AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL __, 2002
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
MARKEL CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 6331 541359284
(State of other jurisdiction of (Primary Standard Industrial IRS Employer
incorporation or organization) Classification Code Number) Identification
Number
4521 Highwoods Parkway
Glenn Allen, Virginia 23060-6148
(804) 747-0136
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
Gregory B. Nevers
Senior Vice President and General Counsel
4521 Highwoods Parkway
Glenn Allen, Virginia 23060-6148
(804) 747-0136
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
WITH COPIES TO:
Leslie A. Grandis Robert H. Craft, Jr.
McGuireWoods LLP Sullivan & Cromwell
One James Center 1701 Pennsylvania Ave., NW
Richmond, Virginia 23219 Washington, D.C. 20006-5805
(804) 775-1000 (202) 956-7500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this registration
statement.
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(d) under
the Securities Act, check the following box and list the Securities Act
registration statement of the earlier effective registration statement for the
same offering. [_]
CALCULATION OF REGISTRATION FEE
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PROPOSED
TITLE OF EACH CLASS OF PROPOSED MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE REGISTRATION
REGISTERED REGISTERED UNIT OFFERING PRICE (1) FEE (1)
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7.2% Notes due 2007 ........... $ 75,000,000 100% $ 70,019,251 $ 6,442
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7.0% Notes due 2008 ........... $ 100,000,000 100% $ 91,200,000 $ 8,391
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Total ......................... $ 175,000,000 $161,219,251 $14,833
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/1/ Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) (2), based upon the book value of the outstanding
notes to be exchanged hereunder.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT 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
Prospectus and Consent Solicitation Statement
U.S. $175,000,000
[MARKEL CORPORATION LOGO]
Exchange Offers
Existing Notes of
Markel International Limited, formerly Terra Nova
Insurance (UK) Holdings plc
Exchanged for
New Notes of
Markel Corporation
and Solicitation of Consents for
Amendment of the Related
Indentures
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Aggregate Principal Description of CUSIP Description of Consent Payment per $1,000
Amount Existing Notes NUMBER Markel's New Notes Principal Amount
------ -------------- ------ ------------------ ----------------
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$75,000,000 7.2% Terra Nova Notes due August 15, 2007 88100DAC9 7.2% Markel Notes due 2007 $
$100,000,000 7.0% Terra Nova Notes due May 15, 2008 88100DAE5 7.0% Markel Notes due 2008 $
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EACH OF THE EXCHANGE OFFERS EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON
MAY __, 2002, UNLESS EXTENDED. THE CONSENT PAYMENT DEADLINE IS MAY , 2002.
TENDERS MAY ONLY BE WITHDRAWN AT ANY TIME PRIOR TO THE CONSENT PAYMENT DEADLINE.
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We are offering to exchange your Terra Nova notes of either series listed above
for new Markel notes having the same principal amount, interest rate, redemption
terms and payment and maturity dates and providing for accrued interest from the
last date for which interest has been paid on those Terra Nova notes.
If you tender your Terra Nova notes in the exchange offers, you will be deemed
to consent to the amendments to the respective indenture under which those Terra
Nova notes were issued. We describe those amendments in this prospectus under
"The Proposed Amendments." We will not be required to complete either exchange
offer or to make the consent payments relating to that exchange offer if we do
not receive valid consents sufficient to effect the amendments with respect to
both series of notes listed above, although we are free to waive this or any
other condition with respect to either of the exchange offers.
The time by which you must tender the applicable series of Terra Nova notes in
order to be eligible to receive the consent payment, which we refer to as the
consent payment deadline, will be 5:00 p.m., New York City time, on May __,
2002, unless extended. Consents may be revoked at any time prior to the consent
payment deadline. We will pay an amount in cash equal to the applicable consent
payment listed above to each holder of Terra Nova notes accepted for exchange if
the holder has tendered those notes before the consent payment deadline.
We do not intend to list the Markel notes to be issued in the exchange offers on
any national securities exchange or on The Nasdaq Stock Market.
For a discussion of the risks that you should consider in evaluating the
exchange offers and consent solicitations, see "Risk Factors" beginning on page
8.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities being offered in the
exchange offers or passed upon the adequacy or accuracy of this prospectus and
consent solicitation statement. Any representation to the contrary is a criminal
offense.
None of Markel, Terra Nova, the exchange agent, the information agent, the
trustee under the Terra Nova indentures, the trustee under the Markel indentures
or the dealer manager makes any recommendation as to whether or not holders of
Terra Nova notes should exchange their securities in the applicable exchange
offer and consent to the proposed amendments to the Terra Nova indentures.
The dealer manager for the exchange offers and consent solicitations is:
JPMorgan
April __, 2002
The exchange offers and consent solicitations are not being made to, nor will
Markel accept, exchanges or consents from, holders of either series of Terra
Nova notes in any jurisdiction in which the exchange offers, the consent
solicitations or the acceptance of outstanding Terra Nova notes of that series
in exchange for the Markel notes would violate the securities or blue sky laws
of that jurisdiction.
You should rely only on the information contained or incorporated by reference
in this prospectus and consent solicitation statement. We have not authorized
any person (including any dealer, salesman or broker) to provide information or
make any representations other than that provided in this prospectus and consent
solicitation statement and, if given or made, that information or representation
must not be relied upon as having been authorized by Markel, Terra Nova, the
dealer manager or any agent or dealer. We are not making an offer of Markel
notes in any state where the offer is not permitted. You should not assume that
the information in this prospectus and consent solicitation statement is
accurate as of any date other than the date on the cover page or that any
information contained in any document we have incorporated by reference is
accurate as of any date other than the date of the document incorporated by
reference.
TABLE OF CONTENTS
Page
----
Summary........................................................... 1
Risk Factors...................................................... 8
Cautionary Statement Regarding
Forward-Looking Statements...................................... 11
Where You Can Find More Information............................... 12
The Exchange Offers............................................... 13
Description of Differences between the Terra
Nova Notes and the Markel Notes................................... 21
The Proposed Amendments........................................... 30
Certain Related Transactions...................................... 32
Descriptions of Markel Notes...................................... 33
Material U.S. Federal Income Tax
Consequences...................................................... 41
Validity of Notes................................................. 45
Experts........................................................... 45
i
SUMMARY
The following summary highlights some information from this prospectus. It may
not contain all of the information that may be important to you. To understand
these exchange offers and consent solicitations fully and for a more complete
description of the legal terms of these exchange offers and consent
solicitations, you should read carefully this entire prospectus and the more
detailed financial information and consolidated financial statements, including
the notes to the financial statements, included or incorporated by reference in
this prospectus and consent solicitation statement. In particular, you should
carefully consider the information set forth under "Risk Factors." Unless
otherwise indicated, as used in this prospectus, the terms "we," "our" and "us"
refer to Markel Corporation and its subsidiaries.
Markel Corporation
We are a specialty property and casualty insurer. We market and underwrite
specialty insurance products and programs to a variety of niche markets. We seek
to provide quality products and excellent customer service so that we can be a
market leader. We operate in three distinct areas of the specialty insurance
market:
. the excess and surplus lines market,
. the specialty admitted market, and
. the London insurance market.
Our financial goals are to earn consistent underwriting profits and superior
investment returns in order to build shareholder value. We are a Virginia
corporation headquartered at 4521 Highwoods Parkway, Glen Allen, Virginia
23060-6148. Our telephone number is (804) 747-0136.
Terra Nova
Markel International Limited, formerly Terra Nova Insurance (UK) Holdings plc,
is a wholly owned subsidiary of Terra Nova (Bermuda) Holdings Ltd. and is the
issuer of the Terra Nova notes. We refer to Markel International Limited as
Terra Nova.
Terra Nova is a company organized under the laws of England and Wales with
principal executive offices located at 49 Leadenhall Street, London EC3A 2EA
England, telephone number 44-207-953-6000.
Bermuda Holdings
On March 24, 2000, we acquired Terra Nova. Bermuda Holdings Ltd., which we refer
to as Bermuda Holdings. Bermuda Holdings is our direct wholly owned subsidiary
and is the holding company for our international operations known as Markel
International. At the same time, our existing U.S. operations became Markel
North America. All of the financial information in this prospectus includes the
results of Bermuda Holdings only since the date of acquisition.
Bermuda Holdings, and its direct and indirect subsidiaries, including Terra
Nova, write specialty property, casualty, marine and aviation insurance on a
direct and reinsurance basis. Business is written worldwide, with the majority
coming from the United Kingdom and the United States. Bermuda Holdings is the
guarantor of the Terra Nova notes.
Bermuda Holdings is a Bermuda company with principal executive offices located
at Richmond House, 12 Par-la-ville Road, Hamilton NMO8, Bermuda, telephone
number 44-1-292-7731.
Markel Corporation Selected Financial Data
(dollars in millions, except per share data)/(1)/
Year Ended December 31,
----------------------------------------------------
2001 2000 1999 1998 1997
----------------------------------------------------
Results of Operations
Earned premiums............................................... $ 1,207 $ 939 $ 437 $ 333 $ 333
Net investment income......................................... 171 154 88 71 69
Total operating revenues...................................... 1,397 1,094 524 426 419
Net income (loss)............................................. (126) (28) 41 57 50
Comprehensive income (loss)................................... (77) 81 (40) 68 92
Financial Position
Total investments and cash.................................... $ 3,591 $ 3,136 $ 1,625 $ 1,483 $ 1,410
Total assets.................................................. 6,441 5,473 2,455 1,921 1,870
Unpaid losses and loss adjustment expenses.................... 3,700 3,037 1,344 934 971
Convertible notes payable..................................... 116 -- -- -- --
Long-term debt................................................ 265 573 168 93 93
8.71% Capital Securities...................................... 150 150 150 150 150
Shareholders' Equity.......................................... 1,085 752 383 425 357
Per Share Data
Net income (loss) (diluted)................................... $(14.73) $ (3.99) $ 7.20 $ 10.17 $ 8.92
Book value as of year-end..................................... 110.50 102.63 68.59 77.02 65.18
/(1)/ Reflects the acquisitions of Gryphon Holding Inc. (January 15, 1999) and
Terra Nova (Bermuda) Holdings Ltd. (March 24, 2000) using the purchase method of
accounting. Also reflects the issuance in 2001 of 2.5 million common shares with
net proceeds of $408 million.
The information as of and for each of the years in the five-year period ended
December 31, 2001 has been derived from and should be read in conjunction with
our audited consolidated financial statements and footnotes incorporated by
reference into this prospectus. See "Where You Can Find More Information."
Certain reclassifications of prior years' amounts have been made to conform with
2001 presentations.
2
Terra Nova (Bermuda) Holdings Ltd. Selected Financial Data
(dollars in millions, except per share data)
Year Ended December 31,
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2001/(1)/ 2000/(1)/ 1999 1998/(2)/ 1997
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Results of Operations
Earned premiums............................................... $540 $ 604 $ 585 $ 547 $ 419
Net investment income......................................... 76 85 94 93 85
Total operating revenues...................................... 633 697 706 658 520
Net income (loss)............................................. (121) (132) (35) 72 73
Comprehensive income (loss)................................... (110) (100) (123) 96 93
Financial Position
Total investments and cash.................................... $1,424 $ 1,369 $ 1,491 $ 1,575 $ 1,476
Total assets.................................................. 3,076 2,637 2,632 2,479 2,220
Unpaid losses and loss adjustment expenses.................... 2,173 1,672 1,410 1,209 1,158
Long-term debts............................................... 173 175 175 175 175
Shareholder's Equity.......................................... 169 279 444 571 482
Per Share Data
Net income (loss) (diluted)................................... -- -- $ (1.38) $ 2.77 $ 2.82
Cash dividends................................................ -- -- 0.24 0.23 0.17
Book value as of year-end..................................... -- -- 17.50 22.51 18.96
/(1)/ On March 24, 2000, Markel acquired Terra Nova (Bermuda) Holdings Ltd. As a
wholly-owned subsidiary of Markel, per share data is no longer relevant.
/(2)/ Net income, comprehensive income and net income per share are stated after
an extraordinary charge of $11.6 million or $0.45 per share associated with
debt refinancing in May 1998.
The information as of and for each of the years in the five-year period ended
December 31, 2001 has been derived from and should be read in conjunction with
Bermuda Holdings audited consolidated financial statements and footnotes
incorporated by reference into this prospectus. See "Where You Can Find More
Information." Certain reclassifications of prior years' amounts have been made
to conform with 2001 presentations.
___________________
/(1/
3
Questions and Answers about the Exchange Offers and Consent Solicitations
Q: Why is Markel Making the Exchange Offers and the Consent Solicitations?
A: The exchange offers and the proposed amendments are intended to reduce
our expenses by eliminating the need to prepare and file separate
financial statements and reports for Bermuda Holdings, as well as to
allow us to simplify our capital structure.
Q: What Will I Receive in the Exchange Offers and Consent Solicitations?
A: For each $1,000 principal amount of either series of Terra Nova notes
validly tendered and accepted for exchange, Markel is offering $1,000
principal amount of Markel's newly issued notes of a corresponding
series. Each series of Markel notes being offered under this prospectus
and consent solicitation statement will have the same principal amount,
interest rate, redemption terms and payment and maturity dates as those
of the corresponding series of Terra Nova notes to be exchanged in the
exchange offers, and will be issued under and governed by the terms of
an indenture described in this prospectus, each of which we refer to as
a Markel indenture. Instead of receiving a payment for accrued interest
on Terra Nova notes you exchange, the Markel notes you receive in
exchange for those Terra Nova notes will accrue interest from the last
date to which interest has been paid on those Terra Nova notes.
In addition, Markel will pay an amount in cash equal to the applicable
consent payment listed on the cover page of this prospectus and consent
solicitation statement to each holder of Terra Nova notes accepted for
exchange if the holder has tendered those notes prior to the applicable
consent payment deadline. The consent payment deadline for each
exchange offer will be 5:00 p.m., New York City time, on May __, 2002,
unless extended.
As a holder of Terra Nova notes of either series, you may give your
consent to the proposed amendments to the Terra Nova indentures only by
tendering your Terra Nova notes in the exchange offer for that series.
By so tendering, you will be deemed to have given a consent with
respect to the notes of that series.
Q: What are the Consequences of not Tendering in the Exchange Offers?
A: If the exchange offers are consummated and the proposed amendments to
the Terra Nova indentures have been adopted, the amendments will apply
to all Terra Nova notes not acquired in the exchange offers. All Terra
Nova notes that remain outstanding after completion of the exchange
offers will be governed by the Terra Nova indentures as amended by the
proposed amendments, which will have less restrictive terms and afford
reduced protection to the holders of the Terra Nova notes compared to
those currently in the Terra Nova indentures. See "Risk Factors -- Risk
Factors Relating to the Exchange Offers and Consent Solicitations --
The proposed amendments to the Terra Nova indentures will afford
reduced protection to remaining holders of Terra Nova's notes." In
addition, holders that do not tender in the exchange offers before the
consent payment deadline will not receive the applicable consent
payment, even though the proposed amendments will become effective with
respect to their Terra Nova notes.
If the exchange offers are completed, Terra Nova may apply to delist
one or both series of the Terra Nova notes from the exchange on which
they are listed. If a series of Terra Nova notes were delisted, then
payments of interest on the applicable Terra Nova notes to holders may
be subject to U.K. withholding or other deduction unless the holder
provides Terra Nova with required information or forms to establish an
applicable withholding exemption.
Q: How do the Terra Nova Notes Differ from the Markel Notes to be Issued
in the Exchange Offers?
A: The Terra Nova notes are the obligations solely of Terra Nova
guaranteed by Bermuda Holdings and are governed by the Terra Nova
indentures, while the Markel notes will be the obligations solely of
Markel and will be governed by the Markel indentures. The Terra Nova
indentures and the Markel indentures differ in some respects, including
as follows:
. The provisions of the Terra Nova indentures limiting the
ability of Bermuda Holdings and its subsidiaries to incur
liens are more restrictive than the corresponding provisions
of the Markel indentures.
. The provisions of the Terra Nova indentures with respect to
mergers, consolidations and sale of assets are more
restrictive than the corresponding provisions of the Markel
indentures.
4
. The Terra Nova indentures contain provisions requiring the
filing of specified reports for Bermuda Holdings and payment
of additional amounts in specified circumstances and the
Markel indentures will not contain comparable provisions.
. The Terra Nova indentures include events of default which are
additional to and more broad than the events of default in the
Markel indentures.
These provisions will be eliminated from the Terra Nova indentures if
the proposed amendments are adopted.
See "Description of Differences Between the Terra Nova Notes and the
Markel Notes" and "Description of the Markel Notes."
Because Markel is a holding company that conducts all of its
operations through its subsidiaries, its ability to meet its
obligations under the Markel notes is dependent on the earnings and
cash flows of those subsidiaries and the ability of those subsidiaries
to pay dividends or to advance or repay funds to Markel. Payment of
dividends or advances from Markel's insurance subsidiaries may require
prior regulatory notice or approval. Holders of Markel notes will
generally have a junior position to claims of creditors of Markel's
subsidiaries, including any holders of Terra Nova notes not validly
tendered and accepted in the exchange offers. As of March 31, 2002,
the aggregate principal amount of outstanding long-term debt of
Markel's subsidiaries to which holders of the Markel notes would have
been structurally subordinated was approximately $170.5 million, all
of which consists of the two series of Terra Nova notes for which
Markel is making the exchange offers less the amount of Terra Nova
notes held by Markel and its subsidiaries. See "Risk Factors -- Risks
Relating to the Exchange Offers and Consent Solicitations -- Our
holding company structure results in substantial structural
subordination and may affect our ability to make payments on the
Markel notes" and "Description of the Markel Notes -- Ranking;
Additional Debt."
Q: What are the U.S. Federal Income Tax Consequences to Holders that
Tender Terra Nova Notes in the Exchange Offers?
A: The receipt of Markel notes and consent payments in connection with the
exchange offers and consent solicitations will be a taxable transaction
for U.S. federal income tax purposes, and holders of Terra Nova notes
validly tendered in the exchange offers will, accordingly, recognize
gain or loss, as described in the section of this prospectus and
consent solicitation statement entitled "Material U.S. Federal Income
Tax Consequences."
Q: What Consents are Required to Effect the Proposed Amendments to the
Terra Nova Indentures and Consummate the Exchange Offers?
A: Consents from holders of a majority of the total outstanding principal
amount, not including notes held by Markel and it subsidiaries, of a
particular series of Terra Nova notes as of the close of business on
May __, 2002 must be received in order to amend the Terra Nova
indenture with respect to that series.
As of April 5, 2002, Markel and its subsidiaries held approximately
$2.0 million in total principal amount of the 7.2% Terra Nova notes and
$2.5 million in total principal amount of the 7.0% Terra Nova notes.
The Terra Nova notes held by Markel or its subsidiaries will not be
deemed to be outstanding for determining the amount required for
consent to the amendments to the Terra Nova indentures.
Markel's obligation to complete each exchange offer and to make the
consent payments relating to that exchange offer is conditioned upon,
among other things, receipt of valid consents sufficient to effect the
amendments with respect to both series of Terra Nova notes, although
Markel is free to waive this or any other condition with respect to
either of the exchange offers. For information about other conditions
to Markel's obligation to complete the exchange offers and to make the
consent payments, see "Conditions to the Exchange Offers and Consent
Solicitations."
Q: Will Markel Accept All Tenders of Terra Nova Notes?
A: Subject to the satisfaction or waiver of the conditions to each
exchange offer, Markel will accept for exchange any and all Terra Nova
notes of either series validly tendered in the applicable exchange
offer on or before the expiration date of that exchange offer.
Q: When Will Markel Issue New Notes and Make Consent Payments in Exchange
for Terra Nova Notes?
A: Assuming the conditions to the exchange offers are satisfied or waived,
Markel will issue new notes in book-entry form and make consent
payments in exchange for Terra Nova notes on the third business day
following the expiration date of the applicable exchange offer or as
soon as practicable after that date.
5
Q: When do I need to Tender My Terra Nova Notes to Receive the Applicable
Consent Payment?
A: The consent payment deadline for each exchange offer is 5:00 p.m., New
York City time on May __, 2002, unless extended. The consent payment
deadline is the latest date and time on which you may tender your Terra
Nova notes and receive the applicable consent payment if these notes
are exchanged.
Q: When do the Exchange Offers Expire?
A: The exchange offers will expire at 5:00 p.m., New York City time, on
May __, 2002, unless Markel, in its sole discretion, extends either or
both of the exchange offers in which case the expiration date with
respect to an exchange offer will be the latest date and time to which
that exchange offer is extended. See "The Exchange Offers -- Consent
Payment Deadline; Expiration Date; Extensions; Amendments."
Q: What are My Rights if I Change My Mind After I Tender My Terra Nova
Notes?
A: You may withdraw your tender at any time before the applicable consent
payment deadline. A valid withdrawal of tendered Terra Nova notes prior
to the applicable consent payment deadline will also constitute the
revocation of the related consent to the proposed amendments to the
applicable Terra Nova indenture. You may only revoke a consent by
validly withdrawing the related Terra Nova notes prior to the consent
payment deadline. See "The Exchange Offers -- Withdrawal of Tenders and
Revocation of Corresponding Consents."
Q: How do I Exchange My Terra Nova Notes if I am a Beneficial Owner of
Terra Nova Notes held of Record by a Custodian Bank, Depositary,
Broker, Trust Company or other Nominee? Will the Record Holder Exchange
My Terra Nova Notes for Me?
A: If your Terra Nova notes are held by a custodian bank, depositary,
broker, trust company or other nominee and you wish to tender the Terra
Nova notes in the exchange offers, you should contact that institution
promptly and instruct the institution to tender on your behalf. The
record holder will tender your Terra Nova notes on your behalf, but
only if you instruct the record holder to do so. See "The Exchange
Offers -- Procedures for Tendering -- Tender of Terra Nova Notes Held
through a Nominee."
Q: Do I have the Right to Dissent from the Exchange Offers or Seek
Appraisal of the Terra Nova Notes I hold?
A: Holders of Terra Nova notes do not have any appraisal or dissenters'
rights under New York law, the law governing the Terra Nova indentures,
or under the terms of the Terra Nova indentures in connection with the
exchange offers and consent solicitations.
Q: To Whom Should I Direct Any Questions?
A: Questions concerning the terms of the exchange offers or the consent
solicitations should be directed to the dealer manager. Questions
concerning tender procedures and requests for additional copies of this
prospectus and consent solicitation statement should be directed to the
information agent. The addresses and telephone numbers of the dealer
manager and the information agent are set forth on the back cover page
of this prospectus and consent solicitation statement.
6
Markel Corporation Ratio of Earnings To Fixed Charges
The results below include Bermuda Holdings since its acquisition by us on March
24, 2000. Markel's ratio of earnings to fixed charges for each of the periods
shown is as follows:
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
2001 2000 1999 1998 1997
-------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges * * 3.0 4.4 4.1
-------------------------------------------------------------------------------------------------
The ratio of earnings to fixed charges is computed by dividing pretax income
from continuing operations before fixed charges by fixed charges. Fixed charges
consist of interest charges and amortization of debt expense and discount or
premium related to indebtedness, whether expensed or capitalized, and that
portion of rental expense we believe to be representative of interest.
Terra Nova (Bermuda) Holdings Ltd. Ratio of Earnings To Fixed Charges
Bermuda Holdings' ratio of earnings to fixed charges for each of the periods
shown is as follows:
YEARS ENDED DECEMBER 31,
----------------------------------------------------
2001 2000 1999 1998 1997
---------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges ** ** ** 7.7 7.5
----------------------------------
---------------------------------------------------------------------------------------------
The ratio of earnings to fixed charges is computed by dividing pretax income
from continuing operations before fixed charges by fixed charges. Fixed charges
consist of interest charges and amortization of debt expense and discount or
premium related to indebtedness, whether expensed or capitalized, and that
portion of rental expense we believe to be representative of interest.
* For 2001 and 2000, Markel's earnings were insufficient to cover fixed
charges by $182.2 million and $51.8 million, respectively.
** For 2001, 2000 and 1999, Bermuda Holdings' earnings were insufficient to
cover fixed charges by $180.2 million, $144.7 million and $72.6 million,
respectively.
7
RISK FACTORS
In addition to the other information contained in this prospectus and consent
solicitation statement and the documents incorporated by reference, you should
carefully consider the following risk factors.
Risk Factors Relating to the Exchange Offers and Consent Solicitations
The proposed amendments to the Terra Nova indentures will afford reduced
protection to remaining holders of Terra Nova notes.
If the proposed amendments to the Terra Nova indentures are adopted, the
covenants and some other terms of the Terra Nova notes will be less restrictive
and will afford reduced protection to holders of those securities compared to
the covenants and other provisions currently contained in the Terra Nova
indentures. The proposed amendments to the Terra Nova indentures would, among
other things:
. eliminate most of the covenants in the Terra Nova indentures,
. eliminate restrictions on Bermuda Holdings' ability to
consolidate, merge or sell all or substantially all of its
assets, and
. eliminate some events of default under the Terra Nova
Indentures.
If the proposed amendments are adopted with respect to the Terra Nova notes,
each non-exchanging holder of Terra Nova notes will be bound by the proposed
amendments even if that holder did not consent to the proposed amendments. The
elimination or modification of the covenants and other provisions in the Terra
Nova indentures contemplated by the proposed amendments would, among other
things, permit Markel, Bermuda Holdings, Terra Nova and their respective
subsidiaries to take actions that could increase the credit risk with respect to
Terra Nova or Bermuda Holdings, and might adversely affect the liquidity, market
price and price volatility of the Terra Nova notes or otherwise be adverse to
the interests of the holders of the Terra Nova notes. See "The Proposed
Amendments."
The liquidity of the Terra Nova notes that are not exchanged will be reduced.
The current trading market for the Terra Nova notes is limited. The trading
market for unexchanged Terra Nova notes will become more limited and could cease
to exist due to the reduction in the amount of the Terra Nova notes outstanding
upon consummation of the exchange offers. In addition, Terra Nova may apply to
delist the Terra Nova notes from the exchanges on which they are listed. A more
limited trading market might adversely affect the liquidity, market price and
price volatility of these securities. If a market for unexchanged Terra Nova
notes exists or develops, these securities may trade at a discount to the price
at which the securities would trade if the amount outstanding were not reduced,
depending on prevailing interest rates, the market for similar securities and
other factors. However, there can be no assurance that an active market in the
unexchanged Terra Nova notes will exist, develop or be maintained or as to the
prices at which the unexchanged Terra Nova notes may be traded.
Our holding company structure results in structural subordination and may affect
our ability to make payments on the Markel notes.
The Markel notes are obligations exclusively of Markel. We are a holding company
and, accordingly, substantially all of our operations are conducted through our
subsidiaries. As a result, our cash flow and our ability to service our debt,
including the notes to be issued in the exchange offers, is dependent upon the
earnings of our subsidiaries and on the distribution of earnings, loans or other
payments by our subsidiaries to us. In addition, payment of dividends by our
insurance subsidiaries may require prior regulatory notice or approval. The
Markel notes offered will be structurally subordinated to all obligations of
Markel's subsidiaries, including any Terra Nova notes not validly tendered and
accepted in the exchange offers. As of March 31, 2002, the aggregate principal
amount of outstanding long-term debt of Markel's subsidiaries to which holders
of the Markel notes would have been structurally subordinated was approximately
$170.5 million, all of which consists of the Terra Nova notes for which Markel
is making the exchange offers. Our debt agreements do not limit the amount of
debt that we or any of our subsidiaries may incur. See "Description of the
Markel Notes -- Ranking; Additional Debt."
A public market does not currently exist for the Markel notes offered in the
exchange offers, and a market may not develop or be sustained.
Markel does not plan to list the Markel notes offered under this prospectus and
consent solicitation statement on any national securities exchange or on The
Nasdaq Stock Market. Although the Terra Nova 7.0% notes due 2008 are listed on
the New York Stock Exchange and the Terra Nova 7.2% notes are listed on the
Luxembourg Stock Exchange, a limited trading market for the Terra Nova notes
currently exists. The Markel notes will represent new
8
securities for which no such market currently exists. Although a market exists
for currently outstanding debt securities of Markel, there can be no assurance
that an active trading market for the Markel notes offered under this prospectus
and consent solicitation statement will develop or, if a market develops,
that it will be liquid or sustainable.
A ratings decline could adversely affect the value of the Markel notes.
Any of the agencies that rate our debt have the ability to lower the ratings
currently assigned to our debt, as a result of their views about our current or
future business, financial condition or results of operations. Any ratings
decline could adversely affect the value of the Markel notes offered under this
prospectus and consent solicitation statement.
Risk Factors Relating to the Business of Markel
Our results may be affected because actual insured losses differ from our loss
reserves.
Significant periods of time often elapse between the occurrence of an insured
loss, the reporting of the loss to us and our payment of that loss. To recognize
liabilities for unpaid losses, we establish reserves as balance sheet
liabilities representing estimates of amounts needed to pay reported and
unreported losses and the related loss adjustment expense. The process of
estimating loss reserves is a difficult and complex exercise involving many
variables and subjective judgments. As part of the reserving process, we review
historical data and consider the impact of various factors such as:
. trends in claim frequency and severity,
. changes in operations,
. emerging economic and social trends,
. inflation, and
. changes in the regulatory and litigation environments.
This process assumes that past experience, adjusted for the effects of current
developments and anticipated trends, is an appropriate basis for predicting
future events. There is no precise method, however, for evaluating the impact of
any specific factor on the adequacy of reserves, and actual results are likely
to differ from original estimates.
We may experience losses from catastrophes.
Because we are a property and casualty insurance company, we frequently
experience losses from man-made or natural catastrophes. Catastrophes may have a
material adverse effect on operations. Catastrophes include windstorms,
hurricanes, earthquakes, tornadoes, hail, severe winter weather, fires and may
include terrorist events such as the attacks on the World Trade Center and
Pentagon on September 11, 2001. We cannot predict how severe a particular
catastrophe may be until after it occurs. The extent of losses from catastrophes
is a function of the total amount of losses incurred, the number of insureds
affected, the frequency of the events and the severity of the particular
catastrophe. Most catastrophes occur in small geographic areas. However, some
catastrophes may produce significant damage in large, heavily populated areas.
We are subject to regulation by insurance regulatory authorities that may affect
our ability to implement our business objectives.
Our insurance subsidiaries are subject to supervision and regulation by the
insurance regulatory authorities in the various jurisdictions in which they
conduct business. Regulation is intended for the benefit of policyholders rather
than shareholders or holders of debt securities. Insurance regulatory
authorities have broad regulatory, supervisory and administrative powers
relating to solvency standards, licensing, policy rates and forms and the form
and content of
9
financial reports. Regulatory actions may affect our ability to implement our
business objectives. Also, payment of dividends by our insurance subsidiaries
may require prior regulatory notice or approval.
Our investment results may be impacted by changes in interest rates, government
monetary policies and general economic conditions.
We receive premiums from customers for insuring their risks. We invest these
funds until they are needed to pay policyholder claims or until they are
recognized as profits. Many of the policies we issue are denominated in foreign
currencies. Fluctuations in the value of our investment portfolio can occur as a
result of changes in interest rates, government monetary policies and general
economic conditions. Our investment results may be impacted by these factors.
Because the risk profile of the business written and the reinsurance program of
recent acquisitions is different from ours, we may incur additional charges.
The risk profile of the business written and reinsurance programs of our recent
acquisitions was not wholly consistent with those of our other operations. For
example, Bermuda Holdings historically wrote policies with large limits and
purchased reinsurance to reduce the net retention to a smaller sum. Such
reliance on reinsurance may create credit risk as a result of the reinsurer's
inability or unwillingness to pay reinsurance claims when due. We have begun to
implement policies to reduce this reliance on reinsurance in the future, but
must still account for and collect reinsurance for business written prior to our
acquisition. Deterioration in the credit quality of existing reinsurers or
disputes over the terms of reinsurance could result in additional charges, which
may impact our profitability.
Because loss reserves are estimates based upon historical experience and
statistical data, there can be no assurances that the loss reserves for recent
acquisitions are adequate and that there will not be any future impact on our
financial performance.
It has long been our policy to establish loss reserves at a level that we
believe is more likely to prove redundant rather than deficient. Many other
companies in the insurance industry establish loss reserves that are "adequate,"
often defined as the mid-point of an actuarially determined range, i.e., as
likely to be too little as too much. When we acquire a company, we seek to apply
our policy over time to the reserving practices of the acquired company.
However, because loss reserve estimates are based on historical experience and
statistical analyses, we often do not have sufficient information for a period
of time following the date of an acquisition to implement this policy
immediately. As we continue to gather information and obtain additional
experience, we can better implement our approach and, depending on the relevant
experience, this may result in additional charges to strengthen reserves.
10
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus and consent solicitation statement and the documents
incorporated by reference in this prospectus and consent solicitation statement
contain both historical and forward-looking statements. All statements other
than statements of historical fact are, or may be deemed to be, forward-looking
statements. Forward-looking statements may be identified by the use of terms
such as believes, expects, estimate, may, intends, plan, will, should or
anticipates or the negative thereof or similar expressions, or by discussions of
strategy. We have based the forward-looking statements on current
expectations and projections about future events. These forward-looking
statements are subject to risks, uncertainties and assumptions about us,
including:
. uncertainties and changes in government policy, regulatory
policy, statutory law or case law with respect to us brokers
or customers which can impede our ability to charge adequate
rates and efficiently allocate capital;
. the amount and nature of competition in the insurance industry
and the amount of capital within the industry and alternative
risk transfer markets;
. the occurrence of man-made or natural catastrophic events;
. assumptions about the impact of events of September 11, 2001,
such as the number of insureds and reinsureds affected by the
events, the amount and timing of losses incurred and reported
and questions of how coverage applies;
. the occurrence of additional terrorist activities;
. the occurrence of significant changes in products or adverse
changes in insurance and financial market conditions;
. changing legal and social trends and the inherent
uncertainties of the reserving process;
. loss of the services of any of our executive officers;
. initiatives underway at Markel International to reorganize
business units and to evaluate reinsurance programs and
exposures that could lead to additional changes and expense;
. assumptions about future profitability at Markel International
and that Markel International will make steady progress
towards underwriting profitability;
. changing rates of inflation and other economic conditions;
. losses due to foreign currency exchange rate and interest rate
fluctuations;
. ability to collect reinsurance recoverables;
. changes in the availability, cost or quality of reinsurance;
. developments in domestic and international financial markets
that could affect our investment portfolios;
. changes in assigned financial strength or debt ratings;
. changes in the distribution or placement of risks due to
increased consolidation of insurance and reinsurance brokers;
and
. the effect of mergers, acquisitions and divestitures.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed herein might not occur. You are cautioned not to place undue
reliance on any forward-looking statements, which speak only as of their dates.
11
WHERE YOU CAN FIND MORE INFORMATION
Markel and Bermuda Holdings are subject to the informational reporting
requirements of the Securities Exchange Act of 1934. You may read and copy any
document that they file at the Public Reference Room of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You may
also inspect Markel's and Bermuda Holdings' annual, quarterly, special reports,
any proxy statements and other information over the Internet at the SEC's home
page at http://www.sec.gov. Markel's common shares are listed on the New York
Stock Exchange under the symbol "MKL," and the Terra Nova notes are also listed
on the New York Stock Exchange. Markel's and Bermuda Holdings' filings may also
be read and copied at the New York Stock Exchange at 20 Broad Street, New York,
NY 10005.
This prospectus and consent solicitation statement is part of a registration
statement Markel has filed with the SEC relating to the Markel notes. As
permitted by SEC rules, this prospectus and consent solicitation statement does
not contain all of the information Markel has included in the registration
statement and the accompanying exhibits and schedules. You may refer to the
registration statement, exhibits and schedules for more information about Markel
and its securities. The registration statement, exhibits and schedules are
available at the SEC's Public Reference Room or through its Web site.
The SEC allows Markel to "incorporate by reference" the information filed with
them, which means that Markel can disclose important information to you by
referring you to those documents. The information Markel incorporates by
reference is an important part of this prospectus and consent solicitation
statement, and later information filed with the SEC will automatically update
and supersede this information. Markel incorporates by reference the documents
listed below and any future filings Markel makes with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until all the
offered securities are sold. The documents incorporated by reference are:
. Markel's Annual Report on Form 10-K for the year ended
December 31, 2001.
. Terra Nova (Bermuda) Holdings Ltd.'s Annual Report on Form
10-K for the year ended December 31, 2001.
You may request a copy of these filings (other than an exhibit to that
filing, unless we have specifically incorporated that exhibit by reference into
this filing), which will be provided at no cost, by writing or telephoning the
information agent at the address or telephone number set forth on the back cover
of this prospectus and consent solicitation statement. In order to ensure timely
delivery of these documents, you should make your request by May __, 2002 or
five days before the expiration of any extension of the exchange offers,
whichever is later.
12
THE EXCHANGE OFFERS
Terms of the Exchange Offers and Consent Solicitations
Markel is offering to exchange its notes for each of the two series of issued
and outstanding Terra Nova notes in two separate exchange offers. Specifically,
Markel is offering:
. $1,000 principal amount of Markel Corporation's 7.2% Senior Notes due
August 15, 2007, which we refer to as the "Markel 7.2% notes," for
each $1,000 principal amount of outstanding Terra Nova 7.2% notes due
August 15, 2007, which we refer to as the "Terra Nova 7.2% notes".
. $1,000 principal amount of Markel Corporation's 7.0% Senior Notes due
May 15, 2008, which we refer to as the "Markel 7.0% notes", for each
$1,000 principal amount of outstanding Terra Nova 7.0% notes due May
15, 2008, which we refer to as the "Terra Nova 7.0% notes".
The principal amounts, interest rates, redemption terms and payment and maturity
dates of a particular series of Markel notes offered in the exchange offers are
the same as those of the corresponding series of Terra Nova notes. The Markel
notes you receive in exchange for Terra Nova notes will accrue interest from the
last date to which interest has been paid on those Terra Nova notes. You will
not receive a payment for accrued interest on Terra Nova notes you exchange at
the time of that exchange.
We refer to the Markel 7.2% notes and Markel 7.0% notes together as the "Markel
notes." The Terra Nova 7.2% notes and Terra Nova 7.0% notes are together
referred to as the "Terra Nova notes." The indenture for the Terra Nova 7.2%
notes is referred to as the "Terra Nova 7.2% notes indenture." The indenture for
the Terra Nova 7.0% notes is referred to as the "Terra Nova 7.0% notes
indenture." The Terra Nova 7.2% notes indenture and the Terra Nova 7.0% notes
indenture are together referred to as the "Terra Nova indentures."
Markel is also soliciting consents from the holders of each series of Terra Nova
notes to effect amendments to each of the Terra Nova indentures under which
those notes were issued. For a description of the proposed amendments, see "The
Proposed Amendments." Markel's obligation to complete each exchange offer and to
make the consent payments relating to that exchange offer is conditioned on,
among other things, receipt of valid and unrevoked consents to the amendments by
the consent payment deadline from the holders of a majority in principal amount
outstanding of each of the two series of Terra Nova notes, which we refer to as
the consent condition, although Markel will be free to waive this or any other
condition with respect to either of the exchange offers. A holder validly
tendering notes for exchange will, by tendering those notes, be consenting to
the proposed amendments to the indenture under which those notes were issued.
In addition to the Markel notes that Markel will issue in exchange for Terra
Nova notes, Markel will pay an amount in cash equal to the applicable consent
payment listed on the cover page of this prospectus and consent solicitation
statement to each holder of Terra Nova notes accepted for exchange if the holder
has tendered those notes prior to the applicable consent payment deadline. The
time by which holders must tender Terra Nova notes in that offer in order to be
eligible to receive the consent payment will be 5:00 p.m., New York City time,
on May ____, 2002, unless extended.
Markel will make a consent payment for Terra Nova notes only if the holder
of those notes tenders those notes in the applicable exchange offer prior
to the applicable consent payment deadline and Markel in fact exchanges
those notes for Markel notes in that exchange offer.
If the required consents are received with respect to each series of Terra Nova
notes, then Terra Nova, Bermuda Holdings and the trustee with respect to each
series of the Terra Nova notes under the Terra Nova indentures will execute
supplemental indentures setting forth the proposed amendment in respect of both
series. If the required consents are received with respect to one, but not both,
series of Terra Nova notes and Markel waives the condition that it receive
consents to the proposed amendments to the Terra Nova indenture with respect to
each series of Terra Nova notes, then Terra Nova, Bermuda Holdings and the Terra
Nova trustee will execute a supplemental indenture setting forth the proposed
amendments in respect of the series as to which the required consents are
received. Under the terms of the supplemental indentures, the amendment will not
become operative with respect to a series of Terra Nova notes until Markel
exchanges all Terra Nova notes of that series validly tendered and not withdrawn
for Markel notes of the corresponding series pursuant to the applicable exchange
offer, even if all notes of that series that were validly tendered are
withdrawn. Each non-exchanging holder of that series of Terra Nova notes will be
bound by the supplemental indenture.
Conditions to the Exchange Offers and Consent Solicitations
13
Markel's obligation to complete each exchange offer and to make the consent
payments relating to that exchange offer is subject to the satisfaction or
waiver by Markel of the following conditions:
. the consent condition described under "Terms of the Exchange Offers
and Consent Solicitations" above,
. the following statements being true:
(1) There does not exist:
. in our sole judgment, any actual or threatened legal impediment,
including a default under an agreement, indenture or other
instrument or obligation to which we are party or by which we are
bound, to the consummation of the exchange offers or
. any change or development, including a prospective change or
development, that, in our sole judgment, has or may have a
material adverse effect on us or on the value of the exchange
offers to us; and
(2) The Terra Nova trustee has executed and delivered a supplemental
indenture relating to the proposed amendments and has not
objected in any respect to, or taken any action that could in our
reasonable judgment adversely affect the consummation of:
. either of the exchange offers;
. the exchange of Terra Nova notes under the exchange offers;
. the consent solicitations; or
. our ability to effect the proposed amendments,
. the Terra Nova trustee has not taken any action that challenges
the validity or effectiveness of the procedures used by Markel in
soliciting consents, including the form thereof, or in making the
exchange offers, the exchange of the Terra Nova notes under the
exchange offers or the consent solicitations.
All of these conditions are for the sole benefit of Markel and may be waived by
Markel, in whole or in part, and with respect to the exchange offers for either
or both series of Terra Nova notes, in its sole discretion. Any determination
made by Markel concerning these events, developments or circumstances shall be
conclusive and binding.
If any of these conditions are not satisfied with respect to a particular series
of Terra Nova notes, Markel may, at any time before or concurrently with
completing the exchange offer or consent solicitation with respect to that
series:
(1) terminate the exchange offer and the consent solicitation with
respect to that series of Terra Nova notes and return all
tendered Terra Nova notes of that series to the holders thereof,
whether or not it terminates the exchange offer and consent
solicitation with respect to the other series of Terra Nova
notes,
(2) modify, extend or otherwise amend the exchange offer and consent
solicitation with respect to that series of Terra Nova notes
whether or not it modifies, extends or otherwise amends the
exchange offer and consent solicitation with respect to the other
series of Terra Nova notes, and retain all tendered Terra Nova
notes of that series and consents until the expiration date, as
extended, of that exchange offer and consent solicitation,
subject, however, to the withdrawal rights of holders (See "The
Exchange Offers -- Withdrawal of Tenders and Revocation of
Corresponding Consents" and "-- Consent Payment Deadline;
Expiration Date; Extensions; Amendments"), or
(3) waive the unsatisfied conditions with respect to that exchange
offer and consent solicitation and accept all Terra Nova notes of
that series tendered and not previously withdrawn, whether or not
it waives these conditions for the exchange offer and consent
solicitation with respect to the other series of Terra Nova
notes.
Consent Payment Deadline, Expiration Date, Extensions, Amendments
For purposes of each of the consent solicitations, the term "consent payment
deadline" means 5:00 p.m., New York City time, on May ____, 2002, subject to the
right of Markel to extend that date and time for either of the consent
solicitations in its sole discretion (whether or not it extends that date and
time with respect to the other consent solicitation), in which case the consent
payment deadline will be, with respect to that extended consent solicitation,
the latest date and time to which that consent payment deadline is extended.
14
For purposes of each of the exchange offers, the term "expiration date" means
5:00 p.m., New York City time, on May _____, 2002, subject to the right of
Markel to extend that date and time for either of the exchange offers in its
sole discretion, in which case the expiration date shall be, with respect to
that extended exchange offer, the latest date and time to which that exchange
offer is extended.
Markel reserves the right, in its sole discretion, to:
. delay accepting any validly tendered Terra Nova notes of either
series,
. extend either or both of the exchange offers, or
. terminate or amend either or both of the exchange offers, by giving
oral or written notice of such delay, extension, termination or
amendment to the exchange agent.
Any delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by a public announcement thereof which, in the case of
an extension, will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date.
Markel also reserves the right, in its sole discretion, to provide a
subsequent offering period of between three and 20 business days for either or
both of the exchange offers. If a subsequent offering period is provided, all
Terra Nova notes validly tendered and not withdrawn prior to the consent payment
deadline of the initial offering period will be accepted and exchanged for
Markel notes and we will make a public announcement of the subsequent offering
period no later than 9:00 a.m., New York City time, on the next business day
after the expiration date of the initial offering period. Unless otherwise
provided in the announcement of the subsequent offering period, all Terra Nova
notes validly tendered during the subsequent offering period will be promptly
accepted and exchanged for the applicable series of Markel notes as they are
tendered. Unless otherwise provided in the announcement of the subsequent
offering period, holders of Terra Nova notes will not have the right to withdraw
notes tendered during the subsequent offering period and no consent payment will
be made with respect to notes tendered during the subsequent offering period.
If the exchange offers are amended in a manner determined by Markel to
constitute a material change, Markel will promptly disclose that amendment by
means of a prospectus supplement that will be distributed to holders of Terra
Nova notes and Markel will extend the exchange offers to a date five to ten
business days after disclosing the amendment, depending upon the significance of
the amendment and the manner of disclosure to the holders, if the exchange
offers would otherwise have expired during that five to ten business day period.
Without limiting the manner in which Markel may choose to make a public
announcement of any delay, extension, amendment or termination of either of the
exchange offers and consent solicitations, Markel will have no obligation to
publish, advertise or otherwise communicate that public announcement other than
by making a timely release to any appropriate news agency, including the Dow
Jones News Service.
Effect of Tender
Any tender by a holder of either series of Terra Nova notes that is not
withdrawn prior to the applicable consent payment deadline of the applicable
exchange offer will constitute a binding agreement between that holder and
Markel, and a consent to the proposed amendments, upon the terms and subject to
the conditions of that exchange offer and the related letter of transmittal and
consent. The acceptance of an exchange offer by a tendering holder of either
series of Terra Nova notes will constitute the agreement by that holder to
deliver good and marketable title to the tendered Terra Nova notes, free and
clear of all liens, charges, claims, encumbrances, interests and restrictions of
any kind. The successful completion of the exchange offers may adversely affect
the liquidity and market prices of any remaining Terra Nova notes.
Absence of Dissenters' Rights
Holders of the Terra Nova notes do not have any appraisal or dissenters' rights
under New York law, the law governing the Terra Nova indentures and the Terra
Nova notes, or under the terms of the Terra Nova indentures in connection with
the exchange offers and consent solicitations.
Accounting Treatment of Exchange Offers
We will account for the exchange offers as an exchange of debt under United
States generally accepted accounting principles. The Markel notes to be issued
in the exchange offers will be recorded at the same carrying value as the Terra
Nova notes. Accordingly, we will recognize no gain or loss for accounting
purposes upon the consummation of the exchange offers. Markel will amortize a
portion of the expenses of the exchange offers over the term of the Markel notes
issued in the exchange offers.
15
Acceptance of Terra Nova Notes for Exchange, Delivery of Markel Notes and
Consent Payments
Assuming the conditions to the exchange offers are satisfied or waived, Markel
will issue new notes in book-entry form and will make consent payments in
exchange for Terra Nova notes on the third business day following the expiration
date of the applicable exchange offer or as soon as practicable after that date.
We refer to the date on which we exchange Markel notes for Terra Nova notes
pursuant to any exchange offer as the "exchange date" for that exchange offer.
Markel will be deemed to have accepted validly tendered Terra Nova notes of
either series when, and if, Markel has given oral or written notice thereof to
the exchange agent. Subject to the terms and conditions of the exchange offers,
the exchange agent will deliver the Markel notes and make the consent payments
for Terra Nova notes of either series accepted by Markel on the applicable
exchange date upon receipt of that notice. The exchange agent will act as agent
for tendering holders of the Terra Nova notes for the purpose of receiving Terra
Nova notes from and transmitting Markel notes and consent payments to those
holders. If any tendered Terra Nova notes are not accepted for any reason set
forth in the terms and conditions of the exchange offers or if Terra Nova notes
are withdrawn prior to the applicable consent payment deadline, those unaccepted
or withdrawn Terra Nova notes will be returned without expense to the tendering
holder as promptly as practicable after the expiration or termination of the
applicable exchange offer.
Procedures for Tendering
If you hold Terra Nova notes of either series and wish to have those notes
exchanged for Markel notes of the corresponding series, you must validly tender
(or cause the valid tender of) your Terra Nova notes using the procedures
described in this prospectus and consent solicitation statement and in the
accompanying letter of transmittal and consent. The proper tender of Terra Nova
notes will constitute an automatic consent to the proposed amendments to the
Terra Nova indentures.
The procedures by which you may tender or cause to be tendered Terra Nova notes
will depend upon the manner in which you hold the Terra Nova notes, as described
below.
Tender of Terra Nova Notes held through a Nominee
If you are a beneficial owner of Terra Nova notes that are held of record by a
custodian bank, depositary, broker, trust company or other nominee, and you wish
to tender Terra Nova notes in either of the exchange offers, you should contact
the record holder promptly and instruct the record holder to tender the Terra
Nova notes and deliver a consent on your behalf using one of the procedures
described below.
Tender of Terra Nova Notes with DTC
Pursuant to authority granted by The Depository Trust Company, or DTC, if you
are a DTC participant that has Terra Nova notes credited to your DTC account and
thereby held of record by DTC's nominee, you may directly tender your Terra Nova
notes and deliver a consent as if you were the record holder. Accordingly,
references herein to record holders include DTC participants with Terra Nova
notes credited to their accounts. Within two business days after the date of
this prospectus and consent solicitation statement, the exchange agent will
establish accounts with respect to the Terra Nova notes at DTC for purposes of
the exchange offers.
Any participant in DTC, including the respective depositants for Euroclear and
Clearstream, Luxembourg, may tender Terra Nova notes and deliver a consent to
the proposed amendments to the Terra Nova indentures by effecting a book-entry
transfer of the Terra Nova notes to be tendered in the applicable exchange
offer(s) into the account of the exchange agent at DTC and either:
. electronically transmitting its acceptance of the applicable exchange
offer through DTC's Automated Tender Offer Program ("ATOP") procedures
for transfer, or
. completing and signing the letter of transmittal and consent according
to the instructions and delivering it, together with any signature
guarantees and other required documents, to the exchange agent at its
address on the back cover page of this prospectus and consent
solicitation statement, in either case before the applicable exchange
offer(s) expire(s).
If ATOP procedures are followed, DTC will verify each acceptance transmitted to
it, execute a book-entry delivery to the exchange agent's account at DTC and
send an agent's message to the exchange agent. An "agent's message" is a
message, transmitted by DTC to and received by the exchange agent and forming
part of a book-entry confirmation, which states that DTC has received an express
acknowledgement from a DTC participant tendering Terra Nova notes that the
participant has received and agrees to be bound by the terms of the letter of
transmittal and consent and that Markel and Terra Nova may enforce the agreement
against the participant. DTC participants following this procedure
16
should allow sufficient time for completion of the ATOP procedures prior to the
expiration date of the applicable exchange offer.
The letter of transmittal and consent (or facsimile thereof), with any required
signature guarantees, or (in the case of book-entry transfer) an agent's message
in lieu of the letter of transmittal and consent, and any other required
documents, must be transmitted to and received by the exchange agent prior to
the expiration date of the applicable exchange offer at one of its addresses set
forth on the back cover page of this prospectus and consent solicitation
statement. Delivery of such documents to DTC does not constitute delivery to the
exchange agent. If you wish to receive the consent payment, you must deliver a
letter of transmittal and consent, or, in the case of book-entry transfer, an
agent's message instead of the letter of transmittal and consent, to the
exchange agent prior to the consent payment deadline of the applicable exchange
offer.
Letter of Transmittal and Consent
Subject to and effective upon the acceptance for exchange and exchange of Markel
notes for Terra Nova notes tendered by a letter of transmittal and consent in
accordance with the terms and subject to the conditions set forth in this
prospectus and consent solicitation statement, by executing and delivering a
letter of transmittal and consent (or agreeing to the terms of a letter of
transmittal and consent pursuant to an agent's message) a tendering holder of
Terra Nova notes:
. irrevocably sells, assigns and transfers to or upon the order of
Markel all right, title and interest in and to, and all claims in
respect of or arising or having arisen as a result of the holder's
status as a holder of the Terra Nova notes tendered thereby,
. waives any and all rights with respect to the Terra Nova notes,
including any existing or past defaults and their consequences in
respect of the Terra Nova notes,
. releases and discharges Markel, Terra Nova, Bermuda Holdings and the
Terra Nova trustee from any and all claims such holder may have, now
or in the future, arising out of or related to the Terra Nova notes
and related guarantee, including any claims that such holder is
entitled to receive additional principal or interest payments with
respect to the Terra Nova notes (other than as expressly provided in
this document and in the letter of transmittal and consent) or to
participate in any redemption or defeasance of the Terra Nova notes,
. represents and warrants that the Terra Nova notes tendered were owned
as of the date of tender, free and clear of all liens, charges,
claims, encumbrances, interests and restrictions of any kind,
. consents to the proposed amendments described under "Proposed
Amendments" below, and
. irrevocably constitutes and appoints the exchange agent the true and
lawful agent and attorney-in-fact of the holder with respect to any
tendered Terra Nova notes, with full powers of substitution and
revocation (such power of attorney being deemed to be an irrevocable
power coupled with an interest) to cause the Terra Nova notes tendered
to be assigned, transferred and exchanged in the applicable exchange
offer.
There is a single form of letter of transmittal and consent that you can fill
out for either series of Terra Nova notes.
Proper Execution and Delivery of Letter of Transmittal and Consent
If you wish to participate in the exchange offers and consent solicitations,
delivery of your Terra Nova notes, signature guarantees and other required
documents are your responsibility. Delivery is not complete until the required
items are actually received by the exchange agent. If you mail these items,
Markel recommends that you:
. use registered mail properly insured with return receipt requested and
. mail the required items sufficiently in advance of the expiration date
with respect to the applicable exchange offer to allow sufficient time
to ensure timely delivery.
Except as otherwise provided below, all signatures on the letter of transmittal
and consent or a notice of withdrawal must be guaranteed by a recognized
participant in the Securities Transfer Agents Medallion Program, the NYSE
Medallion Signature Program or the Stock Exchange Medallion Program. Signatures
on the letter of transmittal and consent need not be guaranteed if:
. the letter of transmittal and consent is signed by a participant in
DTC whose name appears on a security position listing of DTC as the
owner of the Terra Nova notes and that registered holder has not
completed
17
the portion entitled "Special Issuance and Payment Instructions" or
"Special Delivery Instructions" on the letter of transmittal and
consent, or
. the Terra Nova notes are tendered for the account of a firm that is a
member of a registered national securities exchange or the National
Association of Securities Dealers, Inc. or is a commercial bank or
trust company having an office in the United States, each, an
"eligible institution". See Instruction 4 in the letter of transmittal
and consent.
Withdrawal of Tenders and Revocation of Corresponding Consents
Tenders of Terra Nova notes in connection with any of the exchange offers may be
withdrawn at any time prior to expiration of the applicable consent payment
deadline. Tenders of Terra Nova notes may not be withdrawn at any time after the
consent payment deadline. The valid withdrawal of tendered Terra Nova notes
prior to the applicable consent payment deadline will be deemed to be a
concurrent revocation of the related consent to the proposed amendments to the
applicable Terra Nova indenture. You may only revoke a consent by validly
withdrawing the related Terra Nova notes prior to the consent payment deadline.
Tenders of notes made after the Consent Payment Deadline may not be withdrawn.
Beneficial owners desiring to withdraw Terra Nova notes previously tendered
should contact the DTC participant through which they hold their Terra Nova
notes. In order to withdraw Terra Nova notes previously tendered, a DTC
participant may, prior to the applicable consent payment deadline, withdraw its
instruction previously transmitted through ATOP by:
. withdrawing its acceptance through ATOP, or
. delivering to the exchange agent by mail, hand delivery or facsimile
transmission, notice of withdrawal of such instruction.
The notice of withdrawal must contain the name and number of the DTC
participant. Withdrawal of a prior instruction will be effective upon receipt of
the notice of withdrawal by the exchange agent. All signatures on a notice of
withdrawal must be guaranteed by a recognized participant in the Securities
Transfer Agents Medallion Program, the NYSE Medallion Signature Program or the
Stock Exchange Medallion Program, except that signatures on the notice of
withdrawal need not be guaranteed if the Terra Nova notes being withdrawn are
held for the account of an eligible institution. A withdrawal of an instruction
must be executed by a DTC participant in the same manner as the DTC
participant's name appears on its transmission through ATOP to which the
withdrawal relates. A DTC participant may withdraw a tender only if such
withdrawal complies with the provisions described in this paragraph.
Withdrawals of tenders of Terra Nova notes may not be rescinded and any Terra
Nova notes withdrawn will thereafter be deemed not validly tendered for purposes
of either exchange offer. Properly withdrawn Terra Nova notes, however, may be
retendered by following the procedures described above at any time prior to the
consent payment deadline of the applicable exchange offer.
Miscellaneous
All questions as to the validity, form, eligibility (including time of receipt)
and acceptance for exchange of any tender of Terra Nova notes in connection with
any exchange offer will be determined by Markel, in its sole discretion, whose
determination will be final and binding. Markel reserves the absolute right to
reject any or all tenders not in proper form or the acceptance for exchange of
which may, in the opinion of counsel for Markel, be unlawful. Markel also
reserves the absolute right to waive any defect or irregularity in the tender of
any Terra Nova notes in either exchange offer, and the interpretation by Markel
of the terms and conditions of its exchange offers (including the instructions
in the letter of transmittal and consent) will be final and binding on all
parties. None of Markel, Terra Nova, the exchange agent, the information agent,
the dealer manager or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
Tenders of Terra Nova notes involving any irregularities will not be deemed to
have been made until those irregularities have been cured or waived. Terra Nova
notes received by the exchange agent in connection with any exchange offer that
are not validly tendered and as to which the irregularities have not been cured
or waived will be returned by the exchange agent to the DTC participant who
delivered those Terra Nova notes by crediting an account maintained at DTC
designated by that DTC participant as promptly as practicable after the
expiration date of the applicable exchange offer or the withdrawal or
termination of the applicable exchange offer.
Transfer Taxes
Markel will pay all transfer taxes, if any, applicable to the transfer and sale
of Terra Nova notes to Markel in the exchange offers. If transfer taxes are
imposed for any other reason, the amount of those transfer taxes, whether
18
imposed on the registered holders or any other persons, will be payable by the
tendering holder. Other reasons transfer taxes could be imposed include:
. if Markel notes in book-entry form are to be registered in the name of
any person other than the person signing the letter of transmittal and
consent, or
. if tendered Terra Nova notes are registered in the name of any person
other than the person signing the letter of transmittal and consent.
If satisfactory evidence of payment of or exemption from those transfer taxes is
not submitted with the letter of transmittal and consent, the amount of those
transfer taxes will be billed directly to the tendering holder and/or withheld
from any payments due with respect to the Terra Nova notes tendered by that
holder.
U.S. Federal Backup Withholding; Withholding on Consent Payments to Non-U.S.
Holders
U.S. federal income tax law requires that a holder of Terra Nova notes, whose
notes are accepted for exchange, provide the exchange agent, as payer, with the
holder's correct taxpayer identification number or otherwise establish a basis
for an exemption from backup withholding. This information should be provided on
Internal Revenue Service Substitute Form W-9 in the case of a U.S. holder
described below. In the case of a holder who is an individual, including most
resident aliens, this identification number is his or her social security
number. For holders other than individuals, the identification number is an
employer identification number. Exempt holders, including, among others, all
corporations and certain foreign individuals, are not subject to these backup
withholding and reporting requirements, but must establish that they are so
exempt. If you do not provide the exchange agent with your correct taxpayer
identification number or an adequate basis for an exemption or a completed IRS
Form W-8BEN ("Certificate of Foreign Status of Beneficial Owner for United
States Tax Withholding"), you may be subject to backup withholding on consent
payments and a penalty imposed by the IRS. Backup withholding is not an
additional federal income tax. Rather, the amount of tax withheld will be
credited against the federal income tax liability of the holder subject to
backup withholding. If backup withholding results in an overpayment of taxes,
you may obtain a refund from the IRS. You should consult with a tax advisor
regarding qualifications for exemption from backup withholding and the procedure
for obtaining the exemption.
Exchange Agent
JPMorgan Chase Bank has been appointed the exchange agent for the exchange
offers and consent solicitations. Letters of transmittal and consent and all
correspondence in connection with the exchange offers should be sent or
delivered by each holder of Terra Nova notes, or a beneficial owner's custodian
bank, depositary, broker, trust company or other nominee, to the exchange agent
at the addresses and telephone numbers set forth on the back cover page of this
prospectus and consent solicitation statement. Markel will pay the exchange
agent reasonable and customary fees for its services and will reimburse it for
its reasonable, out-of-pocket expenses in connection therewith. J.P.Morgan
Securities Inc., the dealer manager is an affiliate of JPMorgan Chase Bank, the
exchange agent.
Information Agent
Mackenzie Partners, Inc. has been appointed as the information agent for the
exchange offers and the consent solicitations, and will receive customary
compensation for its services. Questions concerning tender procedures and
requests for additional copies of this prospectus and consent solicitation
statement or the letter of transmittal and consent should be directed to the
information agent at the address and telephone numbers set forth on the back
cover page of this prospectus and consent solicitation statement. Holders of
Terra Nova notes may also contact their custodian bank, depositary, broker,
trust company or other nominee for assistance concerning the exchange offers.
Dealer Manager
Markel has retained J.P. Morgan Securities Inc. to act as dealer manager in
connection with the exchange offers and consent solicitations and will pay to
the dealer manager for soliciting tenders in the exchange offers a customary
percentage of the total principal amount outstanding of each series of Terra
Nova notes if the consent condition is satisfied and the exchange offers are
completed. Markel will also reimburse the dealer manager for certain expenses.
The obligations of the dealer manager to perform this function are subject to
certain conditions. Markel has agreed to indemnify the dealer manager against
certain liabilities, including liabilities under the federal securities laws.
Questions regarding the terms of the exchange offers or the consent
solicitations may be directed to the dealer manager at the address and telephone
numbers set forth on the back cover page of this prospectus and consent
solicitation statement.
From time to time, the dealer manager has provided, and may provide in the
future, investment banking, commercial banking and other services for Markel and
Terra Nova.
19
Other Fees and Expenses
Markel will pay the expenses of soliciting tenders of the Terra Nova notes. The
principal solicitation is being made by mail; however, additional solicitations
may be made by facsimile transmission, telephone or in person by the dealer
manager and the information agent, as well as by officers and other employees of
Markel and its affiliates.
Tendering holders of Terra Nova notes will not be required to pay any fee or
commission to the dealer manager. However, if a tendering holder handles the
transaction through its broker, dealer, commercial bank, trust company or other
institution, that holder may be required to pay brokerage fees or commissions.
20
DESCRIPTION OF DIFFERENCES BETWEEN
THE TERRA NOVA NOTES AND THE MARKEL NOTES
The following is a summary comparison of the material terms of the Terra Nova
notes and the Markel notes. The Markel 7.2% notes due 2007 and the Markel 7.0%
notes due 2008 will each be governed by a separate Markel indenture which will
be substantially the same as the indentures governing the Terra Nova notes
except for the material terms described below and differences arising from the
original issuance of the Terra Nova notes in a transaction exempt from
registration under the Securities Act of 1933. The summary does not purport to
be complete and is qualified in its entirety by reference to the Terra Nova
indentures and the Markel indentures. Copies of those indentures have been filed
as exhibits to the registration statement of which this prospectus and consent
solicitation statement forms a part and are available from the information agent
upon request. See "Where You Can Find More Information" for information as to
how you can obtain a copy of these indentures from the SEC.
The Terra Nova notes represent, as of the date of this prospectus and consent
solicitation statement, the only debt securities issued under the Terra Nova
indentures.
The description of the Terra Nova notes reflects the Terra Nova notes as
currently constituted and does not reflect any changes to the covenants and
other terms of the Terra Nova notes or the Terra Nova indentures that may be
effected following the consent solicitations as described under "The Proposed
Amendments."
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The Terra Nova Notes The Markel Notes
-------------------- ----------------
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Limitation on Liens Limitation on Liens
The Terra Nova indentures provide that Bermuda Holdings will The Markel indentures will provide that Markel may not, and may
not, and will not permit, any of its restricted subsidiaries, to not permit, any subsidiary to create, assume, incur or allow to
directly or indirectly create, incur, assume or allow to exist exist any lien, other than a purchase money lien, on any capital
any lien securing indebtedness, as defined in the Terra Nova stock of any restricted subsidiary of Markel to secure any
indentures, other than permitted liens, on any property or asset obligation, as defined in the Markel indentures, without making
or on any related income or profits unless all payments under provisions so that all of the then outstanding Markel notes will
the applicable Terra Nova indenture and the applicable Terra be directly secured equally and ratably with that obligation.
Nova notes are secured on an equal and ratable basis with, or This restriction will not apply to any liens existing on the
prior to, the obligations so secured until those obligations are date of the Markel indentures. In addition, this provision will
no longer secured by a lien. not restrict any other property or Markel or its subsidiaries.
As used in the Terra Nova indentures, "permitted liens" means: As used in the Markel indentures, a "purchase money lien" will
mean:
. liens securing indebtedness pursuant to any credit
agreement that is permitted by the terms of the . any mortgage, pledge, hypothecation, lien,
applicable Terra Nova indenture; encumbrance, charge or security interest on any
capital stock of any restricted subsidiary acquired
. liens in favor of Bermuda Holdings or any restricted after the date of the Markel indentures if the
subsidiary; purchase money lien is for the purpose of financing,
and does not exceed, the cost to Markel or its
. specified liens on property existing at the time an subsidiary of acquiring the capital stock or
capital stock or property of that restricted entity property of that restricted subsidiary and the
is merged into or consolidated with Bermuda financing is effected concurrently with, or within
subsidiary and the financing is effected Holdings or six months after, the date of that acquisition; and
any of its restricted subsidiaries;
. any extension, renewal or refinancing of any
. specified liens on property existing at the time of purchase money lien so long as the principal amount
its acquisition; of obligations secured thereby will not exceed the
original principal amount of obligations so secured
. specified liens to secure the performance of at the time of that extension, renewal or
statutory obligations, surety or appeal bonds or refinancing.
performance bonds, or landlords', carriers',
warehousemen's, mechanics', suppliers',
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21
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The Terra Nova Notes The Markel Notes
-------------------- ----------------
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materialmen's or other like liens, in any case
incurred in the ordinary course of business; and for
. liens existing on the date of the applicable Terra
Nova indenture;
. specified liens for taxes or governmental charges or
claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings;
. specified liens with respect to obligations under
currency agreements or interest swap obligations and
other similar arrangements designed to protect
Bermuda Holdings or any of its restricted
subsidiaries against fluctuations in the value of
investments;
. liens incurred in the ordinary course of business of
Bermuda Holdings or any of its subsidiaries with
respect to obligations permitted under the
applicable Terra Nova indenture that do not exceed
$10.0 million in principal amount in the aggregate
at any one time outstanding; and
. specified liens on assets of unrestricted
subsidiaries.
A "restricted subsidiary" means any subsidiary other than an
unrestricted subsidiary.
An "unrestricted subsidiary" means any subsidiary that is A "restricted subsidiary" will mean any subsidiary of Markel
designated by the board of directors as an unrestricted that is a licensed insurance company. On the date hereof, the
subsidiary; but only if the subsidiary: restricted subsidiaries of Markel are:
. is designated an unrestricted subsidiary before . Associated International Insurance Company,
formation;
. Corpagnie de Reassurance d'Die-de-Fran Deerfield Insurance
. has total assets at the time of formation with a Company,
fair market value, as defined in the Terra Nova
indentures, not exceeding $1,000, . Essex Insurance Company,
. has no indebtedness other than non-recourse . Evanston Insurance Company,
indebtedness, as defined in the Terra Nova
indentures; . Markel American Insurance Company,
. is not party to any agreement or understanding with . Markel Insurance Company,
Bermuda Holdings or any of its restricted
subsidiaries unless the terms of the agreement or . Terra Nova (Bermuda) Insurance Company Ltd.,
understanding are no less favorable to Bermuda
Holdings or the restricted subsidiary than those . Terra Nova Insurance Company Limited.
that might be obtained at the time from entities who
are not
The Markel indentures will not prohibit the sale by Markel or
any subsidiary of any capital stock, indebtedness or assets of
any subsidiary, including any restricted subsidiary.
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22
The Terra Nova Notes The Markel Notes
-------------------- ----------------
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affiliates;
. is an entity with respect to which neither Bermuda
Holdings nor any of its restricted subsidiaries has
any direct or indirect obligation to subscribe for
additional capital stock or to maintain or preserve
the entity's financial condition or to cause the
entity to achieve any specified levels of operating
results; and
. has not guaranteed or otherwise provided credit
support for any indebtedness of Bermuda Holdings or
any of its restricted subsidiaries.
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Reports Reports
Whether or not required by the Exchange Act, so long as any Under the Markel indentures, Markel will not covenant to provide
Terra Nova notes are outstanding, Bermuda Holdings will furnish reports or financial information.
to the holders of Terra Nova notes all financial information
that would be required to be contained in a filing with the SEC
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 this information and these
reports with the SEC for public availability, unless the SEC
will not accept such a filing, and Bermuda Holdings will also
make this information available to investors and some others who
request it in writing.
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Merger, Consolidation or Sale of Assets Merger, Consolidation or Sale of Assets
The Terra Nova indentures provide that Bermuda Holdings will not The Markel indentures will provide that Markel will not, in any
consolidate with or merge with or into any other entity or, transaction, consolidate with or merge with or into any other
directly or indirectly, sell, or otherwise dispose of all or entity or, directly or indirectly, sell, or otherwise dispose of
substantially all of its assets in one or more related all or substantially all of its assets in one or more related
transactions unless, at the time and after giving effect thereto: transactions unless, at the time and after giving effect
thereto:
. Bermuda Holdings is the continuing corporation, or
the surviving entity, if other than Bermuda . Markel is the continuing corporation, or the
Holdings, is a corporation organized and validly surviving entity, if other than Markel, is a
existing under the laws of specified jurisdictions corporation organized and validly existing under the
or any other jurisdiction that is not materially laws of any domestic or foreign jurisdiction and
adverse to the holders of the Terra Nova notes and expressly assumes all the obligations of Markel
under the applicable Markel indenture;
23
The Terra Nova Notes The Markel Notes
-------------------- ----------------
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expressly assumes all the obligations of Bermuda Markel indenture;
Holdings under the guarantee and the applicable . immediately before and after the transaction, giving
Terra Nova indenture; effect to that transaction, no default or event of
default under the applicable Markel indenture shall
. immediately before and after the transaction, giving have occurred and be continuing; and
effect to that transaction, no default or event of
default under the applicable Terra Nova indenture . if any of the property or assets of Markel would
shall have occurred and be continuing; become subject to any lien, the outstanding Markel
notes shall be secured equally and ratably with, or
. immediately after giving effect to the transaction prior to, the obligation or liability secured by
on a pro forma basis, the consolidated net worth of that lien, unless Markel could create that lien
Bermuda Holdings or the surviving entity, if other without equally and ratably securing the Markel
than Bermuda Holdings, is at least equal to the notes.
consolidated net worth of Bermuda Holdings
immediately before the transaction; and
. if any of the property or assets of Bermuda Holdings
would become subject to any lien, the outstanding
Terra Nova notes shall be secured equally and
ratably with, or prior to, the obligation or
liability secured by that lien, unless Bermuda
Holdings could create that lien without equally and
ratably securing the Terra Nova notes.
. Bermuda Holdings or the surviving entity, if other
than Bermuda Holdings, shall be entitled to all the
benefits of the tax sharing agreement.
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Payment of Additional Amounts Payment of Additional Amounts
If any deduction or withholding for taxes or other governmental Under the Markel indentures, Markel will not covenant to pay any
charges of the U.K., Bermuda or any relevant jurisdiction or any additional amounts.
political subdivision or taxing authority thereof, referred to
as a "relevant jurisdiction" is required in respect of any
amounts to be paid under the Terra Nova notes or under the
guarantee, Terra Nova or Bermuda Holdings, as applicable, will
pay such additional amounts as may be necessary so that the net
amounts received by a holder of a Terra Nova note after the
deduction or withholding will not be less than the amounts
specified in the Terra Nova note to which the holder is
entitled. However, neither Terra Nova nor Bermuda Holdings is
required to make any payment of additional amounts for:
. any tax or other governmental charge which would not
have been imposed but for:
- the existence of any present or former
connection between the holder, or between
specified other
24
The Terra Nova Notes The Markel Notes
-------------------- ----------------
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parties if the holder is an estate, nominee,
trust, partnership or corporation, otherwise
than merely by the holding of a Terra Nova
note or the receipt of amounts payable in
respect of the Terra Nova notes, and any
relevant jurisdiction or the holder being
subject to the jurisdiction of any relevant
jurisdiction; or
- the presentation of the Terra Nova note, if
required, for payment on a date more than 30
days after the date on which the 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 Terra Nova notes
been presented on the last day of the period
of 30 days;
. any tax or other governmental charge that is imposed
or withheld because the holder does not provide
information, documents or other evidence requested
by Terra Nova concerning the nationality, residence,
identity or connection with the taxing jurisdiction
of the holder which is required as a precondition to
exemption from all or part of that tax or
governmental charge;
. payments in respect of Terra Nova definitive notes
issued at the request of the holder, including on or
after the occurrence of an event of default; or
. any combination of the foregoing.
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Events of Default and Remedies Events of Default and Remedies
The Terra Nova indentures provide that each of the following The The following will be events of default under the Markel
following will be events of default under the Markel constitutes indentures with respect to the Markel notes:
an event of default: indentures with respect to the Markel
notes: . failure to pay principal of or any premium on the
Markel notes when due; or
. default in the payment of interest on any Terra Nova
note when the payment becomes due and payable and
the continuance of the default for a period of 30 . failure to pay any interest on the Markel notes when
days; or due, continued for 30 days; or
. default in the payment of the principal of (or . failure to perform any covenant of Markel in the
premium, if any, on) any Terra Nova note at its applicable indenture continued for 60 days after
maturity; or written notice has been given by the trustee or the
holders of at least 25% in
. default in the performance of any covenant of
25
The Terra Nova Notes The Markel Notes
-------------------- ----------------
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Terra Nova or Bermuda Holdings in the applicable the trustee or the holders of at least 25% in
Terra Nova indenture, other than the payment principal amount of the applicable outstanding
obligations specified above or the covenant with Markel notes, as provided in the Indenture; or
respect to mergers, and continuance of the default
for a period of 60 days after written notice . acceleration of any indebtedness for money borrowed
specifying the default and stating that the notice is by Markel having an aggregate principal amount
a "notice of default" has been given, by registered outstanding of at least $10 million if that
or certified mail, to Terra Nova or Bermuda Holdings, indebtedness has not been discharged or the
by the trustee or to Terra Nova or Bermuda Holdings acceleration has not been rescinded or annulled
and the trustee by the holders of at least 25% in within 10 days after written notice has been given
principal amount of the outstanding applicable Terra by the trustee, or the holders of at least 25% in
Nova notes; or outstanding principal amount of the applicable
Markel notes, as provided in the indenture; or
. an event of default has occurred under the
indebtedness of Bermuda Holdings or any restricted . specified events of bankruptcy, insolvency or
subsidiary for money borrowed, or the payment of reorganization.
which is guaranteed by Bermuda Holdings or any of
its restricted subsidiaries, having an aggregate
outstanding principal amount of not less than $10.0
million, if the default has resulted in that
indebtedness becoming due and payable prior to the
date on which it would otherwise become due and
payable, and the event has not been cured or
rescinded or the indebtedness has not been satisfied
within ten business days of the event, or
. a default in any payment when due at final stated
maturity of any indebtedness outstanding in an
aggregate principal amount of not less than $10.0
million and the default has not been cured or the
indebtedness has not been satisfied within ten
business days; or
. final judgments are rendered against Bermuda
Holdings, Terra Nova or any restricted subsidiary
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 the judgment or order is
not discharged and either
- any creditor has commenced an enforcement
proceeding upon the judgment or order, which
enforcement proceeding has remained unstayed
for a period of 10 days, or
- a period of 60 days, during which a
26
The Terra Nova Notes The Markel Notes
-------------------- ----------------
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stay of enforcement has not been in effect, has elapsed
following the date on which any period for appeal has
expired; or
. a decree or order is entered
- for relief against Terra Nova, Bermuda Holdings or any
principal insurance subsidiary, as defined in the applicable
Terra Nova indenture, in an involuntary bankruptcy proceeding, or
- adjudging Terra Nova, Bermuda Holdings or any principal
insurance subsidiary bankrupt or insolvent, or seeking
reorganization or comparable relief in respect of Terra Nova,
Bermuda Holdings or any principal insurance subsidiary, or
appointing a custodian or other similar official of Terra Nova,
Bermuda Holdings or any principal insurance subsidiary or of any
substantial part of their properties, or ordering the winding up
or liquidation of any of their affairs, and the decree or order
remains unstayed and in effect for a period of 60 consecutive
days; or
. Terra Nova, Bermuda Holdings or any principal insurance subsidiary
institutes a voluntary case or proceeding under applicable bankruptcy
or similar law, or Terra Nova, Bermuda Holdings or any principal
insurance subsidiary files a petition or answer or consent seeking
reorganization or relief under applicable bankruptcy or similar law, or
Terra Nova, Bermuda Holding or any principal insurance subsidiary
consents to the entry of a decree or order for relief in any involuntary
case or proceeding under applicable bankruptcy law, or consents to the
filing of any such petition or to the appointment of or taking
possession by a custodian or other similar official of any of Terra
Nova, 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
. default in the performance, or breach, of the provisions described
under "--Merger, Consolidation or Sale of Assets."
27
The Terra Nova Notes The Markel Notes
-------------------- ----------------
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Terra Nova is required, if a default has occurred and is
continuing or under other circumstances, to deliver to the
Trustee a statement specifying the default or other
circumstance.
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Corporate Existence Corporate Existence
Subject to the covenants with respect to consolidation, merger Subject to the covenants with respect to consolidation, merger
and consolidation discussed above, each of Terra Nova and and conveyance discussed above, Markel will agree in the Markel
Bermuda Holdings have agreed in the Terra Nova indentures to indentures to maintain its corporate existence, corporate
maintain its corporate existence and that of its subsidiaries, rights, corporate licenses and corporate franchises. However,
as well as the corporate rights, corporate licenses and Markel will not be required to maintain its rights, licenses or
corporate franchises of Terra Nova, Bermuda Holdings and their franchises if its board of directors determines that the
respective subsidiaries, except where failure to do so would not preservation thereof is no longer desirable in the conduct of
have a material adverse effect on Bermuda Holdings and its its business and that the loss thereof is not disadvantageous in
subsidiaries taken as a whole determined on a consolidated basis any material respect to the holders of the applicable notes.
in accordance with generally accepted accounting principles.
However, none of Terra Nova, Bermuda Holdings or their
respective subsidiaries is required to maintain its existence
(other than Bermuda Holdings), rights, licenses or franchises if
its respective board of directors determines that the
preservation thereof is no longer desirable in the conduct of
its business and that the loss thereof is not disadvantageous in
any material respect to the holders of the applicable Terra Nova
notes.
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Payment of Taxes and Other Claims Payment of Taxes and Other Claims
Under the Terra Nova indentures, Bermuda Holdings covenants to The Markel indenture will contain a comparable covenant except
pay or discharge before the following becomes delinquent, that the Markel covenant will not require that Markel maintain
reserves in connection with any tax, assessment, charge, or
. all material taxes, assessments and governmental claim which is being contested in good faith.
charges levied or imposed upon Bermuda Holdings or
any subsidiary or upon the income, profits or
property of Bermuda Holdings or any subsidiary, and
. all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon
the property of Bermuda Holdings or any subsidiary.
Bermuda Holdings is not required to pay or discharge any tax,
assessment charge or claim which is being contested in good
faith by appropriate proceedings and for which appropriate
reserves are being maintained in accordance with generally
accepted accounting principles.
------------------------------------------------------------------..----------------------------------------------------------------
Meetings Meetings
The Terra Nova indentures do not provide for noteholder The Markel indentures will provide that meetings of holders of
meetings. Markel notes may be convened on notice:
. by the Markel trustee,
. by us, if we ask the Markel trustee to call a
28
The Terra Nova Notes The Markel Notes
-------------------- ----------------
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meeting and it fails to do so, or
. by the holders of 10% in principal amount of the
Markel notes, if they ask the Markel trustee to call
a meeting and it fails to do so.
Holders entitled to vote a majority in principal amount of the
Markel notes constitute a quorum at any meeting of holders.
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Maintenance of Properties Maintenance of Properties
In the Terra Nova indentures, Bermuda Holdings agrees to cause In the Markel indentures, Markel will agree to cause all
all properties owned by or leased to it or its subsidiaries and properties owned by or leased to it or its subsidiaries and used
used or useful in the conduct of its business or the business of or useful in the conduct of its business or the business of its
its subsidiaries to be maintained and kept in normal condition, subsidiaries to be maintained and kept in normal condition,
ordinary wear and tear excepted. However, nothing in the ordinary wear and tear excepted. However, nothing in the Markel
indenture prevents Bermuda Holdings or its subsidiaries from indentures will prevent Markel or its subsidiaries from
discontinuing the use, operation or maintenance of its discontinuing the use, operation or maintenance of its
properties or disposing of them, if, in the judgment of Bermuda properties or disposing of them, if, in the judgment of Markel's
Holdings' board of directors or the board of the applicable board of directors or the board of the applicable subsidiary, or
subsidiary, or of any officer having managerial responsibility of any officer having managerial responsibility for the
for the applicable property, this action is desirable in the applicable property, this action is desirable in the conduct of
conduct of the business of Bermuda Holdings or any of its the business of Markel or any of its subsidiaries.
subsidiaries and the discontinuance or disposal is not adverse
in any material respect to the holders of the applicable Terra
Nova notes.
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Other Covenants Other Covenants
The Terra Nova indentures also provide: There will be no comparable covenants in the Markel indentures.
. Bermuda Holdings and its subsidiaries will
carry insurance against loss or damage of the
kinds customarily insured against by similarly
situated corporations;
. Bermuda Holdings and its subsidiaries will
keep proper and true books of record and
account;
. Bermuda Holdings and its subsidiaries will
comply with all applicable statutes and
regulations except where a failure to do so is
not likely to have a material adverse effect
on the business prospects, assets or condition
or results of operation of Bermuda Holdings
and its subsidiaries taken as a whole; and
. Terra Nova and Bermuda Holdings waive, to the
extent they may lawfully do so, any stay,
extension or usury law affecting the covenants
or performance of the Terra Nova indentures or
the execution of any power granted to the
trustee.
29
THE PROPOSED AMENDMENTS
Markel is soliciting the consent of the holders of Terra Nova notes to
. eliminate some covenants in the Terra Nova indentures,
. eliminate restrictions on Terra Nova's ability to consolidate, merge
or sell all or substantially all of its assets and
. eliminate some events of default under the Terra Nova indentures.
You are urged to read the forms of supplemental indentures that have been filed
as exhibits to the registration statement of which this prospectus and consent
solicitation statement forms a part for a complete understanding of the
provisions of the Terra Nova indentures to be eliminated. The forms of
supplemental indentures are available from the Information Agent upon request.
See "Where You Can Find More Information" for information as to how you can
obtain a copy of the Terra Nova indentures, the forms of supplemental indentures
and the Markel indenture from the SEC.
Provisions or the Terra Nova Indentures to be Deleted
Markel is proposing to delete the following covenants from the Terra Nova
indentures:
. The covenant in Section 9.2 entitled "Corporate Existence," which is
described above under "Description of Differences Between the Terra
Nova Notes and the Markel Notes - Corporate Existence."
. The covenant in Section 9.3 entitled "Payment of Taxes and Other
Claims." Under Section 9.3, Bermuda Holdings covenants to pay or
discharge, before the same becomes delinquent,
-- all material taxes, assessments and governmental charges
levied or imposed upon Terra Nova or any subsidiary or upon
the income, profits or property of Bermuda Holdings or any
subsidiary, and
-- all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien upon the property of
Bermuda Holdings or any subsidiary.
. The covenants in Sections 9.4 under the title "Maintenance of
Properties; Insurance; Books and Records; Compliance with Law,"
which are described above under "Description of Differences Between
the Terra Nova Notes and the Markel Notes - Maintenance of
Properties" and the first three paragraphs of "Description of
Differences Between the Terra Nova Notes and the Markel Notes -
Other Covenants."
. The covenant in Section 9.8 entitled "Liens," which is described
above under "Description of Differences Between the Terra Nova Notes
and the Markel Notes -- Limitation on Liens."
. The covenant in Section 9.18(b) under the title "Statement as to
Compliance; Notice of Default; Provision of Financial Statements."
Under Section 9.18(b), Terra Nova must deliver to the Trustee a
certificate specifying any default that has occurred and is
continuing or any notice given or action taken by a trustee for or
holder of any indebtedness of Terra Nova or Bermuda Holdings, other
than indebtedness in the aggregate principal of less than
$5,000,000, with respect to a claimed default within five days of
its occurrence.
. The covenants in Section 9.18(c) and (d) under the title "Statement
as to Compliance; Notice of Default; Provision of Financial
Statements," which are described above under "Description of
Differences Between the Terra Nova Notes and the Markel Notes -
Reports."
. The covenant in Section 9.19 entitled "Waiver of Stay, Extension of
Usury Laws," which is described above under the last paragraph of
"Description of Differences Between the Terra Nova Notes and the
Markel - Other Covenants."
. The covenants in Section 7.1 and 7.2 entitled "Bermuda Holdings May
Consolidate, etc., Only on Certain Terms" and "Successor
Substituted," respectively, which is described above under
"Description of Differences Between the Terra Nova Notes and the
Markel Notes - Merger, Consolidation, or Sale of Assets."
30
In conjunction with the deletion of the covenants identified above, Markel is
proposing to delete the following defined terms in the indenture, which are used
only in those covenants or in other defined terms being deleted: "Permitted
Liens", "Restricted Subsidiary"; and "Wholly-owned Restricted Subsidiary."
Markel is also requesting a waiver with respect to any default, event of default
or other consequence under the Terra Nova indentures of failing to comply with
the terms of the covenants identified above (whether before or after the date of
the supplemental indentures) and to delete clauses (d), (e), (f) and (g) from
the definition of "Event of Default" in Section 4.1, "Events of Default." These
clauses provide, respectively, that each of the following constitutes an "event
of default":
. a default in any payment when due at final stated maturity of any
indebtedness outstanding in an aggregate principal amount of not
less than $10.0 million and the default has not been cured or the
indebtedness has not been satisfied within ten business days; or
. final judgments are rendered against Bermuda Holdings, Terra Nova or
any restricted subsidiary 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 the
judgment or order is not discharged and either
- any creditor has commenced an enforcement proceeding upon the
judgment or order, which enforcement proceeding has remained
unstayed for a period of 10 days, or
- a period of 60 days, during which a stay of enforcement has
not been in effect, has elapsed following the date on which
any period for appeal has expired; or
. Terra Nova, Bermuda Holdings or any principal insurance subsidiary
institutes a voluntary case or proceeding under applicable
bankruptcy or similar law, or Terra Nova, Bermuda Holdings or any
principal insurance subsidiary files a petition or answer or consent
seeking reorganization or relief under applicable bankruptcy or
similar law, or Terra Nova, Bermuda Holding or any principal
insurance subsidiary consents to the entry of a decree or order for
relief in any involuntary case or proceeding under applicable
bankruptcy law, or consents to the filing of any such petition or to
the appointment of or taking possession by a custodian or other
similar official of any of Terra Nova, 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.
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CERTAIN RELATED TRANSACTIONS
At December 31, 2001, Terra Nova had outstanding interest free short-term
borrowings of $54.8 million due to Markel.
Effective January 1, 2001, Terra Nova entered into a quota share reinsurance
agreement with certain United States insurance subsidiaries of Markel. Under the
quota share reinsurance agreement, Terra Nova's subsidiary, Markel Capital
Limited, cedes 24% of 2001 year of account net written premiums and related
losses and expenses to these subsidiaries. For the year ended December 31, 2001,
Terra Nova ceded premiums totaling $71.3 million.
A subsidiary of Markel provides administrative support services to Terra Nova.
Markel charges Terra Nova a proportional share of its administrative costs based
on estimates of the percentage of work the individual Markel departments perform
for Terra Nova. In the opinion of management, Terra Nova is being charged for
all costs incurred on its behalf by Markel under a comprehensive and reasonable
cost allocation method.
As of April 5, 2002, Markel or its subsidiaries held approximately $2.0 million
in total principal amount of the 7.2% Terra Nova notes and $2.5 million in total
principal amount of the 7.0% Terra Nova notes. The Terra Nova notes held by
Markel or its subsidiaries will not be deemed outstanding for determining the
amount required for consent to the amendments to the Terra Nova indentures.
32
DESCRIPTION OF THE MARKEL NOTES
If the exchange offers are consummated, the Markel notes to be issued in
exchange for the Terra Nova notes will be issued under indentures, dated as of
May 1, 2002, as amended, with JPMorgan Chase Bank as trustee referred to as the
"Markel trustee." The Markel indentures will for purposes of the following
description of the Markel notes, be referred to as the "Markel indentures." The
Markel notes will be issued only in book-entry form in denominations of $1,000
and integral multiples of $1,000.
The following summary of some of the provisions of the Markel indentures does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to the Trust Indenture Act of 1939, and to all of the provisions of
the Markel indentures, including the definitions of terms in the Markel
indentures. The Markel indentures are subject to and governed by the Trust
Indenture Act.
Copies of the Markel indentures may be obtained from the information agent and
are also filed as exhibits to the registration statement of which this
prospectus and consent solicitation statement is a part. See "Where You Can Find
More Information" for information as to how you can obtain copies of the Markel
indentures from the SEC.
Principal, Maturity and Interest
The Markel 7.0% notes will be limited in an aggregate principal amount to $100.0
million. The Markel 7.0% notes will mature on May 15, 2008. Interest on the
Markel 7.0% notes will accrue at the rate of 7% per annum and will be payable
semi-annually in arrears in cash on each November 15 and May 15, commencing on
November 15, 2002, to holders of record on the immediately preceding November 1
and May 1, respectively. Each Markel 7.0% note will bear interest from the last
date to which interest has been paid on the Terra Nova 7% notes.
The Markel 7.2% notes will be limited in an aggregate principal amount to $75.0
million. The Markel 7.2% notes will mature on August 15, 2007. Interest on the
Markel 7.2% notes will accrue at the rate of 7.2% per annum and will be payable
semi-annually in arrears in cash on each February 15 and August 15, commencing
on August 15, 2002, to holders of record on the immediately preceding January 31
and July 31, respectively. Each Markel 7.2% note will bear interest from the
last date to which interest has been paid on the Terra Nova 7.2% notes.
Ranking; Additional Debt
The Markel notes will be our unsecured obligations. The Markel notes will rank
senior in right of payment to all subordinated indebtedness of Markel and
equally in right of payment with all indebtedness of Markel not expressly
subordinated or secured. The Markel indentures will not limit the amount of debt
that we or any of our subsidiaries may incur or issue, nor will they restrict
transactions between us and our affiliates or dividends and other distributions
by us or our subsidiaries.
Because Markel is a holding company that conducts all of its operations through
its subsidiaries, its ability to meet its obligations under the Markel notes is
dependent on the earnings and cash flows of those subsidiaries and the ability
of those subsidiaries to pay dividends or to advance or repay funds to Markel.
Payment of dividends or advances from Markel's insurance subsidiaries may
require prior regulatory notice or approval. Holders of Markel notes will
generally have a junior position to claims of creditors of Markel's
subsidiaries, including any holders of Terra Nova notes not validly tendered and
accepted in the exchange offers. As of March 31, 2002, the aggregate amount of
outstanding long-term debt of Markel's subsidiaries to which holders of the
Markel notes would have been structurally subordinated was approximately $170.5
million, all of which consists of both series of Terra Nova notes for which
Markel is making the exchange offers less the amount of Terra Nova notes held by
Markel and its subsidiaries. See "Risk Factors -- Risks Relating to the Exchange
Offers and Consent Solicitation Statement -- Our holding company structure
results in substantial structural subordination and may affect our ability to
make payments on the Markel notes."
Optional Redemption
Markel will have the right to redeem the Markel notes, in whole or in part, at
any time, at a redemption price equal to:
. the sum of the principal amount of the Markel notes being redeemed,
plus accrued and unpaid interest, and
. the excess, if any, of (i) the sum, as determined by a quotation
agent, of the present values of the principal amount of the Markel
notes, together with scheduled payments of interest from the
redemption date to the stated maturity of the Markel 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
Markel notes to be redeemed.
33
The quotation agent means the reference treasury dealer appointed by Markel. The
term reference treasury dealer means a primary treasury dealer selected by
Markel and its respective successors and two other primary treasury dealers
selected by the primary treasury dealer selected by Markel and any other primary
treasury dealer selected by the Markel trustee after consultation with Markel.
If however, either of the reference treasury dealers selected by the primary
treasury dealer selected by Markel ceases to be a primary U.S. government
securities dealer in New York City, the primary treasury dealer selected by
Markel will substitute another primary treasury dealer unless that dealer has
ceased to be a primary treasury dealer, in which case Markel shall substitute
another primary treasury dealer.
A 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, furnished to the
Markel trustee on the third business day preceding the redemption date.
The "adjusted treasury rate" means, for 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
that redemption date, calculated on the third business day preceding the
redemption date, plus in each case 0.20%. "Comparable treasury issue" means the
United States Treasury security selected by the quotation agent as having a
maturity comparable to the remaining term of the Markel notes that would be
used, 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 Markel notes.
The "comparable treasury price" means for any redemption date:
. the average of the bid and asked prices for the comparable treasury
issue, expressed as a percentage of its principal amount, on the
third business day before the 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
. if that release or any successor release, is not published or does
not contain those prices on that business day, the average of the
reference treasury dealer quotations for that redemption date, after
excluding the highest and lowest reference treasury dealer
quotations, or if the quotation agent obtains fewer than three
reference treasury dealer quotations, the average of all the
quotations.
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 Markel notes to be redeemed at
its registered address. Unless Markel defaults in payment of the redemption
price, on and after the redemption date interest ceases to accrue on such Markel
notes called for redemption.
Markel may purchase Markel notes at any price in the open market or otherwise.
Notes so purchased by Markel may, at Markel's discretion, be held or resold or
surrendered to the Markel trustee for cancellation.
Limitation on Liens
The Markel indentures will provide that Markel will not, and will not permit any
of its subsidiaries to create, incur or suffer to exist any lien, other than a
purchase money lien, upon any capital stock, of any restricted subsidiary to
secure any obligation of Markel, any subsidiary or other person, without making
effective provision for all of the outstanding Markel notes to be directly
secured on an equal and ratable basis with the obligations; provided, however,
that the foregoing restriction will not apply to liens existing as of the date
of the Markel indentures.
Merger, Consolidation or Sale of Assets
The Markel indentures will provide that Markel will not, 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 unless at the time:
. Markel will be the continuing corporation, or the person formed by
that consolidation or merger, or the person that acquires by sale or
other disposition the assets of Markel, substantially as an
entirety, is a corporation duly organized and validly existing under
the laws of any domestic or foreign jurisdiction and, if any person
other than Markel, expressly assumes, by supplemental indenture, in
form reasonably satisfactory to the Markel trustee, all the
obligations of Markel under the applicable Markel indenture;
. immediately before and after that transaction, giving effect to that
transaction, no default or event of default occurred and is
continuing;
. if any of the property or assets of Markel would thereupon become
subject to any lien, the outstanding Markel notes shall be secured
equally and ratably with (or prior to) the obligation or liability
secured by that lien, unless Markel could create that lien without
equally and ratably securing the Markel notes; and
34
. Markel delivers to the Markel trustee an officers' certificate and
an opinion of counsel, each stating that the consolidation, merger,
transfer or lease and the supplemental indenture, if any, complies
with the applicable Markel indenture and that all conditions
precedent provided for in the applicable Markel indenture relating
to that 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
Markel in accordance with the provisions described above, the successor person
formed by that consolidation or into which Markel is merged or to whom that
sale, assignment, conveyance, transfer, lease or other disposition is made will
succeed to, and be substituted for, and may exercise every right and power of
Markel under the applicable Markel indenture with the same effect as if that
successor person had been named as Markel in the applicable Markel indenture.
When a successor assumes all the obligations of its predecessor under the Markel
indenture and the Markel notes, the predecessor will be released from those
obligations; provided that, in the case of a transfer by lease, the predecessor
corporation will not be released from the payment of principal and interest on
the Markel notes.
Events of Default and Remedies
The Markel indentures will provide that each of the following constitutes an
event of default:
. default in the payment of interest on any Markel note for a period
of 30 days after the payment becomes due and payable; or
. default in the payment of the principal of, or premium, if any, on,
any Markel note at its maturity; or
. default in the performance, or breach, of any covenant or agreement
of Markel under the applicable Markel indenture (other than a
default in the performance, or breach, of a covenant or agreement
that is specifically dealt with in the immediately preceding two
paragraphs), for a period of 60 days after there has been given, by
registered or certified mail, to Markel by the Markel trustee or to
Markel and the Markel trustee by the holders of at least 25% in
principal amount of the outstanding Markel notes, a written notice
specifying the default or breach and stating that the notice is a
"notice of default" under the applicable Markel indenture; or
. An event of default shall have occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing any issue of
indebtedness of Markel which issue has an aggregate outstanding
principal amount of not less than $10.0 million, and that default
results in that indebtedness becoming due and payable prior to the
date on which it would otherwise become due and payable, or a
default in any payment when due at final stated maturity of any
indebtedness outstanding in an aggregate principal amount of not
less than $10.0 million and, in each case, within 10 days after
notice has been given, by registered or certified mail, to Markel by
the Markel trustee, or to Markel and the Markel trustee by the
Holders of at least 25% in aggregate principal amount of all of the
Markel notes at the time outstanding; provided that if that
indebtedness shall be remedied or cured by Markel or waived by the
holders of that indebtedness, then:
-- the event of default under the applicable Markel indenture by
reason thereof shall be deemed likewise to have been thereupon
remedied, cured or waived without further action on the part
of either the Markel trustee or any holders of the Markel
notes and
-- any acceleration of the principal of the Markel notes will be
rescinded without further action on the part of either the
Markel trustee or any holders of the Markel notes; or
. a decree or order is entered by a court having jurisdiction:
-- for relief in respect of Markel or any material 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
-- adjudging Markel or any material subsidiary bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment
or composition of or in respect of Markel or any 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 Markel or any material 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
35
such decree or order remains unstayed and in effect for a period of
60 consecutive days; or
. Markel or any material 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 Markel or any material
subsidiary consents to the entry of a decree or order for relief in
respect of Markel or any material 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 Markel or any material 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 Markel or any material 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.
If any event of default (other than an event of default described in the
immediately preceding two paragraphs above) occurs and is continuing, the Markel
trustee or the holders of at least 25% in principal amount of the outstanding
Markel notes, by written notice to Markel (and to the Markel trustee, if that
notice is given by the holders), may, and the Markel trustee at the request of
those holders must, declare all unpaid principal of, premium, if any, and
accrued interest on all the Markel notes to be due and payable immediately. In
the case of an event of default described in the last two paragraphs above, all
outstanding Markel notes will become due and payable without further action or
notice. Holders of the Markel notes may not enforce the applicable Markel
indenture or the Markel notes except as provided in the applicable Markel
indenture. Subject to some limitations, holders of a majority in principal
amount of the then outstanding Markel notes may direct the Markel trustee in its
exercise of any trust or power. The Markel trustee may withhold from holders of
the Markel notes notice of any continuing default or event of default (except a
default or event of default relating to the payment of principal, any premium or
interest) if the board of directors, the executive committee or a trust
committee of directors or responsible officers of the Markel trustee determine
in good faith that withholding the notice is in the interest of the holders.
A "material subsidiary" is, at any date, any consolidated subsidiary of Markel
whole total assets after excluding intercompany accounts, are in excess of 10%
of the total assets of Markel and its consolidated subsidiaries, with any
determination being made as at the end of the most recently completed fiscal
year for which consolidated financial statements have been prepared except to
the extent that on that date the principal financial officers of Markel have
actual reason to know to the contrary.
After a declaration of acceleration, but before a judgment or decree for payment
of the money due has been obtained by the Markel trustee, the holders of at
least a majority in aggregate principal amount of the outstanding Markel notes,
by written notice to Markel and the Markel trustee, may annul such declaration
if Markel has paid or deposited with the Markel trustee a sum sufficient to pay:
. all sums paid or advanced by the Markel trustee under the applicable
Markel indenture and the reasonable compensation, expenses,
disbursements and advances of the Markel trustee, its agents and
counsel,
. all overdue interest on all Markel notes,
. the principal of and premium, if any, on any Markel notes which have
become due otherwise than by that declaration of acceleration and
interest thereon at the rate born by the Markel notes, and
. to the extent that payment of the interest is lawful, interest upon
overdue interest at the rate of the Markel notes;
and all events of default, other than the non-payment of principal of the Markel
notes which have become due solely by the declaration or acceleration, have been
waived as provided in the applicable Markel Indenture or cured. No such
rescission will affect any subsequent default or impair any right.
The holders of a majority in aggregate principal amount of the outstanding
Markel notes by notice to the Markel trustee may on the behalf of the holders of
all of the Markel notes waive any existing or past default or event of default
and its consequences under the applicable Markel 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 Markel notes or in respect of covenants or provisions
in the Markel 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 Markel notes.
36
Markel will be required to deliver to the Markel trustee annually a statement
regarding compliance with the applicable Markel indenture, and Markel is
required, upon becoming aware of any default or event of default, to deliver to
the Markel 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 Markel or any subsidiary of
Markel, will have any liability for any obligations of Markel under the Markel
notes or the Markel indentures or for any claim based on, those obligations or
their creation. Each holder of the Markel notes by accepting a Markel note will
waive and release all such liability. The waiver and release will be part of the
consideration for issuance of the Markel notes. That waiver may not be effective
to waive liabilities under the federal securities laws, and it is the view of
the SEC that some waivers are against public policy.
Defeasance or Covenant Defeasance
Under some conditions, Markel may elect to have its obligations discharged with
respect to the outstanding Markel notes. This defeasance means that Markel will
be deemed to have paid and discharged the entire indebtedness represented by the
outstanding Markel notes, except for:
. the rights of holders of outstanding Markel notes to receive
payments in respect of the principal of, premium, if any, and
interest on the Markel notes when those payments are due, or on the
redemption date, as the case may be;
. Markel's obligations with respect to the Markel notes concerning
issuing temporary Markel notes, registration of Markel notes,
mutilated, destroyed, lost or stolen Markel notes and the
maintenance of an office or agency for payment and money for
security payments held in trust;
. the rights, powers, trust, duties and immunities of the Markel
trustee, and Markel's related obligations;
. the defeasance provisions of the applicable Markel indenture.
In addition, under some conditions, Markel may elect to have its obligations
released with respect to some covenants that are described in the Markel
indentures and thereafter any omission to comply with those obligations will not
constitute a default or an event of default with respect to the Markel notes. In
the event covenant defeasance occurs, some 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 Markel notes.
In order to exercise either defeasance or covenant defeasance:
. Markel must irrevocably deposit with the Markel trustee, in trust,
for the benefit of the holders of the applicable Markel notes, cash
in U.S. dollars, U.S. Government Obligations, or a combination
thereof, in amounts that 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 applicable
outstanding Markel notes;
. in the case of defeasance, Markel must deliver to the Markel trustee
an opinion of counsel in the United States reasonably acceptable to
the Markel trustee confirming that Markel has received from, or
there has been published by, the Internal Revenue Service a ruling;
or since the date of the applicable Markel indenture, there has been
a change in the applicable federal income tax law, in either case to
the effect that, confirmed by an opinion of counsel, the holders of
the applicable outstanding Markel notes will not recognize income,
gain or loss for federal income tax purposes as a result of
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 defeasance had not occurred;
. in the case of covenant defeasance, Markel must deliver to the
Markel trustee an opinion of counsel in the United States reasonably
acceptable to the Markel trustee confirming that the holders of the
outstanding Markel notes will not recognize income, gain or loss for
federal income tax purposes as a result of 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;
. no default or event of default may have occurred and be continuing
on the date of the 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;
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. the defeasance or covenant defeasance will not result in a breach or
violation of, or constitute a default under the applicable Markel
indenture, or any other material agreement or instrument to which
Markel is bound,
. Markel must deliver to the Markel 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;
. Markel must deliver to the Markel trustee an officers' certificate
stating that the deposit was not made by Markel with the intent of
preferring the holders of Markel notes over the other creditors of
Markel or with the intent of defeating, hindering, delaying or
defrauding creditors of Markel or others; and
. Markel must deliver to the Markel trustee an officers' certificate
and an opinion of counsel, each stating that all conditions relating
to either the defeasance or the covenant defeasance, as the case may
be, have been complied with.
Amendment, Supplement and Waiver
The Markel indentures will provide that the consent of holders of a majority in
outstanding aggregate principal amount of the applicable Markel notes will be
required with respect to amendments which do not affect the payment terms of the
Markel notes or the amount of Markel notes whose holders must consent to any
amendment or the relative ranking of the Markel notes. The latter amendments may
only be made with the consent of each holder of applicable Markel notes.
With the consent of the holders of not less than a majority in principal amount
of the applicable outstanding Markel notes (including consents obtained in
connection with a tender offer or exchange offer for the Markel notes), Markel
when authorized by a board resolution, and the Markel 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 applicable Markel
indenture or of waiving or modifying in any manner the rights of the holders
under the applicable Markel indenture; provided, however, that no supplemental
indenture, amendment or waiver will without the consent of the holder of each
outstanding Markel note affected thereby:
. change the stated maturity or the principal of, or any installment
of interest on, any Markel note or reduce the principal amount of or
the rate of interest on the Markel notes or any provisions relating
to the redemption price of the Markel notes or the periods during
which redemption may be effected, or change the coin or currency in
which the principal of any Markel note or any premium or the
interest is payable, or impair the right to institute suit for the
enforcement of any payment after the stated maturity (or, in the
case of redemption, on or after the redemption date); or
. reduce the percentage in principal amount of the outstanding Markel
notes, the consent of whose holders is required for any supplemental
indenture or the consent of whose holders is required for any waiver
(of compliance with provisions of the applicable Markel indenture or
defaults and their consequences) provided for in the applicable
Markel indenture; or
. modify any of the provisions of the applicable Markel indenture
relating to amendments or waivers of payment or covenant defaults,
except to increase any percentage or to provide that other
provisions of the applicable Markel indenture cannot be modified or
waived without the consent of the holder of each Markel note
affected.
Without the consent of any holder of Markel notes, Markel and the Markel trustee
may amend or supplement the Markel indenture or the Markel notes:
. to cure any ambiguity or to correct any provision in the applicable
Markel indenture which may be defective or inconsistent with any
other provision therein; or
. to provide for the assumption of Markel's obligations under the
Markel notes in the case of a merger or consolidation; or
. to secure the Markel notes pursuant to the requirements of the
provisions described under "--Merger, Consolidation or Sale of
Assets" or "--Liens," or otherwise; or
. to comply with the requirements of the SEC in order to maintain the
qualification of the applicable Markel indenture under the Trust
Indenture Act; or
. to evidence and provide the acceptance of the appointment of a
successor trustee; or
38
. 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 applicable Markel indenture or the
Markel notes.
Concerning the Trustee
JPMorgan Chase Bank will be the trustee under the Markel indentures. Markel may
borrow money and maintain other banking relationships, in the ordinary course of
business, with the trustee and its affiliates. JPMorgan Chase Bank also serves
as trustee under other indentures pursuant to which securities of Markel are
outstanding. The Markel indentures will, however, contain limitations on the
right of the trustee, if it becomes one of our creditors, to obtain payment of
claims or to realize on property received for any claim, as security or
otherwise. If the trustee acquires any conflicting interest, it must eliminate
that conflict or resign.
J.P.Morgan Securities Inc., the dealer manager, is an affiliate of JPMorgan
Chase Bank, the trustee.
The Markel indentures will contain limitations on the rights of the Markel
trustee, should it become a creditor of Markel, to obtain payment of claims in
some cases or to realize on property received in respect of those claims as
security or otherwise. The Markel trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
that conflict within 90 days, apply to the SEC for permission to continue or
resign.
The holders of a majority in principal amount of the applicable outstanding
Markel notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Markel
trustee, subject to some exceptions. The Markel indentures will provide that in
case an event of default occurs (which is not cured), the Markel 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 those provisions, the Markel
trustee will be under no obligation to exercise any of its rights or powers
under the Markel indentures at the request of any holder of Markel notes, unless
that holder has offered to the Markel trustee security and indemnity
satisfactory to it against any loss, liability or expense.
Book-Entry System
The Markel notes will be represented by one or more global securities. A global
security is a special type of indirectly held security. Each global security
will be deposited with, or on behalf of, The Depository Trust Company or "DTC"
and be registered in the name of a nominee of DTC. Except under the
circumstances described below, the Markel notes will not be issued in definitive
form in the name of individual holders.
Upon the issuance of a global security, DTC will credit on its book-entry
registration and transfer system the accounts of persons designated by the
exchange agent with the respective principal amounts of the Markel notes
represented by the global security. Ownership of beneficial interests in a
global security will be limited to DTC participants (that is, persons that have
accounts with DTC or its nominee) or persons that may hold interests through DTC
participants. Ownership of beneficial interests in a global security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (except with respect to persons that
are themselves DTC participants).
So long as DTC or its nominee is the registered owner of a global security, DTC
or the nominee will be considered the sole owner or holder of the Markel notes
represented by that global security under the applicable Markel indenture.
Except as described below, owners of beneficial interests in a global security
will not be entitled to have Markel notes represented by that global security
registered in their names, will not receive or be entitled to receive physical
delivery of Markel notes in definitive form and will not be considered the
owners or holders of the Markel notes under the Markel indentures. Principal and
interest payments on Markel notes registered in the name of DTC or its nominee
will be made to DTC or the nominee, as the registered owner. Neither Markel, the
Markel trustee, any paying agent or the registrar for the Markel notes will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in a global security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests. The laws of some states require that some purchasers of securities
take physical delivery of securities in definitive form. Those limits and laws
may impair the ability to transfer beneficial interests in a global security.
We expect that DTC or its nominee, upon receipt of any payment of principal or
interest, will credit immediately the participants' accounts with payments in
amounts proportionate to their beneficial interests in the principal amount of
the relevant global security as shown on the records of DTC or its nominee. We
also expect that payments by participants to owners of beneficial interests in a
global security held through those participants will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of those participants.
If DTC is at any time unwilling or unable to continue as a depositary and a
successor depositary is not appointed by us within 90 days, we will issue the
Markel notes in definitive form in exchange for the entire global security for
the
39
Markel notes. In addition, we may at any time choose not to have the Markel
notes represented by a global security and will then issue the Markel notes in
definitive form in exchange for the entire global security relating to the
Markel notes. In any such instance, an owner of a beneficial interest in a
global security will be entitled to physical delivery in definitive form of the
Markel notes represented by the global security equal in principal amount to
that beneficial interest and to have the Markel notes registered in its name.
Markel notes so issued in definitive form will be issued as registered Markel
notes in denominations of $1,000 and integral multiples thereof, unless
otherwise specified by us.
Transfer and Exchange
Markel has appointed the Markel trustee as security registrar for the Markel
notes. Markel will be required to maintain an office or agency for transfers and
exchanges in each place of payment. Markel may at any time designate additional
transfer agents for the Markel notes or rescind the designation of any transfer
agent.
In the case of any redemption of the Markel notes, Markel will not be required:
. to issue, register the transfer of, or exchange the Markel notes
during a period beginning 15 days before the day of mailing of the
relevant notice of redemption and ending on the close of business on
the day of mailing of the relevant notice of redemption, or
. to register the transfer or exchange of a Markel note, or portion of
a note, selected for redemption, except for the unredeemed portion
of any Markel note we are redeeming in part.
Meetings
Meetings of holders of Markel notes may be convened on notice:
. by the Markel trustee,
. by us, if we ask the Markel trustee to call a meeting and it fails
to do so, or
. by the holders of 10% in principal amount of the Markel notes, if
they ask the Markel trustee to call a meeting and it fails to do so.
Holders entitled to vote a majority in principal amount of the Markel notes
constitute a quorum at any meeting of holders. Except for actions requiring the
consent of all holders of the applicable Markel notes affected by the action,
any action at a meeting adopted by the holders of a majority in principal amount
of the applicable Markel notes (or a lesser percentage required for the action
by the applicable Markel indenture) will be binding on all holders of the
applicable Markel notes.
Notices
Notices to holders of the Markel notes will be given by mail to the holder's
address as it appears in the security register.
Governing Law
New York law will govern the Markel indentures and the Markel notes.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of:
. the material U.S. federal income tax considerations relating to the
exchange offers and consent solicitations and to the ownership and
disposition of the Markel notes to initial holders of those
securities who are U.S. holders, as described below, and
. the material U.S. federal income and estate tax considerations
relating to the exchange offers and consent solicitations and to the
ownership and disposition of the Markel notes to initial holders of
those securities who are non-U.S. holders, as described below.
This discussion only addresses tax considerations relevant to holders that hold
Terra Nova notes, and will hold Markel notes, as capital assets.
This discussion does not address all tax considerations that may be important to
you in light of your particular circumstances (such as the alternative minimum
tax provisions) or under certain special rules. Special rules may apply, for
instance, to:
. banks,
. tax-exempt organizations,
. insurance companies,
. dealers in securities or currencies,
. persons who hold Terra Nova notes or Markel notes as part of a
hedge, conversion or constructive sale transaction, or straddle or
other risk reduction transaction,
. traders in securities that elect to use a mark-to-market method of
accounting for their securities holdings,
. persons whose functional currency for tax purposes is not the U.S.
dollar, or
. persons who have ceased to be United States citizens or to be taxed
as resident aliens.
This discussion is limited to holders of Markel notes who acquire such
securities in connection with the exchange offer. This discussion also does not
address the tax consequences arising under the laws of any foreign, state or
local jurisdiction.
This discussion is based upon the Internal Revenue Code of 1986, as amended
(which we refer to as the Internal Revenue Code), its legislative history,
existing and proposed U.S. Treasury regulations, and judicial decisions and
administrative interpretations thereunder, as of the date hereof, all of which
are subject to change or different interpretations, possibly with retroactive
effect. We cannot assure you that the Internal Revenue Service will not
challenge one or more of the tax results described herein, and we have not
obtained, nor do we intend to obtain, a ruling from the Internal Revenue
Service with respect to the U.S. federal tax consequences of the exchange
offers and consent solicitations and of the ownership and disposition of the
Markel notes.
Please consult your own tax advisors as to the particular tax
consequences to you of the exchange offers and consent solicitations
and of the ownership and disposition of the Markel notes, including the
effect and applicability of state, local or foreign tax laws.
U.S. Holders
You are a U.S. holder for purposes of this discussion if you are a beneficial
owner of Terra Nova notes or Markel notes that is, for U.S. federal income tax
law purposes:
. a citizen or resident of the United States,
. a corporation organized in or under the laws of the United States or
of any political subdivision thereof,
. an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or
. a trust if a U.S. court can exercise primary supervision over the
trust's administration and one or more U.S. persons are authorized
to control all substantial decisions of the trust.
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In the case of a holder of Terra Nova notes or Markel notes which is a
partnership, the tax consequences will generally affect the partner rather than
the partnership, but special considerations not here set forth may apply.
Exchange Offers
The exchange of Terra Nova notes for Markel notes pursuant to the exchange
offers will be a taxable transaction for U.S. federal income tax purposes.
Accordingly, if you tender your Terra Nova notes, you will generally recognize
gain or loss equal to the difference between the amount realized by you on the
exchange and your adjusted basis in the Terra Nova notes. The amount realized by
you on the exchange will be the issue price, as defined below, of the Markel
notes which you receive; based on the position that Markel intends to take with
regard to the consent payments, such payments would also be included in your
amount realized. [See "Consent Payments"]. Your gain or loss will generally be
capital gain or loss except for gain attributable to accrued market discount, if
any. In addition, you will recognize ordinary interest income on the amount of
accrued and unpaid interest on the Terra Nova notes which you have not
previously included in income.
If the Markel notes are publicly traded, within the meaning of the applicable
U.S. Treasury regulations, or the Markel notes are not publicly traded but the
Terra Nova notes are publicly traded, the issue price of the Markel notes will
be the fair market value of such publicly traded notes reduced by the amount of
pre-issuance accrued interest on the Markel notes. We believe that the requisite
public trading will exist and intend to take this position for all relevant
reporting and other purposes. Moreover, we intend to reduce the issue price of
the Markel notes by the amount of pre-issuance accrued interest on such notes,
and you should also compute the issue price in such manner. See "-- Taxation of
Interest."
Consent Payments
The proper treatment of the consent payments is unclear. However, we intend to
take the position that the payments will represent additional consideration
received by you in exchange for your Terra Nova notes. You should consult your
own tax advisor as to possible alternative treatments of the consent payments.
Taxation of Interest
Generally, you will be required to include interest received on a Markel note as
ordinary income at the time it accrues or is received, in accordance with your
regular method of accounting for U.S. federal income tax purposes. However,
Markel intends to treat, and you should also treat, a portion of the interest
paid on the first payment date as a return of pre-issuance accrued interest that
is not taxable and is not income.
Discount or Premium
If the face amount of any Markel note exceeds the issue price of the note (other
than by an amount qualifying for a de minimis exception), the excess will
constitute original issue discount. You must include this original issue
discount in income as ordinary income as it accrues on the basis of a constant
yield to maturity, regardless of the receipt of cash representing that income.
Your basis in the Markel notes will be increased by the amount of original issue
discount includible in your gross income as it accrues. The excess will qualify
for a de minimis exception if it is less than 0.25% of the face amount of a
note, multiplied by the number of complete years to maturity. Because we intend
to determine the issue price of a note by reference to the fair market value of
either the Terra Nova notes or the Markel notes on the exchange date, we cannot
know before the exchange date whether any Markel note will have original issue
discount. Recent estimates by Markel and Terra Nova indicate that, if the fair
market value of the Markel notes and Terra Nova notes were the same on the date
of the exchange as on the date when the estimates were made, there would be
original issue discount on both Markel notes.
If the issue price of a Markel note were to exceed its face amount, you would be
considered to have purchased that security with "amortizable bond premium" equal
in amount to such excess. You would be able to elect to amortize that premium by
offsetting against the interest otherwise required to be included in income in
respect of that security during any taxable year the allocable portion of that
premium, determined under the constant yield method over the remaining term. In
such a case, your basis in the security would be reduced by the amount of bond
premium offset against interest.
The rules concerning discounts and premiums are complex, and you should consult
your tax advisor to determine how, and to what extent, any discount or premium
will be included in your income (in the case of any discount) or amortized (in
the case of any premium), and as to the desirability, mechanics and consequences
of making any elections in connection therewith.
42
Sale, Exchange or Retirement of the Markel Notes
With some exceptions, upon the sale, exchange or retirement of a Markel note,
you will recognize gain or loss equal to the difference between the sale or
redemption proceeds and your adjusted tax basis in that security. Your adjusted
tax basis in a Markel note will generally equal your cost for that security,
which is the issue price, increased by any accrued original issue discount or
decreased by any amortized premium applied to reduce interest on your note
during your holding period of the note. Gain or loss realized on the sale,
exchange or retirement of a Markel note (except for certain payments of accrued
interest, see below) will generally be capital gain or loss and will be
long-term capital gain or loss if that security is held for more than one year.
You are urged to consult your tax advisors regarding the treatment of capital
gains (which may be taxed at lower rates than ordinary income for taxpayers who
are individuals) and losses (the deductibility of which is subject to
limitations). Payments for accrued interest not previously included in income
will be treated as ordinary interest income.
Non U.S. Holders
You generally are a non-U.S. holder for purposes of this discussion if you are a
beneficial owner of Terra Nova notes or Markel notes that is not a U.S. holder,
as described above.
Exchange Offers
You generally will not be subject to U.S. federal income and withholding tax on
gain realized on the exchange of Terra Nova notes for Markel notes pursuant to
the exchange offers unless:
. you are an individual present in the United States for 183 days or
more in the year of such exchange and either
-- you have a "tax home" in the United States and certain other
requirements are met or
-- the gain from the exchange is attributable to an office or
other fixed place of business maintained by you in the United
States, or
. the gain is effectively connected with your conduct of a U.S. trade
or business. See "-- Income Effectively Connected with U.S. Trade or
Business."
However, to the extent that disposition proceeds represent interest on the Terra
Nova notes accruing between interest payment dates, you will be required to
establish an exemption from United States federal income tax. See "-- Taxation
of Interest" for a discussion of the requirements of the exemption.
Consent Payments
The proper treatment of the consent payments is unclear. We intend to take the
position that the consent payments are additional consideration in exchange for
the Terra Nova notes and therefore would be taken into account in determining
the amount of gain or loss on the exchange as described above. You are urged to
consult your own tax advisor on this matter, including possible treatment of the
consent payments that could result in their being subject to U.S. taxation at a
30% rate, or lower treaty rate, if applicable.
Taxation of Interest
The payment of interest on a Markel note by us or any paying agent of ours to
you will not be subject to U.S. federal income and withholding tax, provided
that the interest is not effectively connected with a U.S. trade or business of
yours and:
. you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our shares,
. you are not a controlled foreign corporation that is related to us
within the meaning of the Internal Revenue Code, and
. the U.S. payor does not have actual knowledge or reason to know that
you are a U.S. person and either
-- the beneficial owner of the Markel note certifies to the
applicable payor or its agent, under penalties of perjury,
that it is not a U.S. holder and provides its name and address
on IRS Form W-8BEN, or a suitable substitute form or
-- a securities clearing organization, bank or other financial
institution, that holds customers' securities in the ordinary
course of its trade or business (a "financial institution")
and
43
holds the Markel note, certifies under penalties of perjury that a
Form W-8BEN (or a suitable substitute form) has been received from
the beneficial owner by it or by a financial institution between it
and the beneficial owner and furnishes the payor with a copy of the
form or the U.S. payor otherwise possesses documentation upon which
it may rely to treat the payment as made to a non-U. S. person in
accordance with U.S. Treasury regulations.
If that interest is effectively connected with a U.S. trade or business of
yours, see "-- Income Effectively Connected with U.S. Trade or Business."
Payments made to a non-U.S. holder which are attributable to original issue
discount will generally be treated in the same manner as payments of interest,
as just described.
A portion of the first payment of stated interest made by us on the Markel notes
will represent pre-issuance interest in the amount of interest on the Terra Nova
notes which was accrued and unpaid on the date of the exchange. This payment
will be treated as a payment by us and subject to the same U.S. federal
withholding tax rules and exemptions applicable to interest payments, as
described above.
Gain on Disposition of the Markel Notes
You generally will not be subject to U.S. federal income and withholding tax on
gain realized on the sale, exchange or redemption of a Markel note unless:
. you are an individual present in the United States for 183 days or
more in the year of such sale, exchange or redemption and either
-- you have a "tax home" in the United States and other
requirements are met or
-- the gain from the disposition is attributable to an office or
other fixed place of business maintained by you in the United
States, or
. the gain is effectively connected with your conduct of a U.S. trade
or business. See "-- Income Effectively Connected with U.S. Trade or
Business."
However, to the extent that disposition proceeds represent either interest
accruing between interest payment dates or original issue discount accruing
while you held the Markel note, you may be required to establish an exemption
from United States federal income and withholding tax. See "-- Taxation of
Interest."
Income Effectively Connected with U.S. Trade or Business
Except to the extent otherwise provided under an applicable tax treaty, you
generally will be taxed in the same manner as a U.S. holder with respect to
income or gain on a Markel note or Terra Nova note if such income or gain is
effectively connected with a U.S. trade or business of yours. Effectively
connected income received or gain realized by a corporate non-U.S. holder may
also, under certain circumstances, be subject to an additional "branch profits
tax" at a 30% rate (or, if applicable, a lower treaty rate), subject to certain
adjustments. This effectively connected income or gain will not be subject to
withholding tax if the holder delivers the appropriate form, currently IRS Form
W-8ECI, to the payor.
U.S. Federal Estate Tax
A Markel note held by an individual who at the time of death is not a citizen or
resident of the United States, as specially defined for U.S. federal estate tax
purposes, will not be subject to U.S. federal estate tax if:
. the individual did not own 10% of Markel's voting stock at the time
of death, and
. the income on the Markel note was not connected to a United States
business of the individual at the time of death.
Backup Withholding and Information Reporting
U.S. Holders
Consent payments and interest payments made on, or the proceeds of the sale or
other disposition of, the Terra Nova notes or Markel notes may be subject to
information reporting and U.S. federal backup withholding tax (currently at the
rate of 30%) if the recipient of those payments fails to supply an accurate
taxpayer identification number or otherwise fails to comply with applicable
United States information reporting or certification requirements. Any
44
amount withheld from a payment to a U.S. holder under the backup withholding
rules is allowable as a credit against the holder's federal income tax, provided
that the required information is furnished to the IRS.
Non-U.S. Holders
In general, backup withholding and information reporting will not apply to
consent payments and interest payments made on, or the proceeds of the sale or
other disposition of, the Terra Nova notes or Markel notes if the holder
establishes by providing a certificate or, in some cases, by providing other
evidence, that the holder is not a U.S. person. Additional exemptions are
available for certain payments made outside the United States. Non-U.S. holders
of Terra Nova notes or Markel notes are urged to consult their tax advisers
regarding the application of information reporting and backup withholding in
their particular situations, the availability of exemptions, and the procedure
for obtaining such an exemption, if available. Any amount withheld from a
payment to a non-U.S. holder under the backup withholding rules will be
allowable as a credit against the holder's U.S. federal income tax, provided
that the required information is furnished to the IRS.
Holders Not Tendering in an Exchange Offer
Although the matter is not entirely free from doubt, if you do not elect to
exchange your Terra Nova notes for Markel notes pursuant to the exchange offers,
the proposed modifications to the Terra Nova notes should not be treated as a
taxable exchange of the Terra Nova notes for new Terra Nova notes. See "The
Proposed Amendments."
VALIDITY OF NOTES
Certain legal matters in connection with the Markel notes offered in the
exchange offers will be passed upon for us by McGuireWoods LLP, Richmond,
Virginia. Leslie A. Grandis, a partner in McGuireWoods LLP, is Secretary and a
member of the Board of Directors of Markel. As of April 11, 2002, partners of
McGuireWoods LLP owned 20,631 of our common shares, or less than 1% of our
common shares outstanding on that date. The validity of the Markel notes offered
in the exchange offers will be passed upon for the dealer manager by Sullivan &
Cromwell.
EXPERTS
The consolidated financial statements of Markel Corporation and subsidiaries as
of December 31, 2001 and 2000 and for each of the years in the three-year period
ended December 31, 2001 have been incorporated by reference herein in reliance
upon the report of KPMG LLP, independent accountants, incorporated by reference
herein, and upon the authority of that firm as experts in accounting and
auditing.
The consolidated financial statements and schedules of Terra Nova (Bermuda)
Holdings Ltd. and subsidiaries as of December 31, 2001 and 2000 and for each of
the years in the two-year period ended December 31, 2001 have been incorporated
by reference herein in reliance upon the report of KPMG Audit plc, independent
accountants, incorporated by reference herein, and upon the authority of that
firm as experts in accounting and auditing.
The consolidated financial statements and schedules of Terra Nova (Bermuda)
Holdings Ltd. and subsidiaries for the year ended December 31, 1999 have been
incorporated by reference herein in reliance upon the report of
PricewaterhouseCoopers, independent accountants, incorporated by reference
herein, and upon the authority of that firm as experts in accounting and
auditing.
45
In order to tender, a holder of Terra Nova notes should send or deliver a
properly completed and signed letter of transmittal and consent and any other
required documents to the exchange agent at its address set forth below or
tender pursuant to DTC's Automated Tender Offer Program.
The exchange agent for the exchange offers and consent solicitations is:
By Mail: By Hand: By Overnight Delivery:
JPMorgan Chase Bank JPMorgan Chase Bank JPMorgan Chase Bank
55 Wator Street 55 Wator Street 55 Wator Street
Room 234, North Building Room 234, North Building Room 234, North Building
New York, New York 10041 New York, New York 10041 New York, New York 10041
Attention: Victor Matis Attention: Victor Matis Attention: Victor Matis
By Facsimile Transmission: (212) 638-7875
(For Eligible Institutions only)
Confirm facsimile by telephone only: (212) 638-0459
Any questions or requests for assistance or for additional copies of this
prospectus and consent solicitation statement, the letter of transmittal and
consent or related documents may be directed to the information agent at the
telephone numbers listed below. You may also contact the dealer manager at their
telephone number set forth below or your custodian bank, depositary, broker,
trust company or other nominee for assistance concerning the exchange offers and
consent solicitations.
The information agent for the exchange offers and consent solicitations is:
Mackenzie Partners, Inc.
Attn:
Toll Free:
Banks and brokers:
The dealer manager for the exchange offers and consent solicitations are:
JPMorgan
270 Park Avenue, 8/th/ Floor
New York, NY 10017
Toll Free: (866) 839-4666
46
PART II
Information Not Required In The Prospectus
Item 20. Indemnification of Directors And Officers.
Virginia law provides that, unless limited by its articles of
incorporation, a corporation shall indemnify a director or officer who entirely
prevails in the defense of any proceeding to which he was a party because he is
or was a director or officer of the corporation against reasonable expenses
incurred by him in connection with the proceeding.
Virginia law permits a corporation to indemnify, after a determination has
been made that indemnification of the director is permissible in the
circumstances because he has met the following standard of conduct, an
individual made a party to a proceeding because he is or was a director against
liability incurred in the proceeding if:
. he conducted himself in good faith;
. he believed in the case of conduct in his official capacity with the
corporation, that his conduct was in its best interests and in all
other cases that his conduct was at least not opposed to its best
interests; and
. in the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful.
A Virginia corporation, however, may not indemnify a director in connection
with a proceeding by or in the right of the corporation in which the director
was adjudged liable to the corporation or in connection with any other
proceeding charging improper personal benefit to him, whether or not involving
action in his official capacity, in which he was adjudged liable on the basis
that personal benefit was improperly received by him.
In addition, Virginia law permits a corporation to make any further
indemnify, including indemnity with respect to a proceeding by or in the right
of the corporation, and to make additional provision for advances and
reimbursement of expenses, to any director, officer, employee or agent that may
be authorized by the articles of incorporation or any bylaw made by the
shareholders or any resolution adopted by the shareholders, except an indemnity
against his willful misconduct or a knowing violation of the criminal law.
Our Articles of Incorporation provide mandatory indemnification of officers
and directors to the full extent permitted by Virginia law.
We maintain directors' and officers' liability insurance which may provide
indemnification, including indemnification against liabilities under the
Securities Act of 1933 as amended, to our officers and directors in certain
circumstances.
II-1
Limitations on Director Liability
Virginia law provides that a director is not liable to the corporation, its
shareholders, or any person asserting rights on behalf of the corporation or its
shareholders for liabilities arising from a breach of, or failure to perform,
any duty resulting solely from his or her status as director, unless the person
asserting liability proves that the breach or failure to perform was in
violation of the director's duty to discharge his duties as a director,
including his duties as a member of a committee, in accordance with his good
faith business judgment of the best interests of the corporation, provided, that
the director, unless he has knowledge or information concerning the matter in
question that makes reliance unwarranted, is entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, if prepared or presented by:
. one or more officers or employees of the corporation whom the director
believes, in good faith, to be reliable and competent in the matters
presented;
. legal counsel, public accountants, or other persons as to matters the
director believes, in good faith, are within the person's professional
or expert competence; or
. a committee of the board of directors of which he is not a member if
the director believes, in good faith, that the committee merits
confidence.
In addition, Virginia law provides that in any proceeding brought by or in
the right of a corporation or brought by or on behalf of shareholders of the
corporation, the damages assessed against an officer or director arising out of
a single transaction, occurrence or course of conduct shall not exceed the
lesser of:
. the monetary amount, including the elimination of liability, specified
in the articles of incorporation or, if approved by the shareholders,
in the bylaws; or
. the greater of $100,000 or the amount of cash compensation received by
the officer or director from the corporation during the twelve months
immediately preceding the act or omission for which liability was
imposed.
Our articles of incorporation provide for the elimination of liability of
officers and directors in every instance permitted under Virginia law. The
liability of an officer or director is not limited if the officer or director
engaged in willful misconduct or a knowing violation of the criminal law or of
any federal or state securities law, including any claim of unlawful insider
trading or manipulation of the market for any security.
Item 16. Exhibits And Financial Statement Schedules.
The following instruments and documents are included as Exhibits to this
Registration Statement. Exhibits incorporated by reference are indicated below.
II-2
NO. DESCRIPTION OF EXHIBITS
--- -----------------------
**1.1 Form of Dealer Manager Agreement between Markel Corporation and
J.P. Morgan Securities Inc.
3.1 Amended and Restated Articles of Incorporation of Markel
Corporation (incorporated by reference to Exhibit 3(i) of
Markel's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2000)
3.2 Bylaws of Markel Corporation (incorporated by reference to
Exhibit 4.2 of Markel's Registration Statement on Form S-4 filed
as of October 7, 1999 (Registration No. 333-88609))
4.1 Indenture, dated August 26, 1997, among Terra Nova Insurance (UK)
Holdings Plc ("Terra Nova"), Terra Nova Bermuda Holdings Ltd.
("Bermuda Holdings"), and The Chase Manhattan Bank, as Trustee.
(Filed as Exhibit 4.1 to the Terra Nova's Registration Statement
on Form F-4/S-4, Registration No. 333-38063 and incorporated
herein by reference)
4.2 Indenture, dated May 18, 1998, among Terra Nova, Bermuda
Holdings, The Chase Manhattan Bank, as Trustee. (Filed as Exhibit
4.2 to the Terra Nova's Registration Statement on Form F-4/S-4,
Registration No. 333-53999 and incorporated herein by reference)
*4.10 Form of Indenture between Markel Corporation and The Chase
Manhattan Bank, as trustee, relating to the 7.2% Notes
*4.11 Form of Indenture between Markel Corporation and The Chase
Manhattan Bank, as trustee, relating to the 7.0% Notes
*4.12 Form of First Supplemental Indenture, among Terra Nova, Bermuda
Holdings, The Chase Manhattan Bank, as Trustee, amending the
Indenture dated August 26, 1997
*4.13 Form of First Supplemental Indenture, among Terra Nova, Bermuda
Holdings, The Chase Manhattan Bank, as Trustee, amending the
Indenture dated May 18, 1998
*5.1 Opinion of McGuireWoods LLP regarding the legality of the
securities
*8.1 Opinion of McGuireWoods LLP regarding material U.S. federal
income tax consequences
*12.1 Markel statement of computation of ratio of earnings to fixed
charges
II-3
*12.2 Bermuda Holdings statement of computation of ratio of earnings to
fixed charges
*23.1 Consent of KPMG LLP
*23.2 Consent of KPMG Audit plc
*23.3 Consent of PricewaterhouseCoopers LLP
*23.4 Consent of McGuireWoods LLP (included in Exhibits 5.1 and 8.1)
*24 Powers of Attorney
*25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of The Chase Manhattan Bank, as trustee
*99.1 Form of Letter of Transmittal
*99.2 Form of Letter to Depository Trust Company Participants
*99.3 Form of Letter to Beneficial Owners
__________________________________
** To be filed by amendment.
* Filed herewith.
(B) FINANCIAL STATEMENT SCHEDULES
Not applicable.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to the registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration
II-4
statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in 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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act 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 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless, in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(e) 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.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Markel
Corporation certifies that it has reasonable ground to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Richmond, State of Virginia, on April 12, 2002.
MARKEL CORPORATION
By: /s/ DARRELL D. MARTIN
--------------------------
Darrell D. Martin
Title: [Executive Vice President
and Chief Financial Officer
(Principal Financial Officer,
Principal Accounting Officer)]
Signature Title
------------------------------------ -------------------------------------------------
/s/ ALAN I. KIRSHNER* Director, Chairman and Chief Executive
------------------------------------ Officer (Principal Executive Officer)
Alan I. Kirshner
/s/ ANTHONY F. MARKEL* President, Director
------------------------------------
Anthony F. Markel
/s/ STEVEN A. MARKEL* Vice-Chairman, Director
------------------------------------
Steven A. Markel
/s/ DARRELL D. MARTIN* Director, Executive Vice President and
------------------------------------ Chief Financial Officer (Principal Financial
Darrell D. Martin Officer, Principal Accounting Officer)
/s/ MARK J. BYRNE* Director
------------------------------------
Mark J. Byrne
/s/ DOUGLAS C. EBY* Director
------------------------------------
Douglas C. Eby
/s/ LESLIE A. GRANDIS* Director
------------------------------------
Leslie A. Grandis
II-6
/s/ STEWART M. KASEN* Director
--------------------------------------------
Stewart M. Kasen
/s/ GARY L. MARKEL* Director
--------------------------------------------
Gary L. Markel
/s/ THOMAS S. GAYNER* Director
--------------------------------------------
Thomas S. Gayner
*By: /s/ GREGORY B. NEVERS
---------------------------------------
Gregory B. Nevers
Attorney-in-fact
II-7
Exhibit Index
NO. DESCRIPTION OF EXHIBITS
--- -----------------------
*1.1 Form of Dealer Manager Agreement between Markel Corporation
and J.P. Morgan Securities Inc.
3.1 Amended and Restated Articles of Incorporation of Markel
Corporation (incorporated by reference to Exhibit 3(i) of
Markel's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2000)
3.2 Bylaws of Markel Corporation (incorporated by reference to
Exhibit 4.2 of Markel's Registration Statement on Form S-4
filed as of October 7, 1999 (Registration No. 333-88609))
4.1 Indenture, dated August 26, 1997, among Terra Nova Insurance
(UK) Holdings Plc ("Terra Nova"), Terra Nova Bermuda
Holdings Ltd. ("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 by reference)
4.2 Indenture, dated May 18, 1998, among Terra Nova, Bermuda
Holdings, The Chase Manhattan Bank, as Trustee. (Filed as
Exhibit 4.2 to the Terra Nova's Registration Statement on
Form F-4/S-4, Registration No. 333-53999 and incorporated
herein by reference)
*4.10 Form of Indenture, between Markel Corporation and The Chase
Manhattan Bank, as trustee, relating to the 7.2% Notes
*4.11 Form of Indenture, between Markel Corporation and The Chase
Manhattan Bank, as trustee, relating to the 7.0% Notes
*4.12 Form of First Supplemental Indenture, among Terra Nova,
Bermuda Holdings,The Chase Manhattan Bank, as Trustee,
amending the Indenture ated August 26,1997
*4.13 Form of First Supplemental Indenture, among Terra Nova,
Bermuda Holdings,The Chase Manhattan Bank, as Trustee,
amending the Indenture dated May 18, 1998
*5.1 Opinion of McGuireWoods LLP regarding the legality of the
securities
*8.1 Opinion of McGuireWoods LLP regarding material U.S. federal
income tax consequences
*12.1 Markel statement of computation of ratio of earnings to
fixed charges
II-8
*12.2 Bermuda Holdings statement of computation of ratio of earnings to
fixed charges
*23.1 Consent of KPMG LLP
23.2 Consent of KPMG Audit plc
*23.3 Consent of PricewaterhouseCoopers LLP
*23.4 Consent of McGuireWoods LLP (included in Exhibits 5.1 and 8.1)
*24 Powers of Attorney
*25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of The Chase Manhattan Bank, as trustee
*99.1 Form of Letter of Transmittal
*99.2 Form of Letter to Depository Trust Company Participants
*99.3 Form of Letter to Beneficial Owners
________________________________
** To be filed by amendment.
* Filed herewith.
II-9