United Kingdom and in Bermuda, in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated solely upon such securities laws. INVESTMENT PERFORMANCE The Company's investment portfolio consists primarily of investment grade securities with fixed maturities. The market value of the Company's investments varies depending on economic and market conditions. Absent other factors, the market values of fixed maturity securities are likely to decline as interest rates rise. The Company may, from time to time, for business or regulatory reasons, be required to sell certain of its investments at a time when their market value is less than the cost of such investments. 17 SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth summary consolidated financial information with respect to the Company and Terra Nova, its predecessor, for the periods indicated. This information should be read in conjunction with the Consolidated Financial Statements of the Company and related notes thereto and "Management's Discussion and Analysis of Results of Operations and Financial Condition" which have been incorporated herein by reference. In respect of Bermuda Holdings, the selected Statement of Operations Data for the years ended December 31, 1995, 1996 and 1997 and the selected Balance Sheet Data as of December 31, 1997 have been derived from the Company's audited Consolidated Financial Statements incorporated herein by reference. The selected Statement of Operations Data for the three months ended March 31, 1997 and 1998 and the selected Balance Sheet Data as of March 31, 1998 have been derived from the Company's unaudited condensed consolidated financial statements incorporated by reference herein. The financial information for the Company as of March 31, 1998 and for the three month periods ended March 31, 1997 and 1998 is unaudited; however, in management's opinion, it includes all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of results for such interim periods. The results of operations for the periods ended March 31, 1997 and 1998 are not necessarily indicative of the operating results for the full year. The Selected Statutory Data for Terra Nova for the year ended December 31, 1997 and for the three months ended March 31, 1998 have been derived from the unaudited return made to the U.K. HM Treasury. The Selected Statutory Data for Terra Nova (Bermuda) for the year ended December 31, 1997 has been derived from the audited statutory financial statements of Terra Nova (Bermuda) and for the three months ended March 31, 1998 has been derived from the unaudited financial statements of Terra Nova (Bermuda). The respective statutory financial information is prepared in accordance with the applicable statutory accounting practices which differ from GAAP.
TERRA NOVA COMPANY --------------------- ------------------------------------------------------------- THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, ------------------------------------------------------------------------------------- 1993 1994 1995 1996 1997 1997 1998 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Statement of Operations Data: Gross premiums written.................. $ 320,183 $ 359,362 $ 302,658 $ 361,010 $ 550,243 $ 227,656 $ 338,237 Net premiums written.................... 262,019 282,503 246,985 311,166 483,545 183,166 281,845 Net premiums earned..................... 229,510 250,434 251,900 278,756 419,069 78,463 134,584 Net investment income................... 46,888 51,575 74,478 78,130 85,130 19,989 22,582 Realized net capital gains on sales of investments......................... 40,533 13,898 9,384 11,750 15,333 5,930 11,388 Total revenues.......................... 314,877 320,722 336,872 378,059 533,835 108,335 171,917 Income from continuing operations before income taxes and minority interests..................... 81,869 50,737 62,433 82,668 91,049 23,482 30,052 Income tax expense ..................... 27,586 16,458 16,630 17,777 17,639 5,338 5,629 Minority interest in income of consolidated subsidiaries.............. -- -- 2,552 985 -- -- -- Income from continuing operations............................. 54,283 34,279 43,251 63,906 73,410 18,144 24,423 Net income ............................. 51,634 27,449 43,251 63,906 73,410 18,144 24,423 Dividends on the convertible redeemable preferred shares............ -- -- 3,700 1,088 -- -- -- Net income to common shareholders........................... 51,634 27,449 39,551 62,818 73,410 18,144 24,423 BALANCE SHEET DATA (AT END OF PERIOD)... Total investments and cash.............. $1,475,556 $1,247,538 $1,497,230 Total assets............................ 2,220,134 1,987,536 2,481,639 Unpaid losses and loss adjustment expenses............................... 1,157,724 1,046,043 1,184,709 Long-term debt.......................... 175,000 100,000 175,000 Total shareholders' equity.............. 481,888 394,926 505,958
(Continued on following page) 18
TERRA NOVA COMPANY -------------------------- ------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------------ 1993 1994 1995 1996 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (Continued from previous page) SELECTED STATUTORY DATA (AT END OF PERIOD)(1) Terra Nova--Capital and surplus................. $ 231,674 Terra Nova (Bermuda)--Capital and surplus........................................ 260,612 OTHER DATA EBITDA(2)........................................ 82,564 51,669 72,889 97,032 108,508 Adjusted EBITDA(3)............................... 42,031 37,771 63,505 85,282 93,175 Loss and loss adjustment expense ratio(4)........ 71.24% 76.53% 71.10% 64.00% 67.41% Underwriting expense ratio(5).................... 29.15 30.25 32.71 33.20 30.81 -------- -------- -------- -------- ---------- Combined ratio(6)................................ 100.39% 106.78% 103.81% 97.20% 98.22% ======== ======== ======== ======== ========== Operating ratio(7)............................... 79.96% 86.19% 74.24% 69.13% 77.91% ======== ======== ======== ======== ========== ---------------------- THREE MONTHS ENDED MARCH 31, ---------------------- 1997 1998 (Continued from previous page) SELECTED STATUTORY DATA (AT END OF PERIOD)(1) Terra Nova--Capital and surplus................. $ 237,446 Terra Nova (Bermuda)--Capital and surplus........................................ 263,567 OTHER DATA EBITDA(2)........................................ 27,966 35,262 Adjusted EBITDA(3)............................... 22,036 23,874 Loss and loss adjustment expense ratio(4)........ 65.34% 70.74% Underwriting expense ratio(5).................... 33.92 28.76 -------- -------- Combined ratio(6)................................ 99.26% 99.50% ======== ======== Operating ratio(7)............................... 73.78% 82.72% ======== ========
(1) Capital and surplus under U.K. and Bermuda law, respectively. (2) EBITDA consists of earnings before interest, taxes, minority interest, depreciation and amortization. EBITDA is presented here not as a measure of operating results, but rather as a measure of the Company's cash flow and debt service ability, and should not be considered as an alternative to net earnings and cash flows determined in accordance with GAAP. Because the Company's ability to obtain dividends from its insurance subsidiaries may be subject to certain restrictions, EBITDA is not necessarily indicative of the Company's ability to service its indebtedness. (3) Adjusted EBITDA is comprised of EBITDA excluding realized gains or losses on sales of investments. (4) Loss and loss adjustment expense ratio represents the sum of losses and loss adjustment expenses as a percentage of net premiums earned. (5) Underwriting expense ratio represents underwriting expenses as a percentage of net premiums earned. (6) Combined ratio represents the sum of the loss and loss adjustment expense ratio and underwriting expense ratio. (7) Operating ratio represents the combined ratio less the ratio of net investment income to net premiums earned. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges for Bermuda Holdings and its consolidated subsidiaries for each of the last five years.
TERRA NOVA COMPANY -------------------------------------------------------------------------- THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, -------------------------------------------------------------------------- 1993 1994 1995 1996 1997 1997 1998 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NM NM 7.07 7.64 7.25 7.44 7.75
In determining the ratio of earnings to fixed charges, earnings are defined as earnings from continuing operations before income taxes and fixed charges. Fixed charges consist of the total of interest on all indebtedness, amortization of deferred debt issuance costs and one-third of operating lease rental expense deemed representative of the interest factor. The ratio of earnings to fixed charges has not been adjusted to reflect minority interests because the shares of capital stock which comprise such minority interests are not entitled to dividends until debt service payments on the 1997 Senior Notes and the Senior Notes have been made. Terra Nova had no indebtedness through December 21, 1994, the date of its acquisition by Bermuda Holdings. 19 USE OF PROCEEDS Neither the Issuer nor Bermuda Holdings will receive any cash proceeds from the issuance of the Exchange Notes offered hereby. The net proceeds received from the issuance and sale of the Old Notes, together with available cash of the Issuer, were used to fund the Debt Tender. CAPITALIZATION The table below summarizes the capitalization of the Company as of March 31, 1998 and as adjusted for the offering of the Senior Notes and the Debt Tender, including the estimated costs of $11.8 million, net of tax, relating to the Debt Tender.
AS OF MARCH 31, 1998 ---------------------- ACTUAL AS ADJUSTED (DOLLARS IN MILLIONS) Senior Notes.................................. $ 0.0 $100.0 1995 Senior Notes............................. 100.0 0.0 1997 Senior Notes............................. 75.0 75.0 Stockholders' Equity: Common Stock............................... 150.5 150.5 Stock Held in Trust........................ (9.5) (9.5) Deferred equity compensation............... 4.0 4.0 Additional paid-in capital................. 111.7 111.7 Retained earnings.......................... 193.0 181.2 Accumulated other comprehensive income/(1)/ 56.3 56.3 ------ ------ Total Stockholders' Equity.................... 506.0 494.2 ------ ------ Total Capitalization.......................... $681.0 $669.2 ====== ======
________________ (1) Following the implementation of SFAS No. 130 "Reporting Comprehensive Income," accumulated other comprehensive income includes unrealized appreciation of investments and cumulative translation adjustments, net of tax. 20 DESCRIPTION OF EXCHANGE NOTES GENERAL The Old Notes were and the Exchange Notes will be issued pursuant to an Indenture (the "Indenture"), dated as of May 18, 1998, among the Issuer, Bermuda Holdings and The Chase Manhattan Bank, as trustee (the "Trustee"). The Indenture has been filed as an exhibit to the registration statement (the "Registration Statement") of which this Prospectus forms a part. The Indenture will be qualified by the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") upon the effectiveness of the Registration Statement. The terms of the Exchange Notes will include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Exchange Notes are subject to all such terms, and holders of Exchange Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary of certain provisions of the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions therein of certain terms used below. The following description of the terms of the Exchange Notes and the guarantee thereof by Bermuda Holdings pursuant to the Indenture or pursuant to guarantees endorsed on the Exchange Notes (both forms of guarantee are hereinafter referred to collectively as the "Guarantee") sets forth certain terms and provisions of the Exchange Notes and the Guarantee. The definitions of certain general terms used in the following summary are set forth below under "--Certain Definitions." The Exchange Notes will rank senior in right of payment to all subordinated indebtedness of the Issuer and pari passu in right of payment with all indebtedness of the Issuer not expressly subordinated or secured. The Exchange Notes will be fully and unconditionally guaranteed on a senior basis by Bermuda Holdings, and the obligations of Bermuda Holdings under the Guarantee will rank senior in right of payment to all subordinated indebtedness of Bermuda Holdings and pari passu in right of payment with all indebtedness of Bermuda Holdings not expressly subordinated or secured. The Exchange Notes and the Old Notes are sometimes referred to as, collectively, the "Senior Notes" and, individually, a "Senior Note." The Old Notes and the Exchange Notes will constitute a single series of debt securities under the Indenture. If the Exchange Offer is consummated, holders of Old Notes who do not exchange their Old Notes for Exchange Notes will vote together with the holders of Exchange Notes for all relevant purposes under the Indenture. In that regard, the Indenture requires that certain actions by the holders thereunder (including acceleration following an "Event of Default") must be taken, and certain rights must be exercised, by specified minimum percentages of the aggregate principal amount of the outstanding debt securities. In determining whether holders of the requisite percentage and principal amount have given any notice, consent or waiver or taken any other action permitted under the Indenture, any Old Notes which remain outstanding after the Exchange Offer will be aggregated with the Exchange Notes, and the holders of such Old Notes and Exchange Notes will vote together as a single series for all such purposes. Accordingly, all references herein to specified percentages in aggregate principal amount of the outstanding Senior Notes shall be deemed to mean, at any time after the Exchange Offer is consummated, such percentage in aggregate principal amount of the Old Notes and Exchange Notes then outstanding. The Old Notes were issued and the Exchange Notes will initially be issued as one or more Global Notes, which Exchange Notes will be deposited with the Custodian, as custodian thereof for the Depositary, pursuant to the Deposit and Custody Agreement, dated as of May 18, 1998 (the "Depositary Agreement"), among the Issuer, Bermuda Holdings, the Custodian and the Depositary. For a description of the Depositary Agreement, see "Description of Depositary Agreement." The Depositary will issue one or more Global Receipts representing the Exchange Notes, each of which the Depositary will deliver to and register in the name of DTC or its nominee. Unless and until all of the beneficial interests in the Global Notes ("Book-Entry Interests") are exchanged for Definitive Senior Notes (as defined herein), the depositary interest to be held by DTC may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor of DTC or a nominee of such successor. The Issuer intends to list the Exchange Notes on the New York Stock Exchange, Inc. 21 GUARANTEE Bermuda Holdings will fully and unconditionally guarantee on a senior basis to each holder of an Exchange Note the due and punctual payment of the principal of and any premium and interest on such Exchange Note (and any Additional Amounts (as defined herein) payable by the Issuer or Bermuda Holdings in respect thereof) when and as the same shall become due and payable, whether at stated maturity, by declaration of acceleration, call for redemption or otherwise, in accordance with the terms of the Exchange Notes and the Indenture. Bermuda Holdings' obligations under the Guarantee will be as if it were a principal debtor and not merely a surety, and will be absolute and unconditional, irrespective of, and will be unaffected by, any invalidity, irregularity or unenforceability of any Exchange Note or the Indenture, any failure to enforce the provisions of any Exchange Note or the Indenture, any waiver, modification or indulgence granted to the Issuer with respect thereto, by the holder of any Exchange Note or the Trustee, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor, provided, however, that, notwithstanding the foregoing, no such waiver, modification or indulgence shall, without the consent of Bermuda Holdings, increase the principal amount of an Exchange Note or the interest rate thereon or increase any premium payable upon redemption thereof. PRINCIPAL, MATURITY AND INTEREST The Senior Notes are limited in an aggregate principal amount to $100.0 million. The Senior Notes will mature on May 15, 2008. Interest on the Senior Notes accrues at the rate of 7% per annum and is payable semi-annually in arrears in cash on each November 15 and May 15, commencing November 15, 1998 (each, an "Interest Payment Date"), to holders of record on the immediately preceding November 1 and May 1, respectively. Each Exchange Note will bear interest from May 18, 1998, the issue date of the Old Notes. Holders of the Old Notes whose Old Notes are accepted for exchange will not receive any accrued interest on such Old Notes, and will be deemed to have waived the right to receive any such accrued interest. Interest is to be computed on the basis of a 360-day year of twelve 30-day months. OPTIONAL REDEMPTION The Issuer shall have the right to redeem the Senior Notes, in whole or in part, at any time and from time to time, subject to the receipt of any consent required under the terms of any Indebtedness of the Issuer which may be outstanding from time to time, upon not less than 30 nor more than 60 days notice, at a redemption price equal to the sum of (i) the principal amount of the Senior Notes being redeemed, plus accrued and unpaid interest thereon to the redemption date, and (ii) the Make-Whole Amount, if any, with respect to such Senior Notes. "Make-Whole Amount" means, in connection with any optional redemption of any Senior Notes, the excess, if any, of (i) the sum, as determined by a Quotation Agent (as defined herein) of the present values of the principal amount of such Senior Notes, together with scheduled payments of interest from the redemption date to the Stated Maturity of the Senior Notes, in each case discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) over (ii) 100% of the principal amount of the Senior Notes to be redeemed. "Adjusted Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, calculated on the third Business Day preceding the redemption date, plus in each case .20%. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term from the redemption date to the Stated Maturity Date of the Senior Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Senior Notes. "Quotation Agent" means the Reference Treasury Dealer appointed by the Issuer. "Reference Treasury Dealer" means: (i) Donaldson, Lufkin & Jenrette Securities Corporation and its respective successors; provided, however, that if the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Issuer shall substitute therefor another Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by the Indenture Trustee after consultation with the Company. 22 "Comparable Treasury Price" means, with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Quotation Agent obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Indenture Trustee by such Quotation Agent at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date. "Additional Amounts" means such additional amounts as may be necessary in order that the amount of distributions then due and payable by the Issuer on the outstanding Senior Notes shall not be reduced as a result of any additional taxes, duties or other governmental charges to which the Issuer has become subject as a result of an event described in "--Tax Redemption." Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Senior Notes to be redeemed at its registered address. Unless the Issuer defaults in payment of the redemption price, on and after the redemption date interest ceases to accrue on such Senior Notes called for redemption. If the Issuer is required to pay any additional taxes, duties or other governmental charges as a result of an event described in "--Tax Redemption," the Issuer will pay on the Senior Notes the Additional Amounts. TAX REDEMPTION The Senior Notes may also be redeemed at the option of the Issuer, in whole but not in part, upon not less than 30 nor more than 60 days' notice given as provided in the Indenture, at any time at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest to the date fixed for redemption if (a) the Issuer is required to issue Definitive Senior Notes (other than upon the request of a holder of Book-Entry Interests following an Event of Default) after using all reasonable efforts to avoid having to issue such Definitive Senior Notes and the Issuer is or would be so required in the absence of any applicable tax treaty on the next succeeding Interest Payment Date to pay Additional Amounts with respect to any of the Senior Notes as described under "--Payment of Additional Amounts" or (b) the Issuer or Bermuda Holdings is or would be so required in the absence of any applicable tax treaty on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Senior Notes as described under "-- Payment of Additional Amounts," and, in either case, the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Issuer. The Issuer or Bermuda Holdings will also pay, or make available for payment, to holders of Senior Notes on the redemption date any Additional Amounts (as described, but subject to the exceptions referred to, under "-- Payment of Additional Amounts") resulting from the payment of such redemption price. SELECTION AND NOTICE For information with respect to the redemption of Book-Entry Interests, see "Description of Depositary Agreement--Redemption or Repurchase." With respect to any outstanding Definitive Senior Notes, if less than all of the definitive registered Senior Notes (the "Definitive Senior Notes") are to be redeemed at any time, selection of Definitive Senior Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee deems fair and appropriate and in compliance with the requirements of such principal national securities exchange, if any, on which the Senior Notes are listed or, if the Senior Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee deems fair and appropriate; provided that no Definitive Senior Notes with a principal amount of $1,000 or less shall be redeemed in part. With respect to any Definitive Senior Notes, notice of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of Definitive Senior Notes to be redeemed at its registered address. If any Definitive Senior Note is to be redeemed in part only, the notice of redemption that relates to such Definitive Senior Note shall state the portion of the principal amount thereof to 23 be redeemed. A new Definitive Senior Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Definitive Senior Note. On and after the redemption date, interest will cease to accrue on all Senior Notes or portions thereof called for redemption. The Issuer or Bermuda Holdings will comply with the Exchange Act and the rules and regulations of the Commission thereunder to the extent applicable to any such redemption. LIENS The Indenture provides that Bermuda Holdings will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness (other than Permitted Liens) on any property or asset now owned or hereafter acquired, or on any income or profits therefrom or assign or convey any right to receive income therefrom, unless all payments due under the Indenture and the Senior Notes are secured on an equal and ratable basis with (or prior to) the obligations so secured until such time as such obligations are no longer secured by a Lien. REPORTS Whether or not required by the Exchange Act, so long as any Senior Notes are outstanding, Bermuda Holdings will furnish to the holders of Senior Notes all financial information that would be required to be contained in a filing with the Commission on Form 10-K, 10-Q or 8-K if Bermuda Holdings were required to file such form, including a "Management's Discussion and Analysis of Results of Operations and Financial Condition," and, with respect to the annual financial statements only, a report thereon by Bermuda Holdings' independent public accountants. In addition, whether or not required by the Exchange Act, Bermuda Holdings will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to investors who request it in writing. See "Available Information." MERGER, CONSOLIDATION OR SALE OF ASSETS The Indenture provides that after the Issue Date, Bermuda Holdings will not, in any transaction, consolidate with or merge with or into any other Person or, directly or indirectly, sell, or otherwise dispose of all or substantially all of its assets in one or more related transactions to any Person or group of affiliated Persons unless, at the time and after giving effect thereto: (i)(A) Bermuda Holdings shall be the continuing corporation, or (B) the Person (if other than Bermuda Holdings) formed by such consolidation, or into which Bermuda Holdings is merged, or the Person that acquires by sale or other disposition the assets of Bermuda Holdings, substantially as an entirety (the "Surviving Entity"), is a corporation duly organized and validly existing under the laws of the United States, the United Kingdom, Bermuda, the Republic of Ireland, Barbados, the Channel Islands, the Cayman Islands or any other jurisdiction that is not materially adverse to the holders of the Senior Notes and shall, in the case of clause (B), expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of Bermuda Holdings under the Guarantee and the Indenture; (ii) immediately before and after such transaction, giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction on a pro forma basis, the Consolidated Net Worth (after giving pro forma effect to such transaction but not including the effect of any purchase accounting adjustments or the accrual of deferred tax liabilities resulting from the transaction) of Bermuda Holdings (or the Surviving Entity if Bermuda Holdings is not the continuing obligor with respect to the Guarantee under the Indenture) is at least equal to the Consolidated Net Worth of Bermuda Holdings immediately before such transaction; (iv) if any of the property or assets of Bermuda Holdings would thereupon become subject to any Lien, the outstanding Senior Notes shall be secured equally and ratably with (or prior to) the obligation or liability secured by such Lien, unless Bermuda Holdings could create such Lien without equally and ratably securing the Senior Notes; and 24 In connection with any consolidation, merger, transfer or lease contemplated hereby, Bermuda Holdings shall deliver to the Trustee an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, transfer or lease and the supplemental indenture in respect thereto comply with the provisions described herein and that all conditions precedent provided for in the Indenture relating to such transaction have been complied with. Upon any consolidation or merger or any sale, assignment, transfer, lease or conveyance or other disposition of all or substantially all of the assets of Bermuda Holdings in accordance with the provisions described in the second preceding paragraph, the successor Person formed by such consolidation or into which Bermuda Holdings is merged or to which such sale, assignment, conveyance, transfer, lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of Bermuda Holdings under the Indenture with the same effect as if such successor Person had been named as Bermuda Holdings therein. When a successor assumes all the obligations of its predecessor under the Indenture and the Senior Notes, the predecessor will be released from those obligations; provided that, in the case of a transfer by lease, the predecessor corporation shall not be released from the payment of principal and interest on the Senior Notes. PAYMENT OF ADDITIONAL AMOUNTS All payments on the Senior Notes, and all payments pursuant to any Guarantee, will be made without deduction or withholding, for or on account of any and all present and future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction or withholding of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the U.K., Bermuda or any relevant jurisdiction or any political subdivision or taxing authority thereof or therein (the "Relevant Jurisdiction") shall at any time be required in respect of any amounts to be paid under the Senior Notes or under the Guarantee, the Issuer or Bermuda Holdings, as applicable, will pay or cause to be paid such additional amounts ("Additional Amounts") as may be necessary in order that the net amounts received by a holder of a Senior Note after such deduction or withholding shall be not less than the amounts specified in such Senior Note to which such holder is entitled; provided, however, that the Issuer or Bermuda Holdings, as applicable, shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge which would not have been imposed but for (i) the existence of any present or former connection between such holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such holder, if such holder is an estate, nominee, trust, partnership or corporation), otherwise than merely by the holding of a Senior Note or the receipt of amounts payable in respect of such Senior Notes, and any Relevant Jurisdiction or such holder being subject to the jurisdiction of any Relevant Jurisdiction, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein or (ii) the presentation of the Senior Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the holder would have been entitled to Additional Amounts had the Senior Notes been presented on the last day of such period of 30 days; (b) any tax, assessment, or other governmental charge that is imposed or withheld by reason of the failure to comply by the holder of the Global Note or, if different, the beneficial owner of the interest payable on the Global Note, with a timely request of the Issuer addressed to such holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such holder or beneficial owner which is required or imposed by a statute, treaty, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) payments in respect of Definitive Senior Notes issued at the request of the holder (including on or after the occurrence of an Event of Default); or (d) any combination of items (a), (b) and (c) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, any Senior Note to any holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor with respect to such fiduciary or member of such partnership or beneficial owner would not have 25 been entitled to any Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of such Senior Note. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default (whatever the reason for such Event of Default and whether or not it shall be voluntary or involuntary or be effected by the operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) default in the payment of interest on any Senior Note when the same becomes due and payable and the continuance of such default for a period of 30 days; or (ii) default in the payment of the principal of (or premium, if any, on) any Senior Note at its Maturity; or (iii) default in the performance, or breach, of any covenant or agreement of the Issuer or Bermuda Holdings under the Indenture (other than the obligations specified in (i), (ii) and (viii)), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Issuer or Bermuda Holdings, as the case may be, by the Trustee or to the Issuer or Bermuda Holdings, as the case may be, and the Trustee by the holders of at least 25% in principal amount of the outstanding Senior Notes a written notice specifying such default or breach and stating that such notice is a "Notice of Default"; or (iv)(A) an event of default shall have occurred under any mortgage, bond, indenture, loan agreement or other document evidencing any issue of Indebtedness of Bermuda Holdings or any Restricted Subsidiary for money borrowed (or the payment of which is guaranteed by Bermuda Holdings or any of its Restricted Subsidiaries), which issue has an aggregate outstanding principal amount of not less than $10.0 million, and such default shall have resulted in such Indebtedness becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable, or (B) a default in any payment when due at final Stated Maturity of any such Indebtedness outstanding in an aggregate principal amount of not less than $10.0 million and, in each case, 10 Business Days shall have elapsed after such event during which period such event shall not have been cured or rescinded or such Indebtedness shall not have been satisfied; or (v) final judgments or orders are rendered against Bermuda Holdings, the Issuer or any Restricted Subsidiary by a court or regulatory agency of competent jurisdiction which require the payment in money, either individually or in an aggregate amount, that is more than $10.0 million (other than any judgment to the extent a reputable non-affiliated insurance company has accepted liability) and such judgment or order shall not be discharged and either (A) any creditor shall have commenced an enforcement proceeding upon such judgment or order, which enforcement proceeding shall have remained unstayed for a period of 10 days, or (B) a period of 60 days during which a stay of enforcement shall not be in effect shall have elapsed following the date on which any period for appeal has expired; or (vi) a decree or order is entered (A) for relief in respect of the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary in an involuntary case or other bankruptcy proceeding under applicable law, or (B) adjudging the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary under applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary or of any substantial part of any of their properties, or ordering the winding up or liquidation of any of their affairs, and any such decree or order remains unstayed and in effect for a period of 60 consecutive days; or (vii) the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary institutes a voluntary case or proceeding under applicable bankruptcy, insolvency, reorganization or similar law, or any other case or proceedings to be adjudicated a bankrupt or insolvent, or the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary files a petition or answer or consent seeking reorganization or relief under applicable bankruptcy, insolvency, reorganization or similar law, or consents to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of any of the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary or of any substantial part of its property, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due or takes corporate action in furtherance of any such action; or 26 (viii) default in the performance, or breach, of the provisions described under "--Merger, Consolidation or Sale of Assets." If any Event of Default (other than an Event of Default described in (vi) or (vii) above) occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the outstanding Senior Notes, by written notice to the Issuer (and to the Trustee, if such notice is given by the holders), may, and the Trustee at the request of such holders shall, declare all unpaid principal of, premium, if any, and accrued interest on all the Senior Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default described in (vi) or (vii) above, all outstanding Senior Notes will become due and payable without further action or notice. Holders of the Senior Notes may not enforce the Indenture or the Senior Notes except as provided in the Indenture. Subject to certain limitations, holders of a majority in principal amount of the then outstanding Senior Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from holders of the Senior Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers (as defined in the Indenture) of the Trustee determine in good faith that withholding such notice is in the interest of the holders. After a declaration of acceleration, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the holders of at least a majority in aggregate principal amount of the outstanding Senior Notes, by written notice to the Issuer and the Trustee, may annul such declaration if: (i) the Issuer or Bermuda Holdings has paid or deposited with the Trustee a sum sufficient to pay (A) all sums paid or advanced by the Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (B) all overdue interest on all Senior Notes, (C) the principal of and premium, if any, on any Senior Notes which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Senior Notes and (D) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Senior Notes; and (ii) all Events of Default, other than the non-payment of principal of the Senior Notes which have become due solely by such declaration or acceleration, have been waived as provided in the Indenture or cured. No such rescission shall affect any subsequent default or impair any right consequent thereon. The holders of a majority in aggregate principal amount of the outstanding Senior Notes by notice to the Trustee may on the behalf of the holders of all of the Senior Notes waive any existing or past Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, or premium, if any, on the Senior Notes or in respect of covenants or provisions in the Indenture which cannot be modified or amended without the consent of the holders of a greater percentage of the principal amount of, or all of, the outstanding Senior Notes. The Issuer and Bermuda Holdings are required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee or stockholder of the Issuer, Bermuda Holdings or any Subsidiary of Bermuda Holdings, as such, shall have any liability for any obligations of the Issuer or Bermuda Holdings under the Senior Notes, the Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of the Senior Notes by accepting a Senior Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. DEFEASANCE OR COVENANT DEFEASANCE Under certain conditions, each of the Issuer or Bermuda Holdings may, at its option and at any time, elect to have the obligations of the Issuer and Bermuda Holdings discharged with respect to the outstanding Senior Notes and the Guarantee ("defeasance"). Such defeasance means that the Issuer and Bermuda Holdings shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Senior Notes and the Guarantee, except for: (i) the rights of holders of outstanding Senior Notes to receive payments in respect of the principal of, premium, if any, and 27 interest on such Senior Notes when such payments are due, or on the redemption date, as the case may be; (ii) the Issuer's obligations with respect to the Senior Notes concerning issuing temporary Senior Notes, registration of Senior Notes, mutilated, destroyed, lost or stolen Senior Notes and the maintenance of an office or agency for payment and money for security payments held in trust; (iii) the rights, powers, trust, duties and immunities of the Trustee, and the Issuer's and Bermuda Holdings' obligations in connection therewith; (iv) the defeasance provisions of the Indenture; and (v) the obligations of the Issuer and Bermuda Holdings to pay any Additional Amounts under the Indenture. In addition, under certain conditions, the Issuer may, at its option and at any time, elect to have the obligations of Bermuda Holdings and its Subsidiaries released with respect to certain covenants that are described in the Indenture ("covenant defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or an Event of Default with respect to the Senior Notes. In the event covenant defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "--Events of Default and Remedies" will no longer constitute an Event of Default with respect to the Senior Notes. In order to exercise either defeasance or covenant defeasance: (i) the Issuer or Bermuda Holdings must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Senior Notes, cash in U.S. dollars, U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Senior Notes; (ii) in the case of defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that: (a) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling; or (b) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of the outstanding Senior Notes will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (iii) in the case of covenant defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the holders of the outstanding Senior Notes will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under the Indenture, or any other material agreement or instrument to which Bermuda Holdings is a party or by which Bermuda Holdings is bound, (vi) the Issuer shall have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) the Issuer shall have delivered to the Trustee an officers' certificate stating that the deposit was not made by the Issuer or Bermuda Holdings with the intent of preferring the holders of Senior Notes over the other creditors of the Issuer or Bermuda Holdings or with the intent of defeating, hindering, delaying or defrauding creditors of the Issuer or Bermuda Holdings or others; and (viii) the Issuer shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to either the defeasance or the covenant defeasance, as the case may be, have been complied with. AMENDMENT, SUPPLEMENT AND WAIVER The Indenture provides that the consent of holders of a majority in outstanding aggregate principal amount of Senior Notes will be required with respect to amendments which do not affect the payment terms of the Senior Notes or the amount of Senior Notes whose holders must consent to any amendment or the relative ranking of the Senior Notes. The latter amendments may only be made with the consent of each such Senior Note holder. With the consent of the holders of not less than a majority in principal amount of the outstanding Senior Notes (including consents obtained in connection with a tender offer or exchange offer for the Senior Notes), the Issuer and Bermuda Holdings, each when authorized by a board resolution, and the Trustee may enter into one or more supplemental indentures for the purpose of adding any provisions to or changing in any manner the rights of the holders under the Indenture or of waiving or modifying in any manner the rights of the holders under the Indenture; provided, however, that no such supplemental indenture, amendment or waiver shall without the consent of the holder of each outstanding Senior Note affected thereby: (a) change the Stated Maturity or the principal of, or any installment of interest on, or change the obligation of the Issuer or Bermuda Holdings to pay any Additional Amount with respect to, any Senior Note 28 or reduce the principal amount thereof or the rate of interest thereon or any provisions relating to the redemption price of the Senior Notes or the periods during which redemption may be effected, or change the coin or currency in which the principal of any Senior Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date); or (b) reduce the percentage in principal amount of the outstanding Senior Notes, the consent of whose holders is required for any such supplemental indenture or the consent of whose holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults and their consequences) provided for in the Indenture; or (c) modify any of the provisions of the Indenture relating to amendments or waivers of payment or covenant defaults, except to increase any such percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the holder of each Senior Note affected thereby. Notwithstanding the foregoing, without the consent of any holder of Senior Notes, the Issuer, Bermuda Holdings and the Trustee may amend or supplement the Indenture or the Senior Notes: (i) to cure any ambiguity or to correct any provision in the Indenture which may be defective or inconsistent with any other provision therein; or (ii) to provide for Definitive Senior Notes in addition to or in place of Book-Entry Interests; or (iii) to provide for the assumption of Bermuda Holdings' obligations to holders of the Senior Notes in the case of a merger or consolidation; or (iv) to secure the Senior Notes pursuant to the requirements of the provisions described under "--Merger, Consolidation or Sale of Assets" or "--Liens," or otherwise; or (v) to comply with the requirements of the Commission in order to maintain the qualification of the Indenture under the Trust Indenture Act, as contemplated by the Indenture or otherwise; or (vi) to evidence and provide the acceptance of the appointment of a successor Trustee thereunder; or (vii) to make any other change that would provide any additional rights or benefits to the holders or that does not adversely affect the legal rights of any holder under the Indenture or the Senior Notes. CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Issuer or Bermuda Holdings, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee is permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The holders of a majority in principal amount of the outstanding Senior Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any holder of Senior Notes, unless such holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Affiliate" means, with respect to any specified Person: (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person (except in cases where substantially all of the control that would ordinarily be exercisable by virtue of ownership of stock, other than the election of directors, has been eliminated by applicable regulatory authorities); or (ii) for the purposes of the provisions of the Indenture restricting transactions with Affiliates only, any other Person that owns, directly or indirectly, 10% or more of such Person's Capital Stock or any officer or director of any Person or other Person or with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing: (i) the sum of the products of (A) the number of years (or portion thereof) from the date of determination to the 29 dates of each successive scheduled principal payment of such Indebtedness multiplied by (B) the amount of such principal payment by (ii) the sum of all such principal payments. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York or London are authorized or obligated by law, regulation or executive order to close. "Capital Lease Obligation" of any Person means any obligations of such Person and its Subsidiaries on a consolidated basis under any capital lease of real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation. "Capital Stock" of any Person means any and all shares, interests, participation, or other equivalent (however designated) of such Person's capital stock and any rights (other than debt securities convertible into or exchangeable for capital stock), warrants or options to purchase the foregoing whether now outstanding or issued after the date hereof. "Consolidated Net Worth" of any Person means the consolidated stockholders' equity of such Person and its Restricted Subsidiaries as determined in accordance with GAAP, consistently applied. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect such Person or any of its Restricted Subsidiaries against fluctuations in currency values. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, as in effect from time to time. "Guaranteed Debt" of any Person means, without duplication, all Indebtedness of any other Person guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement: (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness; (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling such other Person to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss; (iii) to supply funds to, or in any other manner invest in, such other Person (including any agreement to pay for property or services to be acquired by such other Person irrespective of whether such property is received or such services are rendered); (iv) to maintain working capital or equity capital of such other Person, or otherwise to maintain the net worth, solvency or other financial condition of the debtor, or (v) otherwise to assure a creditor of such other Person against loss; provided that the term "guarantee" shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or any obligation or liability of such other Person in respect of leasehold interests assigned by such other Person to any other Person. "Indebtedness" means, with respect to any Person, without duplication: (i) all obligations of such Person for borrowed money or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities incurred in the ordinary course of business, if, and to the extent, any of the foregoing would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP; (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, if, and to the extent, any of the foregoing would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP; (iii) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade accounts payable arising in the ordinary course of business; (iv) all Capital Lease Obligations of such Person; (v) all obligations referred to in (but not excluded from) clause (i), (ii), (iii) or (iv) above of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien, upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations; (vi) all Guaranteed Debt of such Person; (vii) all Redeemable Capital Stock issued by such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends; (viii) all obligations under Currency Agreements or Interest Swap 30 Obligations of such Person; (ix) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing insurance obligations entered into in the ordinary course of business of such Person to the extent that such letters of credit are not drawn upon, or if and to the extent drawn upon, such drawing is reimbursed not later than the 30th Business Day following a demand for reimbursement following payment on the letter of credit); and (x) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of the types referred to in clauses (i) through (ix) above. Indebtedness shall not include obligations under insurance, reinsurance or retrocession contracts entered into in the ordinary course of business. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Redeemable Capital Stock, such Fair Market Value shall be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. "Interest Swap Obligations" means the obligations of any Person pursuant to any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect such Person or any of its subsidiaries against fluctuations in interest rates. "Issue Date" means the date on which Senior Notes are originally issued under the Indenture. "Lien" means any mortgage, charge, pledge, lien, security interest or encumbrance of any kind. "Maturity" when used with respect to any Senior Note means the date on which the principal of (and premium, if any) and interest on such Senior Note becomes due and payable as therein provided, whether at Stated Maturity, redemption date and whether by declaration of acceleration, call for redemption or otherwise. "Moody's" means Moody's Investors Service, Inc. and its successors. "Non-Recourse Indebtedness" means Indebtedness: (i) as to which neither Bermuda Holdings nor any of its Subsidiaries (other than the Person incurring such Non-Recourse Indebtedness) (a) provides credit support (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable or (c) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against such Person incurring such Non-Recourse Indebtedness) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of Bermuda Holdings or any of its Subsidiaries (other than the Person incurring such Non-Recourse Indebtedness) to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. "Permitted Liens" means (a) Liens securing Indebtedness pursuant to any credit agreement or credit facility that is permitted by the terms of the Indenture to be outstanding; (b) Liens in favor of Bermuda Holdings or any Restricted Subsidiary; (c) Liens on property of a Person existing at the time such Person is merged into or consolidated with Bermuda Holdings or any Restricted Subsidiary of Bermuda Holdings; provided that such Liens were not incurred in connection with, or in contemplation of, such merger or consolidation and such Liens do not extend to any assets of Bermuda Holdings or any of its Restricted Subsidiaries other than the assets of the Person so merged into or consolidated with Bermuda Holdings or such Restricted Subsidiary; (d) Liens on property existing at the time of acquisition thereof by Bermuda Holdings or any Restricted Subsidiary of Bermuda Holdings; provided that such Liens were not incurred in connection with, or in contemplation of, such acquisition and do not extend to any assets of Bermuda Holdings or any of its Restricted Subsidiaries other than the property so acquired; (e) Liens to secure the performance of statutory obligations, surety or appeal bonds or performance bonds, or landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's or other like Liens, in any case incurred in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate process of law, if a reserve or other appropriate provision, if any, as is required by GAAP shall have been made therefor; (f) Liens existing on the date of the Indenture; (g) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (h) Liens with respect to obligations under Currency Agreements or Interest Swap Obligations and other similar agreements or arrangements designed to protect Bermuda Holdings or any of its Restricted Subsidiaries against fluctuations in the value of Investments of Bermuda Holdings and its Restricted Subsidiaries, in each case to the extent permitted under the Indenture; (i) Liens incurred in the ordinary course of business of Bermuda Holdings or any Subsidiary of Bermuda 31 Holdings with respect to obligations permitted under the Indenture that do not exceed $10.0 million in principal amount in the aggregate at any one time outstanding; and (j) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Indebtedness (to the extent permitted under the Indenture) of Unrestricted Subsidiaries. "Person" means any individual, corporation, limited or general partnership, limited liability company, joint venture, association, joint stock company, trust, fund, unincorporated organization or government or any agency or political subdivision thereof. "Principal Insurance Subsidiary" means: (i) the Subsidiaries of Bermuda Holdings in existence on the Issue Date; (ii) any other insurance company Subsidiary of Bermuda Holdings that becomes a "significant subsidiary" as defined in Regulation S-X, as promulgated by the Commission; and (iii) any other Subsidiary of Bermuda Holdings that may succeed, by merger, consolidation or otherwise, to all or substantially all of the business of one or more of such Persons as specified in (i) and (ii) above. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "S&P" means Standard & Poor's Corporation and its successors. "Stated Maturity" means, when used with respect to any Indebtedness or any installment of principal or of interest thereon, the date specified in such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of principal or of interest is due and payable. "Subordinated Indebtedness" means Indebtedness expressly subordinated in right of payment to the Senior Notes. "Subsidiary" means any Person, a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by Bermuda Holdings or by one or more other Subsidiaries, or by Bermuda Holdings and one or more other Subsidiaries. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. "Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) is designated an Unrestricted Subsidiary prior to formation or creation; (b) has total assets at the time of formation or creation with a fair market value not exceeding $1,000; (c) has no Indebtedness other than Non-Recourse Indebtedness; (d) is not party to any agreement, contract, arrangement or understanding with Bermuda Holdings or any Restricted Subsidiary of Bermuda Holdings unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Bermuda Holdings or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Bermuda Holdings; (e) is a Person with respect to which neither Bermuda Holdings nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Capital Stock or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (f) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Bermuda Holdings or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Bermuda Holdings as of such date. The Board of Directors of Bermuda Holdings may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an 32 incurrence of Indebtedness by a Restricted Subsidiary of Bermuda Holdings of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if no Default or Event of Default would be in existence following such designation. "Voting Stock" means stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment. "Wholly-Owned Restricted Subsidiary" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person. DESCRIPTION OF DEPOSITARY AGREEMENT GENERAL All Exchange Notes underlying the Book-Entry Interests will be represented by one or more Global Notes, will be issued in a denomination equal to the aggregate principal amount of the sum of outstanding Old Notes properly tendered pursuant to the terms of the Exchange Offer, and will be deposited with the Custodian pursuant to the terms of the Depositary Agreement. With respect to such Global Notes issued, the Depositary will issue a receipt representing a 100% interest in the underlying Global Note (the "Exchange Global Receipt", and together with global receipts issued in respect of Old Notes not exchanged pursuant to the Exchange Offer, the "Global Receipts"), which will be delivered to and registered in the name of DTC or its nominee. Ownership of Book-Entry Interests is limited to Persons that have accounts with DTC ("participants") or Persons that may hold interests through participants. Procedures with respect to the ownership of Book-Entry Interests are set forth below. Unless and until the Book-Entry Interests representing the Exchange Global Receipts are exchanged for Definitive Senior Notes, the depositary interest held by DTC may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor of DTC or a nominee of such successor. So long as the Custodian, or its nominee, is the holder of the Global Notes underlying Book-Entry Interests, the Custodian or such nominee, as the case may be, will be considered the sole holder of such Exchange Global Note for all purposes under the Indenture. Except as set forth below under "--Issuance of Definitive Senior Notes," participants or Persons that may hold Book-Entry Interests through participants will not be entitled to have Senior Notes registered in their names, will not receive or be entitled to receive physical delivery of Definitive Senior Notes and will not be considered the owners or holders thereof under the Indenture. Accordingly, each Person holding a Book- Entry Interest must rely on the procedures of the Custodian, the Depositary and DTC and, in addition, if such Person is not a participant in DTC, on the procedures of the participant through which such Person owns its interest to exercise any rights and obligations of a holder under the Indenture. See "-- Action by Holders of Book-Entry Interests." PAYMENTS ON GLOBAL NOTE Payment of any amounts in respect of the Global Notes, as long as it is held by the Custodian, will be made to or by the order of the Custodian, as the bearer thereof. The Custodian will distribute all such payments received by it to the Depositary. The Depositary will distribute all such payments received by it to DTC, or its nominee, which will distribute such payments to its participants. All such payments will be distributed without deduction or withholding for any taxes, assessments or other governmental charges of whatever nature except as may be required by law. If any such deduction 33 or withholding is required to be made under the provisions of any applicable law or regulation, then, except as provided in "Description of Exchange Notes-- Payment of Additional Amounts," such additional amounts will be paid by the Issuer and Bermuda Holdings to or for the order of the Custodian as may be necessary in order that the net amounts received by a holder of Book-Entry Interests after such deduction or withholding shall be not less than the amounts which such holder would otherwise have received in respect of such Book-Entry Interests absent such withholding or deduction. DTC, upon receipt of any payment, will promptly credit participants' accounts with payments in amounts proportionate to their respective ownership of Book-Entry Interests, as shown on the records of DTC. The Issuer expects that payments by participants to holders of Book-Entry Interests held through such participants will be governed by standing customer instructions and customary practices, as is now the case with the securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. None of the Issuer, Bermuda Holdings, the Trustee or any other agent of the Issuer, Bermuda Holdings or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of a participant's Book-Entry Interests or for maintaining, supervising or reviewing any records relating to a participant's Book-Entry Interests. DTC has advised the Issuer as follows: DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities of its participants and to facilitate the clearance and settlement of transactions among its participants in such securities through electronic book-entry exchanges in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTC participants include securities brokers and dealers (including the Underwriters), banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives) own DTC. Access to DTC book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Although DTC is expected to follow the foregoing procedures in order to facilitate transfers of Book-Entry Interests among participants of DTC, DTC is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Issuer, Bermuda Holdings nor the Trustee will have any responsibility for the performance by DTC of obligations under the rules and procedure governing their operations. Upon the issuance by the Depositary of the Exchange Global Receipts to DTC, DTC will credit, on its book-entry registration and transfer system, the participants' accounts with the respective interest beneficially owned by such participants. Ownership of Book-Entry Interests will be shown on, and the transfer of such interests will be effected only through, records maintained by DTC (with respect to interests of participants) and on the records of participants (with respect to interests of Persons holding through participants). The laws of some states may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to own, transfer or pledge Book- Entry Interests. The Issuer understands that under existing industry practices, if either the Issuer or the Trustee requests any action of holders of Book-Entry Interests or if a holder of a Book-Entry Interest desires to give or take any action that a holder of Senior Notes is entitled to give or take under the Indenture, DTC would authorize the participants holding the relevant Book-Entry Interests to give or take such action, and such participants would authorize beneficial owners owning through such participants to give or take such action or would otherwise act upon the instructions of beneficial owners holding through them. REDEMPTION OR REPURCHASE In the event the Global Notes (or portions thereof) are redeemed or repurchased, the Custodian will deliver all amounts received by it in respect of the redemption or repurchase to the Depositary. The Depositary will deliver all amounts received by it in respect of the redemption or repurchase of the Global Notes to DTC. The redemption or repurchase price paid in connection with the redemption or repurchase of Book-Entry Interests will be equal to the amount received by the Depositary in connection with the redemption or repurchase of the Global Notes (or portions thereof). For any redemptions of the Global Notes in part, selection of Book-Entry Interests to be redeemed will be made by DTC on a pro rata basis, by lot or by such other method as DTC deems fair and appropriate, and in compliance with the requirements of the principal national securities exchange, if any, on which the Senior Notes are listed, or, if the Senior Notes are not so listed, on a pro rata basis, by lot or by such method as DTC shall deem fair and appropriate; provided that no beneficial interests of $1,000 principal amount at maturity or less shall be redeemed in part. 34 TRANSFERS All transfers of Book-Entry Interests will be recorded in accordance with the book-entry system maintained by DTC, pursuant to customary procedures established by DTC and its participants and will be settled in same-day funds. ISSUANCE OF DEFINITIVE SENIOR NOTES Holders of Book-Entry Interests will receive Definitive Senior Notes if (i) DTC notifies the Issuer and the Depositary that it is unwilling or unable to continue as holder of the Global Receipts or ceases to be a clearing agency registered under the Exchange Act and, in either case, a successor to DTC registered as a clearing agency under the Exchange Act is not appointed by the Issuer within 90 days of such notification, (ii) either the Depositary or the Custodian, as the case may be, notifies the Trustee and the Issuer that it is unwilling or unable to continue as Depositary or Custodian, respectively, and a successor Depositary or Custodian, as the case may be, is not appointed by the Issuer within 90 days of such notification, or (iii) the Issuer determines that Definitive Senior Notes shall be issued. Any Definitive Senior Notes issued in exchange for Book-Entry Interests will be registered in such name or names as the Custodian shall instruct the Trustee based on the instructions of DTC. It is expected that such instructions will be based upon directions received by DTC from participants with respect to ownership of Book-Entry Interests. In addition to the foregoing, holders of Book-Entry Interests will at any time on or after the occurrence of an Event of Default be entitled to request and receive Definitive Senior Notes. Such Definitive Senior Notes will be issued to and registered in the name of, or as directed by, such holders only upon the request in writing by the Depositary (based upon the instructions of DTC). HOLDERS OF BOOK-ENTRY INTERESTS SHOULD BE AWARE THAT, UNDER CURRENT U.K. TAX LAW, UPON THE ISSUANCE OF DEFINITIVE SENIOR NOTES TO A HOLDER, SUCH HOLDER WILL BECOME SUBJECT TO U.K. INCOME TAX (CURRENTLY 20%) TO BE WITHHELD ON ANY PAYMENTS OF INTEREST ON THE SENIOR NOTES AS SET FORTH UNDER "CERTAIN TAX CONSIDERATIONS--TAXATION OF U.S. HOLDERS OF THE SENIOR NOTES--UNITED KINGDOM." IF SUCH DEFINITIVE SENIOR NOTES ARE ISSUED PURSUANT TO THE REQUEST OF A HOLDER OF BOOK-ENTRY INTERESTS FOLLOWING AN EVENT OF DEFAULT, NEITHER THE ISSUER NOR BERMUDA HOLDINGS WILL BE OBLIGATED TO PAY ANY ADDITIONAL AMOUNTS WITH RESPECT TO SUCH SENIOR NOTES. However, U.S. holders of Definitive Senior Notes may be entitled to receive a refund of withheld amounts from the U.K. Inland Revenue in certain circumstances. See "Certain Tax Considerations--Taxation of U.S. Holders of the Senior Notes--United Kingdom." In addition, if a holder of Book-Entry Interests receives Definitive Senior Notes other than pursuant to its request, such holder will be entitled to receive Additional Amounts with respect to such Senior Notes. See "Description of Exchange Notes--Payment of Additional Amounts." Exchanges of Book-Entry Interests for Definitive Senior Notes shall be made free of any fees of the Depositary to the holders of Book-Entry Interests; provided that the Issuer may require the payment of a sum sufficient to pay any tax, assessment, or other governmental charge. ACTION BY HOLDERS OF BOOK-ENTRY INTERESTS As soon as practicable after receipt by the Custodian of notice of any solicitation of consents or request for a waiver or other action by the holders of Book-Entry Interests, the Custodian shall direct the Depositary to mail to DTC a notice containing (a) such information as is contained in such notice, (b) a statement that at the close of business on a specified record date DTC will be entitled to instruct the Depositary as to the consent, waiver or other action, if any, pertaining to the Book-Entry Interests, and (c) a statement as to the manner in which such instructions may be given. Upon the written request of DTC, the Depositary shall endeavor insofar as practicable to take such action regarding the requested consent, waiver or other action in respect of the Book- Entry Interests in accordance with any instructions set forth in such request. DTC is expected to follow the procedures described under "--General" above with respect to soliciting instructions from its participants. Neither the Depositary nor the Custodian will exercise any discretion in the granting of consents or waivers or the taking of any other action relating to the Depositary Agreement or the Indenture. REPORTS The Depositary will promptly send to DTC a copy of any notices, reports and other communications received from the Issuer which are received by the Custodian as holder of the Global Note. 35 THE DEPOSITARY AND CUSTODIAN The Chase Manhattan Bank is the Depositary for the Global Note. The address of the Depositary is 450 West 33rd Street, 15th Floor, New York, New York 10001. Chase Manhattan Bank Luxembourg S.A. will be the Custodian for the Exchange Global Receipt. The address of the Custodian is 5 rue Plaetis L-2338, Luxembourg. ACTION BY DEPOSITARY AND CUSTODIAN Upon the occurrence of a default with respect to the Global Note, or in connection with any other right of the holder of the Global Note under the Indenture or the Depositary Agreement, if requested in writing by DTC in respect thereof, the Depositary and the Custodian will take any such action as shall be requested in such notice; provided that the Depositary and the Custodian have been offered reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by them in complying with such request. Neither the Depositary nor the Custodian will exercise any discretion in the taking of any such action. CHARGES OF DEPOSITARY AND CUSTODIAN The Issuer and Bermuda Holdings have agreed to pay all charges of the Depositary and the Custodian under the Depositary Agreement. The Issuer and Bermuda Holdings have also agreed to indemnify the Depositary and the Custodian against certain liabilities incurred by it under the Depositary Agreement. AMENDMENT AND TERMINATION The Depositary Agreement may be amended by agreement among the Issuer, Bermuda Holdings, the Custodian and the Depositary. The consent of DTC shall not be required in connection with any amendment to the Depositary Agreement: (i) to cure any defect, omission, inconsistency or ambiguity in the Depositary Agreement; (ii) to add to the covenants and agreements of the Depositary or the Custodian, the Issuer and Bermuda Holdings; (iii) to effectuate the assignment of the Depositary's or the Custodian's rights and duties to a qualified successor; (iv) to comply with the Securities Act, the Exchange Act or the U.S. Investment Company Act of 1940, as amended; or (v) to modify, alter, amend or supplement the Depositary Agreement in any other manner that, in the opinion of counsel acceptable to the Issuer and the Depositary, is not adverse to DTC or the owners of Book-Entry Interests. Except as set forth above, no amendment that adversely affects DTC may be made to the Depositary Agreement or the Book-Entry Interests without the consent of DTC. The Depositary shall at any time at the direction of the Issuer or Bermuda Holdings terminate the Depositary Agreement by mailing a notice of such termination to DTC and requesting, on behalf of the Custodian in accordance with the Indenture, the issuance of Definitive Senior Notes to the persons and in the amounts as specified by DTC. Upon the issuance of Definitive Senior Notes in an aggregate principal amount equal to the aggregate principal amount of Senior Notes outstanding, the Depositary Agreement shall terminate. The Depositary Agreement may also be terminated upon the resignation of the Depositary or the Custodian if no successor depositary or custodian, as the case may be, has been appointed by the Issuer within 90 days of the notification of such resignation as set forth under "--Resignation or Removal of Depositary or Custodian" below. RESIGNATION OR REMOVAL OF DEPOSITARY OR CUSTODIAN The Depositary or Custodian may at any time resign as Depositary or Custodian by written notice delivered to each of the Issuer and the Trustee, such resignation to take effect upon the appointment by the Issuer of a successor depositary or custodian (approved, in the case of a successor depositary, by the Trustee and DTC and, in the case of a successor custodian, by the Depositary, none of which shall unreasonably withhold such approval) and such successor's acceptance of such appointment. If at the end of 90 days after delivery of such notice, no successor depositary or custodian has been appointed and approved, and has accepted such appointment, the resigning Depositary or Custodian may terminate the Depositary Agreement. OBLIGATIONS OF DEPOSITARY AND CUSTODIAN Except with respect to the payment of any amount received by it in respect of the Global Notes, neither the Depositary nor the Custodian will assume any obligation or be subject to any liability under the Depositary Agreement, other than by reason of bad faith or negligence in the performance of its respective duties under the Depositary Agreement. 36 DESCRIPTION OF OLD NOTES The terms of the Exchange Notes are identical in all material respects to the terms of the Old Notes, except that (i) the offer and sale of the Exchange Notes have been registered under the Securities Act and therefore the Exchange Notes are not subject to certain restrictions on transfer applicable to the Old Notes, will not contain legends relating thereto and will not be entitled to registration rights or other rights under the Registration Rights Agreement, and (ii) the Exchange Notes will not provide for any increase in the interest rate thereon, which rights and provision will terminate as to all of the Senior Notes upon the consummation of the Exchange Offer. In addition, the Old Notes and the Exchange Notes will constitute a single series of debt securities under the Indenture. See "Description of Exchange Notes--General." THE EXCHANGE OFFER The Issuer and Bermuda Holdings entered into the Registration Rights Agreement dated as of May 18, 1998 (the "Registration Rights Agreement") with Donaldson, Lufkin & Jenrette Securities Corporation, as Initial Purchaser, pursuant to which the Issuer and Bermuda Holdings agreed, for the benefit of the holders of the Old Notes, at the cost of the Issuer and Bermuda Holdings, to use commercially reasonable efforts to file and cause to become effective a registration statement with respect to an exchange offer for exchange notes with terms identical in all material respects to the Old Notes, except as described under "Description of Old Notes." In the event that applicable interpretations of the Commission do not permit the Issuer and Bermuda Holdings to effect the Exchange Offer, or under certain other circumstances, the Issuer and Bermuda Holdings agreed, for the benefit of the Holders of the Old Notes, at the cost of the Issuer and Bermuda Holdings, to use commercially reasonable efforts to cause to become effective a shelf registration statement (the "Shelf Registration Statement") with respect to resales of the Senior Notes and to keep such registration statement effective until May 18, 2001 or such earlier time when the Senior Notes have been sold pursuant to such Shelf Registration Statement. The Old Notes provide that, in the event the Exchange Offer is not consummated or a Shelf Registration Statement is not declared effective on or prior to November 18, 1998, then the annual interest rate borne by the Old Notes shall be increased to 7.25%. If the Exchange Offer is not consummated or a Shelf Registration Statement is not declared effective by February 18, 1999, then the annual interest rate borne by the Old Notes shall be increased to 7.5%. Upon consummation of the Exchange Offer or the effectiveness of such Shelf Registration Statement, the interest rate borne by the Old Notes will return to 7%. The Exchange Offer is not being made to, nor will the Issuer or Bermuda Holdings accept tenders for exchange from, holders of Old Notes in any jurisdiction in which the Exchange Offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction. TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the Exchange Offer), the Issuer will accept for exchange Old Notes which are properly tendered on or prior to the Expiration Date and not withdrawn as permitted below. For each $1,000 principal amount of Old Notes surrendered to the Issuer pursuant to the Exchange Offer, the Holder of such Old Note will receive an Exchange Note having a principal amount equal to that of the surrendered Old Note. The Issuer will keep the Exchange Offer open for not less than 20 business days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to the Holders of the Old Notes. As used herein, the term "Expiration Date" means 5:00 p.m., New York City time, on ____________, 1998; provided, however, that if the Issuer and Bermuda Holdings, in their sole discretion, have extended the period of time for which the Exchange Offer is open, the term "Expiration Date" means the latest time and date to which the Exchange Offer is extended. As of the date of this Prospectus, $100.0 million in aggregate principal amount of the Old Notes were outstanding. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered. This Prospectus, together with the Letter of Transmittal, is first being sent on or about the date set forth on the cover page to all holders of Old Notes at the addresses set forth in the security register with respect to Old Notes maintained by the Trustee. The Issuer's obligations to accept Old Notes for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth under "-- Certain Conditions to the Exchange Offer." 37 The Issuer and Bermuda Holdings expressly reserve the right, at any time or from time to time, to extend the period of time during which the Exchange Offer is open, and thereby delay acceptance of any Old Notes, by giving oral or written notice of such extension to the Exchange Agent and notice of such extension to the holders of Old Notes as described below. During any such extension, all Old Notes previously tendered will be retained by the Issuer or Bermuda Holdings, subject to the rights of holders of Old Notes to withdraw their tendered Old Notes as specified in "--Withdrawal Rights." Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. The Issuer and Bermuda Holdings expressly reserve the right to amend or terminate the Exchange Offer, and not to accept for exchange any Old Notes not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified below under "--Certain Conditions to the Exchange Offer." The Issuer or Bermuda Holdings will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the Old Notes as promptly as practicable, such notice in the case of any extension to be issued by means of a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Issuer or Bermuda Holdings may choose to make any public announcement and subject to applicable law, neither the Issuer nor Bermuda Holdings shall have any obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service. Holders of Old Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer. Old Notes which are not tendered for exchange or are tendered but not accepted in connection with the Exchange Offer will remain outstanding, will be entitled to the benefits of the Indenture and continue to accrue interest, but will not be entitled to any further registration rights under the Registration Rights Agreement. The Issuer and Bermuda Holdings intend to conduct the Exchange Offer in accordance to the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. PROCEDURES FOR TENDERING OLD NOTES The tender to the Issuer of Old Notes by a Holder thereof as set forth below and the acceptance thereof by the Issuer will constitute a binding agreement between the tendering holder, the Issuer and Bermuda Holdings upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on his behalf. A holder who wishes to tender Old Notes for exchange pursuant to the Exchange Offer must transmit a properly completed and duly executed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to the Exchange Agent at the address set forth below under "Exchange Agent" on or prior to the Expiration Date. In addition, (i) a timely confirmation of a book-entry transfer (a "Book- Entry Confirmation") of such Old Notes, if such procedure is available, into the Exchange Agent's account at DTC pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date, or (ii) the holder must comply with the guaranteed delivery procedures described below under "--Guaranteed Delivery Procedures." THE METHOD OF DELIVERY OF LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT TO THE ISSUER OR BERMUDA HOLDINGS. Delivery of all documents must be made to the Exchange Agent at its address set forth below. Holders may also request their respective brokers, dealers, commercial banks, trust companies or nominees to effect such tender for such Holders. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Old Notes surrendered for exchange pursuant thereto are tendered for the account of an Eligible Institution (as defined below). In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company having an office or correspondent in the United States (collectively, "Eligible Institutions"). If a Book-Entry Confirmation indicates that ownership of the Old Notes is in the name of a person other than the person signing the Letter of Transmittal, the Exchange Agent must receive a written instrument or instruments of transfer or exchange, in satisfactory form as 38 determined by the Issuer and Bermuda Holdings in their sole discretion, duly executed by the owner as evidenced by the Book-Entry Confirmation with the signature thereon guaranteed by an Eligible Institution. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Old Notes tendered for exchange will be determined by the Issuer and Bermuda Holdings in their sole discretion, which determination shall be final and binding. The Issuer and Bermuda Holdings reserve the absolute right to reject any and all tenders of any particular Old Notes not properly tendered or to not accept any particular Old Notes which acceptance might, in the judgment of the Issuer and Bermuda Holdings or their counsel, be unlawful. The Issuer and Bermuda Holdings also reserve the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Old Notes either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Old Notes in the Exchange Offer). The interpretation of the terms and conditions of the Exchange Offer as to any particular Old Notes either before or after the Expiration Date (including the Letter of Transmittal and the instructions thereto) by the Issuer and Bermuda Holdings shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with the tender of Old Notes for exchange must be cured within such reasonable period of time as the Issuer or Bermuda Holdings shall determine. Neither the Issuer, Bermuda Holdings, the Exchange Agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of Old Notes for exchange, nor shall any of them incur any liability for failure to give such notification. If the Letter of Transmittal is signed by a person or persons other than the owner as evidenced by the Book-Entry Confirmation, such Letter of Transmittal must be accompanied by an endorsement or appropriate powers of attorney, in either case signed exactly as the name or names of the owner as evidenced by the Book-Entry Confirmation. Signatures on such powers of attorney must be guaranteed by an Eligible Institution. If the Letter of Transmittal or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers or corporations or others acting in a fiduciary or representative capacity, such person should so indicate when signing and, unless waived by the Issuer or Bermuda Holdings, proper evidence satisfactory to the Issuer and Bermuda Holdings of its authority to so act must be submitted. By executing, or otherwise becoming bound by, the Letter of Transmittal, each holder of the Old Notes (other than certain specified holders) will represent that (i) it is not an affiliate of the Issuer or Bermuda Holdings, (ii) any Exchange Notes to be received by it were acquired in the ordinary course of its business, and (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of the Exchange Notes. If the tendering holder is a broker- dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it will be required to acknowledge that it acquired the Old Notes for its account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus in connection with any resale of such Exchange Notes. A broker-dealer that acquired Old Notes in a transaction other than as part of its market-making or other trading activities will not be able to participate in the Exchange Offer. See "--Resales of the Exchange Notes." ACCEPTANCE OF OLD NOTES FOR EXCHANGE Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Issuer will accept, promptly after the Expiration Date, all Old Notes properly tendered and will issue the Exchange Notes promptly after acceptance of the Old Notes. See "--Certain Conditions to the Exchange Offer." For purposes of the Exchange Offer, the Issuer shall be deemed to have accepted properly tendered Old Notes for exchange when, as and if the Issuer has given oral or written notice thereof to the Exchange Agent. In all cases, issuance of Exchange Notes for Old Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of a timely Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at DTC, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or Old Notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Old Notes will be credited to an account maintained with DTC as promptly as practicable after the expiration or termination of the Exchange Offer. 39 INTEREST ON THE EXCHANGE NOTES Each Exchange Note will bear interest from May 18, 1998, the date of issuance of the Old Notes. Holders of the Old Notes whose Old Notes are accepted for exchange will not receive accrued interest on such Old Notes from and after May 18, 1998. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Old Notes at DTC for purposes of the Exchange Offer promptly after the date of this Prospectus. Any financial institution that is a participant in DTC's systems may make book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's account in accordance with DTC's Automated Tender Offer Program ("ATOP") procedures for transfer. However, the exchange for the Old Notes so tendered will only be made after timely confirmation of such book-entry transfer of Old Notes into the Exchange Agent's account, and timely receipt by the Exchange Agent of an Agent's Message (as such term is defined in the next sentence) and any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by DTC and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from a participant tendering Old Notes that are the subject of such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal, and that the Issuer or Bermuda Holdings may enforce such agreement against such participant. Although delivery of Old Notes may be effected through book-entry transfer into the Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other required documents, must in any case be delivered to and received by the Exchange Agent at its address set forth under "--Exchange Agent" prior to the Expiration Date, or the guaranteed delivery procedure set forth below must be complied with. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. GUARANTEED DELIVERY PROCEDURES If the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if (i) the tender is made by or through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Issuer and Bermuda Holdings (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within five New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, a Book-Entry Confirmation and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the Book-Entry Confirmation, and all other documents required by the Letter of Transmittal, are received by the Exchange Agent within five NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. WITHDRAWAL RIGHTS Tenders of Old Notes may be withdrawn at any time prior to the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent by the Exchange Date at one of the addresses set forth below under "--Exchange Agent." Any such notice of withdrawal (which notice may be by telegram, telex, facsimile transmission or letter) must specify the name of the person having tendered the Old Notes to be withdrawn, the number of the account at DTC from which the Old Notes were tendered, the principal amount of the Old Notes to be withdrawn, and the name and number of the account at DTC to be credited with the withdrawn Old Notes, and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Issuer and Bermuda Holdings, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes which have been tendered for exchange but which are not exchanged for any reason will be credited to an account maintained with DTC for the Old Notes as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described under "--Procedures for Tendering Old Notes" at any time prior to the Expiration Date. 40 CERTAIN CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provisions of the Exchange Offer, neither the Issuer nor Bermuda Holdings shall be required to accept for exchange, or to issue Exchange Notes in exchange for, any Old Notes and may terminate or amend the Exchange Offer, if at any time before the acceptance of such Old Notes for exchange or the exchange of the Exchange Notes for such Old Notes, such acceptance or issuance would violate applicable law or any interpretation of the Staff of the Commission. Neither the Issuer or Bermuda Holdings has any obligation, and will not knowingly, permit acceptances of tenders of Old Notes from Affiliates of the Issuer or Bermuda Holdings or from any other holder or holders of Old Notes who are not eligible to participate in the Exchange Offer under applicable law or interpretations thereof by the Commission, or if the Exchange Notes to be received by such holder or holders of Old Notes in the Exchange Offer, upon receipt, will not be tradable by such holder without restriction under the Securities Act and the Exchange Act and without material restrictions under the blue sky or securities laws of substantially all of the states of the United States. The foregoing conditions are for the sole benefit of the Issuer and Bermuda Holdings and may be asserted by the Issuer and Bermuda Holdings regardless of the circumstances giving rise to any such condition. The failure by the Issuer and Bermuda Holdings at any time to exercise the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. In addition, neither the Issuer nor Bermuda Holdings will accept for exchange any Old Notes tendered, and no Exchange Notes will be issued in exchange for any such Old Notes, if at such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act. EXCHANGE AGENT The Chase Manhattan Bank has been appointed as the Exchange Agent for the Exchange Offer. All executed Letters of Transmittal should be directed to the Exchange Agent at one of the addresses set forth below. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent, addressed as follows: Deliver To: The Chase Manhattan Bank, Exchange Agent By Mail or By Hand: The Chase Manhattan Bank 450 West 33rd St. 15th Floor New York, New York 10001 Attention: Corporate Trust Administration By Facsimile: (212) 946-8177 Confirm by Telephone: (212) 946-3352 DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. FEES AND EXPENSES The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telephone or in person by officers and regular employees of the Issuer, Bermuda Holdings and their affiliates. No additional compensation will be paid to any such officers and employees who engage in soliciting tenders. Neither the Issuer nor Bermuda Holdings will make any payment to brokers, dealers, or others soliciting acceptances of the Exchange 41 Offer. The Issuer or Bermuda Holdings, however, will pay the Exchange Agent reasonably customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The estimated cash expenses to be incurred in connection with the Exchange Offer will be paid by the Issuer and Bermuda Holdings and are estimated in the aggregate to be $ ,000. TRANSFER TAXES Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. RESALES OF THE EXCHANGE NOTES Under existing interpretations of the staff of the Division of Corporation Finance of the Commission contained in several no-action letters to third parties (including Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5, 1991), K-III Communications Corporation (available May 14, 1993) and Shearman & Sterling (available July 2, 1993)), the Exchange Notes would in general be freely transferable after the Exchange Offer without further registration under the Securities Act. However, any purchaser of Old Notes who is an "affiliate" of the Issuer or Bermuda Holdings or who intends to participate in the Exchange Offer for the purpose of distributing the Exchange Notes or any broker-dealer who purchased Old Notes from the Issuer or Bermuda Holdings to resell pursuant to Rule 144A or any other available exception under the Securities Act (i) will not be able to rely on the interpretation of the staff of the Division of Corporation Finance of the Commission, (ii) will not be able to tender its Old Notes in the Exchange Offer and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the Old Notes unless such sale or transfer is made pursuant to an exemption from such requirements. By executing, or otherwise becoming bound by, the Letter of Transmittal each holder of the Old Notes (other than certain specified holders) will represent that (i) it is not an "affiliate" of the Issuer or Bermuda Holdings, (ii) any Exchange Notes to be received by it were acquired in the ordinary course of its business and (iii) it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes. In addition, in connection with any resales of Exchange Notes, any Participating Broker-Dealer who acquired the Exchange Notes for its own account as a result of market-making or other trading activities must acknowledge that it acquired the Old Notes for its own account as the result of market-making activities or other trading activities and must agree that it deliver a prospectus meeting the requirements of the Securities Act. A broker-dealer that acquired Existing Notes in a transaction other than as part of its market-making or other trading activities will not be able to participate in the Exchange Offer. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the no-action letters referred to above, the Issuer believes that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the Exchange Notes received upon exchange of such Old Notes (other than Old Notes which represent an unsold allotment from the original sale of the Old Notes) with a prospectus meeting the requirements of the Securities Act, which may be a prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such Exchange Notes. Under the Registration Rights Agreement, the Issuer and Bermuda Holdings is required to allow Participating Broker-Dealers and other persons, if any, subject to similar prospectus delivery requirements, to use this Prospectus as it may be amended or supplemented from time to time, in connection with the resale of such Exchange Notes. PLAN OF DISTRIBUTION Each Participating Broker-Dealer pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Issuer and Bermuda Holdings have agreed that it will make this Prospectus, as amended or supplemented, available to any Participating Broker- Dealer for use in connection with any such resale and Participating Broker- Dealers shall be authorized to deliver this Prospectus for a period not exceeding 180 days after the Expiration Date. In addition, until _______, 1998 (180 days after the date of this Prospectus), all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. 42 Neither the Issuer nor Bermuda Holdings will receive any proceeds from any sales of the Exchange Notes by Participating Broker-Dealers. Exchange Notes received by Participating Brokers-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time, in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer that resells the Exchange Notes that were received by it for its own account pursuant to the Exchange Offer. Any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any omissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Issuer will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Participating Broker-Dealer that requests such documents in the Letter of Transmittal. See "The Exchange Offer." CERTAIN TAX CONSIDERATIONS CERTAIN U.K., U.S. AND BERMUDA TAX CONSIDERATIONS The following summary of certain U.S., U.K. and Bermuda tax consequences of the acquisition, ownership and disposition of the Senior Notes by a "U.S. Holder" (as defined below) is set forth with respect to U.S. federal income tax matters based upon the opinion of Debevoise & Plimpton, U.S. tax counsel to the Issuer, with respect to U.K. tax matters based upon the opinion of Clifford Chance, U.K. tax counsel to the Issuer, and with respect to Bermuda tax matters based upon the opinion of Conyers, Dill & Pearman, Bermuda tax counsel to the Issuer. Such firms express no opinion as to, and have not independently confirmed, any factual or accounting matters, determinations or conclusions described below. The summary describes certain U.S. federal income, U.K. and Bermuda tax consequences of the acquisition, ownership and disposition of the Senior Notes as of the date of this Prospectus. The Summary is for general information purposes only and does not purport to be a complete analysis of all tax considerations that may be applicable to U.S. Holders of Senior Notes. Except where noted, it deals only with Senior Notes beneficially owned as capital assets by a purchaser that is, for U.S. federal income tax purposes, (1) a citizen or resident of the United States, (2) a corporation, partnership or other entity created or organized in, or under the laws of, the United States or any political subdivision thereof or (3) an estate or trust the income of which is subject to U.S. federal taxation regardless of its source (a "U.S. Holder") and does not address the U.K. tax consequences to a holder that is resident (or, in the case of an individual, who is either resident or ordinarily resident or both) for U.K. tax purposes in the U.K., that is domiciled under U.K. law in the U.K. or that carries on business in the U.K. through a branch or agency. It does not deal with special situations, such as those of securities dealers, banks, tax-exempt organizations, life insurance companies, persons that hold the Senior Notes as part of a hedging transaction or straddle or conversion transaction or persons whose functional currency is not the U.S. dollar. It also does not deal with state or local taxes, or U.S. federal taxes other than income taxes. The statements regarding U.S. federal income tax consequences set forth below are based upon the provisions of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and judicial decisions thereunder as of the date of this Prospectus. The statements regarding U.K. and Bermuda tax laws set forth below are based on those laws as in force on the date of this Prospectus. Such authorities may be repealed, revoked or modified, possibly with retroactive effect, in which case tax consequences different from those discussed below could result. The statements regarding U.S. federal income, U.K. and Bermuda tax consequences set forth below assume that the Senior Notes were issued, and transfers thereof and payments thereon have been and will continue to be made, in accordance with the Indenture and the Depositary Agreement. For purposes of the U.K. Treaty (as defined below) and the Code, U.S. Holders of the Book-Entry Interests will be treated as owners of the Senior Notes underlying such Book-Entry Interests and, except as noted below, the tax consequences of owning the Book-Entry Interests will be the same as those applicable to ownership of the Senior Notes. PERSONS CONSIDERING THE ACQUISITION, OWNERSHIP OR DISPOSITION OF THE SENIOR NOTES SHOULD CONSULT THEIR OWN TAX ADVISERS CONCERNING THE U.S. FEDERAL INCOME, 43 U.K. AND BERMUDA TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTIONS. CERTAIN TAX CONSEQUENCES OF THE EXCHANGE OFFER United States. The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer will not result in any federal income tax consequences to holders. When a holder exchanges an Old Note for an Exchange Note pursuant to the Exchange Offer, such holder will have the same adjusted basis and holding period in the Exchange Note as in the Old Note immediately before the Exchange. United Kingdom. The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer will not result in any liability to United Kingdom taxation for holders of Old Notes who are neither resident nor, in the case of a holder who is an individual, ordinarily resident in the United Kingdom for the purposes of United Kingdom taxation, and further who do not carry on a trade, profession or vocation in the United Kingdom through a branch or agency in the United Kingdom to which the Old Notes or the Exchange Notes are attributable. Bermuda. The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer will not result in any Bermuda tax consequences. TAXATION OF U.S. HOLDERS OF THE SENIOR NOTES Bermuda Payments under the Guarantee. Under Bermuda law, no withholding or deduction will be required to be made on account of payments made by Bermuda Holdings under the Guarantee. United Kingdom Payments on the Senior Notes. The rules relating to UK withholding tax have been amended by legislation enacted by Finance Act 1996 supported by regulations laid thereunder. However, as some further regulations have still to be drafted, the rules set out below may be subject to amendment. (a) The Senior Notes will constitute "quoted Eurobonds" provided they continue to carry a right to interest and provided that they are and continue to be in bearer form and quoted on a recognized stock exchange (the New York Stock Exchange, Inc. is a recognized stock exchange for this purpose). (b) Payments of interest on Senior Notes which are and continue to be quoted Eurobonds and are in global form and are held in a "recognized clearing system" (DTC is so recognized) may be made without withholding or deduction for or on account of UK income tax, provided that: (i) payment is made direct to the recognized clearing system; or (ii) payment is made to, or at the direction of, a depositary for the recognized clearing system and the paying agent has obtained a valid declaration PA 3 from the depositary; or (iii) the paying agent has obtained a notice from the Inland Revenue instructing the paying agent to pay the interest with no tax deducted. (c) If the Senior Notes are issued in definitive form and are and continue to be quoted Eurobonds, then payments of interest on the Senior Notes may be made without such withholding or deduction where: (i) the person by or through whom the payment is made is not in the UK; or (ii) the payment is made by or through a person who is in the UK and (aa) the interest is paid on a Senior Note held in a recognized clearing system as defined for the relevant purpose and one of the conditions set out in paragraph (b)(i), (ii) and (iii) above is satisfied; or (bb) a person who is not resident in the UK is beneficially entitled to the interest and is the beneficial owner of the Senior Note on which the interest is paid and either: 44 (1) the paying agent obtains a valid declaration PA1 from the said person on the occasion of each payment; or (2) the paying agent obtains on the occasion of each payment a valid declaration PA2 from another person who holds the Senior Notes for the non- resident person and who is entitled to arrange for the interest to be paid with no UK tax deducted; or (iii) the paying agent has obtained a notice from the Inland Revenue instructing the paying agent to pay the interest with no tax deducted. In other cases, and in particular if either (A) payments on the Senior Notes are made at a time they are not quoted on a recognized stock exchange or (B) Definitive Senior Notes in registered form are issued, interest and Additional Amounts, if any, will be paid after deduction of U.K. income tax at the lower rate (currently 20%). A U.S. Holder of a Senior Note will normally be eligible to recover in full any U.K. tax withheld from payments of interest to which such U.S. Holder is beneficially entitled by making a claim for refund under the U.S./U.K. Treaty on the appropriate form filed in duplicate with the Internal Revenue Service Center Director with which such U.S. Holder's last U.S. federal income tax return was filed. Alternatively, a claim may be made by a U.S. Holder in advance of a payment of interest. If the claim is accepted by the U.K. Inland Revenue, they will authorize subsequent payments to that U.S. Holder to be made without the withholding of U.K. tax. Claims for refund must be made within six years of the end of the U.K. year of assessment (generally April 5th in each year) to which the interest related and must be accompanied by the original statement provided by the Company (or any nominee holding the Senior Notes on the U.S. Holder's behalf) when the interest payment was made showing the amount of income tax deducted and when the interest payment was made. Because a claim for refund is not considered until the U.K. Inland Revenue receives the appropriate form from the IRS, forms should be sent to the IRS well before the end of the applicable limitation period, In the case of Senior Notes which are quoted Eurobonds, a person in the UK who in the course of a trade or profession: (i) by means of coupons, warrants or bills of exchange, collects or secures payment of or receives interest on Senior Notes for a Noteholder; or (ii) arranges to collect or secure payment of interest on Senior Notes for a Noteholder; or (iii) acts as a custodian of such Notes and receives interest on such Senior Notes or directs that interest on such Senior Notes be paid to another person or consents to such payment will be required to withhold UK income tax at the lower rate (currently 20%), subject to certain exceptions, including the following: (a) the Senior Notes are held in a recognized clearing system and either: (i) the collecting agent pays or accounts for the interest directly or indirectly to the recognized clearing system and where such payment or account is made to, or at the direction of, a depositary for the recognized clearing system, the collecting agent holds a valid declaration CA3 from the depositary; or (iii) the collecting agent is acting as depositary for the recognized clearing system in respect of the Senior Notes; or (b) the person beneficially entitled to the interest beneficially owns the Senior Notes and is not resident in the UK and the collecting agent either (i) holds a valid declaration CA1 from the said person; or (ii) holds a valid declaration CA2 from a person (other than the beneficial owner of the Notes) to whom the interest is payable or who is entitled to arrange for the interest to be collected without deduction of UK tax and who is not a collecting agent in the UK. Holders of Senior Notes who request Definitive Senior Notes in registered form will not be entitled to the payment of any Additional Amounts in respect of the U.K. tax withheld. In certain other cases in which Senior Notes are exchanged for Definitive Senior Notes, U.S. Holders of Definitive Senior Notes will be entitled to the payment of Additional Amounts in respect of the U.K. tax withheld. See "Description of Senior Notes--Payment of Additional Amounts." 45 Under provisions of the U.K. Finance Act 1995, interest on the Senior Notes received without deduction or withholding will not be subject to U.K. tax by direct assessment in the hands of a holder of Senior Notes who is not resident for tax purposes in the U.K. unless that holder carries on a trade, profession or vocation within the U.K. through a U.K. branch or agency in connection with which the interest is received or to which the Senior Notes are attributable (in which case certain exemptions may be available). Sale or Disposition (including Redemption). A U.S. Holder (not resident or ordinarily resident in the U.K. and not engaging in business in the U.K. through a branch or agency) will not be subject to U.K. tax (including withholding tax) on the sale, redemption (other than redemption at a premium), retirement or other disposition of a Senior Note. Similarly, such a U.S. Holder will not be subject to U.K. tax where an interest in the Global Note is exchanged for a Definitive Senior Note. For U.K. tax purposes, a disposal of a Senior Note by an individual holder resident or ordinarily resident for U.K. tax purposes in the U.K. or who carries on a trade, profession or vocation in the U.K. through a branch or agency to which the Senior Note is attributable may give rise to a chargeable gain or allowable loss for the purposes of taxation of capital gains. It should be noted that, to calculate any gain on a disposal of Senior Notes, sterling values are compared at acquisition and disposal. Accordingly, a taxable gain can arise on maturity, for example, even where the amount of foreign currency received is less than, or the same as, the amount paid for the Senior Notes. A transfer of a Senior Note by an individual holder resident or ordinarily resident for U.K. tax purposes in the U.K. or who carries on a trade in the U.K. through a branch or agency to which the Senior Note is attributable may give rise to a charge to tax on income in respect of an amount representing interest on the Senior Note which has accrued since the preceding interest payment date. In relation to a holder which is a company that is subject to U.K. corporation tax (other than a company established for charitable purposes only, authorized unit trusts and approved investment trusts and certain other categories of company which are not taxable on chargeable gains), the Senior Notes will be treated on disposal as "qualifying corporate bonds" with the result that on a disposal of the Senior Notes by such a company, neither chargeable gains nor allowable losses will arise for the purposes of taxation of chargeable gains. Holders of Senior Notes who are within the charge to United Kingdom corporation tax will be charged to tax generally on all profits and gains (including interest and other accruals or, as the case may be, movements in value, gains made on disposals and profits attributable to exchange rate fluctuations) arising from the Senior Notes broadly in accordance with their statutory accounting treatment. Such profits and gains will be charged to tax as income in respect of each accounting period to which they are allocated for accounting purposes. Relief may be available for related expenses and losses on a similar basis. U.K. Stamp Duty and Stamp Duty Reserve Tax. No U.K. Stamp Duty or Stamp Duty Reserve Tax is payable on the issue of the Global Note or on the issue or, once the Senior Notes are listed on the New York Stock Exchange, Inc. the transfer by delivery of a Senior Note or on its redemption except that stamp duty reserve tax (currently at the rate of 0.5%) could be payable on an agreement to transfer any Senior Note issued after 25 November 1996 unless, inter alia, the Senior Note is listed on a recognized stock exchange, does not carry a right of conversion into securities not so listed and the agreement to transfer the Senior Note is not made in contemplation of, or as part of an arrangement for, a takeover of the Company. Although the Issuer intends to list the Exchange Notes on the New York Stock Exchange, Inc. it is not expected that the Exchange Notes will be listed on the date of issue. During the period prior to such listing of the Exchange Notes and the Old Notes, any agreement to transfer the Global Note or Senior Note or any interest therein may be subject to Stamp Duty Reserve Tax if made before such Senior Notes are so listed, unless it can be shown that (i) the amount of interest and Additional Amounts payable on the Senior Notes neither exceeds a reasonable commercial return on the nominal amount of the capital nor falls to be determined to any extent by reference to the results of, or any part of, a business or to the value of any property; (ii) the Senior Notes carry a right on repayment to an amount which does not exceed the nominal value of the capital (or if it does, such amount is reasonably comparable with what is generally repayable (in respect of a similar nominal amount of capital) under the terms of issue of loan capital listed in the Official List of The London Stock Exchange); and (iii) the Senior Notes do not carry a right (exercisable then or later) of conversion into shares or other securities, or to the acquisition of shares or other securities, including loan capital of the same description. U.K. Inheritance Tax. Senior Notes represented by the Global Note that are not treated as situated in the U.K. and are beneficially owned by an individual domiciled outside the U.K. will not be subject to U.K. inheritance tax. If a Senior Note is subject to U.K. inheritance tax and U.S. federal estate tax, the U.S./U.K. convention for the avoidance of double taxation with respect to estate and gift taxes may entitle a U.S. Holder to credit or relief in respect of the U.K. tax. 46 United States Payments on the Senior Notes. For U.S. federal income tax purposes, a U.S. Holder will include interest and Additional Amounts, if any, payable on the Senior Notes in income when received or accrued in accordance with the U.S. Holder's method of accounting. Such interest will constitute "foreign source income" for foreign tax credit purposes. Subject to certain limitations, a U.S. Holder would generally be required to include the full amount of the interest payment (without reduction for the U.K. withholding tax, if any) and Additional Amounts, if any, and would be entitled to a credit against its U.S. federal income tax liability, or a deduction in computing its U.S. federal taxable income, for U.K. taxes withheld from payments of interest to which such U.S. Holder is beneficially entitled. In the case of a U.S. Holder entitled to claim a refund of any U.K. tax withheld, no U.S. foreign tax credit or deduction may be claimed for the amount of U.K. tax eligible for a refund, whether or not such refund is sought, to the extent that it is reasonably certain that such U.K. tax will be refunded. If a U.S. Holder receives a refund of U.K. tax for which a deduction or foreign tax credit was previously claimed, the U.S. Holder generally must (i) in the case of a deduction, include the refund in gross income or (ii), in the case of a foreign tax credit, notify the Service of the receipt of the refund, according to the requirements of Section 1.905-4T of the Treasury Regulations or any successor provisions, and the Service will redetermine the U.S. Holder's U.S. federal income tax liability for the taxable year in which the credit was originally claimed. Sale or Disposition (including Redemption). For U.S. federal income tax purposes, taxable gain or loss generally will be recognized by a U.S. Holder on the sale, redemption, retirement or other disposition of the Senior Notes measured by the difference between (1) the sum of (a) any cash and (b) the fair market value of any property received (except in the case of a cash basis taxpayer, to the extent the cash or property received is attributable to accrued interest, which will be taxable as such) and (2) the U.S. Holder's tax basis in the Senior Notes. Subject to the market discount rules discussed below, any gain or loss recognized generally will be capital gain or loss. Any such gain generally will constitute "U.S. source income" for foreign tax credit purposes. Market Discount. A U.S. Holder (other than a U.S. Holder that makes the election described below) that purchases a Senior Note at a market discount that is not de minimis generally will be required to treat any gain realized upon the disposition of such Senior Note as interest income to the extent of the market discount accruing during the period such holder held such Senior Note. A U.S. Holder may also be required to recognize as ordinary income any principal payments with respect to a Senior Note to the extent such payments do not exceed the accrued market discount on the Senior Note. For this purpose, market discount generally equals the excess of the stated redemption price of the Senior Note over the basis of the Senior Note in the hands of the holder immediately after its acquisition. However, market discount is deemed not to exist if the market discount is less than a statutorily defined de minimis amount equal to 1/4 of 1 percent of the Senior Note's stated redemption price multiplied by the number of complete years to the Senior Note's maturity after the holder acquired the Senior Note. The market discount rules also provide that a U.S. Holder of Senior Notes that were acquired at a market discount may be required to defer the deduction, until the Senior Notes are disposed of, of a portion of the interest on any indebtedness incurred or maintained to acquire or carry the Senior Notes. A U.S. Holder of a Senior Note acquired at a market discount may elect to include market discount in income as the discount accrues. In such a case, the foregoing rules with respect to the recognition of ordinary income on dispositions and with respect to the deferral of interest deductions on indebtedness related to such Senior Note would not apply. The current inclusion election applies to all market discount obligations acquired on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the Service. Amortizable Bond Premium. Generally, if the tax basis of an obligation held as a capital asset exceeds the amount payable at maturity of the obligation, such excess may constitute amortizable bond premium that the holder of such obligation may elect to amortize under the constant interest rate method and deduct over the period from the holder's acquisition date to the obligation's maturity date. The amortizable bond premium deduction is treated as a reduction of interest on the bond instead of as a deduction, except as Treasury Regulations may otherwise provide. A holder that elects to amortize bond premium must reduce its tax basis in the related obligation by the amount of the aggregate deductions allowable for the amortizable bond premium. Any election to amortize bond premium will apply to all bonds (other than bonds the interest on which is excludible from gross income) held by the holder at the beginning of the first taxable year 47 to which the election applies or thereafter acquired by the holder. The election may not be revoked without the consent of the Service. In the case of an obligation, such as a Senior Note, that may be called at a premium prior to maturity, an earlier call date is treated as its maturity date, and the amount of bond premium is determined by treating the amount payable on such call date as the amount payable at maturity if such a calculation produces a smaller amortizable bond premium for the period ending on such call date. If a U.S. Holder of a Senior Note is required to amortize and deduct bond premium by reference to a call date, the Senior Note will be treated for this purpose as maturing on such date for the amount payable, and, if not redeemed on such date, as reissued on such date for the amount so payable. If a Senior Note purchased at a premium is redeemed pursuant to a call prior to such early call date or its maturity, a U.S. Holder that has elected to deduct bond premium may deduct the excess of its adjusted basis in the Senior Note over the amount received on redemption (or, if greater, the amount payable on maturity) as an ordinary loss in the taxable year of redemption. United States Information Reporting and Backup Withholding. In general, U.S. information reporting requirements will apply to payments of principal, premium and interest on a Senior Note and on the proceeds of the sale of a Senior Note before maturity to a non-corporate U.S. Holder, and U.S. "backup withholding" at a rate of 31% will apply to such payments if the U.S. Holder fails to provide an accurate taxpayer identification number or to report all interest and dividends required to be shown on its federal income tax returns. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against such U.S. Holder's U.S. federal income tax liability and may entitle such U.S. Holder to a refund, provided that the required information is furnished to the Service. ERISA CONSIDERATIONS The Company, the obligor with respect to the Senior Notes, and its affiliates may be considered a "party in interest" (within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or a "disqualified person" (within the meaning of Section 4975 of the Code) with respect to any employee benefit plans ("Plans") that are subject to ERISA. Any purchaser proposing to acquire Senior Notes with assets of any Plan should consult with its counsel. The purchase and/or holding of Senior Notes by a Plan that is subject to the fiduciary responsibility provisions of ERISA or the prohibited transaction provisions of Section 4975 of the Code (including individual retirement arrangements and other plans described in Section 4975(e)(1) of the Code) and with respect to which the Issuer, Bermuda Holdings or any affiliate is a service provider (or otherwise is a party in interest or a disqualified person) may constitute or result in a prohibited transaction under ERISA or Section 4975 of the Code, unless such Senior Notes are acquired pursuant to and in accordance with an applicable exemption, such as Prohibited Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain transactions determined by an independent qualified professional asset manager), PTCE 91-38 (an exemption for certain transactions involving bank collective investment funds), PTCE 90-1 (an exemption for certain transactions involving insurance company pooled separate accounts), PTCE 95-60 (an exemption for transactions involving certain insurance company general accounts) or PTCE 96-23 (an exemption for certain transactions determined by an in-house professional asset manager). LEGAL MATTERS The validity of the Exchange Notes offered hereby will be passed upon for the Issuer and Bermuda Holdings by Clifford Chance, United Kingdom counsel for the Issuer and Bermuda Holdings, and by Conyers, Dill & Pearman, Bermuda counsel for the Issuer and Bermuda Holdings. EXPERTS The consolidated financial statements of Bermuda Holdings and its subsidiaries as of December 31, 1996 and 1997 and for each of the three years in the period ended December 31, 1997, incorporated by reference in this Prospectus, have been incorporated herein in reliance upon the report of Coopers & Lybrand (Hamilton, Bermuda), independent accountants, given on the authority of that firm as experts in accounting and auditing. 48 ================================================================================ No dealer, salesperson or other person has been authorized to give any information or to make any representations in connection with this offering other than those contained in this Prospectus, and if given or made, such information or representations must not be relied upon as having been authorized by the Issuer or Bermuda Holdings. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of the Senior Notes in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create an implication that the information contained herein is correct as of any time subsequent to its date or that there has been no change in the affairs of the Issuer or Bermuda Holdings since such date. _____________ TABLE OF CONTENTS
Page Available Information....................................................... 1 Incorporation of Certain Documents by Reference............................. 1 Enforceability of Civil Liabilities......................................... 2 Currency.................................................................... 2 Prospectus Summary.......................................................... 3 Company Overview............................................................ 3 The Exchange Offer.......................................................... 7 The Exchange Notes.......................................................... 10 Certain Consequences of a Failure to Exchange Old Notes..................... 11 Risk Factors................................................................ 13 Summary Consolidated Financial Data......................................... 18 Ratio of Earnings to Fixed Charges.......................................... 19 Use of Proceeds............................................................. 20 Capitalization.............................................................. 20 Description of Exchange Notes............................................... 21 Description of Depositary Agreement......................................... 33 Description of Old Notes.................................................... 37 The Exchange Offer.......................................................... 37 Plan of Distribution........................................................ 42 Certain Tax Considerations.................................................. 43 Erisa Considerations........................................................ 48 Legal Matters............................................................... 48 Experts..................................................................... 48
Terra Nova Insurance (UK) Holdings plc OFFER TO EXCHANGE 7% SENIOR NOTES DUE 2008, WHICH WILL BE FULLY AND UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS BY TERRA NOVA (BERMUDA) HOLDINGS LTD. AND WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OUTSTANDING 7% SENIOR NOTES DUE 2008 ______________ PROSPECTUS ______________ __________, 1998 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. THE ISSUER The Issuer is a public limited company organized under the laws of England and Wales. Sections 310 and 727 of the Companies Act of 1985, as amended (the "Companies Act"), and Article 17 of the Issuer's Articles of Association provide for the indemnification or exemption from liability, under the circumstances set forth below, of officers and auditors of the Issuer against certain liabilities in respect of negligence, default, breach of duty or breach of trust in relation to the Issuer, and for the purchase and maintenance of insurance by the Issuer on behalf of officers, directors, and auditors of the Issuer against certain liabilities asserted against, and incurred by, any such officer, director, or auditor in such capacity. Set forth below is the text of Sections 310 and 727 of the Companies Act and the text of Article 17 of the Issuer's Articles of Association. Section 310 of the Companies Act of 1985, as amended, provides as follows: "SEC. 310. Provisions exempting officers and auditors from liability. 310(1) This section applies to any provision, whether contained in a company's articles or in any contract with the company or otherwise, for exempting any officer of the company or any person (whether an officer or not) employed by the company as auditor from, or indemnifying him against, any liability which by virtue of any rule of law would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company. 310(2) Except as provided by the following subsection, any such provision is void. 310(3) This section does not prevent a company -- (a) from purchasing and maintaining for any such officer or auditor insurance against any such liability, or (b) from indemnifying any such officer or auditor against any liability incurred by him -- (i) in defending any proceedings, (whether civil or criminal) in which judgment is given in his favour or he is acquitted, or (ii) in connection with any application under section 144(3) or (4) (acquisition of shares by innocent nominee) or section 727 (general power to grant relief in case of honest and reasonable conduct) in which relief is granted to him by the court." Section 727 of the Companies Act 1985 provides: "(1) If in any proceedings for negligence, default, breach of duty or breach of trust against an officer of a company or a person employed by a company as auditor (whether he is or is not an officer of the company) it appears to the court hearing the case that that officer or person is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case (including those connected with his appointment) he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him, either wholly or partly, from his liability on such terms as it thinks fit. (2) If any such officer or person as abovementioned has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust, he may apply to the court for relief; and the court on the application has the same power to relieve him as under this section it would have had if it had been a court before which proceedings against that person for negligence, default, breach of duty or breach of trust had been brought. (3) Where a case to which subsection (1) applies is being tried by a judge with a jury, the judge, after hearing the evidence, may, if he is satisfied that the defendant or defender ought in pursuance of that subsection to be relieved either in whole or in part from the liability sought to be enforced against him, withdraw the case in whole or in part from the II-1 jury and forthwith direct judgment to be entered for the defendant or defender on such terms as to costs or otherwise as the judge may think proper." Article 17 of the Issuer's Articles of Association provides as follows: "17.(1) subject to the provisions of and to the extent permitted by the Statutes, every director, other officer or auditor of the Company shall be indemnified out of the assets of the Company against any liability incurred by him in the actual or purported execution or discharge of his duties or the exercise or purported exercise of his powers or otherwise in relation to or in connection with his duties, powers or office, but: (a) this indemnity shall not apply to any liability to the extent that it is recovered from any other person; and (b) the indemnity is subject to such officer or auditor taking all reasonable steps to effect such recovery, so that the indemnity shall not apply to the extent that an alternative right of recovery is capable of being enforced. 17.(2) Regulation 188 of Table A shall not apply." As of December 31, 1997, Bermuda Holdings had purchased primary directors and officers liability insurance from New Hampshire Insurance Company (Europe) in the amount of (Pounds)12.5 million, with excess cover of (Pounds)7.5 million provided by Executive Risk Insurance Company and further excess cover of (Pounds)5 million provided by ACE Insurance Company, covering directors and officers of Bermuda Holdings and its subsidiaries including those of the Issuer. BERMUDA HOLDINGS Bermuda Holdings is a company organized under the Laws of Bermuda. Sections 98 and 98A of the Companies Act of 1981 of Bermuda and Article 28 of the Bye- Laws of Bermuda Holdings provide for the indemnification, except under circumstances set forth below, of directors, officers or auditors of Bermuda Holdings from losses or liabilities occurring in connection with their execution of their duties or supposed duties in such capacities, and for the purchase and maintenance of insurance by Bermuda Holdings on behalf of its directors and officers against any liabilities asserted against such directors or officers by virtue of a violation of their duties in such capacities. Set forth below is the text of Sections 98 and 98A of the Companies Act of 1981 of Bermuda and the text of Article 28 of the Bye-Laws of Bermuda Holdings. Section 98 of the Companies Act of 1981 of Bermuda provides: "(1) Subject to subsection (2), a company may in its bye-laws or in any contract or arrangement between the company and any officer, or any person employed by the company as auditor, exempt such officer or person from, or indemnify him in respect of, any loss arising or liability attaching to him by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which the officer or person may be guilty in relation to the company or any subsidiary thereof. (2) Any provision, whether contained in the bye-laws of a company or in any contract or arrangement between the company and any officer, or any person employed by the company as auditor, exempting such officer or person from, or indemnifying him against any liability which by virtue of any rule of law would otherwise attach to him in respect of any fraud or dishonesty of which he may be guilty in relation to the company shall be void. Provided that -- (a) nothing in this section shall operate to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force; and (b) notwithstanding anything in this section, a company may, in pursuance of any such provision as aforesaid indemnify any such officer or auditor against any liability incurred by him in defending any proceedings, whether civil or criminal in which judgment is given in his favor or in which he is acquitted or when relief is granted to him by the Court under section 281." Section 98A of the Companies Act 1981 of Bermuda provides as follows: II-2 "98A A company may purchase and maintain insurance for the benefit of any officer of the company against any liability incurred by him under paragraph (b) of subsection (1) of Section 97 in his capacity as an officer of the Company or indemnifying such an officer in respect of any loss arising or liability attaching to him by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which the officer may be guilty in relation to the company or any subsidiary thereof and nothing in this Act shall make void or voidable any such policy." (Section 97(1)(b), referenced in Section 98A, provides that every officer of a company in exercising his powers and discharging his duties shall "exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.") Article 28 of the Bye-Laws of Bermuda Holdings provides as follows: "(a) The Directors, Secretary and other Officers for the time being of the Company and the liquidator or trustees (if any) for the time being acting in relation to any of the affairs of the Company and every one of them, and their heirs, executors and administrators, shall be indemnified and secured harmless out of the assets of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their heirs, executors or administrators, shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty, or supposed duty, or in their respective offices or trusts, and none of them shall be answerable for the acts, receipts, neglects or defaults of the others of them or for joining in any receipts for the sake of conformity, or for the acts of or the solvency or honesty of any bankers or other persons with whom any moneys or effects belonging to the Company shall or may be lodged or deposited for safe custody, or for insufficiency or deficiency of any security upon which any moneys of or belonging to the Company shall be placed out on or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in relation thereto, PROVIDED THAT this indemnity shall not extend to any matter in respect of any wilful negligence, wilful default, fraud or dishonesty which may attach to any of said persons. (b) Every Director and Officer of the Company shall be indemnified out of the funds of the Company against all liabilities incurred by him as such Director or Officer of the Company in defending any proceedings, whether civil or criminal, in which judgment is given in his favor, or in which he is acquitted, or in connection with any application under the Companies Acts in which relief from liability is granted to him by the court. Such funds shall be advanced to such Director or Officer on his incurring liability prior to judgment provided that should he be found guilty of a criminal or other offense for which he cannot by law be indemnified he shall reimburse the Company the funds advanced." As of December 31, 1997, Bermuda Holdings had purchased primary directors and officers liability insurance from New Hampshire Insurance Company (Europe) in the amount of (Pounds)12.5 million, with excess cover of (Pounds)7.5 million provided by Executive Risk Insurance Company and further excess cover of (Pounds)5 million provided by ACE Insurance Company. II-3 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (A) LIST OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - - ------ ----------------------- 1.1 -- Registration Rights Agreement, dated August 20, 1997, among the Issuer, Bermuda Holdings, and the Initial Purchaser. (Filed as Exhibit 1.1 to the Issuer's Registration Statement on Form F-4/S-4, Registration No. 333-38063 and incorporated herein be reference) 1.2 -- Registration Rights Agreement, dated May 18, 1998, among the Issuer, Bermuda Holdings and the Initial Purchaser. 3.1 -- Copy of Memorandum and Articles of Association of the Issuer dated November 1, 1994 (Filed as Exhibit 3.1 to the Issuers' Registration Statement on Form F-1, Registration No. 33-93358- 01, and incorporated herein by reference). 3.2 -- Certificate of Incorporation and Memorandum of Association of Bermuda Holdings dated November 29, 1993 (Filed as Exhibit 3.2 to Bermuda Holding's Registration Statement on Form S-1, Registration No. 33-93358, and incorporated herein by reference). 3.3 -- Amended and Restated Bye-Laws of Bermuda Holdings dated March 25, 1996 (Filed as Exhibit 3.2 to Bermuda Holdings' Registration Statement on Form S-1, Registration No. 333- 1726, and incorporated herein by reference). 4.1 -- Indenture, dated August 26, 1997, among the Issuer, Bermuda Holdings, and The Chase Manhattan Bank, as Trustee. (Filed as Exhibit 4.1 to the Issuer's Registration Statement on Form F-4/S-4, Registration No. 333-38063 and incorporated herein be reference) 4.2 -- Indenture, dated May 18, 1998, among the Issuer, Bermuda Holdings, The Chase Manhattan Bank, as Trustee. 4.3 -- Deposit and Custody Agreement, dated August 26, 1997, among the Issuer, Bermuda Holdings, Chase Manhattan Bank Luxembourg, S.A. as Custodian, and The Chase Manhattan Bank, as Depositary. (Filed as Exhibit 4.2 to the Issuer's Registration Statement on Form F-4/S-4, Registration No. 333-38063 and incorporated herein be reference) 4.4 -- Deposit and Custody Agreement, dated May 18, 1998, among the Issuer, Bermuda Holdings, Chase Manhattan Bank Luxembourg S.A. as Custodian, and the The Chase Manhattan Bank, as Depositary. 4.5 -- Form of Global Note. Included as Exhibit A to the Indenture filed herewith as Exhibit 4.2. 4.6 -- Form of Global Receipt. Included as Exhibit C to the Deposit and Custody Agreement filed herewith as Exhibit 4.4. 5.1 -- Opinion of Clifford Chance as to the legality of the Exchange Notes.* 5.2 -- Opinion of Conyers, Dill & Pearman as to the legality of the Guarantee.* 5.3 -- Opinion of Milbank, Tweed, Hadley & McCloy as to the legality of the Global Receipt.* 8.1 -- Opinion of Clifford Chance as to U.K. tax matters relative to the Exchange Notes.* 8.2 -- Opinion of Conyers, Dill & Pearman as to Bermuda tax matters relative to the Guarantee.*
II-4 10.1 -- DTI Notice of Requirements (Filed as Exhibit 10.23 of the Issuer's registration statement on Form S-1, Registration No. 33-93358, and incorporated by reference herewith). 11.1 -- Statement re computation of per share earnings. (Filed as Exhibit 11.1 to Bermuda Holdings' annual report on Form 10-K for the year ended December 31, 1997, Commission File Number 001-13834, and incorporated herein by reference). 12.1 -- Statement re computation of ratios.* 21.1 -- Subsidiaries of the Issuer and Bermuda Holdings (filed as Exhibit 21.1 to the Issuer's registration statement on Form F-4/S-4 Registration No. 333-38063 and incorporated herein by reference). 23.1 -- Consent of Clifford Chance.* 23.2 -- Consent of Conyers, Dill & Pearman.* 23.3 -- Consent of Coopers & Lybrand. 24.1 -- Power of Attorney of the Officers and Directors of the Issuer. 24.2 -- Power of Attorney of the Officers and Directors of Bermuda Holdings. 25.1 -- Statement of Eligibility of Trustee on Form T-1.* 99.1 -- Form of Letter of Transmittal.* 99.2 -- Form of Notice of Guaranteed Delivery.* 99.3 -- Form of Letter to Record Holders.* 99.4 -- Form of Letter to Beneficial Holders.* 99.5 -- Form of Instruction from Owner.* * To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES. Financial statement schedules of the registrants for which provision is made in the applicable accounting regulations of the Commission are not required, are inapplicable or have been disclosed in the notes to the financial statements and therefore have been omitted. ITEM 22. UNDERTAKINGS. (a) The undersigned Registrant hereby undertakes 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 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) 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 foregoing provisions, 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 II-5 such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. (c) The undersigned registrant hereby undertakes (i) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b) or 11 of Form F-4 and Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class-mail or other equally prompt means; and (ii) to arrange or provide for a facility in the U.S. for the purpose of responding to such requests. The undertaking in subparagraph (i) above includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (d) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. (e) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form. (f) The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (e) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has caused this Registration Statement on Form S-4, to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hamilton, Bermuda, on the 29th day of May, 1998. TERRA NOVA (BERMUDA) HOLDINGS LTD. By /s/ Jean M. Waggett -------------------------------- Jean M. Waggett, as Attorney-in-Fact May 29, 1998 Pursuant to the requirements of this Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title - - --------- ----- John J. Dwyer* Chairman and Director Nigel H.J. Rogers* Chief Executive Officer (Principal Executive and Accounting Officer) and Director William J. Wedlake* Chief Financial Officer (Principal Financial Officer) John Riddick* Deputy Chairman and Director David L. Jaffe* Director Philip F. Petronis* Director Allan W. Fulkerson* Director Robert S. Fleischer* Director Steven J. Gilbert* Director
* By power of attorney authorizing Jean M. Waggett to execute the Registration Statement and amendments and/or post-effective amendments and supplements thereto on behalf of Terra Nova (Bermuda) Holdings Ltd. and its directors and officers. II-7 Pursuant to the requirements of the Securities Act of 1933, the registrant has caused this Registration Statement on Form F-4, to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hamilton, Bermuda, on the 29th day of May, 1998. TERRA NOVA (BERMUDA) HOLDINGS LTD. By /s/ Jean M. Waggett ------------------------------------ Jean M. Waggett, as Attorney-in-Fact May 29, 1998 Pursuant to the requirements of this Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title - - --------- ----- John Riddick* Chairman and Managing Director (Principal Executive Officer) William J. Wedlake* Chief Financial Officer (Principal Financial Officer and Accounting Officer) John J. Dwyer* Director Nigel H. J. Rogers* Director
* By power of attorney authorizing Jean M. Waggett to execute the Registration Statement and amendments and/or post-effective amendments and supplements thereto on behalf of Terra Nova Insurance (UK) Holdings plc and its directors and officers. II-8 AUTHORIZED REPRESENTATIVE Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement on Forms S-4 and F-4 has been signed below by the undersigned as the duly authorized representative of the Issuer and Bermuda Holdings in the United States. By: /s/ Jean M. Waggett -------------------- Jean M. Waggett New York, New York May 29, 1998 II-9 EXHIBIT INDEX
EXHIBITS DESCRIPTION OF DOCUMENT PAGE - - -------- ----------------------- ---- 1.1 -- Registration Rights Agreement, dated August 20, 1997, among the Issuer, Bermuda Holdings, and the Initial Purchaser. (Filed as Exhibit 1.1 to the Issuer's Registration Statement on Form F-4/S-4, Registration No. 333-38063 and incorporated herein be reference) 1.2 -- Registration Rights Agreement, dated May 18, 1998, among the Issuer, Bermuda Holdings and the Initial Purchaser. 3.1 -- Copy of Memorandum and Articles of Association of the Issuer dated November 1, 1994 (Filed as Exhibit 3.1 to the Issuers' Registration Statement on Form F-1, Registration No. 33-93358-01, and incorporated herein by reference). 3.2 -- Certificate of Incorporation and Memorandum of Association of Bermuda Holdings dated November 29, 1993 (Filed as Exhibit 3.2 to Bermuda Holding's Registration Statement on Form S-1, Registration No. 33-93358, and incorporated herein by reference). 3.3 -- Amended and Restated Bye-Laws of Bermuda Holdings dated March 25, 1996 (Filed as Exhibit 3.2 to Bermuda Holdings' Registration Statement on Form S-1, Registration No. 333-1726, and incorporated herein by reference). 4.1 -- Indenture, dated August 26, 1997, among the Issuer, Bermuda Holdings, and The Chase Manhattan Bank, as Trustee. (Filed as Exhibit 4.1 to the Issuer's Registration Statement on Form F-4/S-4, Registration No. 333-38063 and incorporated herein be reference) 4.2 -- Indenture, dated May 18, 1998, among the Issuer, Bermuda Holdings, The Chase Manhattan Bank, as Trustee. 4.3 -- Deposit and Custody Agreement, dated August 26, 1997, among the Issuer, Bermuda Holdings, Chase Manhattan Bank Luxembourg, S.A. as Custodian, and The Chase Manhattan Bank, as Depositary. (Filed as Exhibit 4.2 to the Issuer's Registration Statement on Form F-4/S-4, Registration No. 333-38063 and incorporated herein be reference) 4.4 -- Deposit and Custody Agreement, dated May 18, 1998, among the Issuer, Bermuda Holdings, Chase Manhattan Bank Luxembourg S.A. as Custodian, and the The Chase Manhattan Bank, as Depositary. 4.5 -- Form of Global Note. Included as Exhibit A to the Indenture filed herewith as Exhibit 4.2. 4.6 -- Form of Global Receipt. Included as Exhibit C to the Deposit and Custody Agreement filed herewith as Exhibit 4.4. 5.1 -- Opinion of Clifford Chance as to the legality of the Exchange Notes.* 5.2 -- Opinion of Conyers, Dill & Pearman as to the legality of the Guarantee.* 5.3 -- Opinion of Milbank, Tweed, Hadley & McCloy as to the legality of the Global Receipt.* 8.1 -- Opinion of Clifford Chance as to U.K. tax matters relative to the Exchange Notes.* 8.2 -- Opinion of Conyers, Dill & Pearman as to Bermuda tax matters relative to the Guarantee.*
10.1 -- DTI Notice of Requirements (Filed as Exhibit 10.23 of the Issuer's registration statement on Form S-1, Registration No. 33-93358, and incorporated by reference herewith). 11.1 -- Statement re computation of per share earnings. (Filed as Exhibit 11.1 to Bermuda Holdings' annual report on Form 10-K for the year ended December 31, 1997, Commission File Number 001-13834, and incorporated herein by reference). 12.1 -- Statement re computation of ratios.* 21.1 -- Subsidiaries of the Issuer and Bermuda Holdings (filed as Exhibit 21.1 to the Issuer's registration statement on Form F-4/S-4 Registration No. 333-38063 and incorporated herein by reference). 23.1 -- Consent of Clifford Chance.* 23.2 -- Consent of Conyers, Dill & Pearman.* 23.3 -- Consent of Coopers & Lybrand. 24.1 -- Power of Attorney of the Officers and Directors of the Issuer. 24.2 -- Power of Attorney of the Officers and Directors of Bermuda Holdings. 25.1 -- Statement of Eligibility of Trustee on Form T-1.* 99.1 -- Form of Letter of Transmittal.* 99.2 -- Form of Notice of Guaranteed Delivery.* 99.3 -- Form of Letter to Record Holders.* 99.4 -- Form of Letter to Beneficial Holders.* 99.5 -- Form of Instruction from Owner.* * To be filed by amendment.
EX-1.2 2 REGISTRATION RIGHTS AGREEMENT EXHIBIT 1.2 REGISTRATION RIGHTS AGREEMENT Dated as of May 18, 1998 by and among TERRA NOVA INSURANCE (UK) HOLDINGS PLC and TERRA NOVA (BERMUDA) HOLDINGS LTD. and DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION _________________________________ 7.0% Senior Notes Due 2008 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "AGREEMENT") is made and entered into as of May 18, 1998, by and among Terra Nova Insurance (UK) Holdings PLC, a company organized under the laws of England and Wales (the "COMPANY"), Terra Nova (Bermuda) Holdings Ltd., a company organized under the laws of Bermuda (the "GUARANTOR") and Donaldson, Lufkin & Jenrette Securities Corporation (the "PURCHASER"). This Agreement is made pursuant to the Purchase Agreement dated May 12, 1998 (the "PURCHASE AGREEMENT") between the Company, the Guarantor and the Purchaser which provides for the sale by the Company to the Purchaser of $100,000,000 aggregate principal amount of the Company's 7.0% Senior Notes Due 2008 (the "NOTES"), which are guaranteed by the Guarantor. In order to induce the Purchaser to enter into the Purchase Agreement and purchase the Notes, the Company and the Guarantor have agreed to provide the registration rights and perform the obligations set forth in this Agreement. The execution of this Agreement is a condition to the purchase of the Notes under the Purchase Agreement. The parties hereby agree as follows: Section 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "AGREEMENT" has the meaning set forth in the first paragraph of this Agreement. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York or Hamilton, Bermuda or London, England are authorized or obligated by law, regulation or executive order to close. "COMMISSION" means the Securities and Exchange Commission. "COMPANY" has the meaning set forth in the first paragraph of this Agreement and also includes the Company's successors. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "EXCHANGE NOTES" means 7.0% Senior Notes Due 2008 issued by the Company under the Indenture and guaranteed by the Guarantor on the same terms as the Notes, and containing terms identical to the Notes (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Notes or, if no such interest has been paid, from May 18, 1998, (ii) the Exchange Notes will not contain restrictions on transfer, and (iii) the Exchange Notes will not contain provisions relating to an increase in their interest rate under certain circumstances) to be offered to Holders of Notes pursuant to the Exchange Offer. "EXCHANGE OFFER" means the exchange offer by the Company of Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION" means a registration under the Securities Act effected pursuant to Section 2(a) hereof. "EXCHANGE OFFER REGISTRATION STATEMENT" means an exchange offer registration statement on Form S-4 or F-4 (or, if applicable, on another appropriate form) pursuant to the provisions of Section 2(a) of this Agreement which covers all of the Exchange Notes and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference therein. "GUARANTOR" has the meaning set forth in the first paragraph of this Agreement and also includes the Guarantor's successors. "HOLDER" means the Purchaser, for so long as it owns any Registrable Notes, and its successors, assigns and direct and indirect transferees who become registered owners of Registrable Notes under the Indenture; provided that for purposes of Sections 4 and 6 of this Agreement, the term "Holder" shall include Participating Broker-Dealers as defined in Section 4(a). "INDENTURE" means the Indenture relating to the Notes dated as of May 18, 1998 among the Company, the Guarantor and The Chase Manhattan Bank, as Trustee, as amended or supplemented from time to time in accordance with the terms thereof. "NOTES" has the meaning set forth in the second paragraph of this Agreement. "PERSON" means an individual, partnership, corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof. 2 "PURCHASE AGREEMENT" has the meaning set forth in the first paragraph of this Agreement. "PROSPECTUS" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any amendment or supplement thereto, with respect to the offering of any portion of the Registrable Notes covered by such Registration Statement or of the Exchange Notes, as the case may be, and all other amendments and supplements to the Prospectus, including post-effective amendments and all material incorporated by reference or deemed to be incorporated by reference therein. "PURCHASER" has the meaning set forth in the first paragraph of this Agreement. "REGISTRABLE NOTES" means the Notes; provided that any Note shall cease to be a Registrable Note upon the earlier to occur of (i) when a Registration Statement with respect to such Note has been declared effective under the Securities Act and such Note has been disposed of pursuant to such Registration Statement, (ii) when such Note has become eligible for resale pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Securities Act, (iii) except with respect to any Note held by a Holder described in clause (iii) of Section 2(b) hereof, an Exchange Offer has been consummated, or (iv) such Notes shall cease to be outstanding. "REGISTRATION EXPENSES" has the meaning set forth in Section 5 hereof. "REGISTRATION STATEMENT" means any registration statement that covers any of the Exchange Notes or Registrable Notes pursuant to the provisions of this Agreement and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference therein. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission thereunder. "SHELF REGISTRATION" means a registration under the Securities Act effected pursuant to Section 2(b) hereof. 3 "SHELF REGISTRATION STATEMENT" means a "shelf" registration statement on Form S-3 (or, if applicable, on another appropriate form) pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Notes (except Registrable Notes that the Holders have elected not to include in such Shelf Registration Statement) under Rule 415 under the Securities Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference therein. "SPECIAL COUNSEL" means Davis Polk & Wardwell, special counsel to the Purchaser or such other special counsel as may be designated by the Holders of a majority in aggregate principal amount of Registrable Notes outstanding. "TRUSTEE" means the trustee with respect to the Notes under the Indenture. Section 2. Registration under the Securities Act. (a) EXCHANGE OFFER REGISTRATION. To the extent not prohibited by any applicable law or applicable interpretation of the Staff of the Commission, each of the Company and the Guarantor agree to use its commercially reasonable efforts to cause to be filed after the Closing Date an Exchange Offer Registration Statement covering an offer by the Company to the Holders to exchange all of the Registrable Notes (except Registrable Notes held by the Purchaser and acquired directly from the Company if the Purchaser is not permitted, pursuant to applicable law or any applicable interpretation of the Staff of the Commission, to participate in the Exchange Offer) for Exchange Notes and to have such Registration Statement remain effective until the closing of the Exchange Offer. The Company shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement has been declared effective by the Commission and use its commercially reasonable efforts to have the Exchange Offer consummated not later than November 18, 1998. The Company shall commence the Exchange Offer by mailing the related exchange offer Prospectus and accompanying documents to each Holder stating, in addition to such other disclosures required by applicable law or the Indenture: (i) that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Notes validly tendered will be accepted for exchange; 4 (ii) the dates of acceptance for exchange (which shall be a period of not less than 20 Business Days from the date such notice is first mailed) (the "EXCHANGE DATES"); (iii) that any Registrable Note entitled to be exchanged in the Exchange Offer not tendered or tendered and validly withdrawn will remain outstanding and continue to accrue interest (but not at any increased rate provided for under certain circumstances in such Notes), but will not retain any rights under this Agreement; (iv) that each Holder electing to have a Registrable Note exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Note, together with letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice prior to the close of business on the last Exchange Date; and (v) that each Holder will be entitled to withdraw its election not later than the close of business on the last Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Notes delivered for exchange and a statement that such Holder is withdrawing its election to have such Registrable Notes exchanged. As soon as practicable after the last Exchange Date, the Company shall: (i) accept for exchange Registrable Notes or portions thereof tendered and not validly withdrawn pursuant to the Exchange Offer; and (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Notes or portions thereof so accepted for exchange by the Company and issue, and cause the Trustee to promptly authenticate and mail to each Holder, Exchange Notes equal in principal amount to the principal amount of the Registrable Notes surrendered by such Holder. The Company shall use its commercially reasonable efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not 5 violate applicable law or any applicable interpretation of the Staff of the Commission. (b) SHELF REGISTRATIONS. In the event that (i) the Company determines that the Exchange Offer Registration provided in Section 2(a) above is not available or may not be consummated as soon as practicable after the last Exchange Date, (ii) the Exchange Offer is not for any other reason consummated by November 18, 1998 or (iii) the Exchange Offer has been completed, and within 60 days following the consummation of the Exchange Offer, a Holder notifies the Company that in the opinion of Special Counsel a Registration Statement must be filed and a Prospectus must be delivered by it because (x) such Registrable Notes represent an unsold allotment of the Registrable Notes purchased by the Purchaser from the Company, (y) such Holder is a Participating Broker-Dealer, or (z) such Holder was otherwise not permitted to participate in the Exchange Offer, unless the Company has previously done so, the Company shall use its commercially reasonable efforts to cause to be filed as soon as practicable after such determination, date or notice of such Special Counsel's opinion is given to the Company, as the case may be, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Notes and to have such Shelf Registration Statement declared effective by the Commission. The Company shall use its commercially reasonable efforts to keep the Shelf Registration Statement continuously effective for a period of three years from the Closing Date or such shorter period which will terminate when all the Registrable Notes covered by the Shelf Registration have been sold pursuant to the Shelf Registration Statement. The Company shall also supplement or amend such Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company or if required by the Securities Act or by any other rules and regulations thereunder for shelf registration or if reasonably requested by a Holder with respect to information relating to such Holder, and to use its commercially reasonable efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon as thereafter practicable. The Company agrees to furnish to the Holders of Registrable Notes copies of any such supplement or amendment promptly after its being used or filed with the Commission. (c) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the Commission; provided that, if, after it has been declared effective, the offering of Registrable Notes pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference until the 6 offering of Registrable Notes pursuant to such Registration Statement may legally resume. In the event that either the Exchange Offer is not consummated or a Shelf Registration Statement is not declared effective on or prior to November 18, 1998, then the annual interest rate borne by the Notes shall be increased by 0.25% beginning at such time. If either such Exchange Offer is not consummated or such Shelf Registration Statement is not declared effective on or prior to February 18, 1999, then the annual interest rate borne by the Notes shall be increased by an additional 0.25% beginning at such time. Upon consummation of such Exchange Offer or the effectiveness of such Shelf Registration Statement, the interest borne by the Notes will revert to the original rate. (d) Without limiting the remedies available to the Purchaser and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Purchaser or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Purchaser or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 2(a) and 2(b) hereof. (e) The Guarantor hereby agrees to cause the Company to perform all of its obligations under this Section 2. Section 3. Registration Procedures. (a) In connection with the obligations of the Company and the Guarantor pursuant to Sections 2(a), 2(b) and 2(d) hereof, the Company shall, and the Guarantor shall take all action necessary to enable the Company and shall cause the Company to: (i) prepare and file with the Commission, within the applicable time period specified in Section 2(a) and Section 2(b), a Registration Statement or Registration Statements on the appropriate form under the Securities Act, which form (A) shall be selected by the Company and (B) shall, in the case of a Shelf Registration Statement, be available for the sale of the Registrable Notes in accordance with the intended method or methods of distribution as the Company is so advised of by the selling Holders thereof and (C) shall comply as to form in all material respects with the requirements of the applicable form and include (including through incorporation by reference) all financial statements required by the Commission to be filed therewith, and the Company shall use its commercially reasonable efforts to cause each such Registration Statement 7 to become effective and remain effective in accordance with Section 2 hereof; (ii) prepare and file with the Commission such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective for the applicable period and cause each Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented, to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and to keep each Prospectus current during the period described under Section 4(3) and Rule 174 under the Securities Act that is applicable to transactions by brokers or dealers with respect to the Registrable Notes or Exchange Notes; (iii) a reasonable time prior to the filing of any Registration Statement or Prospectus or any amendments or supplements thereto or any document which is to be incorporated or deemed to be incorporated therein by reference and amendments to such documents, provide copies of such document to the Holders and the Special Counsel and shall not at any time file or make any amendment to the Registration Statement, any Prospectus or any amendment of or supplement to a Registration Statement or a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Holders and the Special Counsel shall not have previously been advised and furnished a copy or to which the Holders or the Special Counsel shall reasonably object; (iv) use its commercially reasonable efforts to register or qualify the Exchange Notes or Registrable Notes for the exchange or offer and sale, as the case may be, under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the Commission, keep each such registration or qualification effective during the period such Registration Statement is required to be kept effective and do any and all other acts and things which may be necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Notes or Exchange Notes owned by such Holder; provided that the Company will not be required to (A) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(a)(iii), (B) take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) take any action which 8 would subject it to taxation in any such jurisdiction where it is not then so subject; (v) use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement and provide prompt notice to each Holder and the Special Counsel of the withdrawal of any such order; (vi) use its commercially reasonable efforts to obtain the consent or approval of each United States governmental agency or authority, whether federal, state or local, required to be obtained by the Company as may be necessary to enable the Holders thereof to consummate the disposition of such Registrable Notes or Exchange Notes and cooperate with each seller of Registrable Notes in connection with any filings required to be made by such seller with the National Association of Securities Dealers, Inc.; (vii) provide a trustee for the Registrable Notes or Exchange Notes, as the case may be, and cause the Indenture (or the indenture governing the Exchange Notes, if any) to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA") not later than the effective date of any registration; and in connection therewith, cooperate with the Trustee and the Holders to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA and execute, and use its commercially reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable such indenture to be so qualified in a timely manner; (viii) comply with all applicable rules and regulations of the Commission and, in the case of a Shelf Registration, make generally available to its security holders an earning statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year), commencing on the first day of the first fiscal quarter of the Company commencing after the effective date of a Registration Statement, which statement shall cover said 12-month period; 9 (ix) obtain a CUSIP number for all Exchange Notes or Registrable Notes, as the case may be, not later than the effective date of a Registration Statement; and (x) use its commercially reasonable efforts to cause the Exchange Notes or Registrable Notes, as the case may be, to be rated by a nationally recognized statistical rating organization (as such term is defined in Rule 436(g)(2) under the Securities Act) unless such Notes are already so rated. (b) In addition to the obligations set forth above in Section 3(a), in the case of a Shelf Registration pursuant to Section 2(b) hereof, as expeditiously as possible, the Company and the Guarantor shall: (i) notify each Holder of Registrable Notes and the Special Counsel promptly, and (if requested by any such Person) confirm such notice in writing, (A) when a Prospectus, any Prospectus supplement, a Registration Statement or post-effective amendment related to such Registrable Notes has been filed, and, with respect to a Registration Statement or any post-effective amendment related to such Registrable Notes, when the same has become effective, (B) of any request by the Commission or any federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (C) of the issuance by the Commission or any federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Notes covered thereby, the representations and warranties of the Company or the Guarantor contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (E) of the receipt by the Company or the Guarantor of any notification with respect to the suspension of the qualification of any of the Registrable Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (F) of the existence of any fact or happening of any event during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or which requires the making of any changes in a Registration Statement or related Prospectus in order that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein 10 not misleading, and that, in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (G) of the Company's or the Guarantor's determination that a post-effective amendment to a Registration Statement would be appropriate; (ii) if reasonably requested by any Holder of Registrable Notes covered by a Registration Statement, (A) incorporate in a Prospectus supplement or post-effective amendment to a Registration Statement such information as such Holder reasonably requests to be included therein, (B) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such filings and (C) supplement or make amendments to any Registration Statement if reasonably requested by any Holder of Registrable Notes covered by such Registration Statement; (iii) furnish to each Holder of Registrable Notes and the Special Counsel and to each underwriter of an underwritten offering of Registrable Notes, if any, without charge, at least one conformed copy of each Registration Statement or Statements and any amendment thereto, including financial statements and schedules, all documents incorporated therein by reference or deemed incorporated therein by reference and all exhibits (including those previously furnished or incorporated by reference), as soon as practicable after the filing of such documents with the Commission; (iv) furnish to each Holder of Registrable Notes, the Special Counsel and to each underwriter of an underwritten offering of Registrable Notes, if any, without charge, as many copies of each Prospectus or Prospectuses (including each preliminary Prospectus) and any amendment or supplement thereto and such other documents as such Persons may reasonably request in order to facilitate the public sale or other disposition of the Registrable Notes; and each of the Company and the Guarantor hereby consents to the use of such Prospectus or any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Notes and any such underwriter in connection with the offering and sale of the Registrable Notes covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law; 11 (v) cooperate with the selling Holders of Registrable Notes to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends; and enable such Registrable Notes to be in such denominations and registered in such names, in all cases consistent with the requirements set forth in the Indenture, as the Holders may request at least two Business Days prior to the closing of any sale of Registrable Notes; (vi) a reasonable time prior to the filing of any Registration Statement or Prospectus or any amendments or supplements thereto or any document which is to be incorporated or deemed to be incorporated therein by reference and amendments to such documents, make such of the representatives of the Company and the Guarantor as shall be reasonably requested by the Holders or the Special Counsel available for discussion of such document; (vii) upon becoming aware of the occurrence of any event contemplated by Section 3(b)(i)(f) or 3(b)(i)(g) above, use its commercially reasonable efforts to, as promptly as practicable thereafter, prepare and file with the Commission a post-effective amendment to the applicable Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into the Registration Statement so that the Registration Statement shall not contain any untrue statement or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and so that the Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder, and, in the case of a post-effective amendment to a Registration Statement, use its commercially reasonable efforts to cause it to become effective as promptly as is practicable. Each of the Company and the Guarantor agrees to notify the Holders and the Special Counsel to suspend use of the Prospectus as promptly as practicable after becoming aware of the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus upon receipt of such notice until the Company has amended or supplemented the Prospectus to correct such misstatement or omission; (viii) enter into such customary agreements and take all such other customary actions in connection therewith (including those reasonably 12 requested by the Holders of a majority of the Registrable Notes being sold) as are reasonably required to expedite or facilitate the disposition of such Registrable Notes including, but not limited to, an underwritten offering and in connection therewith, (A) to the extent practicable, make such representations and warranties to the Holders and any underwriters of such Registrable Notes with respect to the business of the Guarantor and its subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (B) obtain opinions of counsel to the Company and the Guarantor satisfactory to the selling Holders and any underwriters of such Registrable Notes and updates thereof addressed to each selling Holder and underwriter of Registrable Notes, covering the matters customarily covered in opinions requested in underwritten offerings, (C) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company and the Guarantor (and, if necessary, any other certified public accountant of any subsidiary of the Guarantor, or of any business acquired or to be acquired by the Company or the Guarantor for which financial statements and financial data is or is required to be included in the Registration Statement) addressed to each selling Holder and underwriter of Registrable Notes, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings and (D) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Notes being sold and the Special Counsel to evidence the continued validity of the representations and warranties of the Company and the Guarantor made pursuant to clause (A) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company or the Guarantor. The above shall be done at each closing under such underwriting or similar agreement as and to the extent required thereunder; (ix) upon reasonable notice, make available for inspection by a representative of the Holders of Registrable Notes, Special Counsel, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney and accountant designated by such selling Holders or underwriters, at reasonable times and in a reasonable manner, all financial and other records, pertinent documents and properties of the Guarantor and its subsidiaries and cause the officers, directors and employees of the Guarantor and its subsidiaries to supply all information reasonably requested by any such representative, underwriter, 13 attorney or accountant in connection with such disposition, in each case that would customarily be reviewed or examined in connection with a "due diligence" review of the Company and the Guarantor; and (x) use its commercially reasonable efforts to cause all Registrable Notes to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company are then listed if requested by the Holders of a majority in aggregate principal amount, to the extent such Registrable Notes satisfy applicable listing requirements. In the case of a Shelf Registration Statement, the Company may require each Holder of Registrable Notes to furnish to the Company such information regarding the Holder and the distribution of such Registrable Notes by such Holder as the Company may from time to time reasonably request in writing. Each Holder of Registrable Notes as to which any registration is being effected will be required to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Holder to the Company pursuant to Section 2 or of the happening of any event, in either case as a result of which any Prospectus relating to such registration contains an untrue statement of a material fact regarding such Holder or the distribution of such Registrable Notes required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and to furnish to the Company promptly any additional information required to correct and update any previously furnished information or required such that such Prospectus shall not contain, with respect to such Holder or the distribution of such Registrable Notes, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any (i) notice from the Company or the Guarantor of the happening of any event of the kind described in Section 3(b)(i)(f) or 3(b)(i)(g) hereof, (ii) notice from the Company or the Guarantor that it is in possession of material information that has not been disclosed to the public and the Company or the Guarantor reasonably deems it to be advisable not to disclose such information in a registration statement or (iii) notice from the Company or the Guarantor that it is in the process of a registered offering of securities and the Company or the Guarantor reasonably deems it to be advisable to temporarily discontinue disposition of Registrable Notes pursuant to the Shelf Registration Statement (in each case, such notice being hereinafter referred to as a "SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of Registrable Notes pursuant 14 to any Shelf Registration Statement and shall not be entitled to the benefits provided under Section 6 hereof with respect to any sales made by it in contravention of this paragraph, until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(b)(vii) hereof or a notice that any order suspending the effectiveness of the Shelf Registration Statement has been withdrawn, or, in the case of (ii) or (iii) above, until further notice from the Company and the Guarantor that disposition of Registrable Notes may resume, provided that such further notice will be given within 90 days of the Suspension Notice in the case of (ii) above and within 120 days of the Suspension Notice in the case of (iii) above, and provided further that in the case of (ii) and (iii) above that any Suspension Notice must be based upon a good faith determination of the Board of Directors of the Company or the Guarantor that such Suspension Notice is necessary; and, if so directed by the Company or the Guarantor, such Holder will deliver to the Company (at the expense of the Company) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Notes current at the time of receipt of such notice. If the Company or the Guarantor shall give any Suspension Notice relating to the disposition of Registrable Notes pursuant to any Shelf Registration Statement, the Company shall extend the period during which such Shelf Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such Notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions or received such Notice that any order suspending dispositions of the Notes has been withdrawn. Notwithstanding the foregoing, in the case of clauses (ii) or (iii) above, neither the Company nor the Guarantor may deliver a Suspension Notice if a period of 90 days in the case of (ii) above and 120 days in the case of (iii) above has not elapsed since the termination of any prior period during which a Suspension Notice was in effect. SECTION 4. Participation of Broker-dealers in Exchange Offer. (a) The Staff of the Commission has taken the position that any broker-dealer that receives Exchange Notes for its own account in the Exchange Offer in exchange for Notes that were acquired by such broker-dealer as a result of market-making or other trading activities (a "PARTICIPATING BROKER-DEALER"), may be deemed to be an "underwriter" within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. Each of Company and the Guarantor understands that it is the Staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above 15 effect and the means by which Participating Broker-Dealers may resell the Exchange Notes, without naming the Participating Broker-Dealers or specifying the amount of Exchange Notes owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the Securities Act in connection with resales of Exchange Notes for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act. (b) In the light of the above, notwithstanding the other provisions of this Agreement, each of the Company and the Guarantor agrees that the provisions of this Agreement as they relate to a Shelf Registration shall also apply to an Exchange Offer Registration to the extent, and with such reasonable modifications thereto as may be, reasonably requested by the Purchaser or by one or more Participating Broker-Dealers, in each case as provided in clause (ii) below, in order to expedite or facilitate the disposition of any Exchange Notes by Participating Broker-Dealers consistent with the positions of the Staff of the Commission recited in Section 4(a) above; provided that: (i) neither the Company nor the Guarantor shall be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(b)(vii), for a period exceeding 180 days after the last Exchange Date (as such period may be extended pursuant to the last paragraph of Section 3 of this Agreement) and Participating Broker-Dealers shall not be authorized by the Company or the Guarantor to deliver and shall not deliver such Prospectus after such period in connection with resales contemplated by this Section 4; and (ii) in connection with such application of the Shelf Registration procedures set forth in Section 3 to an Exchange Offer Registration, the Company and the Guarantor shall be obligated (A) to deal only with one entity representing the Participating Broker-Dealers, which shall be Donaldson, Lufkin & Jenrette Securities Corporation unless it elects not to act as such representative, (B) to pay the fees and expense of only one counsel representing the Participating Broker-Dealers, which shall be the Special Counsel unless such counsel elects not to so act and (C) to cause to be delivered only one, if any, "cold comfort" letter or set of letters, as the case may be, with respect to the Prospectus in the form existing on the last Exchange Date and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (i) above. SECTION 5. Registration Expenses. 16 The Company shall pay all fees and expenses incident to the performance of or compliance with this Agreement by the Company including, without limitation, (i) all Commission, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualification of any of the Exchange Notes or Registrable Notes), (iii) all expenses of any Persons acting on behalf of the Company and the Guarantor in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the reasonable fees and disbursements of the Trustee (including the reasonable fees and disbursements of its counsel), (vii) the fees and disbursements of counsel for the Company and the Guarantor, the Special Counsel and of the independent public accountants of the Company and the Guarantor, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, but excluding fees of counsel to the underwriters or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Notes by a Holder. In the event the Company shall fail to pay any amounts owed pursuant to this Section 5, the Guarantor shall pay such amounts. SECTION 6. Indemnification and Contribution. (a) Each of the Company and the Guarantor jointly and severally agrees to indemnify and hold harmless (i) the Purchaser, (ii) each Holder, (iii) each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Purchaser or any Holder (such person referred to in this clause (ii) as a "CONTROLLING PERSON"), and (iv) the respective officers, directors, partners, employees, representatives and agents of the Purchaser, any Holder or any controlling person (any person referred to in clause (i), (ii) or (iii) may be referred to as an "INDEMNIFIED PERSON"), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including, without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Person) directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any 17 Registration Statement, or any amendment or supplement thereto, any preliminary prospectus or the Prospectus (as amended and supplemented if the Company or the Guarantor shall have furnished any amendments or supplements thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages, liabilities, judgments, actions or expenses are caused by any such untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to the Purchaser or any Holder, as requested in writing to be included by any Holder pursuant to Section 2, furnished in writing to the Company by the Purchaser or any Holder expressly for use therein. The Company and the Guarantor also agree, jointly and severally, to indemnify any underwriters of the Registrable Notes, their officers and directors and each Person who controls such underwriters on substantially the same basis as that of the indemnification of the Purchaser and the Holders provided in this Section 6. The Company and the Guarantor shall notify the Purchaser promptly of the institution, threat or assertion of any claim, proceeding (including any governmental investigation) or litigation relating to the offering of the Senior Notes or this Agreement which involves the Company or the Guarantor or any Indemnified Person. (b) In case any action or proceeding (including any governmental investigation) shall be brought or asserted against any Indemnified Person based upon any Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended and supplemented if the Company or the Guarantor shall have furnished any amendments or supplements thereto), and with respect to which indemnity may be sought against either the Company or the Guarantor (each, an "INDEMNIFYING PARTY"), such Indemnified Person shall promptly notify the Indemnifying Party in writing (provided, that the failure to give such notice shall not relieve the Indemnifying Party of its obligations pursuant to this Agreement unless the Indemnifying Party is materially prejudiced thereby and had no knowledge of such action or proceeding) and such Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person and payment of all fees and expenses. Such Indemnified Person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the employment of such counsel shall have been specifically authorized in writing by the Indemnifying Party, (ii) the Indemnifying Party shall have failed to assume the defense and employ counsel or (iii) the named parties to any such action (including any impleaded parties) include both such Indemnified Person and the Indemnifying Party and such Indemnified Person shall have been advised by such counsel that there may be one or more legal defenses available to 18 it which are different from or additional to those available to the Indemnifying Party or to another Indemnified Party (in which case the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Person, it being understood, however, that the Indemnifying Party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than (i) one separate firm of attorneys (in addition to any local counsel) for the Purchaser and all controlling persons, which firm shall be designated in writing by Donaldson, Lufkin & Jenrette Securities Corporation, and (ii) one separate firm of attorneys (in addition to any local counsel) for all such Holders and controlling persons, which firm shall be designated by Holders of a majority in aggregate principal amount of Registrable Notes, and that all such fees and expenses shall be reimbursed as they are incurred). Such Indemnifying Party shall be liable for any settlement of any such action effected with such Indemnifying Party's prior written consent, which consent shall not be unreasonably withheld, and such Indemnifying Party agrees to indemnify and hold harmless any Indemnified Person from and against any loss, claim, damage, liability or expense by reason of any settlement of any action effected with the written consent of such Indemnifying Party. Notwithstanding the immediately preceding sentence, if in any case where the fees and expenses of counsel are at the expense of such Indemnifying Party and the Indemnified Person shall have requested such Indemnifying Party to reimburse the Indemnified Person for such fees and expenses of counsel as incurred, such Indemnifying Party agrees that it shall be liable for any settlement of any action effected without its written consent if (i) such settlement is entered into more than 30 business days after the receipt by such Indemnifying Party of the aforesaid request, and (ii) such Indemnifying Party shall have failed to reimburse the Indemnified Person in accordance with such request for reimbursement prior to the date of such settlement. Such Indemnifying Party shall not, without the prior written consent of each Indemnified Person, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Person is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Person from all liability arising out of such action, claim, litigation or proceeding. (c) In connection with any Shelf Registration in which a Holder is participating, the Holders agree severally and not jointly, to indemnify and hold harmless the Purchaser and each person, if any, who controls the Purchaser within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and the respective officers, directors, partners, employees, 19 representatives and agents of the Purchaser and each of the Company and the Guarantor, its directors, officers and any person controlling such person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company and the Guarantor to the Purchaser and each Holder set forth in Section 6(a) above, but only with reference to information relating to such Holder furnished in writing by or on behalf of such Holder, expressly for use in any Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended and supplemented if the Company or the Guarantor shall have furnished any amendments or supplements thereto). In case any action shall be brought against any of the Company, the Guarantor, any of their directors, any such officers or any person controlling such person or the Purchaser, any of its directors or any person controlling the Purchaser based on any Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended and supplemented if the Company or the Guarantor shall have furnished any amendments or supplements thereto), and in respect of which indemnity may be sought against any Holder, such Holder shall have the rights and duties given to the Company and the Guarantor (except that if the Company, the Guarantor or the Purchaser shall have assumed the defense thereof, such Holder shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof but the fees and expenses of such counsel shall be at such Holder's expense), and each of the Company, the Guarantor and the Purchaser, their directors, any such officers and any person controlling such persons shall have the rights and duties given to the Purchaser and the Holders, by Section 6(b) hereof. (d) The Purchaser agrees to indemnify and hold harmless each of the Company and the Guarantor and any person, if any, controlling (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company or the Guarantor, and the officers, directors, partners, employees, representatives and agents of each such person, to the same extent as the foregoing indemnity from the Company and the Guarantor to each of the Indemnified Persons, but only with respect to claims and actions based on information relating to the Purchaser furnished in writing by the Purchaser expressly for use in any Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended and supplemented if the Company or the Guarantor shall have furnished any amendments or supplements thereto). In case any action shall be brought against the Company or the Guarantor, or any of their directors, officers or persons controlling the Company or the Guarantor, based on any Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended and supplemented if the Company or the Guarantor shall have furnished any amendments or supplements thereto), and in respect of which indemnity may be sought against 20 the Purchaser, the Purchaser shall have the rights and duties given to the Company and the Guarantor (except that if the Company or the Guarantor shall have assumed the defense thereof, the Purchaser shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, the fees and expenses of such counsel shall be at the expense of the Purchaser), and the Company and the Guarantor, their directors, officers and any persons controlling any such persons shall have the rights and duties given to the Purchaser, by Section 6(b) hereof. (e) If the indemnification provided for in this Section 6 is unavailable to any Indemnified Person in respect of any losses, claims, damages, liabilities, judgments or expenses referred to herein, then each Indemnifying Party, in lieu of indemnifying such any Indemnified Person, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities, judgments and expenses in such proportion as is appropriate to reflect the relative fault of the Company and the Guarantor, on the one hand, and the Purchaser, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantor, on the one hand, and the Purchaser, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company and the Guarantor or by the Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (f) The Company, the Guarantor and the Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation (even if the Purchaser and the Holders were treated as one entity) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such indemnified party in connection with investigating or defending any matter, including any action, that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 6, neither the Purchaser nor any Holder shall be required to contribute any amount in excess of the amount by which the total price of the Registrable Notes sold by the Purchaser or such Holder exceeds the amount of any damages which the Purchaser or such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent 21 misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' respective obligations to contribute pursuant to this Section 6 are several in proportion to the respective amount of Registrable Notes of such Holder that were registered pursuant to a Registration Statement and not joint. The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (g) The indemnity and contribution provisions contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Purchaser or any person controlling the Purchaser, any Holder or any person controlling the Holder, or the Company, the Guarantor, their officers or directors or any person controlling any such person, and (iii) the sale or transfer of any Registrable Notes by any Holder. SECTION 7. Selection of Underwriters. The Holders of Registrable Notes covered by the Shelf Registration Statement who desire to do so may sell such Registrable Notes in an underwritten offering. In any such underwritten offering, the investment banker or investment bankers and manager or managers (the "UNDERWRITERS") that will administer the offering will be selected by the Holders of a majority of the aggregate principal amount of outstanding Registrable Notes included in such offering. SECTION 8. Miscellaneous. (a) REMEDIES. In the event of a breach by the Company or the Guarantor of any of their obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Each of the Company and the Guarantor agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, they shall waive the defense that a remedy at law would be adequate. 22 (b) NO INCONSISTENT AGREEMENTS. Neither the Company nor the Guarantor has, as of the date hereof, and shall not, on or after the date of this Agreement, enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Holders in this Agreement. Each of the Company and the Guarantor represents and warrants that the rights granted to the Holders hereunder do not in any way conflict with the rights granted to the holders of the Company's or the Guarantor's securities under any other agreements. (c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company and the Guarantor have obtained the written consent of Holders of a majority of the then outstanding aggregate principal amount of Registrable Notes affected by such amendment, modification, supplement, waiver or departure; provided, however, no amendment, modification or supplement, waiver or consent with respect to the provisions of Section 6 hereof shall be effective as against any Holder of Registrable Notes unless consented to in writing by such Holder. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter which relates exclusively to the rights of Holders whose securities are being sold pursuant to a Registration Statement and which does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold by such Holders; provided, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. (d) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first- class mail, telex, telecopier or any courier guaranteeing overnight delivery: (i) if to a Holder, in accordance with the notice provisions set forth in the Indenture, with a copy to the Purchaser, initially at their respective addresses as follows: Donaldson, Lufkin & Jenrette Securities Corporation 277 Park Avenue New York, New York 10172 Attention: Jonathan D. Kelly and thereafter at such other address, notice of which is given in accordance with this Section 8(d); and 23 (ii) if to the Company, initially at its address as follows: Terra Nova Insurance (UK) Holdings plc Terra Nova House 41-43 Mincing Lane London EC3R 7SP, Great Britain Attention: John Riddick and thereafter at such other address, notice of which is given in accordance with this Section 8(d); and (iii) if to the Guarantor, initially at its address as follows: Terra Nova (Bermuda) Holdings Ltd. Richmond House 2nd Floor 12 Par-La-Ville Road Hamilton HM 08, Bermuda Attention: Jean Waggett and thereafter at such other address, notice of which is given in accordance with this Section 8(d); and (iv) if to Special Counsel, initially at its address as follows: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attention: Richard J. Sandler and thereafter at such other address, notice of which is given in accordance with this Section 8(d). All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; the next business day if timely delivered to an air courier guaranteeing overnight delivery; when answered back, if telexed; and when receipt acknowledged, if telecopied. Copies of all such notices, demands or other communications shall be concurrently delivered by the person giving the same to the Trustee under the Indenture at the address specified in such Indenture. 24 (e) SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Registrable Notes. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and/or the Guarantor, on the one hand, and the Purchaser, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights hereunder. (f) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. (i) JURISDICTION. Each of the Company and the Guarantor has designated and appointed CT Corporation System, 1633 Broadway, New York, New York 10019, as its authorized agent (the "AUTHORIZED AGENT") upon which process may be served in any legal suit, action or proceeding (a "PROCEEDING") based on or arising under this Agreement, which may be instituted in any state or federal court sitting in the City of New York by any Holder, and each of the Company and the Guarantor expressly accepts and irrevocably submits to the jurisdiction of any such court in respect of any such Proceeding. Such appointment shall be irrevocable unless and until a successor authorized agent in the City or State of New York reasonably acceptable to the Holders shall have been appointed by the Company or the Guarantor, as applicable, such successor shall have accepted such appointment and written notice thereof shall have been given to the Holders. Each of the Company and the Guarantor represents and warrants that the Authorized Agent has agreed to act as said agent for service of process and agrees to take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect as aforesaid. Service of process upon the Authorized Agent and written notice of such service to such party (mailed or delivered to such party at such party's address set forth above) shall be deemed, in every respect, valid and effective personal service of process upon such party in any such Proceeding and each of the Company and the Guarantor irrevocably waives all claim of error by reason of any such service. Each of the Company and the 25 Guarantor irrevocably waives any objection which it may now or hereafter have to the laying of venue in any federal or state court sitting in the City of New York of any Proceeding based on or arising under this Agreement and irrevocably waives any claim that any such Proceeding in any such court has been brought in an inconvenient forum. Each of the Company and the Guarantor agrees that a final judgment in any such Proceeding brought in any such court shall be conclusive and binding upon it and may be enforced in any court having jurisdiction over the Company or the Guarantor, as applicable, by a suit upon such judgment. (j) PAYMENT CURRENCY. Any obligation of the parties to make payments hereunder is in U.S. dollars (the "OBLIGATION CURRENCY") and such obligation shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in any currency other than the Obligation Currency or any other realization in such other currency, whether as proceeds of set-off, security, guarantee, distributions, or otherwise, except to the extent to which such tender, recovery or realization shall result in the receipt by the party which is to receive such payment of the full amount of the Obligation Currency expressed to be payable hereunder. The party liable to make such payment agrees to indemnify the party which is to receive such payment for the amount (if any) by which such receipt shall fall short of the full amount of the Obligation Currency expressed to be payable hereunder and the party which is to receive such payment agrees to pay to the party liable to make such payment the amount (if any) by which such receipt shall exceed the full amount of the Obligation Currency, and, in each case, such obligation shall not be affected by judgment being obtained for any other sums due under this Agreement. The parties agree that the rate of exchange which shall be used to determine if such tender, recovery or realization shall result in the receipt by the party which is to receive such payment of the full amount of the Obligation Currency expressed to be payable hereunder shall be the noon buying rate in New York City for cable transfers in such foreign currency as certified for customs purposes by the Federal Reserve Bank of New York for the business day preceding that on which the judgment becomes a final judgment or, if such noon buying rate is not available, the rate of exchange shall be the rate at which in accordance with normal banking procedures Donaldson, Lufkin & Jenrette Securities Corporation could purchase United States dollars with such foreign currency on the business day preceding that on which the judgment becomes a final judgment. (k) SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result 26 as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. (l) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. Except as provided in the Purchase Agreement, there are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Company with respect to the securities sold pursuant to the Purchase Agreement. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 27 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TERRA NOVA INSURANCE (UK) HOLDINGS PLC By:___________________________________ Name: Title: TERRA NOVA (BERMUDA) HOLDINGS LTD. By:___________________________________ Name: Title: DONALDSON LUFKIN & JENRETTE SECURITIES CORPORATION By:___________________________________ Name: Title: 28 EX-4.2 3 INDENTURE EXHIBIT 4.2 TERRA NOVA INSURANCE (UK) HOLDINGS PLC, as Issuer TERRA NOVA (BERMUDA) HOLDINGS LTD., as Guarantor and THE CHASE MANHATTAN BANK, as Trustee ___________________ INDENTURE Dated as of May 18, 1998 ___________________ 7% Senior Notes due 2008 TABLE OF CONTENTS ---------------
Page ---- RECITALS -------- ARTICLE 1 Definitions and Other Provisions of General Application Section 1.01. Definitions.............................................................. 2 Section 1.02. Other Definitions........................................................ 17 Section 1.03. Compliance Certificates and Opinions..................................... 17 Section 1.04. Form of Documents Delivered to Trustee................................... 18 Section 1.05. Acts of Holders.......................................................... 19 Section 1.06. Notices, Etc., to Trustee, the Issuer Bermuda Holdings................... 20 Section 1.07. Notice of Holders; Waiver................................................ 21 Section 1.08. Conflict of Any Provision of Indenture with Trust Act.................... 21 Section 1.09. Effect of Headings and Table of Contents................................. 22 Section 1.10. Successor and Assigns.................................................... 22 Section 1.11. Separability Clause...................................................... 22 Section 1.12. Benefits of Indenture.................................................... 22 Section 1.13. Governing Law............................................................ 22 Section 1.14. Legal Holidays........................................................... 22 Section 1.15. No Recourse Against Others............................................... 23 Section 1.16. Submission of Jurisdiction; Appointment of Agent for Service of Process.. 23 ARTICLE 2 --------- The Senior Notes ---------------- Section 2.01. Form and Dating........................................................ 24 Section 2.02. Execution and Authentication........................................... 26 Section 2.03. Senior Note Registrar and Paying Agent................................. 27 Section 2.04. Paying Agent to Hold Money in Trust.................................... 28 Section 2.05. Senior Note Holder Lists............................................... 30 Section 2.06. Transfer and Exchange.................................................. 30 Section 2.07. Replacement Securities................................................. 32 Section 2.08. Outstanding Securities................................................. 33 Section 2.09. Temporary Senior Notes................................................. 33 Section 2.10. Cancellation........................................................... 33 Section 2.11. Interest, Defaulted Interest........................................... 34 Section 2.12. Special Transfer Provisions............................................ 34
PAGE ---- Section 2.13. CUSIP and CINS Numbers................................................ 38 ARTICLE 3 --------- Satisfaction and Discharge --------------------------- Section 3.01. Satisfaction and Discharge of Indenture ............................... 38 Section 3.02. Application of Trust Money ............................................ 40 ARTICLE 4 --------- Defaults and Remedies --------------------- Section 4.01. Events of Default ..................................................... 40 Section 4.02. Acceleration of Maturity; Rescission .................................. 42 Section 4.03. Collection of Indebtedness and Suits for Enforcement by Trustee ....... 43 Section 4.04. Trustee May File Proofs of Claim ...................................... 44 Section 4.05. Trustee May Enforce Claims Without Possession of Senior Notes ......... 45 Section 4.06. Application of Money Collected ........................................ 45 Section 4.07. Limitation of Suits ................................................... 46 Section 4.08. Unconditional Right of Holders to Receive Principal Premium and Interest 46 Section 4.09. Restoration of Rights and Remedies ..................................... 47 Section 4.10. Rights and Remedies Cumulative ......................................... 47 Section 4.11. Delay or Omission Not Waiver ........................................... 47 Section 4.12. Control by Holders ..................................................... 47 Section 4.13. Waiver of Defaults...................................................... 48 Section 4.14. Undertaking for Costs .................................................. 48 ARTICLE 5 --------- The Trustee ----------- Section 5.01. Notice of Events of Default ............................................ 49 Section 5.02. Certain Rights of Trustee .............................................. 49 Section 5.03. Not Responsible for Recitals or Issuance of Senior Notes ............... 51 Section 5.04. Trustee and Agents May Hold Senior Notes; collections; etc ............. 52 Section 5.05. Money Held in Trust .................................................... 52 Section 5.06. Compensation and Reimbursement ......................................... 52 Section 5.07. Conflicting Interests .................................................. 53 Section 5.08. Corporate Trustee Required; Eligibility ................................ 53
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PAGE ---- Section 5.09. Resignation and Removal; Appointment of Successor ...................... 53 Section 5.10. Acceptance of Appointment of Successor ................................. 55 Section 5.11. Merger, Conversion, Consolidation or Succession to Business ............ 56 Section 5.12. Preferential Collection of Claims Against the Issuer or Bermuda Holdings 56 ARTICLE 6 --------- Holders' Lists And Reports By Trustee ------------------------------------- Section 6.01. Disclosure of Names and Addresses of Holders ........................... 57 Section 6.02. Reports by Trustee 57 ARTICLE 7 --------- Consolidation, Merger, Conveyance, Transfer Or Lease ---------------------------------------------------- Section 7.01. Bermuda Holdings May Consolidated, Etc., Only on Certain Terms.......... 57 Section 7.02. Successor Substituted .................................................. 58 ARTICLE 8 --------- Supplemental Indentures ----------------------- Section 8.01. Supplemental Indentures Without Consent of Holders ..................... 59 Section 8.02. Supplemental Indentures with Consent of Holders ........................ 59 Section 8.03. Execution of Supplemental Indentures ................................... 60 Section 8.04. Effect of Supplemental Indentures ...................................... 60 Section 8.05. Conformity with Trust Indenture Act .................................... 61 Section 8.06. Reference in Senior Notes to Supplemental Indentures ................... 61 ARTICLE 9 --------- Covenants --------- Section 9.01. Payment of Principal, Premium and Interest............................. 61 Section 9.02. Corporate Existence.................................................... 61 Section 9.03. Payment of Taxes and Other Claims...................................... 62 Section 9.04. Maintenance of Properties; Insurance; Books and Records; Compliance with Law........................................... 62 Section 9.05. [Intentionally Omitted]................................................ 63 Section 9.06. [Intentionally Omitted]................................................ 63 Section 9.07. [Intentionally Omitted]................................................ 63
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PAGE ---- Section 9.08. Liens.................................................................. 63 Section 9.09. [Intentionally Omitted]................................................. 63 Section 9.10. [Intentionally Omitted]................................................. 63 Section 9.11. [Intentionally Omitted]................................................. 63 Section 9.12. [Intentionally Omitted]................................................. 63 Section 9.13. [Intentionally Omitted]................................................. 64 Section 9.14. [Intentionally Omitted]................................................. 64 Section 9.15. [Intentionally Omitted]................................................. 64 Section 9.16. [Intentionally Omitted]................................................. 64 Section 9.17. Additional Amounts..................................................... 64 Section 9.18. Statement as to Compliance; Notice of Default; Provision of............ 65 Financial Statements................................................... 66 Section 9.19. Waiver of Stay; Extension of Usury Law................................. 66 Section 9.20. Waiver of Certain Covenants ARTICLE 10 ---------- Redemption Of Senior Notes -------------------------- Section 10.01. Right of Redemption................................................... 67 Section 10.02. Applicability of Article.............................................. 67 Section 10.03. Election to Redeem; Notice to Trustee................................. 67 Section 10.04. Selection by Trustee of Senior Notes to Be Redeemed................... 67 Section 10.05. Notice of Redemption.................................................. 68 Section 10.06. Deposit of Redemption Price........................................... 69 Section 10.07. Senior Notes Payable on Redemption Date............................... 69 Section 10.08. Senior Notes Redeemed in Part......................................... 70 Section 10.09. Optional Redemption................................................... 70 Section 10.10. Tax Redemption........................................................ 70 ARTICLE 11 ---------- Defeasance And Covenant Defeasance ---------------------------------- Section 11.01. Option to Effect Defeasance or Covenant Defeasance.................... 71 Section 11.02. Defeasance and Discharge.............................................. 71 Section 11.03. Covenant Defeasance................................................... 72 Section 11.04. Conditions to Defeasance or Covenant Defeasance....................... 72 Section 11.05. Deposited Money and U.S. Government Obligations to be................. 74 Held in Trust; Other Miscellaneous Provisions......................... 75 Section 11.06. Reinstatement
iv ARTICLE 12 ---------- Guarantee of Senior Notes ------------------------ Section 12.01. Guarantee............................................................. 76 Section 12.02. Execution of Guarantee................................................ 77 Section 12.03. Other Obligations of Bermuda Holdings................................. 77 EXHIBITS Exhibit A Form of Global Note Exhibit B Form of Regulation S Global Note Exhibit C Form of Definitive Senior Note Exhibit D Form of Notation of Guarantee Exhibit E Form of Regulation S Transfer Certificate
INDENTURE, dated as of May 18, 1998, between Terra Nova Insurance (UK) Holdings plc, a public limited company organized under the laws of England and Wales (hereinafter called the "ISSUER"), Terra Nova (Bermuda) Holdings Ltd., a company organized under the laws of Bermuda (hereinafter called "BERMUDA HOLDINGS"), and The Chase Manhattan Bank, a New York banking corporation, as trustee (hereinafter called the "TRUSTEE"). RECITALS WHEREAS, the Issuer has duly authorized the issue of its 7% Senior Notes due 2008 (hereinafter called the "SENIOR NOTES") in an aggregate principal amount not to exceed $100,000,000 and, to provide the terms and conditions upon which the Senior Notes are to be authenticated, issued and delivered, the Issuer has duly authorized the execution and delivery of this Indenture; WHEREAS, Bermuda Holdings has duly authorized the provision of its full and unconditional guarantee of the Senior Notes (hereinafter called the "GUARANTEE") and, to provide the terms and conditions upon which the Guarantee is to be provided, Bermuda Holdings has duly authorized the execution and delivery of this Indenture; WHEREAS, upon the effectiveness of the Exchange Registration Statement (as defined herein) filed with respect to the Senior Notes, this Indenture will be subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of and govern indentures qualified under the Trust Indenture Act; WHEREAS, all acts and things necessary have been done to make the Senior Notes, when executed by the Issuer and authenticated and delivered hereunder and duly issued by the Issuer, the valid, binding and legal obligations of the Issuer, and to make this Indenture a valid agreement of the Issuer in accordance with its terms; WHEREAS, all acts and things necessary have been done to make the Guarantee, when the notation of the Guarantee has been endorsed on the Senior Notes by Bermuda Holdings and delivered hereunder, the valid, binding and legal obligation of Bermuda Holdings, and to make this Indenture a valid agreement of Bermuda Holdings in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Senior Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Senior Notes, as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article 1 have the meanings assigned to them in this Article 1 and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (d) the words "HEREIN," "HEREOF" and "HEREUNDER" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (e) all references to "$" or "DOLLARS" shall refer to the lawful currency of the United States of America; (f) the words "INCLUDE," "INCLUDED" and "INCLUDING" as used herein shall be deemed in each case to be followed by the phrase "WITHOUT LIMITATION", if not expressly followed by such phrase or the phrase "BUT NOT LIMITED TO"; (g) any reference to a Section or Article refers to such Section or Article of this Indenture unless otherwise indicated. Certain terms used principally in Articles 2, 9, and 11 are defined in those Articles. "ADDITIONAL SUMS" means such additional amounts as may be necessary in order that the amount of distributions then due and payable by the Issuer on the outstanding Senior Notes shall not be reduced as a result of any additional taxes, 2 duties or other governmental charges to which the Issuer has become subject as a result of an event described in Section 10.10. "ADJUSTED TREASURY RATE" means, with respect to any Redemption Date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, calculated on the third Business Day preceding the Redemption Date, plus in each case .20%. "AFFILIATE" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person (except in cases where substantially all of the control that would ordinarily be exercisable by virtue of ownership of stock, other than the election of directors, has been eliminated by applicable regulatory authorities). For the purposes of this definition, "CONTROL" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "BERMUDA HOLDINGS" means the Person named as "BERMUDA HOLDINGS" in the first paragraph of this instrument, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "BERMUDA HOLDINGS" shall mean such successor Person. To the extent necessary to comply with the requirements of the provisions of Sections 310 through 317 of the Trust Indenture Act as they are applicable to Bermuda Holdings, the term "BERMUDA HOLDINGS" shall include any other obligor with respect to the Guarantee for the purposes of complying with such provisions. "BOARD OF DIRECTORS" means the board of directors of the Issuer or Bermuda Holdings, as the case may be, or any duly authorized committee of such board. "BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Issuer or Bermuda Holdings, as the case may be, to have been duly adopted by the Board of Directors of the Issuer or Bermuda Holdings, as the case may be, and to be in full force and effect on the date of such certification and delivered to the Trustee. "BOOK-ENTRY INTERESTS" means any beneficial interest in a Global Note. 3 "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York, or London, England, are authorized or obligated by law, regulation or executive order to close. "CAPITAL LEASE OBLIGATION" means, as to any Person, any obligations of such Person and its Subsidiaries on a consolidated basis under any capital lease of real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation. "CAPITAL STOCK" of any Person means any and all shares, interests, participation or other equivalents (however designated) of such Person's capital stock and any rights (other than debt securities convertible into or exchangeable for capital stock), warrants or options to purchase the foregoing whether now outstanding or issued after the date hereof. "CEDEL" means Cedel Bank, societe anonyme. "COMMISSION" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "COMPARABLE TREASURY ISSUE" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term from the Redemption Date to the Stated Maturity Date of the Senior Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Senior Notes. "COMPARABLE TREASURY PRICE" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "COMPOSITE 3:30 P.M. QUOTATIONS FOR U.S. GOVERNMENT SECURITIES" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Quotation Agent obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. 4 "CORPORATE TRUST OFFICE" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 450 West 33rd Street, 15th Floor, New York, New York 10001. "CORPORATION" includes corporations, associations, partnerships, companies and business trusts. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect such Person or any of its Restricted Subsidiaries against fluctuations in currency values. "CUSTODIAN" means Chase Manhattan Bank Luxembourg S.A., as Custodian under the Deposit and Custody Agreement. "DEFAULT" means any event which is, or after notice or passage of time or both would be, an Event of Default. "DEFINITIVE SENIOR NOTE" means any Senior Note substantially in the form of Exhibit C to this Indenture issued in accordance with this Indenture. "DEPOSIT AND CUSTODY AGREEMENT" means the Deposit and Custody Agreement, dated as of May 18, 1998, among the Issuer, Bermuda Holdings, Chase Manhattan Bank Luxembourg S.A., as Custodian, The Chase Manhattan Bank, as Trustee, and The Chase Manhattan Bank, as Depositary. "DEPOSITARY" means The Chase Manhattan Bank, as Depositary under the Deposit and Custody Agreement. "DTC" means The Depository Trust Company. "EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System. "EVENT OF DEFAULT" has the meaning specified in Article4. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" means an issue of senior notes of the Issuer with terms identical to the Senior Notes (except that the Exchange Notes will not bear the Private Placement Legend or any other legends restricting the transfer thereof, will contain the alternative paragraph 1(b) appearing on the reverse of the Senior Notes 5 in the form appearing as Exhibit A hereto and except that interest thereon shall accrue from the last date on which interest was paid on the Senior Notes or, if no such interest has been paid, from the date of issuance of the Senior Notes) to be exchanged for the Senior Notes pursuant to the Exchange Offer. "EXCHANGE OFFER" means the registered offer by the Issuer to exchange the Senior Notes for the Exchange Notes pursuant to the Registration Rights Agreement. "EXCHANGE REGISTRATION" means a registration of the Senior Notes by the Issuer under the Securities Act pursuant to and in accordance with the terms of the Registration Rights Agreement. "EXCHANGE REGISTRATION STATEMENT" means the registration statement relating to an Exchange Offer on an appropriate form and all amendments and supplements to such registration statement, in each case including the prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "FAIR MARKET VALUE" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer. "FEDERAL BANKRUPTCY CODE" means the Bankruptcy Act of Title 11 of the United States Code, as amended from time to time. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally accepted accounting principles in the United States, set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, consistently applied, as in effect from time to time. "GLOBAL NOTES" means, collectively, the Restricted Global Note and the Regulation S Global Note substantially in the forms of Exhibit A and Exhibit B to this Indenture. "GLOBAL RECEIPTS" means, collectively, the Restricted Global Receipt and the Regulation S Global Receipt. 6 "GUARANTEE" means the full and unconditional guarantee by Bermuda Holdings of the Senior Notes, the notation of which is endorsed on the Senior Notes, substantially in the form of Exhibit D to this Indenture. "GUARANTEED DEBT" of any Person means, without duplication, all Indebtedness of any other Person guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (1) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling such other Person to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (3) to supply funds to, or in any other manner invest in, such other Person (including any agreement to pay for property or services to be acquired by such other Person irrespective of whether such property is received or such services are rendered), (4) to maintain working capital or equity capital of such other Person, or otherwise to maintain the net worth, solvency or other financial condition of the debtor, or (5) otherwise to assure a creditor of such other Person against loss; provided that the term "GUARANTEE" shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or any obligation or liability of such other Person in respect of leasehold interests assigned by such other Person to any other Person. "HOLDER" means (a) in the case of any Definitive Senior Note, the Person in whose name such Definitive Senior Note is registered in the Senior Note Register and (b) in the case of a Global Note, the Custodian, or its nominee, or any successor custodian to whom the Global Note is transferred. "INDEBTEDNESS" means, with respect to any Person, without duplication, (1) all obligations of such Person for borrowed money or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities incurred in the ordinary course of business, if, and to the extent, any of the foregoing would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, (2) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, if, and to the extent, any of the foregoing would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, (3) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade accounts payable arising in the ordinary course of business, (4) all Capital Lease Obligations of such Person, (5) all obligations referred to in (but not excluded from) clause (1), (2), (3) or (4) above 7 of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien, upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such obligation, (6) all Guaranteed Debt of such Person, (7) all Redeemable Capital Stock issued by such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends, (8) all obligations under Currency Agreements or Interest Swap Obligations of such Person, (9) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing insurance obligations entered into in the ordinary course of business of such Person to the extent that such letters of credit are not drawn upon, or if and to the extent drawn upon, such drawing is reimbursed not later than the 30th Business Day following a demand for reimbursement following payment on the letter of credit), and (10) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of the types referred to in clauses(1) through (9) above. Indebtedness shall not include obligations under insurance, reinsurance or retrocession contracts entered into in the ordinary course of business. For purposes hereof, the "MAXIMUM FIXED REPURCHASE PRICE" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Redeemable Capital Stock, such Fair Market Value shall be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. "INDENTURE" means this instrument as originally executed (including all exhibits and schedules hereto) and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "INSURANCE BUSINESS" means any business consisting principally of the ownership or issuance of or entry into insurance policies or reinsurance or retrocession contracts that have not expired or the ownership or operation of any other similar assets of an insurer or reinsurer, or any interest therein, which is related to the general business of Bermuda Holdings and its Subsidiaries, and would be reflected on the balance sheet of Bermuda Holdings prepared in accordance with GAAP. Without limiting the foregoing, the term "INSURANCE BUSINESS" shall include a direct or indirect ownership interest in a Person which issues insurance policies, reinsurance or retrocession contracts or similar products 8 or performs investment, management, administrative or similar services related or adaptable to the business of Bermuda Holdings or one or more of its Subsidiaries, so long as such ownership interest would be reflected on the balance sheet of Bermuda Holdings prepared in accordance with GAAP. "INTEREST PAYMENT DATE" means the Stated Maturity of an installment of interest on the Senior Notes. "INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant to any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect such Person or any of its subsidiaries against fluctuations in interest rates. "ISSUE DATE" means the date on which Senior Notes are originally issued under this Indenture. "ISSUER" means the Person named as the "ISSUER" in the first paragraph of this instrument, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "ISSUER" shall mean such successor Person. To the extent necessary to comply with the requirements of the provisions of Sections 310 through 317 of the Trust Indenture Act as they are applicable to the Issuer, the term "ISSUER" shall include any other obligor with respect to the Senior Notes for the purposes of complying with such provisions. "LIEN" means any mortgage, charge, pledge, lien, security interest or other encumbrance of any kind. "MAKE-WHOLE AMOUNT" means, in connection with any optional redemption of any Senior Notes, the excess, if any, of (i) the sum, as determined by a Quotation Agent of the present values of the principal amount of such Senior Notes, together with scheduled payments of interest from the redemption date to the Stated Maturity of the Senior Notes, in each case discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, over (ii) 100% of the principal amount of the Senior Notes to be redeemed. "MATURITY" when used with respect to any Senior Note means the date on which the principal of (and premium, if any) and interest on such Senior Note becomes due and payable as therein provided, whether at Stated Maturity or redemption date and whether by declaration of acceleration call for redemption or otherwise. "MOODY'S" means Moody's Investors Service, Inc. and its successors. 9 "NON-RECOURSE INDEBTEDNESS" means Indebtedness (a) as to which neither Bermuda Holdings nor any of its Subsidiaries (other than the Person incurring such Non-Recourse Indebtedness) (i) provides credit support (including any undertaking, agreement or instrument that would constitute Indebtedness), (ii) is directly or indirectly liable, or (iii) constitutes the lender; and (b) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against such Person incurring such Non-Recourse Indebtedness) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of Bermuda Holdings or any of its Subsidiaries (other than the Person incurring such Non-Recourse Indebtedness) to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. "OFFICERS' CERTIFICATE" means a certificate signed by (1) the Chairman, a Vice Chairman, the President, a Vice President, the Treasurer or a director (or equivalent officers) of Bermuda Holdings or the Issuer, as the case may be, and (2) the Secretary or an Assistant Secretary of Bermuda Holdings or the Issuer, as the case may be, and delivered to the Trustee; provided, however, that such certificate may be signed by two of the officers or directors listed in clause (1) above in lieu of being signed by one of such officers or directors listed in such clause (1) and one of the officers listed in clause (2) above. "OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel for Bermuda Holdings or the Issuer, as the case may be. Each such opinion shall include the statements provided for in Section 314(e) of the Trust Indenture Act to the extent applicable. "ORDER" means a written order signed in the name of the Issuer or Bermuda Holdings, as the case may be (1) by its Chairman, a Vice Chairman, its President, a Vice President, its Treasurer or a director (or equivalent officers), and (2) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (1) above in lieu of being signed by one of such officers or directors listed in such clause (1) and one of the officers listed in clause (2) above. "OUTSTANDING" when used with respect to the Senior Notes means, as of the date of determination, all Senior Notes theretofore authenticated and delivered under this Indenture, except: (i) Senior Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; 10 (ii) Senior Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Issuer or Bermuda Holdings) in trust or set aside and segregated in trust by the Issuer or Bermuda Holdings (if the Issuer or Bermuda Holdings shall act as its own Paying Agent) for the Holders of such Senior Notes; provided that, if such Senior Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Senior Notes, except to the extent provided in Section 11.02 and Section 11.03 with respect to which Bermuda Holdings has effected defeasance or covenant defeasance as provided in Article 11; and (iv) Senior Notes in exchange for or in lieu of which other Senior Notes have been authenticated and delivered pursuant to this Indenture, other than any such Senior Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Senior Notes are held by a bona fide purchaser in whose hands the Senior Notes are valid obligations of the Issuer and Bermuda Holdings; provided, however, that, in determining whether the Holders of the requisite principal amount of Outstanding Senior Notes have given any request, demand, authorization, notice, direction, consent or waiver hereunder, Senior Notes owned by the Issuer, Bermuda Holdings, any other obligor upon the Senior Notes or any Affiliate of the Issuer, Bermuda Holdings or such other obligor shall be disregarded and deemed not to be Outstanding solely for purposes of such determination, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, notice, direction, consent or waiver, only Senior Notes which the Trustee knows to be so owned shall be so disregarded. Senior Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Senior Notes and that the pledgee is not the Issuer or Bermuda Holdings or any other obligor upon the Senior Notes or any Affiliate of Bermuda Holdings or such other obligor. "PERMITTED LIENS" means (1) Liens securing Indebtedness pursuant to any credit agreement or credit facility that is permitted by the terms of the Indenture to be outstanding; (2) Liens in favor of Bermuda Holdings or any Restricted Subsidiary; (3) Liens on property of a Person existing at the time such Person is merged into or consolidated with Bermuda Holdings or any Restricted Subsidiary of Bermuda Holdings, provided that such Liens were not incurred in connection with, or in contemplation of, such merger or consolidation and such Liens do not 11 extend to any assets of Bermuda Holdings or any of its Restricted Subsidiaries other than the assets of the Person so merged into or consolidated with Bermuda Holdings or such Restricted Subsidiary; (4) Liens on property existing at the time of acquisition thereof by Bermuda Holdings or any Restricted Subsidiary of Bermuda Holdings; provided that such Liens were not incurred in connection with, or in contemplation of, such acquisition and do not extend to any assets of Bermuda Holdings or any of its Restricted Subsidiaries other than the property so acquired; (5) Liens to secure the performance of statutory obligations, surety or appeal bonds or performance bonds, or landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's or other like Liens, in any case incurred in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate process of law, if a reserve or other appropriate provision, if any, as is required by GAAP shall have been made therefor; (6) Liens existing on the date of the Indenture; (7) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (8) Liens with respect to obligations under Currency Agreements or Interest Swap Obligations and other similar agreements or arrangements designed to protect Bermuda Holdings or any of its Restricted Subsidiaries against fluctuations in the value of Investments of Bermuda Holdings and its Restricted Subsidiaries, in each case to the extent permitted hereunder; (9) Liens incurred in the ordinary course of business of Bermuda Holdings or any Subsidiary of Bermuda Holdings with respect to obligations permitted under the Indenture that do not exceed $10,000,000 in principal amount in the aggregate at any one time outstanding; and (10) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Indebtedness (to the extent permitted under the Indenture) of Unrestricted Subsidiaries. "PERSON" means any individual, corporation, limited or general partnership, limited liability company, joint venture, association, joint stock company, trust, fund, unincorporated organization or government or any agency or political subdivision thereof. "PRINCIPAL INSURANCE SUBSIDIARY" means: (i) the Subsidiaries of Bermuda Holdings in existence on the Issue Date; (ii) any other insurance company Subsidiary of Bermuda Holdings that becomes a "SIGNIFICANT SUBSIDIARY" as defined in Regulation S-X, as promulgated by the Commission; and (iii) any other Subsidiary of Bermuda Holdings that may succeed, by merger, consolidation or otherwise, to all or substantially all of the business of one or more of such persons as specified in (i) and (ii) above. 12 "QIB" means a "QUALIFIED INSTITUTIONAL BUYER" as defined in Rule 144A. "QUOTATION AGENT" means the Reference Treasury Dealer appointed by the Issuer. "REDEEMABLE CAPITAL STOCK" means any Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is, or upon the happening of an event or passage of time would be required to be, redeemed on or prior to the final Stated Maturity of the Senior Notes or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity. "REDEMPTION DATE", when used with respect to any Senior Notes to be redeemed, means the date fixed for such redemption pursuant to this Indenture. "REDEMPTION PRICE", when used with respect to any Senior Notes to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "REFERENCE TREASURY DEALER" means, at any time, (i) Donaldson, Lufkin & Jenrette Securities Corporation and its respective successors ("DLJ") and two additional Primary Treasury Dealers (as defined below) selected by DLJ; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "PRIMARY TREASURY DEALER"), DLJ will substitute therefor another Primary Treasury Dealer unless DLJ has ceased to be a Primary Treasury Dealer in which case the Issuer shall substitute therefor another Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by the Indenture Trustee after consultation with the Company, it being understood that the Trustee shall under no circumstances have any duty or responsibility to select any such other Primary Treasury Dealer, and should it select such Primary Treasury Dealer, shall have no liability for any such selection, except for its gross negligence or bad faith, in selecting such Primary Treasury Dealer. "REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each Reference Treasury Dealer and any prepayment date, the arithmetic average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) furnished in writing to the Indenture Trustee by such Quotation Agent at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date. 13 "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of May 18, 1998, between the Issuer, Bermuda Holdings and Donaldson, Lufkin & Jenrette Securities Corporation and certain permitted assigns specified therein. "REGULAR RECORD DATE" for the interest payable on any Interest Payment Date means the May 1 or November 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "REGULATION S DEFINITIVE SENIOR NOTE" means a Definitive Senior Note issued in exchange for an interest in the Regulation S Global Note. "REGULATION S GLOBAL NOTE" means the Regulation S Global Note substantially in the form of Exhibit B to this Indenture. "REQUEST" means a written request signed in the name of the Issuer or Bermuda Holdings, as the case may be, (1) by its Chairman, a Vice Chairman, its President, a Vice President, its Treasurer or a director (or equivalent officers) and (2) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (1) above in lieu of being signed by one of such officers or directors listed in such clause (1) and one of the officers listed in clause (2) above. "RESPONSIBLE OFFICER" when used with respect to the Trustee, means any officer assigned to the Corporate Trust Administration of the Trustee or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers or assigned by the Trustee to administer corporate trust matters at its Corporate Trust Office and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED DEFINITIVE SENIOR NOTE" means a Definitive Senior Note issued in exchange for an interest in the Restricted Global Note. "RESTRICTED GLOBAL NOTE" means the Restricted Global Note substantially in the form of Exhibit A to this Indenture. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary that is not an Unrestricted Subsidiary. "S&P" means Standard & Poor's Corporation and its successors. 14 "SECURITIES ACT" means the Securities Act of 1933, as amended. "SENIOR NOTES" means (a) the Global Notes, substantially in the form of Exhibit A to this Indenture, (b) Definitive Senior Notes, substantially in the form of Exhibit B to this Indenture, issued in accordance with this Indenture or (c) of any Exchange Notes to be issued and exchanged for (a) or (b) above pursuant to the Registration Rights Agreement and this Indenture. For purposes of this Indenture, all Senior Notes and Exchange Notes shall vote as one series of Senior Notes under this Indenture. "SPECIAL RECORD DATE" means a date fixed by the Trustee for the payment of any Defaulted Interest. "STATED MATURITY" means, when used with respect to any Indebtedness or any installment of principal or of interest thereon, the date specified in such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of principal or of interest is due and payable. "SUBSIDIARY" means any Person, a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by Bermuda Holdings or by one or more other Subsidiaries, or by Bermuda Holdings and one or more other Subsidiaries. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended, and as in force at the date as of which this instrument was executed, except as provided in Section 8.05. "TRUSTEE" means the Person named as the "TRUSTEE" in the first paragraph of this instrument, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "TRUSTEE" shall mean such successor Trustee. "U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository 15 receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. "UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) is designated an Unrestricted Subsidiary prior to formation or creation; (b) has total assets at the time of formation or creation with a Fair Market Value not exceeding $1,000; (c) has no Indebtedness other than Non-Recourse Indebtedness; (d) is not party to any agreement, contract, arrangement or understanding with Bermuda Holdings or any Restricted Subsidiary of Bermuda Holdings unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Bermuda Holdings or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Bermuda Holdings; (e) is a Person with respect to which neither Bermuda Holdings nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Capital Stock or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (f) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Bermuda Holdings or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Bermuda Holdings as of such date. The Board of Directors of Bermuda Holdings may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of Bermuda Holdings of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if no Default or Event of Default would be in existence following such designation. "VOTING STOCK" means stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or 16 classes shall have or might have voting power by reason of the happening of any contingency). "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment. "WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person. Section 1.02. Other Definitions
Defined in Term Section - - ---------------------------------------------------------------- --------- "ACT"........................................................... 1.5 "ADDITIONAL AMOUNTS"............................................ 9.17 "AGENT MEMBERS"................................................. 2.05 "COVENANT DEFEASANCE"........................................... 11.2 "DEFAULTED INTEREST"............................................ 2.11 "DEFEASANCE".................................................... 11.2 "INCORPORATED PROVISION"........................................ 1.8 "NOTICE OF DEFAULT"............................................. 4.1 "REGULATION S GLOBAL RECEIPT"................................... 2.1 "RESTRICTED GLOBAL RECEIPT"..................................... 2.1 "SENIOR NOTE REGISTER".......................................... 2.5 "SENIOR NOTE REGISTRAR"......................................... 2.3 "SURVIVING ENTITY".............................................. 7.1
Section 1.03. Compliance Certificates and Opinions. Upon any application or request by the Issuer or Bermuda Holdings to the Trustee to take any action under any provision of this Indenture, the Issuer or Bermuda Holdings shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, 17 if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion (other than the certificates required by Section 9.18(a)) with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.04. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Issuer or Bermuda Holdings may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which the certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or 18 representations by, an officer or officers of the Issuer or Bermuda Holdings stating that the information with respect to such factual matters is in the possession of the Issuer or Bermuda Holdings, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.05. Acts of Holders (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such request, demand, authorization, direction, notice, consent, waiver or other action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Issuer and Bermuda Holdings. Such instrument or instruments (and the request, demand, authorization, direction, notice, consent, waiver or other action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 315 of the Trust Indenture Act) conclusive in favor of the Trustee, the Issuer and Bermuda Holdings, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any reasonable manner which the Trustee deems sufficient. (c) The ownership of Definitive Senior Notes shall be proved by the Senior Note Register. (d) If the Issuer or Bermuda Holdings shall solicit from the Holders of Senior Notes any request, demand, authorization, direction, notice, consent, waiver or other Act, the Issuer or Bermuda Holdings, as the case may be, may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of such Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Issuer or Bermuda Holdings, as the case may be, shall have no obligation to do so. Notwithstanding Section 316(c) of the Trust Indenture Act, any such record date shall be the record date specified in or pursuant to such Board Resolution, which 19 shall be a date not more than 30 days prior to the first solicitation of Holders generally in connection therewith and no later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record of Senior Notes at the close of business on such record date shall be deemed to be Holders of Senior Notes for the purposes of determining whether Holders of the requisite proportion of Senior Notes then outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Senior Notes then outstanding shall be computed as of such record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other Act by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act by the Holder of any Senior Notes shall bind every future Holder of the same Senior Notes or the Holder of every Senior Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Issuer in reliance thereon, whether or not notation of such action is made upon such Senior Notes. Section 1.06. Notices, Etc., to Trustee, the Issuer Bermuda Holdings. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a) the Trustee by any Holders, any representative or the Issuer or Bermuda Holdings shall be sufficient for every purpose hereunder if made, given, furnished or delivered in writing or mailed, first-class postage prepaid, or by facsimile, to or with the Trustee at its Corporate Trust Office at 450 West 33rd Street, 15th Floor, New York, New York 10001, Attention: Corporate Trust Administration, facsimile number (212) 946-8177; or (b) the Issuer by the Trustee, any representative or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing or mailed, first- class postage prepaid, or by facsimile, to the Issuer at Terra Nova House, 41-43 Mincing Lane, London EC3R 7SP, Great Britain, Attention: Company Secretary, 20 facsimile number (011-44-171) 283-1749, or at any other address or facsimile number furnished in writing to the Trustee by the Issuer; or (c) Bermuda Holdings by the Trustee, any representative or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing or mailed, first-class postage prepaid, or by facsimile, to Bermuda Holdings at Richmond House, 2nd Floor, 12 Par-La-Ville Road, Hamilton HM 08, Bermuda, Attention: Company Secretary, facsimile number (809) 292-7572, or at any other address or facsimile number furnished in writing to the Trustee by Bermuda Holdings. Section 1.07. Notice of Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder of Definitive Senior Notes affected by such event at his address as it appears in the Senior Note Register or at the address provided by such Holder in writing to the Trustee not later than the latest date and not earlier than the earliest date prescribed for the giving of such notice (or, in the case of the Holder of a Global Note, to the Custodian at Chase Manhattan Bank Luxembourg S.A., 5 rue Plaetis, L-2338, Luxembourg, Attention: Corporate Trust Department). In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice when mailed to a Holder in the aforesaid manner shall be conclusively deemed to have been received by such Holder whether or not actually received by such Holder. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event as required by any provisions of this Indenture, then any method of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. Section 1.08. Conflict of Any Provision of Indenture with Trust Act. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 318 of the Trust Indenture Act, inclusive, or conflicts with any provision (an "INCORPORATED PROVISION") required by or deemed to be included in this Indenture by operation of such Trust Indenture 21 Act Sections, such imposed duties or incorporation provision of the Trust Indenture Act shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, such provision of the Trust Indenture Act shall be deemed to apply to this Indenture as so modified or excluded, as the case may be, if this Indenture shall then be qualified under the Trust Indenture Act. Section 1.09. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.10. Successor and Assigns. All covenants and agreements in this Indenture by the Issuer, Bermuda Holdings and the Trustee shall bind its respective successors and assigns, whether so expressed or not. Section 1.11. Separability Clause. In case any provision in this In denture or in the Senior Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.12. Benefits of Indenture. Nothing in this Indenture or in the Senior Notes, express or implied, shall give to any Person (other than the parties hereto and their successors hereunder, any Paying Agent and the Holders) any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.13. Governing Law. This Indenture and the Senior Notes shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of laws principles thereof. Section 1.14. Legal Holidays. In any case where any Interest Payment Date, any date established for payment of Defaulted Interest pursuant to Section 2.11 or any Maturity with respect to any Senior Note shall not be a Business Day, then (notwithstanding any other provisions of this Indenture or of the Senior Notes) payment of the principal of, or any premium and interest on the Senior Notes (and any Additional Amounts payable in respect thereof, need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or date established for payment of Defaulted Interest pursuant to Section 2.11 or Maturity, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date or date established for payment of Defaulted Interest pursuant to Section 2.11 or Maturity, as the case may be, to the next succeeding Business Day. 22 SECTION 1.15. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Issuer, Bermuda Holdings or any subsidiary of Bermuda Holdings shall not have any liability for any payment of the principal of, or premium, if any, or interest on, any of the Senior Notes, or any other obligations of the Issuer or Bermuda Holdings under the Senior Notes, the Guarantee or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting any of the Senior Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Notes. SECTION 1.16. Submission of Jurisdiction; Appointment of Agent for Service of Process. Each of the Issuer and Bermuda Holdings hereby appoints CT Corporation System acting through its office at 1633 Broadway, New York, New York as its authorized agent (the "AUTHORIZED AGENT") upon which process may be served in any legal action or proceeding against it with respect to its obligations under this Indenture, the Senior Notes or any Guarantee, as the case may be, instituted in any federal or state court in the Borough of Manhattan, The City of New York, by the Holder of any Senior Notes and agrees that service of process upon such authorized agent, together with written notice of said service to the Issuer and Bermuda Holdings by the person serving the same addressed as provided in Section 1.06, shall be deemed in every respect effective service of process upon the Issuer or Bermuda Holdings, as the case may be, in any such legal action or proceeding, and each of the Issuer and Bermuda Holdings hereby irrevocably submits to the non-exclusive jurisdiction of any such court in respect of any such legal action or proceeding. Such appointment shall be irrevocable until this Indenture has been satisfied and discharged in accordance with Article 3 hereof. Notwithstanding the foregoing, the Issuer and Bermuda Holdings reserve the right to appoint another person located or with an office in the Borough of Manhattan, The City of New York, selected in its discretion, as a successor Authorized Agent, and upon acceptance of such appointment by such a successor the appointment of the prior Authorized Agent shall terminate. If for any reason CT Corporation System ceases to be able to act as the Authorized Agent or to have an address in the Borough of Manhattan, The City of New York, the Issuer and Bermuda Holdings will appoint a successor Authorized Agent in accordance with the preceding sentence. Each of the Issuer and Bermuda Holdings further agrees to take any and all action, including the filing of any and all documents and instruments as may be necessary to continue such designation and appointment of such agent in full force and effect until this Indenture has been satisfied and discharged in accordance with Article 3 hereof. Service of process upon the Authorized Agent addressed to it at he address set forth above, as such address may be changed within the Borough of Manhattan, The City of New York by notice given by the Authorized Agent to the Trustee, together with written notice of such service mailed or delivered to the Issuer and Bermuda Holdings shall be 23 deemed, in every respect, effective service of process on the Issuer and Bermuda Holdings, respectively. ARTICLE 2 THE SENIOR NOTES SECTION 2.01. Form and Dating. (a)(i) The Global Notes shall be substantially in the form of Exhibit A and Exhibit B, and the Trustee's certificate of authentication shall be substantially in the form set forth in such exhibits, which are hereby incorporated in and expressly made a part of this Indenture and (ii) the Definitive Senior Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit C, which is hereby incorporated in and expressly made a part of this Indenture; provided that with respect to clauses (i) and (ii) above, Exchange Notes (A) shall contain the alternative Paragraph 1(b) appearing on the reverse thereof, and (B) shall not contain the Private Placement Legend. The notation of Guarantee endorsed on the Senior Notes shall be substantially in the form of Exhibit D, which is hereby incorporated in and expressly made a part of this Indenture. The Global Notes and the Definitive Senior Notes may have notations, legends or endorsements required by law, governmental rule or regulation, stock or other securities exchange rule, depositary rule or usage agreements to which the Issuer or Bermuda Holdings is subject, if any, or usage (provided that any such notation, legend or endorsement is approved by the Issuer or Bermuda Holdings). The Issuer or Bermuda Holdings shall furnish any such legend not contained in Exhibit A, Exhibit B or Exhibit C to the Trustee in writing. The Global Notes and each Definitive Senior Note shall be dated the date of its authentication. The terms of the Global Notes and of the Definitive Senior Notes set forth in Exhibit A, Exhibit B and Exhibit C, respectively, are part of the terms of this Indenture. The Senior Notes are being offered and sold by the Issuer pursuant to the Purchase Agreement. The Senior Notes will be initially issued as one or more global notes without coupons in bearer form. Transfer of the Global Notes shall be by physical delivery. The Global Notes authenticated under this Indenture shall be deposited with Chase Manhattan Bank Luxembourg S.A., as custodian thereof (the "CUSTODIAN"), for the benefit of The Chase Manhattan Bank, as depositary (the "DEPOSITARY") pursuant to the terms of the Deposit and Custody Agreement. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made in the records of the Trustee. 24 With respect to the Senior Notes being issued or sold in reliance on Regulation S of the Securities Act, the Depositary will issue one or more global receipts representing a 100% interest in the underlying Regulation S Global Note (the "REGULATION S GLOBAL RECEIPTS"), which will be delivered and registered in the name of DTC or its nominee pursuant to the terms of the Deposit and Custody Agreement for the accounts of Cedel and Euroclear. With respect to the Senior Notes being issued or sold to "QUALIFIED INSTITUTIONAL BUYERS" (as defined in Rule 144A under the Securities Act ("RULE 144A"), the Depositary will issue one or more global receipts representing a 100% interest in the underlying Restricted Global Note (the "RESTRICTED GLOBAL RECEIPTS", and together with the Regulation S Global Receipts, the "GLOBAL RECEIPTS"), which will be delivered and registered in the name of DTC or its nominee pursuant to the terms of the Deposit and Custody Agreement. (b) Restrictive Legends. Unless and until a Senior Note is exchanged for an Exchange Note in connection with an effective Exchange Registration pursuant to the Registration Rights Agreement and except as provided in Section 2.08, the Restricted Global Note and each Restricted Definitive Senior Note shall bear the following legend (the "PRIVATE PLACEMENT LEGEND") on the face thereof: THIS SENIOR NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SENIOR NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SENIOR NOTE EXCEPT, (A) TO BERMUDA HOLDINGS OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL 25 BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SENIOR NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. [WITH RESPECT TO ANY RESTRICTED DEFINITIVE SENIOR NOTE: IN CONNECTION WITH ANY TRANSFER OF THIS SENIOR NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THE CERTIFICATE TO THE TRUSTEE ON THE REVERSE HEREOF.] AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS SENIOR NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. SECTION 2.02. Execution and Authentication. Two directors, or a director and the Secretary, shall sign the Senior Notes for the Issuer by manual or facsimile signature. Two directors, or a director and the Secretary, shall sign the notation of Guarantee, to be endorsed on the Senior Notes by Bermuda Holdings, for Bermuda Holdings by manual or facsimile signature. The signatures required hereby may in each case be the manual signature of any person duly delegated by a director or the Secretary, as the case may be. If an officer (including a director, Secretary or Assistant Secretary) whose signature is on a Senior Note no longer holds that office at the time the Trustee authenticates the Senior Note, the Senior Note shall be valid nevertheless. 26 A Senior Note shall not be valid until an authorized officer of the Trustee manually signs the certificate of authentication on the Senior Note. The signature shall be conclusive evidence that the Senior Note has been authenticated under this Indenture. The Trustee shall authenticate and deliver the (a) Global Notes for original issue in an aggregate principal amount at maturity not in excess of $100,000,000, and (b) Exchange Notes for issue only in an Exchange Offer pursuant to the Registration Rights Agreement, for a like principal amount of Global Notes exchanged pursuant thereto, in each case upon a written order signed by a director or Secretary of the Issuer and a director or Assistant Secretary of Bermuda Holdings. Such order shall specify the principal amount of the Global Notes to be authenticated and the date on which the original issue of the Global Notes are to be authenticated and shall further provide instructions concerning delivery of the Global Notes. The aggregate principal amount of Senior Notes outstanding at any time may not exceed that amount, except as provided in Section 2.07 hereof. Each Global Note shall be dated the date of its authentication, shall bear interest from the applicable date and shall be payable on the dates specified on the face of the form of Global Notes set forth as Exhibit A and Exhibit B hereto. Each Definitive Senior Note shall be dated the date of its authentication, shall bear interest from the applicable date and shall be payable on the dates specified on the face of the form of Definitive Senior Note set forth in Exhibit C hereto. The Trustee may appoint an authenticating agent reasonably acceptable to the Issuer and Bermuda Holdings to authenticate the Senior Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Senior Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Senior Note Registrar or Paying Agent. SECTION 2.03. Senior Note Registrar and Paying Agent. The Issuer will maintain in the City of New York, an office or agency where Senior Notes may be presented or surrendered for payment (the "PAYING AGENT"), where Senior Notes may be surrendered for registration of transfer or exchange (the "SENIOR NOTE REGISTRAR") and where notices and demands to or upon the Issuer in respect of the Senior Notes and this Indenture may be served. Until otherwise designated by the Issuer, such office or agency in The City of New York shall be the office maintained by the Trustee for such purpose. The Issuer will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust 27 Office, and the Issuer hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Issuer may from time to time designate one or more other offices or agencies (in or outside The City of New York) where the Senior Notes may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation; provided, however, that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency in The City of New York for such purposes. The Issuer will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such office or agency. The Issuer shall enter into an appropriate agency agreement with any Senior Note Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the Trust Indenture Act. The agreement shall implement the provisions of this Indenture that relate to such agent. The Issuer shall notify the Trustee of the name and address of any such agent. The Issuer may change any Paying Agent, Senior Note Registrar, co-registrar or transfer agent without prior notice to any holder of Senior Notes. If the Issuer fails to maintain a Senior Note Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 5.06. The Issuer initially appoints the Trustee as Senior Note Registrar and Paying Agent in connection with the Senior Notes. SECTION 2.04. Paying Agent to Hold Money in Trust. If the Issuer shall at any time act as its own Paying Agent, it will, by 10:00 a.m. (New York City time) on or before each due date of the principal of and any premium and interest on the Senior Notes (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof), segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest on the Senior Notes (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof) so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. Whenever the Issuer shall have one or more Paying Agents for the Senior Notes, it will, at least one Business Day before such due date of the principal of and any premium and interest on the Senior Notes (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof), deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be 28 made) sufficient to pay the principal and any premium and interest to become due on the Senior Notes (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof), such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest on the Senior Notes and (unless such Paying Agent is the Trustee) the Issuer will promptly notify the Trustee of such action or any failure so to act. The Issuer will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of and any premium and interest on the Senior Notes (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof) in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Issuer or Bermuda Holdings (or any other obligor upon the Senior Notes) in the making of any payment of principal and any premium and interest on the Senior Notes (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof); (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and (d) acknowledge, accept and agree to comply in all respects with the provisions of this Indenture relating to the duties, rights and obligations of such Paying Agent. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by an order of the Issuer direct any Paying Agent to pay, to the Trustee all sums held in trust by the Issuer or such Paying Agent, such sums to be held by the Trustee upon the same terms as those upon which such sums were held by the Issuer or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of and any premium and interest on the Senior Notes (and any Additional Amounts payable by the Issuer or 29 Bermuda Holdings in respect thereof) and remaining unclaimed for two years after such principal and any premium and interest on the Senior Notes (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof) has become due and payable shall be paid to the Issuer or Bermuda Holdings upon Request by the Issuer or Bermuda Holdings, as the case may be; and the Holder of such Senior Note shall thereafter, as an unsecured general creditor, look only to the Issuer or Bermuda Holdings for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Issuer or Bermuda Holdings. SECTION 2.05. Senior Note Holder Lists. The Trustee, or such other person designated by the Issuer, shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders of Definitive Senior Notes, if any (the "SENIOR NOTE REGISTER"). If the Trustee is not the Senior Note Registrar, the Issuer or Bermuda Holdings shall furnish to the Trustee, in writing on or before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders of Definitive Senior Notes, if any. SECTION 2.06. Transfer and Exchange. The Global Notes shall be exchanged by the Issuer (with authentication by the Trustee) for one or more Definitive Senior Notes, if (i) the Custodian notifies the Issuer, Bermuda Holdings and the Trustee that it is unwilling or unable to continue as Custodian and no successor Custodian has been appointed by the Issuer within 90 days of such notification, (ii) the Depositary notifies the Issuer, Bermuda Holdings and the Trustee that it is unwilling or unable to continue as Depositary and no successor Depositary has been appointed by the Issuer or Bermuda Holdings within 90 days of such notification, (iii) DTC notifies the Issuer, Bermuda Holdings and the Depositary that it is unwilling or unable to continue as holder with respect to the Global Receipts or if at any time it ceases to be a clearing agency under the Exchange Act and, in either case, a successor to DTC registered as a clearing agency under the Exchange Act is not appointed by the Issuer or Bermuda Holdings within 90 days of such notification, (iv) the Issuer or Bermuda Holdings determines that Definitive Senior Notes shall be issued, or (v) the Holder requests the issuance of Definitive Senior Notes after the occurrence of an Event of 30 Default; provided, however, that no Regulation S Definitive Senior Note may be issued prior to June 28, 1998. Members of, or participants in, the DTC ("AGENT MEMBERS") shall have no rights under this Indenture with respect to any Global Receipt held on their behalf by the Depositary, or the Trustee as its custodian, or under the Global Receipt, and the Depositary may be treated by the Issuer, Bermuda Holdings, the Trustee and any agent of the Issuer, Bermuda Holdings, or the Trustee as the absolute owner of such Global Receipt for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, Bermuda Holdings, the Trustee or any agent of the Issuer, Bermuda Holdings or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Senior Note. Whenever all of a Global Note is exchanged for one or more Definitive Senior Notes, such Global Note shall be surrendered by the Holder thereof to the Trustee for cancellation. Whenever a part of the Global Notes is exchanged for one or more Definitive Senior Notes (which shall be in denominations of $1,000 or integral multiples thereof), the Global Note shall be surrendered by the Holder thereof to the Trustee who shall cause an adjustment to be made to such Global Note such that the principal amount of such Global Notes will be equal to the portion of such Global Notes not exchanged and shall thereafter return such Global Notes to such Holder. Definitive Senior Notes issued in exchange for the Global Notes or any portion thereof shall be registered in such names as the Depositary shall instruct the Trustee based on the instructions of DTC, as requested by the Issuer. The Global Notes may not be exchanged other than as provided in this Section 2.06. Definitive Senior Notes shall be transferable only upon the surrender of a Definitive Senior Note for registration of transfer. When a Definitive Senior Note is presented to the Senior Note Registrar or a co-registrar with a request to register a transfer, the Senior Note Registrar shall register the transfer as requested if its requirements for such transfers are met. When Definitive Senior Notes are presented to the Senior Note Registrar or a co-registrar with a request to exchange them for an equal principal amount of Definitive Senior Notes of other denominations, the Senior Note Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Definitive Senior Notes at the Senior Note Registrar's or co- registrar's request. 31 The Holder of the Global Note may increase the principal amount of the Global Note held by it by surrendering any Definitive Senior Note registered in its name to the Senior Note Registrar for cancellation, provided that no Definitive Senior Note shall be so surrendered during the period beginning on the Record Date and ending on the corresponding Interest Payment Date. Upon surrender of such Definitive Senior Note, the Senior Note Registrar shall forward such Definitive Senior Note to the Trustee for cancellation and the Trustee shall cause an adjustment to be made to such Global Note to increase the principal amount at maturity of such Global Note by an amount equal to the principal amount at maturity of the Definitive Senior Note surrendered for cancellation. The Issuer shall not be required to make and the Senior Note Registrar need not register transfers or exchanges of Definitive Senior Notes selected for redemption (except, in the case of Definitive Senior Notes to be redeemed in part, the portion thereof not to be redeemed) or any Definitive Senior Notes for a period of 15 days before a selection of Definitive Senior Notes to be redeemed. Prior to the due presentation for registration of transfer of any Definitive Senior Note, the Issuer, the Trustee, the Paying Agent, the Senior Note Registrar or any co-registrar shall deem and treat the person in whose name a Definitive Senior Note is registered as the absolute owner of such Definitive Senior Note for the purpose of receiving payment of principal of and interest on such Definitive Senior Note and for all other purposes whatsoever, whether or not such Definitive Senior Note is overdue, and none of the Issuer, the Trustee, the Paying Agent, the Senior Note Registrar or any co-registrar shall be affected by notice to the contrary. The Issuer may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section 2.06. All Senior Notes issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt and will be entitled to the same benefits under this Indenture as the Senior Notes surrendered upon such transfer or exchange. SECTION 2.07. Replacement Securities. If a mutilated Definitive Senior Note is surrendered to the Senior Note Registrar, if a mutilated Global Note is surrendered to the Issuer, or if the Holder of a Senior Note claims that the Senior Note has been lost, destroyed or wrongfully taken, the Issuer shall issue, and the Trustee shall authenticate, a replacement Senior Note in such form as the Senior Note mutilated, lost, destroyed or wrongfully taken, if the Holder satisfies any reasonable requirements of the Trustee, the Senior Note Registrar or the Issuer. If 32 required by the Trustee, the Senior Note Registrar or the Issuer, such Holder shall furnish an indemnity bond sufficient in the judgment of the Issuer, the Senior Note Registrar and the Trustee to protect the Issuer, Bermuda Holdings, the Trustee, the Paying Agent, the Senior Note Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Issuer, the Senior Note Registrar and the Trustee may charge the Holder for their expenses in replacing a Senior Note. Every replacement Senior Note is an additional obligation of the Issuer. SECTION 2.08. Outstanding Securities. If a Senior Note is replaced pursuant to Section 2.07 hereof, it ceases to be Outstanding unless the Trustee and the Issuer receive proof satisfactory to them that the replaced Senior Note is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date, money sufficient to pay all principal and interest payable on that date with respect to the Senior Notes (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Senior Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue, as the case may be. SECTION 2.09. Temporary Senior Notes. Until Definitive Senior Notes are ready for delivery, the Issuer and Bermuda Holdings may prepare and the Trustee shall authenticate temporary Senior Notes. Temporary Senior Notes shall be substantially in the form of Definitive Senior Notes but may have variations that the Issuer and Bermuda Holdings consider appropriate for temporary Senior Notes. Without unreasonable delay, the Issuer and Bermuda Holdings shall prepare and the Trustee shall authenticate Definitive Senior Notes and deliver them in exchange for temporary Senior Notes. SECTION 2.10. Cancellation. The Issuer at any time may deliver Senior Notes to the Trustee for cancellation. The Senior Notes Registrar and the Paying Agent shall forward to the Trustee any Senior Notes surrendered to them for registration of transfer, exchange, purchase or payment. The Trustee (and no one else) shall cancel all Senior Notes surrendered for registration of transfer, exchange, purchase, payment or cancellation and shall dispose of cancelled Senior Notes as the Issuer directs. The Issuer may not issue new Senior Notes to replace Senior Notes it has redeemed, paid or delivered to the Trustee for cancellation. The Trustee shall not authenticate Senior Notes in place of cancelled Senior Notes other than pursuant to the terms of this Indenture. 33 SECTION 2.11. Interest, Defaulted Interest. Interest on the Senior Notes shall accrue from May 18, 1998 at the rate set forth in Exhibit A, Exhibit B and Exhibit C. If the Issuer defaults in a payment of interest on the Senior Notes, the Issuer shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Issuer may pay the defaulted interest in the case of a Global Note, to the Trustee, which shall, in accordance with Section 3.01 of the Deposit and Custody Agreement, distribute such payments, on behalf of the Custodian and the Depositary to DTC or its nominee, and in the case of any Definitive Senior Note, to the Holder of such Definitive Senior Note on a subsequent Special Record Date. The Issuer shall fix or cause to be fixed any such Special Record Date and payment date and shall promptly mail to each holder of Senior Notes and the Trustee a notice that states the special record date, if any, the payment date and the amount of defaulted interest to be paid. The Issuer may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements (if applicable) of any securities exchange on which the Senior Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Issuer to the Trustee of the proposed payment pursuant to this paragraph, such manner of payment shall be deemed practicable by the Trustee. SECTION 2.12. Special Transfer Provisions. Unless and until a Senior Note is exchanged for an Exchange Note in connection with an effective Exchange Registration pursuant to the Registration Rights Agreement, the following provisions shall apply: (a) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Restricted Definitive Senior Note or an interest in a Restricted Global Note to a QIB (excluding Non-U.S. Persons): (i) If the Senior Note to be transferred consists of (x) a Restricted Definitive Senior Note, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Senior Note stating, or has otherwise advised the Issuer and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Senior Note stating, or has otherwise advised the Issuer and the Registrar in writing, that it is purchasing the Senior Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer and Bermuda Holdings 34 as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A or (y) an interest in a Restricted Global Note, the transfer of such interest may be effected only through the book entry system maintained by the DTC. (ii) If the proposed transferee is an Agent Member, and the Senior Note to be transferred consists of Restricted Definitive Senior Notes, upon receipt by the Registrar of the documents referred to in clause (i) and instructions given in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Restricted Global Note in an amount equal to the principal amount of the Restricted Definitive Senior Note to be transferred and the Trustee shall cancel the Restricted Definitive Senior Note so transferred. (b) Transfers of Interests in the Regulation S Global Note prior to June 28, 1998. The following provisions shall apply with respect to registration of any proposed transfer of interests in the Regulation S Global Note prior to June 28, 1998: (i) The Registrar shall register the transfer of any interest in the Regulation S Global Note prior to June 28, 1998 (x) if the proposed transferee is a Non-U.S. Person and the proposed transferor has delivered to the Issuer a certificate substantially in the form of Exhibit E hereto or (y) if the proposed transferee is a QIB and the proposed transferor has advised the Issuer and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has advised the Issuer and the Registrar in writing, that it is purchasing the Senior Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance of Rule 144A and acknowledges that it has received such information regarding the Issuer and Bermuda Holdings as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. The Registrar shall not be responsible for transfers within a Global Note in connection with which the principal amount of such Global Note is not being increased or decreased. 35 (ii) If the proposed transferee is an Agent Member, upon receipt by the Registrar of the documents referred to in clause(i)(y) above and instructions given in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Restricted Global Note, in an amount equal to the principal amount of the Regulation S Global Note to be transferred, and the Trustee shall decrease the amount of the Regulation S Global Note in a like amount. (c) Transfers of Interests in the Regulation S Global Note or Regulation S Definitive Senior Notes to U.S. Persons after June 28, 1998. The following provision shall apply with respect to any transfer of interests in the Regulation S Global Note or Regulation S Definitive Senior Notes to U.S. Persons after June 28, 1998: The Registrar shall register the transfer of any such Senior Note without requiring any additional certification. (d) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any transfer of Senior Notes to a Non-U.S. Person: (i) Prior to June 28, 1998, the Registrar shall register any pro posed transfer of a Senior Note to a Non-U.S. Person upon receipt of a certificate substantially in the form of Exhibit E hereto from the proposed transferor. (ii) On and after June 28, 1998, the Registrar shall register any proposed transfer to any Non-U.S. Person (x) if the Senior Note to be transferred is a Restricted Definitive Senior Note or an interest in the Restricted Global Note, upon receipt of a certificate substantially in the form of Exhibit E from the proposed transferor or (y) if the Senior Note to be transferred is a Regulation S Definitive Senior Note or an interest in the Regulation S Global Note, without requiring any additional certification. The Registrar shall not be responsible for any transfers within a Global Note in connection with which the principal amount of such Global Note is not being increased or decreased. (iii) (A) If the proposed transferor is an Agent Member holding a beneficial interest in the Restricted Global Note, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (ii) and (y) instructions in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Restricted Global Note in an amount equal to the principal amount of the beneficial interest in the Restricted Global 36 Note to be transferred and (B) if the proposed transferee is an Agent Member, upon receipt by the Registrar of instructions given in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Regulation S Global Note in an amount equal to the principal amount of the Restricted Definitive Senior Note or the Restricted Global Note, as the case may be, to be transferred, and the Trustee shall cancel the Definitive Senior Note, if any, so transferred or decrease the amount of the Restricted Global Note, as the case may be, (e) Private Placement Legend. Upon the transfer, exchange or replacement of Senior Notes not bearing the Private Placement Legend, the Registrar shall deliver Senior Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Senior Notes bearing the Private Placement Legend, other than in connection with the exchange of Exchange Notes for Senior Notes, the Registrar shall deliver only Senior Notes that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (d)(ii) of this Section 2.12 exists or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Issuer and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) General. By its acceptance of any Senior Note bearing the Private Placement Legend, each Holder of such a Senior Note acknowledges the restrictions on transfer of such Senior Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Senior Note, only as provided in this Indenture. The Registrar shall not register a transfer of any Senior Note unless such transfer complies with the restrictions on transfer of such Senior Note set forth in this Indenture. In connection with any transfer of Senior Notes, each Holder agrees by its acceptance of the Senior Notes to furnish the Registrar or the Issuer such certifications, legal opinions or other information as the Issuer may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine (but may rely on a determination made by the Issuer with respect to) the sufficiency of any such certifications, legal opinions or other information. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.06 or this Section 2.12 in accordance with its customary procedures. The Issuer shall have the right to inspect and make copies of all such letters, notices or other written 37 communications at any reasonable time upon the giving of reasonable notice to the Registrar. In connection with any transfer of Senior Notes, the Trustee, the Registrar and the Issuer or Bermuda Holdings shall be entitled to receive, shall be under no duty to inquire into, may conclusively presume the correctness of, and shall be fully protected in relying upon the certificate, opinions and other information referred to herein (or in the forms provided herein, attached hereto or to the Senior Notes, or otherwise) received from any Holder and any transferee of any Senior Notes regarding the validity, legality and due authorization of any such transfer, the eligibility of the transferee to receive such Senior Notes and any other facts and circumstances related to such transfer. SECTION 2.13. CUSIP and CINS Numbers. The Issuer in issuing the Senior Notes may use "CUSIP" and "CINS" numbers (if then generally in use), and the Trustee shall use CUSIP numbers or CINS numbers, as the case may be, in notices of redemption or exchange as a convenience to holders; provided that any such notice shall state that no representation is made as the correctness of such numbers either as printed on the Senior Notes or as contained in any notice of redemption or exchange and that reliance may be placed only on the other identification numbers printed on the Senior Notes. ARTICLE 3 SATISFACTION AND DISCHARGE SECTION 3.01. Satisfaction and Discharge of Indenture. This Indenture shall, upon request of the Issuer and Bermuda Holdings, cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Senior Notes herein expressly provided for) and the Trustee, on demand of and at the expense of the Issuer and Bermuda Holdings, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: (a) either: (i) all Senior Notes theretofore authenticated and delivered (other than (A) Senior Notes which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.07 and (B) Senior Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer or Bermuda Holdings and thereafter repaid to the Issuer or Bermuda Holdings or discharged from 38 such trust, as provided in Section 2.04) have been delivered to the Trustee for cancellation; or (ii) all such Senior Notes not theretofore delivered to the Trustee for cancellation, (A) have become due and payable, or (B) will become due and payable at their Stated Maturity within one year, or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer, and the Issuer or Bermuda Holdings, in the case of Section 3.01(a)(ii)(A), Section 3.01(a)(ii)(B) or Section 3.01(a)(ii)(C) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount of money or U.S. Government Obligations sufficient to pay and discharge the entire indebtedness on such Senior Notes not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof) to the date of such deposit (in the case of Senior Notes which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (b) the Issuer and Bermuda Holdings have paid or caused to be paid all other sums payable hereunder by the Issuer and Bermuda Holdings; (c) such satisfaction and discharge shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Issuer or Bermuda Holdings is a party or by which the Issuer or Bermuda Holdings is bound; and (d) the Issuer and Bermuda Holdings have each delivered to the Trustee an Officers' Certificate and an Opinion of Counsel stating that (1) all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and (2) such satisfaction and discharge will not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Issuer or Bermuda Holdings, as the case may be, is a party or by which the Issuer or Bermuda Holdings, as the case may be, is bound. 39 Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Issuer to the Trustee under Section 5.06 and, if money shall have been deposited with the Trustee pursuant to this Section 3.01, the obligations of the Trustee under Sections 2.04 and 3.02 shall survive. SECTION 3.02. Application of Trust Money. Subject to the provisions of Section 2.04, all money deposited with the Trustee pursuant to Section 3.01 shall be held in trust and applied by it, in accordance with the provisions of the Senior Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal of and any premium and interest on the Senior Notes (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof) for whose payment such money has been deposited with the Trustee. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 3.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer's and Bermuda Holdings' obligations under this Indenture and the Senior Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 3.01; provided that if the Issuer or Bermuda Holdings has made any payment of principal of, and any premium and interest on, any Senior Notes (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof) because of the reinstatement of its obligations, the Issuer or Bermuda Holdings shall be subrogated to the rights of the Holders of such Senior Notes to receive such payment for the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 4 DEFAULTS AND REMEDIES SECTION 4.01. Events of Default. "EVENT OF DEFAULT," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be voluntary or involuntary or be effected by the operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation or any administrative or governmental body): (a) default in the payment of interest on any Senior Note when the same becomes due and payable and the continuance of such default for a period of 30 days; or 40 (b) default in the payment of the principal of and any premium on any Senior Note at its Maturity, upon acceleration, optional redemption, required purchase or otherwise; or (c) default in the performance, or breach, of any covenant or agreement of the Issuer or Bermuda Holdings hereunder (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with in clauses (a), (b) and (h) in this Section 4.01), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Issuer or Bermuda Holdings, as the case may be, by the Trustee or to the Issuer or Bermuda Holdings, as the case may be, and the Trustee by the holders of at least 25% in principal amount of the Outstanding Senior Notes, a written notice specifying such default or breach and stating that such notice is a "NOTICE OF DEFAULT" hereunder; or (d) (1) an event of default shall have occurred under any mortgage, bond, indenture, loan agreement or other document evidencing any issue of Indebtedness of Bermuda Holdings or any Restricted Subsidiary for money borrowed (or the payment of which is guaranteed by Bermuda Holdings or any of its Restricted Subsidiaries), which issue has an aggregate outstanding principal amount of not less than $10,000,000, and such default shall have resulted in such Indebtedness becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (2) a default in any payment when due at final Stated Maturity of any such Indebtedness outstanding in an aggregate principal amount of not less than $10,000,000 and, in each case, 10 Business Days shall have elapsed after such event during which period such event shall not have been cured or rescinded or such Indebtedness shall not have been satisfied; or (e) final judgments or orders are rendered against Bermuda Holdings, the Issuer or any Restricted Subsidiary by a court or regulatory agency of competent jurisdiction which require the payment in money, either individually or in an aggregate amount, that is more than $10,000,000 (other than any judgment to the extent a reputable non-affiliated insurance company has accepted liability) and such judgment or order shall not be discharged and either (1) any creditor shall have commenced an enforcement proceeding upon such judgment or order, which enforcement proceeding shall have remained unstayed for a period of 10 days, or (2) a period of 60 days during which a stay of enforcement shall not be in effect shall have elapsed following the date on which any period for appeal has expired; or 41 (f) a decree or order is entered by a court having jurisdiction (1) for relief in respect of the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary in an involuntary case or proceeding under the Federal Bankruptcy Code or any other federal or state bankruptcy, insolvency, reorganization or similar law or (2) adjudging the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary or of any substantial part of any of their properties, or ordering the winding up or liquidation of any of their affairs, and any such decree or order remains unstayed and in effect for a period of 60 consecutive days; or (g) the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary institutes a voluntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or any other case or proceedings to be adjudicated bankrupt or insolvent, or the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary consents to the entry of a decree or order for relief in respect of the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary in any involuntary case or proceeding under the Federal Bankruptcy Code or any other applicable federal or state law or to the institution of bankruptcy or insolvency proceedings against the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary, or the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary files a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law, or consents to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of any of the Issuer, Bermuda Holdings or any Principal Insurance Subsidiary or of any substantial part of its property, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due or takes corporate action in furtherance of any such action; or (h) default in the performance or breach of the provisions of Article 7. SECTION 4.02 Acceleration of Maturity; Rescission. If an Event of Default (other than an Event of Default specified in Section 4.01(f) or Section 4.01(g) occurs and is continuing, the Trustee or the Holders of at least 25% of the principal amount of the Outstanding Senior Notes, by written notice to the Issuer (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare all unpaid principal of, and any premium 42 and accrued interest on, all the Senior Notes (and any Additional Amounts payable in respect thereof) to be due and payable immediately. Notwithstanding the foregoing, in the event of an Event of Default specified in Section 4.01(f) ------- or Section 4.01(g), the amounts described above shall by such fact itself become ------- and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. After a declaration of acceleration, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of at least a majority in aggregate principal amount of the Outstanding Senior Notes, by written notice to the Issuer and the Trustee, may annul such declaration if (a) the Issuer or Bermuda Holdings has paid or deposited with the Trustee a sum sufficient to pay (1) all sums paid or advanced by the Trustee under this Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (2) all overdue interest on all Senior Notes, (3) the principal of and premium, if any, on any Senior Notes which have become due and otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Senior Notes, and (4) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Senior Notes; and (b) all Events of Default, other than the non- payment of principal of the Senior Notes which have become due solely by such declaration of acceleration, have been waived as provided in Section 4.13 or ---- cured. No such recision shall affect any subsequent default or impair any right consequent thereon. SECTION 4.03. Collection of Indebtedness and Suits for Enforcement by Trustee. Each of the Issuer and Bermuda Holdings covenants that if: (a) default is made in the payment of any interest on any Senior Note when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of and any premium on any Senior Note at the Maturity thereof, the Issuer or Bermuda Holdings will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Senior Notes, the whole amount then due and payable on such Senior Notes for principal and interest (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof) and, to the extent that payment of such interest shall be legally enforceable, interest on overdue installments of interest at the rate borne by the Senior Notes; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. 43 If the Issuer or Bermuda Holdings fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Issuer, Bermuda Holdings or any other obligor upon the Senior Notes or the Guarantee and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Issuer, Bermuda Holdings or any other obligor upon the Senior Notes or the Guarantee, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture by such appropriate private or judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights. SECTION 4.04. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Issuer, Bermuda Holdings or any other obligor upon the Senior Notes or the Guarantee or the property of the Issuer, Bermuda Holdings or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Senior Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Issuer or Bermuda Holdings for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal and any premium and interest (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof) owing and unpaid in respect of the Senior Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same, and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and 44 advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 5.06. ---- Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any proposal, plan of reorganization, arrangement, adjustment or composition or other similar arrangement affecting the Senior Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 4.05. Trustee May Enforce Claims Without Possession of Senior Notes. All rights of action and claims under this Indenture or the Senior Notes may be prosecuted and enforced by the Trustee without the possession of any of the Senior Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Senior Notes in respect of which such judgment has been recovered. SECTION 4.06. Application of Money Collected. Any money, securities or other property collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium and interest (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof), upon presentation of the Senior Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 5.06; ---- SECOND: To the payment of the amounts then due and unpaid upon the Senior Notes for principal or any premium and interest (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof), in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Senior Notes for principal or any premium and interest (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof); and 45 THIRD: The balance, if any, to the Issuer or Bermuda Holdings. SECTION 4.07. Limitation of Suits. No Holder of any Senior Notes shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or the Senior Notes, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in principal amount of the Outstanding Senior Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in the Trustee's own name; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Senior Notes; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture except in the manner provided in this Indenture and for the equal and ratable benefit of all the Holders. SECTION 4.08. Unconditional Right of Holders to Receive Principal Premium and Interest. Notwithstanding any other provision in this Indenture or any provision of the Senior Notes, the Holder of any Senior Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Section 2.11) interest on such Senior Note (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof) on the respective due dates expressed in such Senior Note (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement 46 of any such payment, and such rights shall not be impaired or affected without the consent of such Holder. SECTION 4.09. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Issuer, Bermuda Holdings, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 4.10. Rights and Remedies Cumulative. Except as provided in Section 2.07, no right or remedy herein conferred upon or reserved to the ---- Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 4.11. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Senior Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article 4 or by law to the Trustee or to - the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 4.12. Control by Holders. The Holders of not less than a majority in principal amount of the Outstanding Senior Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that: (a) such direction shall not be in conflict with any rule of law or with this Indenture or expose the Trustee to personal liability, and (b) subject to the provisions of Section 315 of the Trust Indenture Act, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. 47 SECTION 4.13. Waiver of Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Senior Notes by notice to the Trustee may on behalf of the Holders of all the Senior Notes waive any existing or past Default or Event of Default hereunder and its consequences, except a Default or Event of Default: (a) in the payment of the principal of and any premium or interest on any Senior Note, (b) in respect of a covenant or provision hereof which under Article 8 - cannot be modified or amended without the consent of the Holder of each Outstanding Senior Note affected, or (c) in respect of a covenant or provision hereof which under Article 8 - cannot be modified or amended without the consent of the Holders of a greater percentage in principal amount of, or all of, the Outstanding Senior Notes. The Holders of not less than the percentage in principal amount of Outstanding Senior Notes specified in Article 8 may on behalf of the Holders of all the - Senior Notes waive any past Default or Event of Default hereunder and its consequences arising under a covenant or provision specified in Section 4.13(b). ------- Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 4.14. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Senior Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant, in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 4.14 shall not apply to ---- any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Senior Notes, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or any premium or interest on any Senior Note on or after the respective Stated Maturities expressed in such Senior Note (or, in the case of redemption, on or after the Redemption Date). 48 ARTICLE 5 THE TRUSTEE SECTION 5.01. Notice of Events of Default. Within 60 days after the occurrence of any Event of Default, the Trustee shall transmit by mail to (a) all Holders of Definitive Senior Notes, as their names and addresses appear in the Senior Note Register or at the addresses provided by Holders in writing to the Trustee, and (b) the Holder of the Global Note(s), at Chase Manhattan Bank Luxembourg S.A., 5 rue Plaetis, L-2338, Luxembourg, Attention: Corporate Trust Department, notice of such Event of Default hereunder known to the Trustee, unless such Event of Default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of or any premium and interest on any Senior Note (and any Additional Amounts payable by the Issuer or Bermuda Holdings in respect thereof), the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders. SECTION 5.02. Certain Rights of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the period when an Event of Default is continuing: (i) the Trustee is required to perform only those duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in this Indenture that are adverse to the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this Section 5.02(c) does not limit the effect of Section ------- 5.02(b); ------- 49 (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 4.12; and ---- (iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to this Section 5.02. ---- (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense, including such reasonable advances as may be requested by the Trustee. (f) Subject to the foregoing Sections 5.02(a), 5.02(b), 5.02(c), 5.02(d) ------- ------- ------- ------- and 5.02(e): ------- (i) The Trustee may rely and shall be protected in acting or in refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. Any request or direction of the Issuer or Bermuda Holdings mentioned herein shall be sufficiently evidenced by a Request or Order of the Issuer or Bermuda Holdings and any resolution by the Board of Directors of the Issuer or Bermuda Holdings may be sufficiently evidenced by a Board Resolution. (ii) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. In addition, in determining the compliance of the Issuer or Bermuda Holdings with the financial covenants set forth herein, the Trustee may rely on the certificate delivered to the Trustee pursuant to Section 9.18(a). ------- 50 (iii) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (iv) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers. (v) The Trustee may consult with counsel, accountants or other experts and any advice of such counsel, accountants or other experts shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice. (vi) The Trustee shall not be deemed to have notice of any Default hereunder, except for Events of Default described in Paragraphs (a), (b) or (c) of Section 4.01 (only to the extent that the Trustee acts as the Paying ---- Agent), unless the Trustee shall be specifically notified by a writing delivered to it of such Default by the Issuer, Bermuda Holdings, the Paying Agent (to the extent the Trustee is not acting as the Paying Agent) or by the Holders of at least 25% in aggregate principal amount of the Outstanding Senior Notes, and in the absence of such notice so delivered, the Trustee may conclusively assume that there is no Default except as aforesaid. SECTION 5.03. Not Responsible for Recitals or Issuance of Senior Notes. The recitals contained herein and in the Senior Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer and Bermuda Holdings, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or the Senior Notes. The Trustee shall not be accountable for the use or application by the Issuer or Bermuda Holdings of Senior Notes or the proceeds thereof, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Senior Notes and perform its obligations hereunder. The Trustee agrees that at the time of the filing of a Statement of Eligibility and Qualification on Form T-1 ("FORM T-1"), the Trustee shall deliver an officer's certificate stating that the information supplied to the Issuer and Bermuda Holdings in connection with the filing of the Exchange Registration Statement is true and accurate, subject to the qualifications to be set forth therein. SECTION 5.04. Trustee and Agents May Hold Senior Notes; collections; etc. The Trustee and any Paying Agent, Senior Note Registrar or other agent of 51 the Issuer or Bermuda Holdings, in its individual or any other capacity, may become the owner or pledgee of Senior Notes with the same rights it would have if it were not the Trustee, Paying Agent, Senior Note Registrar or such other agent and, subject to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise deal with the Issuer or Bermuda Holdings and receive, collect, hold and retain collections from the Issuer or Bermuda Holdings with the same rights it would have if it were not Trustee, Paying Agent, Senior Note Registrar or such other agent. SECTION 5.05. Money Held in Trust. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust hereunder for the purposes for which they were received and need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Issuer or Bermuda Holdings. SECTION 5.06. Compensation and Reimbursement. The Issuer and Bermuda Holdings covenant and agree: (a) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee and each of its officers, directors, employees, agents and counsel for, and to hold them harmless against, any loss, liability or expense incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation of the Issuer and Bermuda Holdings under this Section 5.06 ---- to compensate the Trustee and to pay and reimburse the Trustee for such expenses, disbursements and advances shall constitute additional Indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. 52 As security for the performance of the obligation of the Issuer and Bermuda Holdings under this Section 5.06, the Trustee shall have a claim prior to the ---- Senior Notes upon all money, securities or other property held or collected by the Trustee as such and the Senior Notes are hereby subordinated to such claim. If the Trustee incurs expenses or renders services after an Event of Default specified in Section 4.01(f) or Section 4.01(g) occurs, the expenses and ------- ------- the compensation for the services are intended to constitute expenses of administration under the Federal Bankruptcy Code and any other applicable federal or state bankruptcy law. SECTION 5.07. Conflicting Interests. The Trustee shall comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 5.08. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under Section 310(a)(1) of the Trust Indenture Act and which shall have a combined capital and surplus of at least $50,000,000 and have its Corporate Trust Office located in The City of New York (or if its Corporate Trust Office shall not be located in The City of New York, the Issuer shall, pursuant to Section 2.03, ---- maintain an office or agency in The City of New York where the Senior Notes may be presented or surrendered and notices and demands hereunder may be made or served) to the extent there is such an institution eligible and willing to serve. If such corporation publishes reports of condition at least annually pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then, for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article 5. - SECTION 5.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article 5 shall become effective until the acceptance of - appointment by the successor Trustee under Section 5.10, at which time the ---- retiring Trustee shall be fully discharged from its obligations hereunder. (b) The Trustee may resign at any time by giving written notice thereof to the Issuer. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor Trustee by written instrument executed by authority of the Board of Directors of the Issuer, a copy of which shall be delivered to the resigning Trustee and a copy to the successor Trustee. If an instrument of 53 acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may, or any Holder who has been a bona fide Holder of a Senior Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper, appoint a successor Trustee. (c) The Trustee may be removed at any time by an Act of the Holders of a majority in principal amount of the Outstanding Senior Notes, delivered to the Trustee and the Issuer. (d) If at any time: (i) the Trustee shall fail to comply with the provisions of Section 310(b) of the Trust Indenture Act after written request therefor by the Issuer or by any Holder who has been a bona fide Holder of a Senior Note for at least six months, or (ii) the Trustee shall cease to be eligible under Section 5.08 and shall fail to resign after written request therefor by the Issuer or by any Holder who has been a bona fide Holder of a Senior Note for at least six months, or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any case, (i) the Issuer by a Board Resolution may remove the Trustee, or (ii) subject to Section 4.14, the Holder of any Senior Note who has been a ---- bona fide Holder of a Senior Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Issuer, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Senior Notes delivered to the Issuer and the retiring Trustee, the successor Trustee so appointed shall, forthwith 54 upon its acceptance of such appointment in accordance with Section 5.10, become ---- the successor Trustee and supersede the successor Trustee appointed by the Issuer. If no successor Trustee shall have been so appointed by the Issuer or the Holders of the Senior Notes and so accepted appointment, the Holder of any Senior Note who has been a bona fide Holder for at least six months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Issuer shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first class mail, postage prepaid, (i) to the Holders of Definitive Senior Notes as their names and addresses appear in the Senior Note Register, or (ii) to the Holder of the Global Note at Chase Manhattan Bank Luxembourg S.A., 5 rue Plaetis, L-2338, Luxembourg, Attention: Corporate Trust Department. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 5.10. Acceptance of Appointment of Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; provided, however, that the retiring Trustee shall continue to be entitled to the benefit of Section 5.06(c); but, on request of ------- the Issuer or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article 5. - Upon acceptance of appointment by any successor Trustee as provided in this Section 5.10, the Issuer shall give notice thereof to the Holders of the Senior ---- Notes, by mailing such notice to the Holders of Definitive Senior Notes as their names and addresses appear on the Senior Note Register, or (b) the Holder of the Global Note at Chase Manhattan Bank Luxembourg S.A., 5 rue Plaetis, L-2338, Luxembourg, Attention: Corporate Trust Department. If the acceptance of 55 appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 5.09. If the Issuer fails to give such notice within 10 ---- days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Issuer. SECTION 5.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Senior Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Senior Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Senior Notes. SECTION 5.12. Preferential Collection of Claims Against the Issuer or Bermuda Holdings. If and when the Trustee shall be or become a creditor of the Issuer or Bermuda Holdings (or any other obligor under the Senior Notes or the Guarantee), the Trustee shall be subject to the provisions of Section 311(b) of the Trust Indenture Act regarding the collection of claims against the Issuer or Bermuda Holdings (or any such other obligor). ARTICLE 6 HOLDERS' LISTS AND REPORTS BY TRUSTEE SECTION 6.01. Disclosure of Names and Addresses of Holders. Every Holder of Senior Notes, by receiving and holding the same, agrees with the Issuer, Bermuda Holdings and the Trustee that neither the Issuer, Bermuda Holdings nor the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 312 of the Trust Indenture Act. 56 SECTION 6.02. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Senior Notes, the Trustee shall transmit by mail to all Holders of Definitive Senior Notes, as their names and addresses appear in the Senior Note Register, or (b) the Holder of the Global Note, at Chase Manhattan Bank Luxembourg S.A., 5 rue Plaetis, L- 2338, Luxembourg, Attention: Corporate Trust Department, as provided in Trust Indenture Act Section 313(c), a brief report dated as of such May 15 if required by Trust Indenture Act Section 313(a). ARTICLE 7 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 7.01. Bermuda Holdings May Consolidated, Etc., Only on Certain Terms. After the Issue Date, Bermuda Holdings shall not consolidate with or merge with or into any other Person, or, directly or indirectly, sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its assets in one or more related transactions to any Person or group of affiliated Persons unless, at the time and after giving effect thereto: (a) (i) Bermuda Holdings shall be the continuing corporation, or (ii) the Person (if other than Bermuda Holdings) formed by such consolidation, or into which Bermuda Holdings is merged or the Person that acquires by sale, assignment, transfer, lease, conveyance or other disposition the assets of Bermuda Holdings, substantially as an entirety (the "SURVIVING ENTITY"), is a corporation duly organized and validly existing under the laws of the United States of America, the United Kingdom, Bermuda, the Republic of Ireland, Barbados, the Channel Islands, the Cayman Islands or any other jurisdiction that is not materially adverse to the holders of the Senior Notes and shall, in the case of clause (2), expressly assume, by supplemental indenture hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of Bermuda Holdings under the Guarantee and this Indenture; (b) immediately before and after such transaction, giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (c) immediately after giving effect to such transaction on a pro forma basis, the Consolidated Net Worth (after giving pro forma effect to such transaction but not including the effect of any purchase accounting adjustments or the accrual of deferred tax liabilities resulting from the transaction) of Bermuda Holdings (or the Surviving Entity if Bermuda Holdings is not the continuing obligor with respect to the Guarantee under this Indenture) is at least equal to the 57 Consolidated Net Worth of Bermuda Holdings immediately before such transaction; (d) if any of the property or assets of Bermuda Holdings would there upon become subject to any Lien, the outstanding Senior Notes shall be secured equally and ratably with (or prior to) the obligation or liability secured by such Lien, unless Bermuda Holdings could create such Lien hereunder without equally and ratably securing the Senior Notes; and (e) Bermuda Holdings has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, transfer or lease and such supplemental indenture, if one is required by this Section 7.01, comply with this Section 7.01 and that all conditions precedent ---- ---- herein provided for relating to such transaction have been complied with. SECTION 7.02. Successor Substituted. Upon any consolidation or merger or any sale, assignment, transfer, lease or conveyance or other disposition of all or substantially all of the assets of Bermuda Holdings in accordance with Section 7.01, the successor Person formed by such consolidation or into which ---- Bermuda Holdings is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, Bermuda Holdings under this Indenture with the same effect as if such successor Person had been named as Bermuda Holdings herein. When a successor assumes all the obligations of its predecessor under this Indenture and the Senior Notes, the predecessor will be released from those obligations, provided that in the case of a transfer by lease, the predecessor corporation shall not be released from the payment of principal and interest on the Senior Notes. ARTICLE 8 SUPPLEMENTAL INDENTURES SECTION 8.01. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Issuer and Bermuda Holdings, each when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto in form satisfactory to the Trustee, for any of the following purposes: (a) to cure any ambiguity or to correct any provision herein which may be defective or in consistent with any other provision herein; 58 (b) to provide for the assumption of Bermuda Holding's obligations to Holders of the Senior Notes in the case of a merger or consolidation; (c) to secure the Senior Notes pursuant to the requirements of Section 7.01; - - ---- (d) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by Section 8.05 or otherwise; ---- (e) to evidence and provide the acceptance of the appointment of a successor Trustee hereunder; or (f) to make any other change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights of any Holder under this Indenture or the Senior Notes. SECTION 8.02. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Senior Notes (including consents obtained in connection with a tender offer or exchange offer for the Senior Notes), by Act of such Holders delivered to the Issuer and the Trustee, the Issuer and Bermuda Holdings, each when authorized by a Board Resolution, and the Trustee may enter into one or more indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of waiving or modifying in any manner the rights of the holders under this Indenture; provided, however, that no such supplemental indenture, amendment or waiver shall without the consent of the Holder of each Outstanding Senior Note affected thereby: (i) change the Stated Maturity or the principal of, or any installment of interest on, or change the obligation of the Issuer or Bermuda Holdings to pay any Additional Amount with respect to, any Senior Note or reduce the principal amount thereof or the rate of interest thereon or any provision relating to redemption price of Senior Notes or the periods during which redemption may be effected, or change the coin or currency in which the principal of any Senior Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); or (ii) reduce the percentage in principal amount of the Outstanding Senior Notes, the consent of whose Holders is required for any such 59 supplemental indenture or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (iii) modify any of the provisions of this Section 8.02, Section 4.13 ---- ---- or Section 9.20, except to increase any such percentage or to provide that ---- certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Senior Note affected thereby. It shall not be necessary for any Act of Holders under this Section 8.02 to ---- approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 8.03. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article 8 or the modifications thereby of the trusts created by this - Indenture, the Trustee shall be entitled to receive, and (subject to Section 315(a) through 315(d) of the Trust Indenture Act and Section 5.02 hereof) shall ---- be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 8.04. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article 8, this Indenture shall be modified in - accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Senior Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 8.05. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article 8 shall conform to the requirements - of the Trust Indenture Act as then in effect. SECTION 8.06. Reference in Senior Notes to Supplemental Indentures. Senior Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 8 may, and shall if required by the Issuer - and Bermuda Holdings, bear a notation in form approved by the Issuer and Bermuda Holdings as to any matter provided for in such supplemental indenture. If the Issuer and Bermuda Holdings shall so determine, new Senior Notes so modified as to conform, in the opinion of the Issuer and Bermuda Holdings, to any such 60 supplemental indenture may be prepared and executed by the Issuer and shall be authenticated and delivered by the Trustee in exchange for Outstanding Senior Notes. ARTICLE 9 COVENANTS SECTION 9.01. Payment of Principal, Premium and Interest. The Issuer will duly and punctually pay the principal of and any premium and interest on the Senior Notes (and any Additional Amounts payable in respect thereof) in accordance with the terms of the Senior Notes and this Indenture. Principal and interest (and any Additional Amounts payable in respect thereof) shall be considered paid on the date due if the Paying Agent (other than the Issuer) holds on that date money sufficient to pay all principal and interest (and any Additional Amounts payable in respect thereof) then due. The Issuer shall pay interest on overdue principal and, to the extent lawful, interest on overdue installments of interest, at the rate per annum set forth in the Senior Notes. SECTION 9.02. Corporate Existence. Subject to Article 7, each of the - Issuer and Bermuda Holdings shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and that of each Subsidiary of the Issuer and Bermuda Holdings and the corporate rights (charter and statutory), corporate licenses and corporate franchises of the Issuer and Bermuda Holdings and its Subsidiaries, except where a failure to do so, singly or in the aggregate, would not have a material adverse effect upon the business, prospects, assets, conditions (financial or otherwise) or results of operations of Bermuda Holdings and its Subsidiaries taken as a whole determined on a consolidated basis in accordance with GAAP; provided that neither the Issuer nor Bermuda Holdings shall be required to preserve any such existence (except of Bermuda Holdings), right, license, or franchise if the Board of Directors of the Issuer, Bermuda Holdings, or of the Subsidiary concerned, shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer, Bermuda Holdings or such Subsidiary and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 9.03. Payment of Taxes and Other Claims. Bermuda Holdings will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or 61 property of Bermuda Holdings or any of its Subsidiaries and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, might by law become a Lien upon the property of Bermuda Holdings or any of its Subsidiaries that could produce a material adverse effect on the consolidated financial condition of Bermuda Holdings (in the good faith judgment of management of Bermuda Holdings); provided, however, that Bermuda Holdings shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and in respect of which appropriate reserves (in the good faith judgment of management of Bermuda Holdings) are being maintained in accordance with GAAP. SECTION 9.04. Maintenance of Properties; Insurance; Books and Records; Compliance with Law. (a) Bermuda Holdings shall cause all properties owned by or leased to it or any Subsidiary of Bermuda Holdings and used or useful in the conduct of its business or the business of such Subsidiary to be maintained and kept in normal condition, repair and working order, ordinary wear and tear excepted; provided that nothing in this Section 9.04 shall prevent Bermuda ---- Holdings or any Subsidiary of Bermuda Holdings from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors of Bermuda Holdings or the Subsidiary concerned, or of any officer (or other agent employed by Bermuda Holdings or any Subsidiary of Bermuda Holdings) of Bermuda Holdings or such Subsidiary having managerial responsibility for any such property, desirable in the conduct of the business of Bermuda Holdings or any Subsidiary of Bermuda Holdings and if such discontinuance or disposal is not adverse in any material respect to the Holders of the Senior Notes. (b) Bermuda Holdings shall provide or cause to be provided, for itself and any Subsidiaries of Bermuda Holdings, insurance (including appropriate self- insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties in the same general areas in which Bermuda Holdings or such Subsidiaries operate. (c) Bermuda Holdings shall and shall cause each of its Subsidiaries to keep proper and true books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of Bermuda Holdings and each Subsidiary of Bermuda Holdings, and reflect on its financial statements adequate accruals and appropriations to reserves, all in accordance with GAAP consistently applied to Bermuda Holdings and its Subsidiaries taken as a whole. 62 (d) Bermuda Holdings shall and shall cause each of its Subsidiaries to comply with all statutes, laws, ordinances or government rules and regulations to which it is subject, except where a failure to do so, singly or in the aggregate, is not likely to have a materially adverse effect upon the business, prospects, assets or condition (financial or otherwise) or results of operations of Bermuda Holdings and its Subsidiaries taken as a whole. SECTION 9.05. [Intentionally Omitted] SECTION 9.06. [Intentionally Omitted] SECTION 9.07. [Intentionally Omitted] SECTION 9.08. Liens. Bermuda Holdings will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness (other than Permitted Liens) on any property or asset now owned or hereafter acquired, or on any income or profits therefrom or assign or convey any right to receive income therefrom, unless all payments due under the Senior Notes and hereunder are secured on an equal and ratable basis with (or prior to) the obligations so secured until such time as such obligations are no longer secured by a Lien. SECTION 9.09. [Intentionally Omitted] SECTION 9.10. [Intentionally Omitted] SECTION 9.11. [Intentionally Omitted] SECTION 9.12. [Intentionally Omitted] SECTION 9.13. [Intentionally Omitted] SECTION 9.14. [Intentionally Omitted] SECTION 9.15. [Intentionally Omitted] SECTION 9.16. [Intentionally Omitted] Section 9.17. Additional Amounts. All payments made by the Issuer under the Senior Notes, and all payments made by Bermuda Holdings pursuant to the Guarantee, will be made without deduction or withholding, for or on account of, any and all present and future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction or withholding of such taxes, 63 duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, Bermuda or any relevant jurisdiction or any political subdivision or taxing authority thereof or therein (the "RELEVANT JURISDICTION") shall at any time be required in respect of any amounts to be paid by the Issuer under the Senior Notes or Bermuda Holdings pursuant to the Guarantee, the Issuer or Bermuda Holdings, as the case may be, will pay such additional amounts ("ADDITIONAL AMOUNTS") as may be necessary in order that the net amounts received by a Holder of Senior Notes after such deduction or withholding shall be not less than the amounts specified in the Senior Notes to which the Holder of the Senior Notes is entitled; provided, however, that the Issuer or Bermuda Holdings shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge which would not have been imposed but for (i) the existence of any present or former connection between such Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such holder is an estate, nominee, trust, partnership or corporation) otherwise than merely by the holding of the Senior Notes or the receipt of amounts payable in respect of the Senior Notes, and any Relevant Jurisdiction or such holder being subject to the jurisdiction of any Relevant Jurisdiction, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having had a permanent establishment therein or (ii) the presentation of the Senior Notes (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the holder would have been entitled to Additional Amounts had the Senior Notes been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Holder of the Senior Notes or, if different, the beneficial owner of the interest payable on the Senior Notes with a timely request of the Issuer addressed to such Holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such Holder or beneficial owner which is required or imposed by a statute, treaty, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; 64 (c) payments in respect of Definitive Senior Notes issued at the request of the Holder (including on or after the occurrence of an Event of Default); or (d) any combination of items (a), (b) and (c) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, the Senior Notes to any holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor with respect to such fiduciary or member of such partnership or beneficial owner would not have been entitled to any Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of the Senior Notes. SECTION 9.18. Statement as to Compliance; Notice of Default; Provision of Financial Statements. (a) Each of the Issuer and Bermuda Holdings will deliver to the Trustee, within 120 days after the end of each fiscal year ending after the date hereof, a certificate of its principal executive officer, principal financial officer or principal accounting officer stating whether, to such officer's knowledge, each of the Issuer and Bermuda Holdings, respectively, is in compliance with all covenants and conditions to be complied with by it under this Indenture. For purposes of this Section 9.18, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. (b) If a default has occurred and is continuing, or if the Trustee, any Holder or the trustee for or the holder of any other evidence of Indebtedness of the Issuer and Bermuda Holdings (other than Indebtedness in the aggregate principal amount of less than $5,000,000) gives any notice or takes any other action with respect to a claimed default, the Issuer shall deliver to the Trustee an Officers' Certificate specifying such Default, notice or other action within five Business Days of its occurrence. (c) Bermuda Holdings shall supply without cost to each holder of the Senior Notes, and file with the Trustee within 15 days after Bermuda Holdings is required to file the same with the Commission, copies of the annual reports and quarterly reports and of the information, documents and other reports which Bermuda Holdings may be required to file with the Commission pursuant to Sections 13(a), 13(c) or 15(d) of the Exchange Act; and (d) Whether or not Bermuda Holdings is required to file with the Commission such reports and other information referred to in Section 9.18(c), Bermuda Holdings shall file with the Commission and the Trustee such reports and information and furnish without cost to each Holder of Senior Notes all 65 financial information that would be required to be contained in a filing referred to in Section 9.18(c). Bermuda Holdings shall also make such reports available to prospective purchasers of the Senior Notes, securities analysts and broker-dealers upon their written request. Bermuda Holdings shall also file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by Bermuda Holdings with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations. Section 9.19. Waiver of Stay; Extension of Usury Law. Each of the Issuer and Bermuda Holdings covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and each of the Issuer and Bermuda Holdings (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 9.20. Waiver of Certain Covenants Bermuda Holdings or the Issuer may omit in any particular instance to comply with any covenant or condition set forth in Sections 9.08 and 9.18 if, before or after the time for such compliance, the Holders of not less than a majority in aggregate principal amount of the Senior Notes at the time Outstanding shall, by Act of such Holders, waive such compliance in such instance with such covenant or condition. No such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of Bermuda Holdings and the Issuer and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. ARTICLE 10 Redemption of Senior Notes Section 10.01. Right of Redemption. The Issuer shall have the right to redeem the Senior Notes, in whole or in part, at any time and from time to time, subject to the receipt of any consent required under the terms of any Indebtedness of the Issuer which may be outstanding from time to time. 66 Section 10.02. Applicability of Article. Redemption of Senior Notes at the election of the Issuer or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article 10. Section 10.03. Election to Redeem; Notice to Trustee. The election of the Issuer to redeem any Senior Notes pursuant to Section 10.01 shall be evidenced by a Board Resolution. In case of such redemption, the Issuer shall, at least 60 days prior to the Redemption Date fixed by it (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Senior Notes to be redeemed. Section 10.04. Selection by Trustee of Senior Notes to Be Redeemed. If less than all of the Senior Notes are to be redeemed, the particular Senior Notes or portions thereof to be redeemed shall be selected not more than 60 days and not less than 30 days prior to the Redemption Date by the Trustee, from the Outstanding Senior Notes not previously called for redemption on a pro rata basis, by lot or by any other method the Trustee shall deem fair and appropriate and in compliance with the requirements of such principal national securities exchange, if any, on which the Senior Notes are listed or, if the Senior Notes are not so listed, on a pro rata basis, by lot or by any other method the Trustee shall deem fair and appropriate, provided that the amounts to be redeemed shall be equal to $1,000 or any integral multiple thereof. The Trustee shall promptly notify the Issuer, the Custodian and the Senior Note Registrar in writing of the Senior Notes selected for redemption and, in the case of any Senior Notes selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Senior Notes shall relate, in the case of any Senior Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Senior Note which has been or is to be redeemed. Section 10.05. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Senior Notes to be redeemed at the Redemption Prices specified in Section 10.09. All notices of redemption shall state: (a) the Redemption Date; 67 (b) the Redemption Price including, in connection with an optional redemption pursuant to Section 10.09, the estimated Make-Whole Amount due in connection with such redemption (calculated as if the date of such notice were the date of the prepayment) and setting forth the details of such calculation of Make-Whole Amount; (c) if less than all Outstanding Senior Notes are to be redeemed, the identification (and, if the case of a Senior Note to be redeemed in part, the principal amount) of the particular Senior Notes to be redeemed; (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Senior Note or portion thereof, and that (unless the Issuer shall default in payment of the Redemption Price) interest thereon shall cease to accrue on and after said date; (e) the place or places where such Senior Notes are to be surrendered for payment of the Redemption Price; (f) that Senior Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (g) the CUSIP number or numbers, if any, relating to such Senior Notes, but that no representation is made as to the correctness or accuracy of the CUSIP number listed in such notice or printed on the Senior Notes and that reliance may be placed only on the other identification numbers printed on the Senior Notes; (h) in the case of a Definitive Senior Note to be redeemed in part, the principal amount of such Senior Note to be redeemed and that after the Redemption Date upon surrender of such Definitive Senior Note, a new Definitive Senior Note or Definitive Senior Notes in the aggregate principal amount equal to the unredeemed portion thereof will be issued; and (i) in the case of a Global Note to be redeemed in part, the principal amount of such Global Note to be redeemed and that after the Redemption Date upon surrender of such Global Note a new Global Note in principal amount equal to the unredeemed portion will be issued or an adjustment will be made to the existing Global Note such that the aggregate principal amount of the Global Note will equal the unredeemed portion of the Global Note; Notice of redemption of Senior Notes to be redeemed at the election of the Issuer shall be given by the Issuer or, at its request, by the Trustee in the name and at the expense of the Issuer. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. 68 Section 10.06. Deposit of Redemption Price. On or prior to any Re Redemption Date, the Issuer shall deposit with the Trustee or with a Paying Agent (or, if the Issuer is acting as its own Paying Agent, segregate and hold in trust as provided in Section 2.04) an amount of money in same-day funds (or New York Clearing House funds if such deposit is made prior to the applicable Redemption Date) sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Senior Notes or portions thereof which are to be redeemed on that date. Section 10.07. Senior Notes Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Senior Notes to be redeemed shall, subject to the provisions of Section 10.03, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Issuer shall default in the payment of the Redemption Price and accrued interest) such Senior Notes shall cease to bear interest. Upon surrender of any such Senior Note for redemption in accordance with said notice, such Senior Note shall be paid by the Issuer at the Redemption Price together with accrued interest to the Redemption Date; provided, however, that installments of interest on any Definitive Senior Notes whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Definitive Senior Notes, or one or more predecessor Definitive Senior Notes, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 2.05. If any Senior Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal thereof (and premium, if any, thereon) shall, until paid, bear interest from the Redemption Date at the rate borne by such Senior Note. Section 10.08. Senior Notes Redeemed in Part. Any Senior Note which is to be redeemed only in part shall be surrendered at the office or agency of the Issuer maintained for such purpose pursuant to Section 2.05 (with, if the Issuer, the Senior Note Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Issuer, the Senior Note Registrar or the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing). Upon surrender of a Definitive Senior Note that is redeemed in part, the Issuer shall execute, and the Trustee shall authenticate and deliver to the Holder of such Definitive Senior Note without service charge, a new Definitive Senior Note or Definitive Senior Notes, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Definitive Senior Note so surrendered. Upon surrender of a Global Note that is redeemed in part, the Paying Agent shall forward the Global Note to the Trustee who shall 69 reduce the principal amount of such Global Note to an amount equal to the unredeemed portion of the Global Note surrendered. Section 10.09. Optional Redemption. (a) The Senior Notes are subject to redemption at a Redemption Price equal to 100% of the principal amount, together with accrued and unpaid interest to the Redemption Date (subject to the right of Holders of record on relevant Regular Record Dates to receive interest due on an Interest Payment Date) as provided in the Indenture, plus the Make-Whole Amount, if any, with respect to such Senior Notes. Three Business Days prior to such prepayment, the Issuer or Bermuda Holdings shall give notice to the Quotation Agent requesting the Quotation Agent to provide a quote of the Comparable Treasury Price and the Quotation Agent shall provide such quotation to the Issuer on or before one Business Day prior to such prepayment. One Business Day prior to such prepayment, the Quotation Agent, the Issuer or Bermuda Holdings shall give notice to the Indenture Trustee specifying the calculation of the Make-Whole Amount as of the Redemption Date. (b) The Senior Notes are not subject to redemption through operation of a sinking fund. Section 10.10. Tax Redemption. The Senior Notes may be redeemed at the option of the Issuer, in whole but not in part, upon not less than 30 nor more than 60 days' notice, at any time at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the date fixed for redemption if (a) the Issuer is required to issue Definitive Senior Notes (other than upon the request of a holder of Book-Entry Interests following an Event of Default) after using all reasonable efforts to avoid having to issue such Definitive Senior Notes and the Issuer is or would be so required in the absence of any applicable tax treaty on the next succeeding Interest Payment Date to pay Additional Amounts with respect to any of the Senior Notes, or (b) the Issuer or Bermuda Holdings is or would be so required in the absence of any applicable tax treaty on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Senior Notes and, in either case, the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Issuer. The Issuer or Bermuda Holdings will also pay, or make available for payment, to holders of Senior Notes on the redemption date any Additional Amounts (as described, but subject to the exceptions referred to, in Section 9.17) resulting from the payment of such Redemption Price. 70 ARTICLE 11 Defeasance and Covenant Defeasance Section 11.01. Option to Effect Defeasance or Covenant Defeasance Each of the Issuer and Bermuda Holdings may, at its option by Board Resolution, at any time, elect to have either Section 11.02 or Section 11.03 be applied to all Outstanding Senior Notes upon compliance with the conditions set forth below in this Article 11. Section 11.02. Defeasance and Discharge. Upon the Issuer's or Bermuda Holdings' exercise under Section 11.01 of the option applicable to this Section 11.02, each of the Issuer and Bermuda Holdings shall be deemed to have been discharged from its obligations with respect to all Outstanding Senior Notes and the Guarantee on the date the conditions set forth below are satisfied (hereinafter, "DEFEASANCE"). For this purpose, such defeasance means that the Issuer and Bermuda Holdings shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Senior Notes and the Guarantee, which shall thereafter be deemed to be "OUTSTANDING" only for the purposes of Section 11.05 and the other sections of this Indenture referred to in Section 11.02(a) and Section 11.02(b) below, and the Guarantee, and to have satisfied all other obligations under such Senior Notes, the Guarantee and this Indenture (and the Trustee, on demand of and at the expense of the Issuer and Bermuda Holdings, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of Outstanding Senior Notes to receive solely from the trust fund described in Section 11.05 and as more fully set forth in such Section, payments in respect of the principal of and any premium and interest on such Senior Notes (and any Additional Amounts payable in respect thereof) when such payments are due, or on the Redemption Date, as the case may be, (b) the Issuer's obligations with respect to such Senior Notes under Section 2.05, Section 2.04, Section 2.06, Section 2.07, Section 2.12 and Section 2.13, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuer's and Bermuda Holdings' obligations in connection therewith, (d) this Article 11, and (e) the obligations of the Issuer and Bermuda Holdings to pay any Additional Amounts. Subject to compliance with this Article 11 each of the Issuer and Bermuda Holdings may exercise its option under this Section 11.02 notwithstanding the prior exercise of its option under Section 11.03 with respect to the Senior Notes. SECTION 11.03. Covenant Defeasance. Upon the Issuer's or Bermuda Holdings' exercise under Section 11.01 of the option applicable to this Section 11.03, each of the Issuer and Bermuda Holdings, and, if applicable, the Trustee and each Holder of Senior Notes, shall be released from its obligations under the 71 covenants contained in Article 7, Sections 9.02 through 9.04, Section 9.08 and Section 9.18 inclusive, with respect to the Outstanding Senior Notes on and after the date the conditions set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Senior Notes shall thereafter be deemed to be not "OUTSTANDING" for the purposes of any request, demand, authorization, direction, notice, consent, waiver or other Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "OUTSTANDING" for all other purposes hereunder (it being understood that such Senior Notes shall not be deemed Outstanding for financial accounting purposes). For this purpose, such covenant defeasance means that, with respect to the Outstanding Senior Notes, the Issuer and Bermuda Holdings may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Section 4.01(b) or 4.01(h), but, except as specified above, the remainder of this Indenture and such Senior Notes shall be unaffected thereby. SECTION 11.04. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 11.02 or Section 11.03 to the Outstanding Senior Notes: (a) The Issuer or Bermuda Holdings shall irrevocably have deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Senior Notes, (1) cash in U.S. Dollars in an amount, or (2) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in U.S. Dollars in an amount, or (3) a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge the principal of (and premium, if any) and interest on the Outstanding Senior Notes on the Stated Maturity or on the applicable Optional Redemption Date, as the case may be, of such principal or installment of principal of and any premium and interest on the Senior Notes; provided that the Trustee shall have been irrevocably instructed by the Issuer or Bermuda Holdings in writing to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Senior Notes. For this purpose, "U.S. GOVERNMENT OBLIGATIONS" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and 72 credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt; (b) In the case of an election under Section 11.02, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably satisfactory to the Trustee confirming that (1) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (2) since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Senior Notes will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (c) In the case of an election under Section 11.03, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably satisfactory to the Trustee confirming that the Holders of the Outstanding Senior Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (d) No Default or Event of Default with respect to the Senior Notes shall have occurred and be continuing on the date of such deposit or, insofar as Section 4.01(f) or Section 4.01(g)) is concerned, at any time in the period ending on the 91st day after the date of such deposit; (e) Such election under Section 11.02 or Section 11.03 shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which Bermuda Holdings is a party or by which Bermuda Holdings is bound; 73 (f) In the case of an election under either Section 11.02 or Section 11.03, the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) In the case of an election under either Section 11.02 or Section 11.03, the Issuer shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Issuer or Bermuda Holdings pursuant to its election under Section 11.02 or Section 11.03 was not made by the Issuer or Bermuda Holdings with the intent of preferring the Holders over other creditors of the Issuer or Bermuda Holdings or with the intent of defeating, hindering, delaying or defrauding creditors of the Issuer or Bermuda Holdings or others; and (h) The Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States, each stating that all conditions precedent provided for relating to either the defeasance under Section 11.02 or the covenant defeasance under Section 11.04 (as the case may be) have been complied with as contemplated by this Section 11.03. SECTION 11.05. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of Section 2.04, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 11.05, the "TRUSTEE") pursuant to Section 11.04 in respect of the Outstanding Senior Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Senior Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Senior Notes of all sums due and to become due thereon in respect of principal and any premium and interest, but such money need not be segregated from other funds except to the extent required by law. The Issuer or Bermuda Holdings shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or U.S. Government Obligations deposited pursuant to Section 11.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Senior Notes. Anything in this Article 11 to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer or Bermuda Holdings from time to time upon Issuer Request any money or U.S. Government Obligations held by it as provided 74 in Section 11.04 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 11.04) are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. SECTION 11.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or U.S. Government Obligations in accordance with Section 11.02 or Section 11.03 as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuer's and Bermuda Holdings' obligations under this Indenture and the Senior Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.02 or Section 11.03 as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 11.02 or Section 11.03, as the case may be; provided, however, that, if the Issuer makes any payment of principal of or any premium and interest on any Senior Note following the reinstatement of its obligations, the Issuer and Bermuda Holdings shall be subrogated to the rights of the Holders of such Senior Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 12 Guarantee of Senior Notes SECTION 12.01. Guarantee. Bermuda Holdings hereby irrevocably and fully and unconditionally guarantees to each Holder of a Senior Note authenticated and delivered by the Trustee the due and punctual payment of the principal of and any premium and interest on such Senior Note (and any Additional Amounts payable in respect thereof), when and as the same shall become due and payable, whether at the Stated Maturity, by declaration of acceleration, call for redemption or otherwise, in accordance with the terms of such Senior Note and of this Indenture. Bermuda Holdings hereby agrees that its obligations hereunder shall be as if it were a principal debtor and not merely a surety, and shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any Senior Note or this Indenture, any failure to enforce the provisions of any Senior Note or this Indenture, any waiver, modification or indulgence granted to the Issuer with respect thereto, by the Holder of any Senior Note or the Trustee, any merger or consolidation by the Issuer or any sale, lease or other disposition of all or substantially all of the assets of the Issuer, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor; 75 provided, however, that, notwithstanding the foregoing, no such waiver, modification or indulgence shall, without the consent of Bermuda Holdings, increase the principal amount of a Senior Note or the interest rate thereon or increase any premium payable upon redemption thereof. Bermuda Holdings hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, the benefit of discussion, protest or notice with respect to any Senior Note or the indebtedness evidenced thereby and all demands whatsoever, and covenants that this Guarantee will not be discharged with respect to any Senior Note except by payment in full of the principal thereof and any premium and interest thereon (and any Additional Amounts payable in respect thereof) or as provided in Article 11. Bermuda Holdings further agrees that, as between Bermuda Holdings, on the one hand, and the Holders and the Trustee, on the other hand, the Maturity of the obligations guaranteed hereby may be accelerated as provided in Article 4 hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby. Bermuda Holdings shall be subrogated to all rights of each Holder of Senior Notes against the Issuer in respect of any amounts paid to such Holder by Bermuda Holdings pursuant to the provisions of this Guarantee; provided, however, that Bermuda Holdings shall not be entitled to enforce, or to receive any payments arising out of or based upon, such right of subrogation until the principal of and any premium and interest on (and any Additional Amounts payable in respect thereof) shall have been paid in full. No past, present or future stockholder, officer, director, employee or incorporator of Bermuda Holdings shall have any personal liability under the Guarantee set forth in this Section 12.01 by reason of his or its status as such stockholder, officer, director, employee or incorporator. The Guarantee set forth in this Section 12.01 shall not be valid or become obligatory for any purpose with respect to a Senior Note until the certificate of authentication on such Senior Note shall have been signed by or on behalf of the Trustee. SECTION 12.02. Execution of Guarantee. To evidence its guarantee to the Holders specified in Section 12.01, Bermuda Holdings hereby agrees to execute the notation of the Guarantee in substantially the form set forth in Exhibit D to be endorsed on each Senior Note authenticated and delivered by the Trustee. Bermuda Holdings hereby agrees that its Guarantee set forth in Section 12.01 shall remain in full force and effect notwithstanding any failure to endorse on each Senior Note a notation of such Guarantee. Each such notation of the Guarantee 76 shall be signed on behalf of Bermuda Holdings, by any two duly authorized officers, prior to the authentication of the Senior Note on which it is endorsed, and the delivery of such Senior Note by the Trustee, after the due authentication thereof by the Trustee hereunder, shall constitute due delivery of the Guarantee on behalf of Bermuda Holdings. Such signatures upon the notation of the Guarantee may be manual or facsimile signatures of any present, past or future duly authorized officers and may be imprinted or otherwise reproduced below the notation of the Guarantee, and in case any such authorized officer who shall have signed the notation of the Guarantee shall cease to be such duly authorized officer before the Senior Note on which such notation is endorsed shall have been authenticated and delivered by the Trustee or disposed of by the Issuer, such Senior Note nevertheless may be authenticated and delivered or disposed of as though the person who signed the notation of the Guarantee had not ceased to be such duly authorized officer of Bermuda Holdings. SECTION 12.03. Other Obligations of Bermuda Holdings The obligations of Bermuda Holdings pursuant to this Section 12 shall be in addition to, and not exclusive of, the other obligations of Bermuda Holdings set forth elsewhere in this Indenture. For purposes of the Guarantee, such other obligations shall be deemed to be included in this Section 12. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and attested, all as of the date first above written. TERRA NOVA INSURANCE (UK) HOLDINGS PLC By:___________________________ Name: Jean M. Waggett Title: Secretary Attest:_________________________ Name: Title: TERRA NOVA (BERMUDA) HOLDINGS LTD. By:___________________________ 77 Name: Jean M. Waggett Title: Senior Vice-President, Secretary and General Counsel Attest:_________________________ Name: Title: THE CHASE MANHATTAN BANK, as Trustee By:______________________________ Name: Title: Attest:_________________________ Name: Title: EXHIBIT A [FORM OF FACE OF RESTRICTED GLOBAL NOTE] THIS NOTE IS A RESTRICTED GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO. TERRA NOVA INSURANCE (UK) HOLDINGS PLC 7% Senior Notes due 2008 Guaranteed by TERRA NOVA (BERMUDA) HOLDINGS LTD. Terra Nova Insurance (UK) Holdings plc, a public limited company organized under the laws of England and Wales, promises to pay to the bearer upon surrender hereof the principal sum of U.S. $100,000,000 (less the principal amount, if any, of any outstanding Regulation S Global Note and any outstanding Definitive Senior Notes evidencing such Notes, as reflected in the records of the Trustee hereinafter referred to), on May 15, 2008. Interest Payment Dates: May 15 and November 15, commencing November 15, 1998. This Global Note is fully and unconditionally guaranteed as to the payment of principal and any premium and interest (and any Additional Amounts payable in respect thereof), when and as the same shall become due and payable, in accordance with the terms of this Global Note and of the Indenture, by Terra Nova (Bermuda) Holdings Ltd., a company organized under the laws of Bermuda. Additional provisions of this Restricted Global Note are set forth on the other side of this Global Note. Dated: May 18, 1998 TERRA NOVA INSURANCE (UK) HOLDINGS PLC By:_____________________________ By:_____________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION The Chase Manhattan Bank as Trustee, certifies that this is the Restricted Global Note referred to in the Indenture. ______________________________ Authorized Officer 2 [REVERSE SIDE OF RESTRICTED GLOBAL NOTE] TERRA NOVA INSURANCE (UK) HOLDINGS PLC 7% Senior Notes due 2008 Guaranteed by TERRA NOVA (BERMUDA) HOLDINGS LTD. 1. Interest -------- (a) Terra Nova Insurance (UK) Holdings plc, a public limited company organized under the laws of England and Wales (such company, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "ISSUER"), promises to pay interest on the principal amount of this Note to the bearer at the rate per annum shown above. Terra Nova (Bermuda) Holdings Ltd., a company organized under the laws of Bermuda (such company, and its successors and assigns under the Indenture hereinafter referred to, being herein called "BERMUDA HOLDINGS"), irrevocably and fully and unconditionally guarantees this Note as to the payment of principal, and any premium and interest (and any Additional Amounts payable in respect thereof), when and as the same shall become due and payable. [(b) The principal of this Note shall mature on May 15, 2008. Interest on this Note shall accrue at the rate of 7% per annum and is payable semiannually in arrears on May 15 and November 15 of each year, commencing on November 15, 1998. In the event that the Exchange Offer (as defined in the Indenture) has not been consummated or a Shelf Registration Statement (as defined in the Indenture) has not been declared effective on or prior to November 18, 1998, then additional interest shall accrue at a rate of 0.25% per annum from November 18, 1998, and shall be payable in cash semiannually in arrears on May 15 and November 15 of each year, commencing on May 15, 1999. If such Exchange Offer has not been consummated or such Shelf Registration Statement has not been declared effective on or prior to February 18, 1999, the rate per annum at which such additional interest shall accrue shall increase from 0.25% to 0.50% per annum from February 18, 1999, and shall be payable in cash semi-annually in arrears on May 15 and November 15 of each year, commencing May 15, 1999. The accrual of additional interest shall cease upon the consummation of such Exchange Offer or the effectiveness of such Shelf Registration Statement.]/1/ _________________________ /1/ To be included in Senior Notes which are not Exchange Notes. 1 [(b) Interest on this Note shall accrue from the most recent date to which interest has been paid on the Note for which this Note was exchanged or, if no interest has been paid on such Note, from May 18, 1998, at the rate of 7% per annum and shall be payable in cash semiannually in arrears on May 15 and November 15 of each year, commencing on November 15, 1998. There shall also be payable in respect of this Note all additional interest that may have accrued on the Note for which this Note was exchanged (as calculated in accordance with the terms of such Note) pursuant to the Exchange Offer or otherwise pursuant to a Registration of such Note, such additional interest to be payable at the same time and in the same manner as the periodic interest on this Note.]/2/ (c) Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Issuer shall pay interest at the applicable interest rate on the Notes on overdue principal, interest (to the extent lawful) or premium, if any, on demand. 2. Additional Amounts ------------------ All payments made by the Issuer on this Note, and all payments made by Bermuda Holdings pursuant to the Guarantee, shall be made without deduction or withholding, for or on account of, any and all present and future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction or withholding of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, Bermuda or any relevant jurisdiction or any political subdivision or taxing authority thereof or therein (the "RELEVANT JURISDICTION") shall at any time be required in respect of any amounts to be paid by the Issuer under this Note or Bermuda Holdings under the Guarantee, the Issuer or Bermuda Holdings, as the case may be, shall pay or cause to be paid such additional amounts ("ADDITIONAL AMOUNTS") as may be necessary in order that the net amounts received by a holder of this Note after such deduction or withholding shall be not less than the amounts specified in this Note to which the holder of this Note is entitled; provided, however, that the Issuer or Bermuda Holdings, as applicable, shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge which would not have been imposed but for (i) the existence of any present or former connection between such holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such holder, if such holder is an ____________________________ /2/ To be included in Exchange Notes. 2 estate, nominee, trust, partnership or corporation), otherwise than merely by the holding of this Note or the receipt of amounts payable in respect of this Note, and any Relevant Jurisdiction or such holder being subject to the jurisdiction of any Relevant Jurisdiction, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having had a permanent establishment therein or (ii) the presentation of this Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the holder would have been entitled to Additional Amounts had this Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the holder of this Note or, if different, the beneficial owner of the interest payable on this Note with a timely request of the Issuer addressed to such holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such holder or beneficial owner which is required or imposed by a statute, treaty, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) payments in respect of Definitive Senior Notes issued at the request of the holder (including on or after the occurrence of an Event of Default); or (d) any combination of items (a), (b) and (c) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, this Note to any holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor with respect to such fiduciary or member of such partnership or beneficial owner would not have been entitled to any Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of this Note. 3. Method of Payment ----------------- The Issuer through the Paying Agent shall pay interest on this Note to the bearer of this Note or as instructed in writing by the bearer of this Note. The bearer of this Note must surrender this Note to the Paying Agent to collect principal payments. The Issuer shall pay principal and interest in money of the 3 United States of America that at the time of payment is legal tender for payment of public and private debts. 4. Paying Agent and Registrar -------------------------- Initially, The Chase Manhattan Bank, a New York banking corporation (the "TRUSTEE"), will act as Paying Agent and Senior Note Registrar. The Issuer may appoint and change any Paying Agent, Senior Note Registrar, co-registrar or transfer agent without prior notice. The Issuer may act as Paying Agent, Senior Note Registrar, co-registrar or transfer agent to the bearer of this Note. 5. Indenture --------- The Issuer issued this Note under an Indenture, dated as of May 18, 1998 (the "INDENTURE"), between the Issuer, Bermuda Holdings and the Trustee. The terms of this Note include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) ------ 77aaa- 77bbbb) as in effect on the date of the Indenture (the "ACT"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. This Note is subject to all such terms, and the bearer of this Note is referred to the Indenture and the Act for a statement of those terms. This Note is a senior unsecured obligation of the Issuer limited to $100,000,000 aggregate principal amount at maturity (subject to Section 2.7 of the Indenture). 6. Optional Redemption ------------------- (a) This Note is subject to redemption in whole or in part, of any time and from time to time, upon not less than 30 nor more than 60 days' notice, in an amount of $1,000 or an integral multiple of $1,000, at a Redemption Price equal to 100% of the principal amount, together with accrued and unpaid interest to the Redemption Date, as provided in the Indenture, plus the Make-Whole amount, if any. (b) This Note is not subject to redemption through operation of a sinking fund. 7. Tax Redemption -------------- This Note may be redeemed at the option of the Issuer, in whole but not in part, upon not less than 30 nor more than 60 days' notice, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid 4 interest to the date fixed for redemption if (a) the Issuer is required to issue Definitive Senior Notes (other than upon the request of a holder of Book-Entry Interests following an Event of Default) after using all reasonable efforts to avoid having to issue such Definitive Senior Notes and the Issuer is or would be so required in the absence of any applicable tax treaty on the next succeeding Interest Payment Date to pay Additional Amounts with respect to any of the Senior Notes, or (b) the Issuer or Bermuda Holdings is or would be so required in the absence of any applicable tax treaty on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Senior Notes and, in either case, the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Issuer. The Issuer or Bermuda Holdings shall also pay, or make available for payment, to the bearer of this Note on the redemption date any Additional Amounts resulting from the payment of such redemption price. 8. Notice of Redemption -------------------- Notice of redemption shall be mailed not less than 30 nor more than 60 days prior to the Redemption Date to the bearer of this Note at Chase Manhattan Bank Luxembourg S.A., 5 rue Plaetis, L-2338, Luxembourg, or at any other address provided to the Trustee in writing by the bearer of this Note. 9. Denominations; Transfer; Exchange --------------------------------- This Note is in bearer form without coupons. This Note is in an aggregate principal amount of $100,000,000 (less the principal amount, if any, of any outstanding Regulation S Global Notes and any outstanding Definitive Senior Notes evidencing such Notes, as reflected in the records of the Trustee) (subject to adjustment as provided in the Indenture). The bearer of this Note may only transfer or exchange this Note in accordance with the Indenture. 10. Persons Deemed Owners --------------------- The bearer of this Note will be treated as the owner of it for all purposes. 11. Defeasance and Covenant Defeasance. ---------------------------------- The Indenture contains provisions for defeasance at any time, upon compliance by the Issuer and Bermuda Holdings with certain conditions set forth in the Indenture, of (a) the entire indebtedness of the Issuer and Bermuda Holdings with respect to this Note and (b) certain restrictive covenants and the related defaults and Events of Default. 5 12. Amendment, Waiver ----------------- The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer, Bermuda Holdings and the Trustee with the consent of the holders of a majority in aggregate principal amount of the Senior Notes outstanding at the time of amendment or modification. The Indenture also contains provisions permitting the holders of specified percentages in aggregate principal amount of the Senior Notes at any time outstanding, on behalf of the holders of all the Senior Notes, to waive compliance by the Issuer and Bermuda Holdings with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the holder of this Note shall be conclusive and binding upon such holder and upon all future holders of this Note and of any Senior Note issued in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. 13. Defaults and Remedies --------------------- This Note has the Events of Default as set forth in Section 4.1 of the Indenture. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the Senior Notes, subject to certain limitations, may declare all the Senior Notes to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Senior Notes being due and payable immediately upon the occurrence of such Events of Default. Holders of Senior Notes may not enforce the Indenture or the Senior Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Senior Notes unless it receives reasonable indemnity or security. Subject to certain limitations, holders of a majority in principal amount of the Senior Notes may direct the Trustee in its exercise of any trust or power. The holders of a majority in principal amount of the Senior Notes then outstanding by written notice to the Trustee may rescind a declaration of acceleration if the rescission is prior to a judgment or decree for payment and if all Events of Default have been cured or waived except nonpayment of principal and interest that has been due solely because of the acceleration. The Trustee may withhold from holders of Senior Notes notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in the interest of the holders. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 14. Trustee Dealings with the Issuer or Bermuda Holdings ---------------------------------------------------- 6 Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of this Note and may otherwise deal with and collect obligations owed to it by the Issuer or Bermuda Holdings or their Affiliates and may otherwise deal with the Issuer or Bermuda Holdings or their Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Senior Note Registrar or such other agent may do the same with like rights. 15. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Issuer, Bermuda Holdings or any Subsidiary of Bermuda Holdings shall not have any liability for any payment of the principal of, or premium, if any, or interest on, any of the Notes or any other obligations of the Issuer or Bermuda Holdings under this Note, the Guarantee or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting this Note, the bearer of this Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Note. 16. Authentication -------------- This Note shall not be valid until an authorized officer of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Note. 17. Governing Law ------------- The internal laws of the State of New York shall govern the Indenture and this Note without regard to conflict of law provisions thereof. The Issuer will furnish to the bearer of this Note upon written request and without charge to the holder a copy of the Indenture which has in it the text of this Global Note in larger type. Requests may be made to: Terra Nova Insurance (UK) Holdings plc Attention: Company Secretary Terra Nova House 41-43 Mincing Lane London EC3R 7SP Great Britain 7 EXHIBIT B [FORM OF FACE OF REGULATION S GLOBAL NOTE] THIS NOTE IS A REGULATION S GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO. TERRA NOVA INSURANCE (UK) HOLDINGS PLC 7% Senior Notes due 2008 Guaranteed by TERRA NOVA (BERMUDA) HOLDINGS LTD. Terra Nova Insurance (UK) Holdings plc, a public limited company organized under the laws of England and Wales, promises to pay to the bearer upon surrender hereof the principal sum of U.S. $0 (or such other amount as reflected in the records of Trustee), on May 15, 2008. Interest Payment Dates: May 15 and November 15, commencing November 15, 1998. This Global Note is fully and unconditionally guaranteed as to the payment of principal and any premium and interest (and any Additional Amounts payable in respect thereof), when and as the same shall become due and payable, in accordance with the terms of this Global Note and of the Indenture, by Terra Nova (Bermuda) Holdings Ltd., a company organized under the laws of Bermuda. Additional provisions of this Regulation S Global Note are set forth on the other side of this Global Note. Dated:________________________ TERRA NOVA INSURANCE (UK) HOLDINGS PLC By:_______________________________ By:_______________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION The Chase Manhattan Bank, as Trustee, certifies that this is the Regulation S Global Note referred to in the Indenture. ______________________________ Authorized Officer 2 [REVERSE SIDE OF REGULATION S GLOBAL NOTE] TERRA NOVA INSURANCE (UK) HOLDINGS PLC 7% Senior Notes due 2008 Guaranteed by TERRA NOVA (BERMUDA) HOLDINGS LTD. 1. Interest -------- (a) Terra Nova Insurance (UK) Holdings plc, a public limited company organized under the laws of England and Wales (such company, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "ISSUER"), promises to pay interest on the principal amount of this Note to the bearer at the rate per annum shown above. Terra Nova (Bermuda) Holdings Ltd., a company organized under the laws of Bermuda (such company, and its successors and assigns under the Indenture hereinafter referred to, being herein called "BERMUDA HOLDINGS"), irrevocably and fully and unconditionally guarantees this Note as to the payment of principal, and any premium and interest (and any Additional Amounts payable in respect thereof), when and as the same shall become due and payable. [(b) The principal of this Note shall mature on May 15, 2008. Interest on this Note shall accrue at the rate of 7% per annum and is payable semiannually on May 15 and November 15 of each year, commencing on November 15, 1998. In the event that the Exchange Offer (as defined in the Indenture) has not been consummated or a Shelf Registration Statement (as defined in the Indenture) has not been declared effective on or prior to November 18, 1998, then additional interest shall accrue at a rate of 0.25% per annum from November 18, 1998, and shall be payable in cash semiannually in arrears on May 15 and November 15 of each year, commencing on May 15, 1999. If such Exchange Offer has not been consummated or such Shelf Registration Statement has not been declared effective on or prior to February 18, 1999, the rate per annum at which such additional interest shall accrue shall increase from 0.25% to 0.50% per annum from February 18, 1999, and shall be payable in cash semi-annually in arrears on May 15 and November 15 of each year, commencing May 15, 1999. The accrual of additional interest shall cease upon the consummation of such Exchange Offer or the effectiveness of such Shelf Registration Statement.]/3/ ___________________________ /3/ To be included in Senior Notes which are not Exchange Notes. [(b) Interest on this Note shall accrue from the most recent date to which interest has been paid on the Note for which this Note was exchanged or, if no interest has been paid on such Note, from May 18, 1998, at the rate of 7% per annum and shall be payable in cash semiannually in arrears on May 15 and November 15 of each year, commencing on November 15, 1998. There shall also be payable in respect of this Note all additional interest that may have accrued on the Note for which this Note was exchanged (as calculated in accordance with the terms of such Note) pursuant to the Exchange Offer or otherwise pursuant to a Registration of such Note, such additional interest to be payable at the same time and in the same manner as the periodic interest on this Note.]/4/ (c) Interest will be computed on the basis of a 360-day year of twelve 30- day months. The Issuer shall pay interest at the applicable interest rate on the Notes on overdue principal, interest (to the extent lawful) or premium, if any, on demand. 2. Additional Amounts ------------------ All payments made by the Issuer on this Note, and all payments made by Bermuda Holdings pursuant to the Guarantee, shall be made without deduction or withholding, for or on account of, any and all present and future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction or withholding of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, Bermuda or any relevant jurisdiction or any political subdivision or taxing authority thereof or therein (the "RELEVANT JURISDICTION") shall at any time be required in respect of any amounts to be paid by the Issuer under this Note or Bermuda Holdings under the Guarantee, the Issuer or Bermuda Holdings, as the case may be, shall pay or cause to be paid such additional amounts ("ADDITIONAL AMOUNTS") as may be necessary in order that the net amounts received by a holder of this Note after such deduction or withholding shall be not less than the amounts specified in this Note to which the holder of this Note is entitled; provided, however, that the Issuer or Bermuda Holdings, as applicable, shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge which would not have been imposed but for (i) the existence of any present or former connection between such holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such holder, if such holder is an estate, nominee, trust, partnership or corporation), otherwise than merely by the ____________________________ /4/ To be included in Exchange Notes. 2 holding of this Note or the receipt of amounts payable in respect of this Note, and any Relevant Jurisdiction or such holder being subject to the jurisdiction of any Relevant Jurisdiction, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having had a permanent establishment therein or (ii) the presentation of this Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the holder would have been entitled to Additional Amounts had this Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the holder of this Note or, if different, the beneficial owner of the interest payable on this Note with a timely request of the Issuer addressed to such holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such holder or beneficial owner which is required or imposed by a statute, treaty, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) payments in respect of Definitive Senior Notes issued at the request of the holder (including on or after the occurrence of an Event of Default); or (d) any combination of items (a), (b) and (c) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, this Note to any holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor with respect to such fiduciary or member of such partnership or beneficial owner would not have been entitled to any Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of this Note. 3. Method of Payment ----------------- The Issuer through the Paying Agent shall pay interest on this Note to the bearer of this Note or as instructed in writing by the bearer of this Note. The bearer of this Note must surrender this Note to the Paying Agent to collect principal payments. The Issuer shall pay principal and interest in money of the 3 United States of America that at the time of payment is legal tender for payment of public and private debts. 4. Paying Agent and Registrar -------------------------- Initially, The Chase Manhattan Bank, a New York banking corporation (the "TRUSTEE"), will act as Paying Agent and Senior Note Registrar. The Issuer may appoint and change any Paying Agent, Senior Note Registrar, co-registrar or transfer agent without prior notice. The Issuer may act as Paying Agent, Senior Note Registrar, co-registrar or transfer agent to the bearer of this Note. 5. Indenture --------- The Issuer issued this Note under an Indenture, dated as of May 18, 1998 (the "INDENTURE"), between the Issuer, Bermuda Holdings and the Trustee. The terms of this Note include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) ------ 77aaa- 77bbbb) as in effect on the date of the Indenture (the "ACT"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. This Note is subject to all such terms, and the bearer of this Note is referred to the Indenture and the Act for a statement of those terms. This Note is a senior unsecured obligation of the Issuer limited to $100,000,000 aggregate principal amount at maturity (subject to Section 2.7 of the Indenture). 6. Optional Redemption ------------------- (a) This Note is subject to redemption in whole or in part, of any time and from time to time, upon not less than 30 nor more than 60 days' notice, in an amount of $1,000 or an integral multiple of $1,000, at a Redemption Price equal to 100% of the principal amount, together with accrued and unpaid interest to the Redemption Date, as provided in the Indenture, plus the Make-Whole amount, if any. (b) This Note is not subject to redemption through operation of a sinking fund. 7. Tax Redemption -------------- This Note may be redeemed at the option of the Issuer, in whole but not in part, upon not less than 30 nor more than 60 days' notice, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid 4 interest to the date fixed for redemption if (a) the Issuer is required to issue Definitive Senior Notes (other than upon the request of a holder of Book-Entry Interests following an Event of Default) after using all reasonable efforts to avoid having to issue such Definitive Senior Notes and the Issuer is or would be so required in the absence of any applicable tax treaty on the next succeeding Interest Payment Date to pay Additional Amounts with respect to any of the Senior Notes, or (b) the Issuer or Bermuda Holdings is or would be so required in the absence of any applicable tax treaty on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Senior Notes and, in either case, the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Issuer. The Issuer or Bermuda Holdings shall also pay, or make available for payment, to the bearer of this Note on the redemption date any Additional Amounts resulting from the payment of such redemption price. 8. Notice of Redemption -------------------- Notice of redemption shall be mailed not less than 30 nor more than 60 days prior to the Redemption Date to the bearer of this Note at Chase Manhattan Bank Luxembourg S.A., 5 rue Plaetis, L-2338, Luxembourg, or at any other address provided to the Trustee in writing by the bearer of this Note. 9. Denominations; Transfer; Exchange --------------------------------- This Note is in bearer form without coupons. This Note is in an aggregate principal amount of $0 (or such other amount as reflected in the records of the Trustee) (subject to adjustment as provided in the Indenture). The bearer of this Note may only transfer or exchange this Note in accordance with the Indenture. 10. Persons Deemed Owners --------------------- The bearer of this Note will be treated as the owner of it for all purposes. 11. Defeasance and Covenant Defeasance. ---------------------------------- The Indenture contains provisions for defeasance at any time, upon compliance by the Issuer and Bermuda Holdings with certain conditions set forth in the Indenture, of (a) the entire indebtedness of the Issuer and Bermuda Holdings with respect to this Note and (b) certain restrictive covenants and the related defaults and Events of Default. 12. Amendment, Waiver ----------------- 5 The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer, Bermuda Holdings and the Trustee with the consent of the holders of a majority in aggregate principal amount of the Senior Notes outstanding at the time of amendment or modification. The Indenture also contains provisions permitting the holders of specified percentages in aggregate principal amount of the Senior Notes at any time outstanding, on behalf of the holders of all the Senior Notes, to waive compliance by the Issuer and Bermuda Holdings with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the holder of this Note shall be conclusive and binding upon such holder and upon all future holders of this Note and of any Senior Note issued in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. 13. Defaults and Remedies --------------------- This Note has the Events of Default as set forth in Section 4.1 of the Indenture. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the Senior Notes, subject to certain limitations, may declare all the Senior Notes to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Senior Notes being due and payable immediately upon the occurrence of such Events of Default. Holders of Senior Notes may not enforce the Indenture or the Senior Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Senior Notes unless it receives reasonable indemnity or security. Subject to certain limitations, holders of a majority in principal amount of the Senior Notes may direct the Trustee in its exercise of any trust or power. The holders of a majority in principal amount of the Senior Notes then outstanding by written notice to the Trustee may rescind a declaration of acceleration if the rescission is prior to a judgment or decree for payment and if all Events of Default have been cured or waived except nonpayment of principal and interest that has been due solely because of the acceleration. The Trustee may withhold from holders of Senior Notes notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in the interest of the holders. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 14. Trustee Dealings with the Issuer or Bermuda Holdings ---------------------------------------------------- 6 Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of this Note and may otherwise deal with and collect obligations owed to it by the Issuer or Bermuda Holdings or their Affiliates and may otherwise deal with the Issuer or Bermuda Holdings or their Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Senior Note Registrar or such other agent may do the same with like rights. 15. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Issuer, Bermuda Holdings or any Subsidiary of Bermuda Holdings shall not have any liability for any payment of the principal of, or premium, if any, or interest on, any of the Notes or any other obligations of the Issuer or Bermuda Holdings under this Note, the Guarantee or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting this Note, the bearer of this Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Note. 16. Authentication -------------- This Note shall not be valid until an authorized officer of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Note. 17. Governing Law ------------- The internal laws of the State of New York shall govern the Indenture and this Note without regard to conflict of law provisions thereof. The Issuer will furnish to the bearer of this Note upon written request and without charge to the holder a copy of the Indenture which has in it the text of this Global Note in larger type. Requests may be made to: Terra Nova Insurance (UK) Holdings plc Attention: Company Secretary Terra Nova House 41-43 Mincing Lane London EC3R 7SP Great Britain 7 EXHIBIT C [FORM OF FACE OF DEFINITIVE SENIOR NOTE] THIS SENIOR NOTE IS A SENIOR NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO. TERRA NOVA INSURANCE (UK) HOLDINGS PLC 7% Senior Notes due 2008 Guaranteed by TERRA NOVA (BERMUDA) HOLDINGS LTD. Terra Nova Insurance (UK) Holdings plc, a public limited company organized under the laws of England and Wales, promises to pay to _________, or registered assigns, the principal sum of U.S. ____________, on May 15, 2008. Interest Payment Dates: May 15 and November 15, commencing November 15, 1998. This Senior Note is fully and unconditionally guaranteed as to the payment of principal and any premium and interest (and any Additional Amounts payable in respect thereof), when and as the same shall become due and payable, in accordance with the terms of this Senior Note and of the Indenture by Terra Nova (Bermuda) Holdings Ltd., a company organized under the laws of Bermuda. Additional provisions of this Definitive Senior Note are set forth on the other side of this Definitive Senior Note. Dated: _________, ____ TERRA NOVA INSURANCE (UK) HOLDINGS PLC By: ________________________ By: ________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION The Chase Manhattan Bank, as Trustee, certifies that this is one of the Senior Notes referred to in the Indenture. _____________________________ Authorized Officer 2 [FORM OF REVERSE SIDE OF DEFINITIVE SENIOR NOTE] TERRA NOVA INSURANCE (UK) HOLDINGS PLC 7% Senior Notes due 2008 Guaranteed by TERRA NOVA (BERMUDA) HOLDINGS LTD. 1. Interest -------- (a) Terra Nova Insurance (UK) Holdings plc, a public limited company organized under the laws of England and Wales (such company, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "ISSUER"), promises to pay interest on the principal amount of this Senior Note to the bearer at the rate per annum shown above. Terra Nova (Bermuda) Holdings Ltd., a company organized under the laws of Bermuda (such company, and its successors and assigns under the Indenture hereinafter referred to, being herein called "BERMUDA HOLDINGS"), irrevocably and fully and unconditionally guarantees this Senior Note as to the payment of principal, and any premium and interest (and any Additional Amounts payable in respect thereof), when and as the same shall become due and payable. [(b) The principal of this Senior Note shall mature on May 15, 2008. Interest on this Senior Note shall accrue at the rate of 7% per annum and is payable semiannually in arrears on May 15 and November 15 of each year, commencing on November 15, 1998. In the event that the Exchange Offer (as defined in the Indenture) has not been consummated or a Shelf Registration Statement (as defined in the Indenture) has not been declared effective on or prior to November 18, 1998, then additional interest shall accrue at a rate of 0.25% per annum from November 18, 1998, and shall be payable in cash semiannually in arrears on May 15 and November 15 of each year, commencing on May 15, 1999. If such Exchange Offer has not been consummated or such Shelf Registration Statement has not been declared effective on or prior to February 18, 1999, the rate per annum at which such additional interest shall accrue shall increase from 0.25% to 0.50% per annum from February 18, 1999, and shall be payable in cash semi-annually in arrears on May 15 and November 15 of each year, commencing May 15, 1999. The accrual of additional interest shall cease upon the consummation of such Exchange Offer or the effectiveness of such Shelf Registration Statement.] /5/ [(b) Interest on this Senior Note shall accrue from the most recent date to which interest has been paid on the Senior Note for which this Senior Note was exchanged or, if no interest has been paid on such Senior Note, from May 18, 1998, at the rate of 7% per annum and shall be payable in cash semiannually in arrears on May 15 and November 15 of each year, commencing on November 15, 1998. There shall also be payable in respect of this Senior Note all additional interest that may have accrued on the Senior Note for which this Senior Note was exchanged (as calculated in accordance with terms of such Senior Note) pursuant to the Exchange Offer or otherwise pursuant to a Registration of such Senior Note, such additional interest to be payable at the same time and in the same manner as the periodic interest on this Senior Note.] /6/ (c) Interest will be computed on the basis of a 360-day year of twelve 30- day months. The Issuer shall pay interest at the applicable interest rate on the Senior Notes, on overdue principal, interest (to the extent lawful) or premium, if any, on demand. 2. Additional Amounts ------------------ All payments made by the Issuer on this Senior Note, and all payments made by Bermuda Holdings pursuant to the Guarantee, shall be made without deduction or withholding, for or on account of, any and all present and future taxes, duties, assessments, or governmental charges of whatever nature unless the deduction or withholding of such taxes, duties, assessments or governmental charges is then required by law. If any deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges of the United Kingdom, Bermuda or any relevant jurisdiction or any political subdivision or taxing authority thereof or therein (the "RELEVANT JURISDICTION") shall at any time be required in respect of any amounts to be paid by the Issuer under this Senior Note or Bermuda Holdings under the Guarantee, the Issuer or Bermuda Holdings, as the case may be, shall pay or cease to be paid such additional amounts ("ADDITIONAL AMOUNTS") as may be necessary in order that the net amounts received by a holder of this Senior Note after such deduction or withholding shall be not less than the amounts specified in this Senior Note to which the holder of this Senior Note is entitled; provided, however, that the Issuer __________________________ /5/ To be included in Senior Notes which are not Exchange Notes. /6/ To be included in Exchange Notes. 2 or Bermuda Holdings, as applicable, shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge which would not have been imposed but for (i) the existence of any present or former connection between such holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such holder, if such holder is an estate, nominee, trust, partnership or corporation), otherwise than merely by the holding of this Senior Note or the receipt of amounts payable in respect of this Senior Note, and any Relevant Jurisdiction or such holder being subject to the jurisdiction of any Relevant Jurisdiction, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having had a permanent establishment therein or (ii) the presentation of this Senior Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later, except to the extent that the holder would have been entitled to Additional Amounts had this Senior Note been presented on the last day of such period of 30 days; (b) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the holder of this Senior Note or, if different, the beneficial owner of the interest payable on this Senior Note with a timely request of the Issuer addressed to such holder or beneficial owner to provide information, documents or other evidence concerning the nationality, residence, identity or connection with the taxing jurisdiction of such holder or beneficial owner which is required or imposed by a statute, treaty, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or governmental charge; (c) payments in respect of Definitive Senior Notes issued at the request of the holder (including on or after the occurrence of an Event of Default); or (d) any combination of items (a), (b) and (c) above; nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, this Senior Note to any holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor with respect to such fiduciary or member of such partnership or beneficial owner would not have been entitled to any Additional 3 Amounts had such beneficiary, settlor, member or beneficial owner been the holder of this Senior Note. 3. Method of Payment ----------------- The Issuer through the Paying Agent shall pay interest on this Senior Note to the registered holder of this Senior Note or as instructed in writing by such holder of this Senior Note. The holder of this Senior Note must surrender this Senior Note to the Paying Agent to collect principal payments. The Issuer shall pay principal and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. 4. Paying Agent and Registrar -------------------------- Initially, The Chase Manhattan Bank, a New York banking corporation (the "TRUSTEE"), will act as Paying Agent and Senior Note Registrar. The Issuer may appoint and change any Paying Agent, Senior Note Registrar, co-registrar or transfer agent without prior notice. The Issuer may act as Paying Agent, Senior Note Registrar, co-registrar or transfer agent to the holder of this Note. 5. Indenture --------- The Issuer issued this Senior Note under an Indenture, dated as of May 18, 1998 (the "INDENTURE"), between the Issuer, Bermuda Holdings and the Trustee. The terms of this Senior Note include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the - - ------ "ACT"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. This Senior Note is subject to all such terms, and holders of the Senior Notes are referred to the Indenture and the Act for a statement of those terms. The Senior Notes are senior unsecured obligations of the Issuer limited to $100,000,000 aggregate principal amount at maturity (subject to Section 2.7 of the Indenture). 6. Optional Redemption ------------------- (a) This Senior Note is subject to redemption in whole or in part, of any time and from time to time, upon not less than 30 nor more than 60 days' notice, in an amount of $1,000 or an integral multiple of $1,000, at a Redemption Price equal to 100% of the principal amount, together with accrued and unpaid 4 interest to the Redemption Date, as provided in the Indenture, plus the Make- Whole amount, if any. (b) This Senior Note is not subject to redemption through operation of a sinking fund. 7. Tax Redemption -------------- This Senior Note may be redeemed at the option of the Issuer, in whole but not in part, upon not less than 30 nor more than 60 days' notice, at any time at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date fixed for redemption if the Issuer or Bermuda Holdings is or would be so required in the absence of any applicable tax treaty on the next succeeding Interest Payment Date to pay Additional Amounts with respect to the Senior Notes and, in either case, the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures available to the Issuer. The Issuer or Bermuda Holdings shall also pay, or make available for payment, to holders of the Senior Notes on the redemption date any Additional Amounts resulting from the payment of such redemption price. 8. Notice of Redemption -------------------- Notice of redemption shall be mailed not less than 30 nor more than 60 days prior to the Redemption Date to each holder of the Senior Notes at the addresses provided to the Trustee in writing by the holders of such Senior Notes on the date of issuance of such Senior Notes or on the dates of any subsequent transfer of such Senior Notes or at any address provided to the Trustee in writing by such holders. Senior Notes in denominations larger than $1,000 of principal amount at maturity may be redeemed in part but only in whole multiples of $1,000 at maturity. In the event of a redemption of less than all of the Senior Notes, the Senior Notes for redemption will be chosen by the Trustee in accordance with the Indenture. If any Senior Note is redeemed subsequent to a record date with respect to any interest payment date specified above and or prior to such interest payment date, then any accrued interest will be paid to the holder of the Senior Note at the close of business on such record date. If money sufficient to pay the redemption price of and accrued interest on all Senior Notes (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Senior Notes (or such portions thereof) called for redemption. 9. Denominations; Transfer; Exchange --------------------------------- 5 This Senior Note is in registered form without coupons. The holder of this Senior Note may only transfer or exchange this Senior Note in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Senior Notes selected for redemption (except, in the case of a Senior Note to be redeemed in part, the portion of the Senior Note need not be redeemed) or any Senior Notes for a period of 15 days before a selection of Senior Notes to be redeemed. 10. Persons Deemed Owners --------------------- The registered holder of this Senior Note will be treated as the owner of it for all purposes. 11. Defeasance and Covenant Defeasance. ---------------------------------- The Indenture contains provisions for defeasance at any time, upon compliance by the Issuer and Bermuda Holdings with certain conditions set forth in the Indenture, of (a) the entire indebtedness of the Issuer and Bermuda Holdings with respect to this Senior Note and (b) certain restrictive covenants and the related defaults and Events of Default. 12. Amendment, Waiver ----------------- The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer, Bermuda Holdings and the Trustee with the consent of the holders of a majority in aggregate principal amount of the Senior Notes outstanding at the time of amendment or modification. The Indenture also contains provisions permitting the holders of specified percentages in aggregate principal amount of the Senior Notes at any time outstanding, on behalf of the holders of all the Senior Notes, to waive compliance by the Issuer and Bermuda Holdings with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the holder of this Senior Note shall be conclusive and binding upon such holder and upon all future holders of this Senior Note and of any Senior Note issued in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Senior Note. 13. Defaults and Remedies --------------------- This Senior Note has the Events of Default as set forth in Section 4.1 of the Indenture. If an Event of Default occurs and is continuing, the Trustee or the 6 holders of at least 25% in principal amount of the Senior Notes, subject to certain limitations, may declare all the Senior Notes to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Senior Notes being due and payable immediately upon the occurrence of such Events of Default. Holders of Senior Notes may not enforce the Indenture or the Senior Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Senior Notes unless it receives reasonable indemnity or security. Subject to certain limitations, holders of a majority in principal amount of the Senior Notes may direct the Trustee in its exercise of any trust or power. The holders of a majority in principal amount of the Senior Notes then outstanding by written notice to the Trustee may rescind a declaration of acceleration if the rescission is prior to a judgment or decree for payment and if all Events of Default have been cured or waived except nonpayment of principal and interest that has been due solely because of the acceleration. The Trustee may withhold from holders of Senior Notes notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in the interest of the holders. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 14. Trustee Dealings with the Issuer or Bermuda Holdings ---------------------------------------------------- Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of this Senior Note and may otherwise deal with and collect obligations owed to it by the Issuer or Bermuda Holdings or their Affiliates and may otherwise deal with the Issuer or Bermuda Holdings or their Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Senior Note Registrar or such other agent may do the same with like rights. 15. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Issuer, Bermuda Holdings or any Subsidiary of Bermuda Holdings shall not have any liability for any payment of the principal of, or premium, if any, or interest on, any of the Senior Notes or any other obligations of the Issuer or Bermuda Holdings under this Senior Note, the Guarantee or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting this Senior Note, the bearer of this Senior Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Senior Note. 7 16. Authentication -------------- This Senior Note shall not be valid until an authorized officer of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Senior Note. 17. Governing Law ------------- The internal laws of the State of New York shall govern the Indenture and this Senior Note without regard to conflict of law provisions thereof. The Issuer will furnish to the holder of this Note upon written request and without charge to the holder a copy of the Indenture which has in it the text of this Global Note in larger type. Requests may be made to: Terra Nova Insurance (UK) Holdings plc Attention: Company Secretary Terra Nova House 41-43 Mincing Lane London EC3R 7SP Great Britain 8 [FORM OF TRANSFER NOTICE] FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. ___________________________________________________________________________ Please print or typewrite name and address including zip code of assignee ___________________________________________________________________________ the within Senior Note and all rights thereunder, hereby irrevocably constituting and appointing _____________________ attorney to transfer said Senior Note on the books of the Issuer with full power of substitution in the premises. [THE FOLLOWING PROVISIONS TO BE INCLUDED ON ALL RESTRICTED DEFINITIVE SENIOR NOTES] In connection with any transfer of this Senior Note occurring prior to the date of an effective Registration, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [_](a) This Senior Note is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. or [_](b) This Senior Note is being transferred in an offshore transaction in compliance with Rule 904 of the Securities Act of 1933, as amended. or [_](c) This Senior Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Senior Note and the Indenture. If none of the foregoing boxes is checked the Trustee or other Registrar shall not be obligated to register this Security in the name of any Person other than the 9 Holder hereof unless and until the conditions to any such transfer or registration set forth herein and in Section 2.12 of the Indenture shall have been satisfied. Date: ____________ ____________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Senior Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "QUALIFIED INSTITUTIONAL BUYER" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance an Rule 144A and acknowledges that it has received such information regarding the Issuer and Bermuda Holdings as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: _______________ ______________________________ NOTICE: To be executed by an executive officer 10 EXHIBIT D [FORM OF NOTATION OF GUARANTEE] TERRA NOVA (BERMUDA) HOLDINGS LTD., a company duly organized and existing under the laws of Bermuda (herein called "BERMUDA HOLDINGS," which term includes any successor Person under the Indenture (the "INDENTURE") referred to in the Global Note on which this notation is endorsed), has irrevocably, fully and unconditionally guaranteed, pursuant to the terms of the Guarantee contained in Article 12 of the Indenture, the due and punctual payment of the principal of and any premium and interest on this Global Note (and any Additional Amounts payable in respect thereof), when and as the same shall become due and payable, whether at the Stated Maturity, by declaration of acceleration, call for redemption or otherwise, in accordance with the terms of this Global Note and the Indenture. All payments pursuant to this Guarantee shall be made without withholding or deduction for, or on account of, any present and future taxes, duties, assessments or governmental charges of whatever nature unless the deduction or withholding of such taxes, duties, assessments or governmental charges is then required by law. If any such taxes, duties, assessments or governmental charges are required by the U.K., Bermuda or any Relevant Jurisdiction or any political subdivision or taxing authority thereof or therein to be withheld or deducted, Bermuda Holdings will pay such Additional Amounts (as defined in the Indenture) as will result (after deduction of such taxes, duties, assessments or governmental charges and any additional taxes, duties, assessments or governmental charges payable in respect of such) in the payment to each holder of a Senior Note of the amounts which would have been payable in respect of the Guarantee thereof had no such withholding or deduction been required, subject to certain exceptions as set forth in Section 9.17 of the Indenture. The obligations of Bermuda Holdings to the holders of the Senior Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article 12 of the Indenture, and reference is hereby made to such Article and Indenture for the precise terms of the Guarantee. The Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Global Note upon which this notation of the Guarantee is endorsed shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. Capitalized terms used but not defined herein are used herein as defined in the Indenture. TERRA NOVA (BERMUDA) HOLDINGS LTD. By:________________________________ By:________________________________ 2 EXHIBIT E [Name of Transferor] Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S ___________, ____ The Chase Manhattan Bank 450 West 33rd Street - 15th Floor New York, New York 10001 Attention: Corporate Trust Administration RE: TERRA NOVA INSURANCE (UK) HOLDINGS PLC 7% SENIOR NOTES DUE 2008 (THE "SENIOR NOTES") Dear Sirs: In connection with our proposed sale of U.S.$_________ aggregate principal amount of the Senior Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, we represent that: (1) the offer of the Senior Notes was not made to a person in the United States; (2) at the time the buy order was originated, the transferee was outside the United States or we and any person acting an our behalf reasonably believed that the transferee was outside the United States; (3) no directed selling efforts have been made by us in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933. You and the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, 2 EX-23.3 4 CONSENT OF COOPERS AND LYBRAND EXHIBIT 23.3 [Letterhead of Coopers & Lybrand] CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement on Forms F-4 and S-4 dated May 29, 1998 related to the offering of Senior Notes due 2008 (the "Exchange Notes") by Terra Nova Insurance (UK) Holdings plc fully and unconditionally guaranteed by Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings"), of our report dated March 6, 1998 included in the annual report on Form 10-K for the year ended December 31, 1997 (the "Form 10-K") of Bermuda Holdings, on our audit of the consolidated financial statements of Bermuda Holdings and subsidiaries as of December 31, 1996 and 1997 and for each of the three years in the period ended December 31, 1997, and of our report dated March 6, 1998 included in the Form 10-K of Bermuda Holdings, on the financial statement schedules listed in Item 14 therein. We also consent to the reference to our firm under the caption "Experts". COOPERS & LYBRAND Hamilton, Bermuda May 29, 1998 EX-24.1 5 POWER OF ATTORNEY Exhibit 24.1. POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that each undersigned does hereby make, constitute and appoint John Riddick, John J. Dwyer, Jean M. Waggett, William J. Wedlake and Peter W. Norledge, and each of them, with full power to act without the other, his or her true and lawful attorney-in-fact and agent, in his or her name, place and stead to execute on his or her behalf, as an officer and/or director of Terra Nova (Bermuda) Holdings Ltd. (the "Company"), the Registration Statement of the Company on Forms S-4 and F-4 (the "Registration Statement"), for the registration of its full and unconditional guarantee of up to $100,000,000 aggregate principal amount of 7% Senior Notes due 2008 to be issued by Terra Nova Insurance (UK) Holdings plc (the "Exchange Notes"), and any and all amendments (including post-effective amendments) to the Registration Statement, and file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the "Act"), and any and all other instruments to which either of said attorneys-in-fact and agents deem necessary or advisable to enable the Company to comply with the Act, the rules, regulations and requirements of the SEC in respect thereof, and the securities or Blue Sky laws of any State or other governmental subdivision, giving and granting to each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing whatsoever necessary or appropriate to be done in and about the premises as fully to all intents as he or she might or could do if personally present at the doing thereof, with full power of substitution and resubstitution, hereby ratifying and confirming all that his or her said attorney-in-fact and agents or substitutes may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each undersigned has hereunto set his hand on the date indicated below: /s/ John J. Dwyer Chairman /s/ Allan W. Fulkerson Director - - ------------------------ -------------------------- John J. Dwyer and Director Allan W. Fulkerson /s/ Nigel H.J. Rogers Chief Executive /s/ Robert S. Fleischer Director - - ------------------------ -------------------------- Nigel H.J. Rogers Office (Principal Robert S. Fleischer Executive and Accounting Officer) and Director /s/ William J. Wedlake Chief Financial /s/ Steven J. Gilbert Director - - ------------------------ -------------------------- William J. Wedlake Officer (Principal Steven J. Gilbert Financial Officer) /s/ John Riddick Deputy Chairman and /s/ Philip F. Petronis Director - - ------------------------ -------------------------- John Riddick Director Philip F. Petronis /s/ David L. Jaffe Director - - ------------------------ David L. Jaffe May 28, 1998
EX-24.2 6 POWER OF ATTORNEY Exhibit 24.2. POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that each undersigned does hereby make, constitute and appoint John Riddick, John J. Dwyer, Jean M. Waggett, William J. Wedlake and Peter W. Norledge, and each of them, with full power to act without the other, his or her true and lawful attorney-in-fact and agent, in his or her name, place and stead to execute on his or her behalf, as an officer and/or director of Terra Nova Insurance (UK) Holdings plc (the "Company"), the Registration Statement of the Company on Forms S-4 and F-4 (the "Registration Statement"), for the registration of up to $100,000,000 aggregate principal amount of 7% Senior Notes due 2008 to be issued by the Company and fully and unconditionally guaranteed by Terra Nova (Bermuda) Holdings Ltd. (the "Exchange Notes"), and any and all amendments (including post-effective amendments) to the Registration Statement, and file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the "Act"), and any and all other instruments to which either of said attorneys-in-fact and agents deem necessary or advisable to enable the Company to comply with the Act, the rules, regulations and requirements of the SEC in respect thereof, and the securities or Blue Sky laws of any State or other governmental subdivision, giving and granting to each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing whatsoever necessary or appropriate to be done in and about the premises as fully to all intents as he or she might or could do if personally present at the doing thereof, with full power of substitution and resubstitution, hereby ratifying and confirming all that his or her said attorney-in-fact and agents or substitutes may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each undersigned has hereunto set his hand on the date indicated below: /s/ John Riddick Chairman and /s/ John J. Dwyer Director - - ----------------------- ------------------- John Riddick Managing Director John J. Dwyer Principal Executive Officer) /s/ William J. Wedlake Chief Financial - - ----------------------- William J. Wedlake Officer and Director (Principal Financial and Accounting Officer) /s/ Nigel H.J. Rogers Director - - ----------------------- Nigel H.J. Rogers Dated: May 28 , 1998 -----END PRIVACY-ENHANCED MESSAGE-----