ARGO GROUP INTERNATIONAL HOLDINGS, LTD. - S-3 - 20040809 - EXPERTS
EXPERTS
The consolidated financial statements and financial statement schedules
of PXRE Group Ltd. as of December 31, 2003 and 2002, and for each of the years
in the three-year period ended December 31, 2003, have been incorporated by
reference herein and in the registration statement in reliance upon the reports
of KPMG LLP, independent registered public accounting firm, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and
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auditing. The audit reports refer to the adoption of the provisions of FAS 133
"Accounting for Derivative Instruments and Hedging Activities," during 2001.
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit
plan subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which we refer to as a "plan," should consider the fiduciary
standards of ERISA in the context of the plan's particular circumstances before
authorizing an investment in these securities. Accordingly, among other factors,
the fiduciary should consider whether the investment would satisfy the prudence
and diversification requirements of ERISA and would be consistent with the
documents and instruments governing the plan.
ERISA Section 406 and Code Section 4975 generally prohibit transactions
between plans, individual retirement accounts and other arrangements including
individual retirement accounts and Keogh plans that are subject to ERISA and/ or
Section 4975 of the Code (also "plans"), and "parties in interest" within the
meaning of ERISA or "disqualified persons" within the meaning of the Code.
Prohibited transactions within the meaning of ERISA or the Code could arise, for
example, if these securities are acquired by or with the assets of a plan with
respect to which we or one of our subsidiaries or affiliates is a service
provider, unless the securities are acquired pursuant to an exemption from the
"prohibited transaction" rules. A violation of these "prohibited transaction"
rules may result in an excise tax or other liabilities under ERISA and/or
Section 4975 of the Code for those persons, unless exemptive relief is available
under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions ("PTCEs") that may provide exemptive relief for direct or
indirect prohibited transactions resulting from the purchase or holding of these
securities. Those class exemptions are PTCE 96-23 (for certain transactions
determined by in-house asset managers), PTCE 95-60 (for certain transactions
involving insurance company general accounts), PTCE 91-38 (for certain
transactions involving bank collective investment funds), PTCE 90-1 (for certain
transactions involving insurance company separate accounts) and PTCE 84-14 (for
certain transactions determined by independent qualified asset managers).
Unless otherwise specified in the applicable prospectus supplement,
these securities may not be purchased or held by any plan, any entity whose
underlying assets include "plan assets" by reason of any plan's investment in
the entity (a "Plan Asset Entity") or any person investing "plan assets" of any
plan, unless such purchase and holding will not constitute a non-exempt
prohibited transaction. Unless otherwise specified in the applicable prospectus
supplement, any purchaser, including any fiduciary purchasing on behalf of a
plan, or holder of these securities will be deemed to have represented, in its
corporate and fiduciary capacity, by its purchase and holding thereof that it
either (a) is not a plan or a Plan Asset Entity and is not purchasing such
securities on behalf of or with "plan assets" of any plan or (b) or such
purchase and holding will not constitute a non-exempt prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code.
Under ERISA, assets of a plan may include assets held in the general
account of an insurance company which has issued an insurance policy to such
plan or assets of an entity in which the plan has invested. Accordingly,
insurance company general accounts that include assets of a plan must ensure
that one of the foregoing exemptions is available. Due to the complexity of
these rules and the penalties that may be imposed upon persons involved in
non-exempt prohibited transactions, it is particularly important that
fiduciaries or other persons considering purchasing these securities on behalf
of or with "plan assets" of any plan consult with their counsel regarding the
availability of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
Purchasers of these securities have exclusive responsibility for
ensuring that their purchase and holding of the securities do not violate the
prohibited transaction rules of ERISA or the Code.
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BERMUDA MONETARY AUTHORITY
The Bermuda Monetary Authority has classified us as a non-resident of
Bermuda for exchange control purposes. Accordingly, the Bermuda Monetary
Authority does not restrict our ability to convert currency, other than Bermuda
dollars, held for our account to any other currency, to transfer funds in and
out of Bermuda or to pay dividends or other forms of payment to non- Bermuda
residents who are shareholders or holders of our other securities, other than in
Bermuda dollars.
We have obtained the permission of the Bermuda Monetary Authority for
the issuance and free transferability of our share capital that we may offer as
described in this document to and between non-residents of Bermuda for exchange
control purposes. This permission is subject to the condition that our common
shares be listed on an appointed stock exchange, which includes the New York
Stock Exchange. No further permission from the Bermuda Monetary Authority will
be required to issue our shares or to transfer our shares between persons
regarded as non-resident in Bermuda for exchange control purposes. Approvals or
permissions received from the Bermuda Monetary Authority do not constitute a
guaranty by the Bermuda Monetary Authority as to our performance or our
creditworthiness. Accordingly, in giving those approvals or permissions, the
Bermuda Monetary Authority will not be liable for our performance or default or
for the correctness of any opinions or statements expressed in this document.
SUPERVISION, INVESTIGATION AND INTERVENTION
The Bermuda Monetary Authority may appoint an inspector with extensive
powers to investigate the affairs of an insurer if the Bermuda Monetary
Authority believes that such an investigation is in the best interests of the
insurer's policyholders or persons who may become policyholders. In order to
verify or supplement information otherwise provided to the Bermuda Monetary
Authority, the Bermuda Monetary Authority may direct an insurer to produce
documents or information relating to matters connected with its business. In
addition, the Bermuda Monetary Authority has the power to require the production
of documents from any person who appears to be in possession of such documents
as the Authority may reasonably require for the performance of its functions
under the Insurance Act. The Bermuda Monetary Authority has the power in respect
of a person registered under the Insurance Act, to appoint a professional person
to prepare a report on any aspect of any matter about which the Bermuda Monetary
Authority has required or could require information. If it appears to the
Bermuda Monetary Authority to be desirable in the interests of the clients of a
person registered under the Insurance Act, the Bermuda Monetary Authority may
also exercise these powers in relation to any company that is or has at any
relevant time been (a) a parent company, subsidiary company or related company
of that registered person, (b) a subsidiary company of a parent company of that
registered person, (c) a parent company of a subsidiary company of that
registered person or (d) a company in the case of which a shareholder controller
of that registered person, either alone or with any associate or associates,
holds 50 per cent or more of the shares or is entitled to exercise, or control
the exercise of more than 50 per cent of the voting power at a general meeting.
If it appears to the Bermuda Monetary Authority that there is a risk of
an insurer becoming insolvent, or that the insurer is in breach of the Insurance
Act or any conditions imposed upon its registration, the Bermuda Monetary
Authority may, among other things, direct the insurer (i) not to take on any new
insurance business, (ii) not to vary any insurance contract if the effect would
be to increase its liabilities, (iii) not to make certain investments, (iv) to
liquidate certain investments, (v) to maintain in, or transfer to the custody of
a specified bank, certain assets, (vi) not to declare or pay any dividends or
other distributions or to restrict the making of such payments and/or (vii) to
limit its premium income. The Bermuda Monetary Authority intends to meet with
each Class 4 insurance company on a voluntary basis, every two years.
DISCLOSURE OF INFORMATION
In addition to powers under the Insurance Act to investigate the
affairs of an insurer, the Bermuda Monetary Authority may require certain
information from an insurer (or certain other persons) to be produced to them.
The Bermuda Monetary Authority has the power to assist other regulatory
authorities, including foreign insurance regulatory authorities, with their
investigations involving insurance and reinsurance companies in Bermuda but
subject to restrictions. For example, the Bermuda Monetary Authority must be
satisfied that the assistance being requested is in connection with the
discharge of regulatory responsibilities of the foreign regulatory
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authority. Further, the Bermuda Monetary Authority must consider whether
cooperation is in the public interest. The grounds for disclosure are limited
and the Insurance Act provides sanctions for breach of the statutory duty of
confidentiality.
Under the Companies Act, the Minister of Finance has been given powers
to assist a foreign regulatory authority that has requested assistance in
connection with inquiries being carried out by it in the performance of its
regulatory functions. The Minister's powers include requiring a person to
furnish information, to produce documents, to attend and to give assistance and
answer questions in connection with inquiries. The Minister must be satisfied
that the assistance requested by the foreign regulatory authority is for the
purpose of its regulatory functions and that the request is in relation to
information in Bermuda that a person possesses or controls. The Minister must
consider, amongst other things, whether it is in the public interest to give the
information.
UNENFORCEABILITY OF CERTAIN UNITED STATES JUDGMENTS
PXRE Group Ltd. is organized under the laws of Bermuda. In addition,
some of our directors and officers, as well as the experts named in this
prospectus reside outside of the United States. A substantial portion of our and
their assets are or may be located outside the United States. As a result it may
not be possible for the holders of our common or preferred shares or holders of
other securities to effect service of process within the United States upon us
and them or to enforce against us and them in U.S. courts judgments based on the
civil liability provisions of the securities laws of the United States. However,
investors may serve us with process in the United States with respect to actions
against us arising out of or in connection with violations of securities laws of
the United States, relating to offers and sales of the securities covered by
this prospectus, by serving CT Corporation, our United States agent irrevocably
appointed for that purpose.
In addition, there is significant doubt as to whether the courts of
Bermuda would recognize or enforce judgments of U.S. courts obtained against us
or our directors or officers based on the liability provisions of the securities
laws of the United States or any state or hear actions brought in Bermuda
against us or those persons based on those laws. We have been advised by our
Bermuda legal counsel, Conyers Dill & Pearman, that the United States and
Bermuda do not currently have as treaty providing for reciprocal recognition and
enforcement of judgments in civil and commercial matters. As a result, whether a
U.S. judgment would be enforceable in Bermuda against us or our directors and
officers depends on whether the U.S. court that entered the judgment is
recognized by the Bermuda Court as having jurisdiction over us or our directors
or officers, as determined by reference to the Bermuda conflict of law rules. A
judgment debt from a U.S. court that is final and for a sum certain based on
U.S. federal securities laws may not be enforceable in Bermuda. A Bermuda court
may, however, impose civil liability on us or our directors and officers if the
facts alleged in a complaint constitute or give rise to a cause of action under
Bermuda law.
U.S. statutory law and related regulations are not enforceable by
original action in Bermuda and investors could not rely upon U.S. federal
securities laws to assert a cause of action in the Bermuda courts. There are,
however, remedies available under Bermuda common law, equity and under Bermuda
statutes that would be available to investors in the Bermuda courts against the
registrant, affiliates of the registrant, underwriters, or any named expert.
These remedies will not be identical to the remedies available under U.S.
statutory law and may not be as extensive.
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DIFFERENCE IN CORPORATE LAWS
The Companies Act 1981 of Bermuda, which applies to us, differs in
material respects from laws generally applicable to U.S. corporations and their
shareholders. Set forth below is a summary of significant provisions of the
Companies Act, including modifications adopted pursuant to the bye-laws,
applicable to us which differ in some respects from provisions of Delaware
corporate law. Because the following statements are summaries, they do not
purport to deal with all aspects of Bermuda law that may be relevant to us and
our shareholders.
ALTERNATE DIRECTORS
Bermuda law provides that each director may appoint an alternate
director, who shall have the power to attend and vote at any meeting of the
board of directors or committee at which that director is not personally present
and to sign written consents in place of that director. Delaware law does not
provide for alternate directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Our bye-laws provide, as permitted by Bermuda law, that the board of
directors may delegate any of its powers to committees that the board appoints,
and those committees may consist partly or entirely of non- directors. Delaware
law allows the board of directors of a corporation to delegate many of its
powers to committees, but those committees may consist only of directors.
FIDUCIARY DUTIES OF DIRECTORS AND OFFICERS
In addition to common law fiduciary duty to us, the Companies Act 1981
of Bermuda imposes the following fiduciary duties on each director and officer:
Duty to act honestly and in good faith with a view to the best
interests of the company. In conflict of interest situations, a director or
officer must place the best interests of the company above the director's own
personal interests. A director or officer may not use his or her position as a
director or officer to make a personal profit from opportunities that rightfully
belong to the company.
Duty to exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances. A director or officer
must act reasonably in accordance with the level of skill expected from a person
of his or her knowledge and experience. A director must attend diligently to the
company's affairs, but may, in doing so, act on an intermittent, rather than a
continuous, basis. A director or officer may delegate management functions to
suitably qualified persons, although the director or officer will not avoid duty
by delegation to others.
These two duties are similar to the duty of loyalty and the duty of
care that directors and officers have under Delaware law. Delaware courts
generally presume that directors have fulfilled their duty of care so long as
their conduct does not involve fraud, illegality, conflict of interest, lack of
a rational business purpose or gross negligence. A Bermuda court is likely to
interfere with decisions of directors only if the directors acted in bad faith
or exceeded the powers granted to them under a company's bye-laws, or it the
court finds that no reasonable board of directors could have come to the
decision that was reached.
Under Bermuda law, directors and officers owe fiduciary duties to the
company as a whole and not to shareholders individually. If a company suffers
any losses due to acts or omissions of its directors or officers that constitute
a breach of their duties to the company, then the company may be able to recover
its losses from those directors or officers. Examples of this type of situation
would be misappropriation of the company's assets or transactions undertaken on
behalf of the company for an unlawful purpose. Under Delaware law, directors and
officers owe fiduciary duties to both the corporation and its shareholders.
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INTERESTED DIRECTOR TRANSACTIONS
Bermuda law and our bye-laws provide that any transaction entered into
by us in which a director has an interest is not voidable by us nor can the
director be liable to us for any profit realized pursuant to the transaction
provided the nature of the interest is disclosed at the first opportunity at a
meeting of directors or in writing to the directors. Under Delaware law, this
type of transaction would not be voidable if:
o the material facts as to the director's relationship or
interest and as to the transaction are disclosed or are known
to the board of directors, and the board, in good faith,
authorizes the transaction by the affirmative vote of a
majority of the disinterested directors;
o the material facts as to the director's relationship or
interest and as to the transaction are specifically approved,
in good faith, by vote of the shareholders; or
o the transaction is fair as to the corporation as of the time
it is authorized, approved or ratified by the board of
directors or the shareholders.
Under Delaware law, the interested director could be held liable for a
transaction in which the director derived an improper personal benefit.
BUSINESS COMBINATIONS
A Bermuda company may not enter into business combinations with its
large shareholders or affiliates, without obtaining prior approval from its
board of directors and, in certain instances, its shareholders. Examples of
business combinations include mergers, asset sales and other transactions in
which a large shareholder or affiliate receives or could receive a financial
benefit that is greater than that received or to be received by other
shareholders. A Delaware company may not enter into a business combination with
an interested shareholder for a period of three years from the time the person
became an interested shareholder unless it obtained either:
o prior approval from its board of directors of the business
combination or transaction, which resulted in the person
becoming an interested shareholder; or
o simultaneous or subsequent approval by its board of directors
and a supermajority of its shareholders.
Notwithstanding the previous sentence, the prior approval of its board
of directors and/or a supermajority of its shareholders would not be required
if, upon consummation of the transaction which resulted in the person becoming
an interested shareholder, the interested shareholder owned at least 85% of the
outstanding voting shares at the time the transaction commenced or if the
company expressly opted out of this statute in its articles of incorporation.
Under Delaware law, an interested shareholder is someone who, together with its
affiliates and associates, owns 15% or more of our outstanding voting shares.
MERGERS AND SIMILAR ARRANGEMENTS
We may acquire the business of another Bermuda exempted company or a
company incorporated outside Bermuda of which the business is within the
business purposes as set forth in our memorandum of association. We may, with
the approval of a majority of votes cast at a general meeting of our
shareholders at which a quorum is present, amalgamate with another Bermuda
company or with a body incorporated outside of Bermuda. In the case of an
amalgamation, a shareholder may apply to a Bermuda court for a proper valuation
of the shareholder's shares if the shareholder is not satisfied that fair value
has been paid for the shares. The court ordinarily would not disapprove the
transaction on that ground absent evidence of fraud or bad faith. Under Delaware
law, with some exceptions, a merger, consolidation or sale of all or
substantially all of the assets of a corporation must be approved by the board
of directors and a majority of the outstanding shares entitled to vote on the
transaction (rather than, as in Bermuda, a majority of votes cast). Delaware law
also provides that a parent corporation, by resolution of its board of directors
and without any shareholder vote, may merge with any subsidiary of which it owns
at least 90% of the outstanding shares of each class of share capital. Upon this
type of merger and unless the parent corporation owns 100% of the subsidiary's
shares, dissenting shareholders of the subsidiary would have appraisal rights
for the shares of the subsidiary.
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TAKEOVERS
Bermuda law provides that where an offer is made for shares of a
company and within four months of the offer the holders of not less than 90% of
the shares which are the subject of the offer accept the offer, the company may,
by notice, require the nontendering shareholders to transfer their shares on the
terms of the offer. Dissenting shareholders may apply to the court within one
month of the notice objecting to the transfer. The burden is on the dissenting
shareholders to show that the court should exercise its direction to enjoin the
required transfer, which the court will be unlikely to do unless there is
evidence of fraud or bad faith or collusion between the offeror and the holders
of the shares who have accepted the offer as a means of unfairly forcing out
minority shareholders. There are no directly comparable provisions under
Delaware law, although as set forth above under "Mergers and Similar
Arrangements," a parent corporation holding 90% of a subsidiary's shares could
cause a merger of that subsidiary, which would give any minority shareholders
dissenter rights.
SHAREHOLDER'S SUIT
The rights of shareholders under Bermuda law are not as extensive as
the rights of shareholders under legislation or judicial precedent in many
United States jurisdictions. Class actions and derivative actions are generally
not available to shareholders under the laws of Bermuda. However, the Bermuda
courts ordinarily would be expected to follow English case law precedent, which
would permit a shareholder to commence an action in the name of the company to
remedy a wrong done to a company where the act complained of is alleged to be
beyond the corporate power of the company, is illegal or would result in the
violation of the company's memorandum of association or bye-laws. Furthermore,
consideration would be given by the court to acts that are alleged to constitute
a fraud against the minority shareholders or where any act requires the approval
of a greater percentage of our shareholders than actually approved it. The
winning party in this type of an action generally would be able to recover a
portion of attorneys' fees incurred in connection with the action. Our bye-laws
provide that shareholders waive all claims or rights of action that they might
have, individually or in the right of the company, against any director or
officer for any act or failure to act in the performance of the director's or
officer's duties, except with respect to any fraud or dishonesty of the director
or officer. Class actions and derivative actions generally are available to
shareholders under Delaware law for, among other things, breach of fiduciary
duty, corporate waste and actions not taken in accordance with applicable law.
In these types of actions, the court has discretion to permit the winning party
to recover its attorneys' fees.
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS
Bermuda law and our bye-laws provide that a company and its
shareholders may waive all claims or rights of action that it or they might
have, individually or in the right of the company, against any director or
officer for any act or failure to act in the performance of that director's or
officer's duties. However, this waiver does not apply to claims involving fraud
or dishonesty. This waiver may have the effect of barring claims arising under
U.S. federal securities laws. Under Delaware law, a corporation may include in
its certificate of incorporation provisions limiting the personal liability of
its directors to the corporation or its shareholders for monetary damages for
many types of breach of fiduciary duty. However, these provisions may not limit
liability for any breach of the duty of loyalty, acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law, the
authorization of unlawful dividends, share repurchases or share redemptions, or
any transaction from which a director derived an improper personal benefit.
Moreover, these provisions would not be likely to bar claims arising under U.S.
federal securities laws. Our bye-laws do not provide for these specific types of
limitation of liability of our directors and officers.
INDEMNIFICATION OF DIRECTORS
In accordance with Bermuda law, we may indemnify our directors or
officers in their capacity as directors or officers against all civil
liabilities for any loss arising out of, or liability attaching to them by
virtue of, any rule of law in respect of any negligence, default, breach of duty
or breach of trust of which a director or officer may be guilty in relation to
the company other than in respect of the director's or officer's fraud or
dishonesty. Under Delaware law, a corporation may indemnify a director or
officer of the corporation against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with an action, suit or proceeding by reason of his or her
position if:
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o the director or officer acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the
best interests of the corporation; and
o with respect to any criminal action or proceeding, the
director or officer had no reasonable cause to believe his or
her conduct was unlawful.
ENFORCEMENT OF JUDGMENTS AND OTHER MATTERS
We have been advised by Conyers Dill & Pearman, our Bermuda counsel,
that there is doubt as to whether:
o an investor would be able to enforce, in the courts of
Bermuda, judgments of United States courts against us or our
directors or officers, as well as the experts name in this
prospectus, based on the civil liability provisions of the
United States federal securities laws; or
o an investor would be able to bring an original action in the
courts of Bermuda to enforce liabilities against us or our
directors and officers, as well as the experts name in this
prospectus, based solely on United States federal securities
laws.
We also have been advised by Conyers Dill & Pearman that there is no
treaty in effect between the United States and Bermuda providing for enforcement
of judgments based on securities laws, and there are grounds upon which Bermuda
courts may decide not to enforce judgments of Unites States courts. Certain
remedies available under the laws of United States jurisdictions, including some
remedies available under the United federal securities laws, may not be allowed
in Bermuda courts as contrary to Bermuda public policy. See also
"Unenforceability of Certain United States Judgments".
INSPECTION OF CORPORATE RECORDS
Members of the general public have the right to inspect our public
documents at the office of the Registrar of Companies in Bermuda, which will
include our memorandum of association, including its objects and powers, and any
alteration to our memorandum of association and documents relating to any
increase or reduction of authorized share capital. Our shareholders have the
additional right to inspect our bye-laws, minutes of general meetings and
audited financial statements (and, if applicable, summarized financial
statements), which must be presented to the general meeting of shareholders. The
register of our shareholders is also open to inspection by shareholder without
charge, and to members of the public for a fee. We are required to maintain our
share register in Bermuda but may establish a branch register outside Bermuda.
We are required to keep at our registered office a register of our directors and
officers, which is open for inspection by members of the public without charge.
Bermuda law does not, however, provide a general right for shareholders to
inspect or obtain copies of any other corporate records. Delaware law permits
any shareholder to inspect or obtain copies of a corporation's shareholder list,
share ledger and its other books and records for any purpose reasonably related
to the person's interest as a shareholder.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses, other than
underwriting discounts and commissions, in connection with the issuance and
distribution of the securities, all of which will be paid by the registrant:
Securities and Exchange Commission filing fee........ $37,715
Rating agency fees................................... **
Legal fees and expenses.............................. **
Accounting fees and expenses......................... **
Trustees' fees and expenses.......................... **
Printing and engraving............................... **
Miscellaneous........................................ **
-------
Total........................................... $ **
**To be included by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Indemnification. PXRE Group Ltd. is a Bermuda company. Section 98
of the Companies Act 1981 of Bermuda (the "Act") provides generally that a
Bermuda company may indemnify its directors, officers and auditors against any
liability which by virtue of Bermuda law otherwise would be imposed on them,
except in cases where such liability arises from fraud or dishonesty of which
such director, officer or auditor may be guilty in relation to the company.
Section 98 further provides that a Bermudian company may indemnify its
directors, officers and auditors against any liability incurred by them in
defending any proceedings, whether civil or criminal, in which judgment is
awarded in their favor or they are acquitted or in which they are acquitted or
granted relief by the Supreme Court of Bermuda in certain proceedings arising
under Section 281 of the Act.
We have adopted provisions in our bye-laws that provide that we shall
indemnify our officers and directors to the maximum extent permitted under the
Act.
(b) Insurance.
There is in effect a Claim-Made and Reported Directors, Officers and
Company Liability Policy ("Policy") with Twin City Fire Insurance Company, a
subsidiary of The Hartford, which insures losses incurred as a result of claims
alleging wrongful acts committed by the directors and officers of PXRE Group
Ltd. and its subsidiaries (with "subsidiary" defined as any corporation in which
more than 50% of the outstanding securities or voting rights for election of
directors is owned by the PXRE Group Ltd.), hereinafter collectively referred to
as "the Company".
II-1
The Policy coverages fall into the following three categories, each of
which is described further below: (A) Directors' and Officers' Liability; (B)
Company Reimbursement; and (C) Company Securities Claim Liability. By way of
endorsement the Policy also covers certain employment practices claims.
The term "loss" is defined as sums which directors and officers or,
with respect to Coverage C (Securities Claim Liability), the Company, are liable
to pay as a result of a covered claim insured by the Policy, including claims
expenses, compensatory damages, settlement amounts, legal fees and costs, but
excluding fines, penalties, taxes or matters uninsurable by law. The Policy does
contain an endorsement making clear that the parties intend that the Policy
cover punitive damages and prohibits the insurer from contending that such
punitive damages are uninsurable.
As a "Claims Made and Reported" type coverage, the Policy covers claims
only if one or more directors or officers of the Company reports the claim to
the insurer within 60 days after termination of the Policy Period (November 20,
2003 to November 20, 2004) or during the "Discovery Period" (12 months after the
cancellation or non-renewal of the Policy) and the alleged wrongful act takes
place during or prior to the Policy Period.
I. POLICY COVERAGES
(A) Directors' and Officers' Liability:
The Policy insures the directors and officers of the Company against
loss arising from any claim made against such directors or officers for a
wrongful act (such as any actual or alleged error or misstatement or misleading
statement or act, omission, neglect or breach of duty) committed or attempted by
such officer or director in his or her capacity as such, or in an "outside
position" (an executive position held by a director or officer in a nonprofit
entity provided such service is with the consent of the Company). By way of
endorsement, coverage is also provided to employees of the Company if the claim
against the employee is also made against one or more directors and officers,
and the claim does not allege failure to render services to persons other than
the Company.
(B) Company Reimbursement:
The Policy insures the Company against loss for which the Company has,
to the extent permitted or required by law, indemnified the directors and
officers, and which the directors and officers are legally obligated to pay as a
result of a claim first made during the Policy Period or Discovery Period.
(C) Company Securities Claim Liability:
The Policy provides coverage to the Company against losses resulting
from a securities claim. "Securities claim" is defined as a claim: (a) alleging
a violation of the Securities Act, Exchange Act or any similar statutes, common
law or rules or regulations; or (b) arising from the purchase or sale of, or
offer to purchase or sell, any securities issued by the Company.
(D) Employment Practice Claims:
By way of endorsement, coverage is extended to cover employment
practice claims, including wrongful dismissal, discharge or termination of
employment, sexual harassment of employees, employment discrimination, wrongful
failure to hire or promote, or failure to grant tenure.
II-2
II. POLICY EXCLUSIONS
Among other exclusions, the Policy does not provide coverage for loss
in connection with claims relating to (1) any deliberately dishonest, malicious
or fraudulent act or omission, any willful violation of law; or (2) a director
or officer's gaining in fact any personal profit, remuneration or advantage to
which they were not legally entitled. In the event that a factual dispute arises
with respect to such claims, the Company has the right to refer the dispute to
binding arbitration. Also excluded are claims for any accounting for profits for
the purchase or sale of securities of the Company within the meaning of Section
16(b) of the Exchange Act or similar provision of any federal, state, local or
common law.
Claims brought by or on behalf of the Company (or any director or
officer) are excluded from coverage, except for claims involving derivative
actions by security holders who are not directors and officers, wrongful
termination or discrimination claims brought by a former director or officer, a
claim for contribution or indemnity resulting from a claim covered under the
Policy; and a covered claim by an employee of the Company. The Policy excludes
"Errors and Omissions" from coverage (i.e., claims alleging mishandling of
insurance and reinsurance policies, including cancellation, failure to renew or
make payment under a policy).
III. POLICY LIMITS AND COVERAGE LAYERS
The aggregate limit of liability is $10,000,000 per policy year,
including claims expenses. Excess coverage over this primary layer is provided
as follows: Travelers Casualty and Surety Company of America ($10,000,000 excess
of $10,000,000), Ace American Insurance Company ($10,000,000 excess of
$20,000,000) and Liberty International Underwriters ($10,000,000 excess of
$30,000,000).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The attached index to exhibits is incorporated by reference in this
Item 16.
ITEM 17. UNDERTAKINGS
(1) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
PXRE's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrants pursuant to the foregoing provisions, or otherwise,
the registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a registrant
of expenses incurred or paid by a director, officer or controlling person of 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, such 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 Act and will be governed by the final
adjudication of such issue.
II-3
(3) The undersigned registrants hereby undertake:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this 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 this
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 SEC pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in this registration statement or any material change to such
information in this registration statement;
provided, however, that paragraphs (3)(a)(i) and (3)(a)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
this registration statement.
(b) 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.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) The undersigned registrants (other than PXRE) hereby undertake to
provide to the underwriter at the closing specified in the underwriting
agreements, certificates in such denominations and registered in such names as
required by the underwriter to permit prompt delivery to each purchaser.
(5) The undersigned registrants hereby undertake that:
(a) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the forms of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new
II-4
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.
(6) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the SEC under Section 305(b)(2) of the Act.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in Hamilton, Bermuda, on the 9th day of August, 2004.
PXRE GROUP LTD.
(Registrant)
By: /s/ Jeffrey L. Radke
-----------------------------------------------
Name: Jeffrey L. Radke
Title: President and Chief Executive Officer
PXRE CAPITAL TRUST IV
(Registrant)
By: PXRE Group Ltd., as sponsor
By: /s/ Jeffrey L. Radke
-----------------------------------------------
Name: Jeffrey L. Radke
Title: President and Chief Executive Officer
II-6
POWERS OF ATTORNEY
Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Jeffrey L. Radke and John M. Modin, and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this registration statement, any and all amendments thereto
(including post-effective amendments), any subsequent registration statements
pursuant to Rule 462 of the Securities Act of 1933, as amended, and any
amendments thereto and to file the same, with exhibits and schedules thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE
--------- -----
/s/ Jeffrey L. Radke
------------------------------------
Jeffrey L. Radke President and Chief Executive Officer
(Principal Executive Officer)
/s/ John M. Modin
------------------------------------
John M. Modin Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting
Officer)
/s/ Gerald L. Radke
------------------------------------
Gerald L. Radke Chairman and Director
/s/ F. Sedgwick Browne
------------------------------------
F. Sedgwick Browne Director
/s/ Bradley E. Cooper
------------------------------------
Bradley E. Cooper Director
/s/ Robert W. Fiondella
------------------------------------
Robert W. Fiondella Director
/s/ Susan S. Fleming
------------------------------------
Susan S. Fleming Director
II-7
SIGNATURE TITLE
--------- -----
/s/ Franklin D. Haftl
------------------------------------
Franklin D. Haftl Director
/s/ Craig A. Huff
------------------------------------
Craig A. Huff Director
/s/ Mural R. Josephson
------------------------------------
Mural R. Josephson Director
/s/ Wendy Luscombe
------------------------------------
Wendy Luscombe Director
/s/ Philip R. McLoughlin
------------------------------------
Philip R. McLoughlin Director
/s/ Robert M. Stavis
------------------------------------
Robert M. Stavis Director
By: /s/ John M. Modin
--------------------------------------------------------
John M. Modin
Authorized U.S. Representative
Dated: August 9, 2004
II-8
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1*** Form of Underwriting Agreement for Debt Securities and Warrants
1.2*** Form of Underwriting Agreement for Common Shares, Preferred Shares and Depositary Shares
1.3*** Form of Underwriting Agreement for Capital Securities.
4.1+ Bye-laws of PXRE Group Ltd., as amended through September 22, 1999 (incorporated by
reference to Exhibit No. 3.2 to PXRE Group Ltd.'s Form S-4 Registration Statement dated
August 18, 1999 (File No. 333-85451)).
4.2+ Memorandum of Association of PXRE Group Ltd. (incorporated by reference to Exhibit No.
3.1 to PXRE Group Ltd.'s Form S-4 Registration Statement dated August 18, 1999 (File No.
333-85451)).
4.3+ Form of Specimen Certificate for PXRE's Common Shares (incorporated by reference to
Exhibit No. 4.1 to PXRE Group Ltd.'s Form S-4 Registration Statement dated August 18,
1999 (File No. 333-85451)).
4.4+ Description of Stock for Series A Convertible Voting Preferred Shares, Series B
Convertible Voting Preferred Shares, Series C Convertible Voting Preferred Shares, Class
A Convertible Voting Common Shares, Class B Convertible Voting Common Shares and Class C
Convertible Voting Common Shares (incorporated by reference to Appendix II to PXRE Group
Ltd.'s Proxy Statement for the February 12, 2002 Special Meeting of Shareholders).
4.5*** Description of Offered Preferred Stock.
4.6*** Form of Deposit Agreement (including Form of Depositary Receipt).
4.7*** Form of Warrant Agreement (including Form of Warrant Certificate).
4.8+ Certificate of Trust of PXRE Capital Trust IV (incorporated by reference to Exhibit No.
4.8 to PXRE Group Ltd.'s Registration Statement on Form S-3, File No.333-105589).
4.9+ Trust Agreement, with respect to PXRE Capital Trust IV, among PXRE, the Trustee, and the
Administrators named therein (incorporated by reference to Exhibit No. 4.9 to PXRE Group
Ltd.'s Registration Statement on Form S-3, File No.333-105589).
4.10+ Form of Amended and Restated Trust Agreement with respect to PXRE Capital Trust
(incorporated by reference to Exhibit No. 4.10 to PXRE Group Ltd.'s Registration
Statement on Form S-3, File No.333-105589).
II-9
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.11+ Form of Guarantee Agreement (incorporated by reference to Exhibit No. 4.11 to PXRE
Group Ltd.'s Registration Statement on Form S-3, File No.333-105589).
4.12+ Form of Senior Indenture (including Form of Senior Debt Security)(incorporated by
reference to Exhibit No. 4.12 to PXRE Group Ltd.'s Registration Statement on Form S-3,
File No.333-105589).
4.13+ Form of Subordinated Indenture (including Form of Subordinated Debt Security)
(incorporated by reference to Exhibit No. 4.13 to PXRE Group Ltd.'s Registration
Statement on Form S-3, File No.333-105589).
4.14+ Form of Junior Subordinated Indenture (including Form of Junior Subordinated Debt
Security)(incorporated by reference to Exhibit No. 4.14 to PXRE Group Ltd.'s Registration
Statement on Form S-3, File No.333-105589).
4.15+ Form of Capital Security (including Capital Securities Guarantee) (incorporated by
reference to Exhibit No. 4.15 to PXRE Group Ltd.'s Registration Statement on Form S-3,
File No.333-105589).
4.16* Letter Agreement dated August 4, 2004 by and among Capital Z Financial Services Fund II, L.P.,
Capital Z Financial Services Private Fund II, L.P., Reservoir Capital Partners, L.P., Reservoir
Capital Master Fund, L.P., RER Reinsurance Holdings, L.P., SAB Capital Advisors, L.L.C. and
Robert M. Stavis.
5.1** Opinion of Sidley Austin Brown & Wood LLP as to the legality of the Debt Securities and
Guarantee to be issued by PXRE.
5.2* Opinion of Conyers Dill & Pearman as to the legality of the Common Shares, Preferred
Shares and Depositary Shares to be issued by PXRE.
5.3** Opinion of Delaware Trust Counsel, with respect to PXRE Capital Trust IV.
8.1*** Opinion of Sidley Austin Brown & Wood LLP as to the U.S. federal tax consequences of the
securities.
12.1* Computation of Consolidated Ratio of Earnings to Fixed Charges.
23.1* Consent of KPMG LLP.
23.2** Consent of Sidley Austin Brown & Wood LLP (included in Exhibit 5.1).
23.3* Consent of Conyers Dill & Pearman (included in Exhibit 5.2).
23.4** Consent of Delaware Trust Counsel with respect to the Capital Securities (included in
Exhibit 5.3).
24.1* Powers of Attorney for PXRE (included on signature page).
24.2* Power of Attorney for PXRE, as sponsor, to sign the Registration Statement on behalf of
PXRE Capital Trust IV (included in Exhibit 4.9).
II-10
EXHIBIT
NUMBER DESCRIPTION
------- -----------
25.4+ Form T-1 Statement of Eligibility and Qualification under Trust Indenture Act of 1939 of
the Trustee under the Senior Indenture (incorporated by reference to Exhibit No. 25.4 to
PXRE Group Ltd.'s Registration Statement on Form S-3, File No.333-105589).
25.5+ Form T-1 Statement of Eligibility and Qualification under Trust Indenture Act of 1939 of
the Trustee under the Subordinated Indenture (incorporated by reference to Exhibit No.
25.5 to PXRE Group Ltd.'s Registration Statement on Form S-3, File No.333-105589).
25.6+ Form T-1 Statement of Eligibility and Qualification under Trust Indenture Act of 1939 of
the Trustee under the Junior Subordinated Indenture (incorporated by reference to Exhibit
No. 25.6 to PXRE Group Ltd.'s Registration Statement on Form S-3, File No.333-105589).
25.7+ Form T-1 Statement of Eligibility and Qualification under Trust Indenture Act of 1939 of
the Property Trustee under the Amended and Restated Trust Agreement for PXRE Capital
Trust IV (incorporated by reference to Exhibit No. 25.7 to PXRE Group Ltd.'s Registration
Statement on Form S-3, File No.333-105589).
25.8+ Form T-1 Statement of Eligibility and Qualification under Trust Indenture Act of 1939 of
the Guarantee Trustee under the Guarantee of PXRE Group (incorporated by reference to
Exhibit No. 25.8 to PXRE Group Ltd.'s Registration Statement on Form S-3, File
No.333-105589).
+ Filed previously.
* Filed herewith.
** To be filed by amendment.
*** To be filed by a Current Report on Form 8-K and incorporated herein by
reference.
II-11
EXHIBIT 4.16
August 4, 2004
Capital Z Financial Services Fund II, L.P. Reservoir Capital Partners, L.P.
54 Thompson Street c/o Reservoir Capital Group, L.L.C.
New York, NY 10012 650 Madison Avenue, 26th Floor
New York, NY 10022
Capital Z Financial Services Private
Fund II, L.P. Reservoir Capital Master Fund, L.P.
54 Thompson Street c/o Reservoir Capital Group, L.L.C.
New York, NY 10012 650 Madison Avenue, 26th Floor
New York, NY 10022
RER Reinsurance Holdings, L.P.
777 Main Street, Suite 2250 Robert M. Stavis
Fort Worth, TX 76102 c/o Bessemer Venture Partners
1865 Palmer Avenue, Suite 104
SAB Capital Advisors, L.L.C. Larchmont, NY 10538
650 Madison Avenue, 26th Floor
New York, NY 10022
Re: Certain Preferred Securities of PXRE Group Ltd. (the "Company")
Gentlemen:
Reference is made to those certain Series A Convertible Voting
Preferred Shares ("Series A Preferred Shares"), Series B Convertible Voting
Preferred Shares ("Series B Preferred Shares"), Series C Convertible Voting
Preferred Shares ("Series C Preferred Shares" and, with the Series A Preferred
Shares and the Class B Preferred Shares, collectively, the "Preferred Shares")
of the Company held by you on the date hereof; the Class A Convertible Voting
Common Shares ("Class A Convertible Common Shares"), Class B Convertible Voting
Common Shares ("Class B Convertible Common Shares"), Class C Convertible Voting
Common Shares ("Class C Convertible Common Shares" and, with Class A Convertible
Common Shares and the Class B Convertible Common Shares, collectively, the
"Convertible Common Shares") into which the respective series of Preferred
Shares are convertible.
This letter will serve to confirm that each of you (each, a "Preferred
Shareholder") does not intend to sell any Convertible Preferred Shares or
Convertible Common Shares owned directly or indirectly by you pursuant to the
shelf registration statement on Form S-3 (the "Registration Statement") which
the Company is proposing to file with the Securities and Exchange Commission
(the "SEC") on or about August 6, 2004, to register the Preferred Shares, the
Convertible Common Shares and the common shares of the Company into which the
Convertible Common Shares are convertible (the "Common Shares"), and that, in
consideration of the Company's agreement to register for resale the Preferred
Shares, the Convertible Common Shares and the Common Shares, each of you hereby
agrees to not sell, offer for sale, assign or otherwise transfer to any third
party any of such Preferred Shares (or Convertible Common Shares) in a public
offering pursuant to the Registration Statement without the prior consent of the
Company. Nothing herein shall, nor shall it be deemed to, in any manner
whatsoever, (i) affect the timing of any election by any Preferred Shareholder
to convert the Preferred Shares and the Convertible Common Shares, respectively,
held by any Preferred Shareholder, or to sell the Common Shares issuable upon
conversion of such Preferred Shares and Convertible Common Shares or engage in
any other transaction with respect to such Common Shares or (ii) enter into any
transaction not involving a public offering with respect to the Preferred Shares
or Convertible Common Shares held by any Preferred Shareholder or (iii) enter
into any transaction not pursuant to the Registration Statement, which decision
in the case of clauses (i), (ii) and (iii) shall continue to be made solely in
the discretion of each such Preferred Shareholder; provided, however, it is
understood and agreed that no undertaking referenced in (i), (ii) or (iii) above
is intended to expand the rights of the Preferred Shareholders under the terms
of that certain Investment Agreement dated April 4, 2002 (the "Investment
Agreement") entered into by the Company and the Preferred Shareholders named
therein.
Each of you hereby acknowledges the fact that this Agreement together
with the specific terms hereof are subject to disclosure by the Company in the
registration statement to be filed with the SEC with respect to the Preferred
Shares, the Convertible Common Shares and the Common Shares, in any current or
periodic report filed with the SEC or in any press release with respect thereto;
provided, however that PXRE shall provide a copy of such disclosure to each
Preferred Shareholder prior to the filing or publication of such disclosure and
shall afford you a reasonable opportunity to provide any comments to such
disclosure.
This Agreement shall be governed by and construed in accordance with
the substantive laws of the State of New York. This Agreement supercedes any and
all prior agreements (other than the Investment Agreement) with respect to the
subject matter hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. This Agreement may be
modified only pursuant to a written instrument executed by the Company and each
of the other parties hereto.
2
To evidence your agreement to the foregoing, please execute each of
five copies of this letter Agreement in the spaces provided below, distributing
a copy to each party hereto.
Very truly yours,
/s/ Jeffrey L. Radke
-----------------------
AGREED TO AND CONFIRMED:
CAPITAL Z FINANCIAL SERVICES
FUND II, L.P.
By: /s/ Roland Bernardon
------------------------------------------------
Name: Roland Bernardon
Title: CFO
CAPITAL Z FINANCIAL SERVICES
PRIVATE FUND II, L.P.
By: /s/ Roland Bernardon
------------------------------------------------
Name: Roland Bernardon
Title: CFO
RESERVOIR CAPITAL PARTNERS, L.P.
By: /s/ Craig Huff
------------------------------------------------
Name: Craig Huff
Title: President
RESERVOIR CAPITAL MASTER FUND, L.P.
By: /s/ Craig Huff
------------------------------------------------
Name: Craig Huff
Title: President
3
RER REINSURANCE HOLDINGS, L.P.
By: /s/ Richard E. Rainwater by Melissa Parrish
--------------------------------------------
Name: Richard E. Rainwater by
Melissa T. Parrish,
Attorney-in-fact
Title: General Partner
SAB CAPITAL ADVISORS, L.L.C.
By: /s/ Scott A. Bommer
------------------------------------------------
Name: Scott A. Bommer
Title: Managing Member
/s/ Robert M. Stavis
------------------------------------------------
Robert M. Stavis, an Individual
4
EXHIBIT 5.2
August 9, 2004
PXRE Group Ltd. DIRECT LINE: 441-299-4902
110 Pitts Bay Road E-MAIL: djdoyle@cdp.bm
Pembroke HM 08 OUR REF: .DJD/aet/379382/corp118945
Bermuda
YOUR REF:
Dear Sirs
PXRE GROUP LTD. (THE "COMPANY")
We have acted as special legal counsel in Bermuda to the Company in connection
with the filing by the Company with the United States Securities and Exchange
Commission (the "Commission") on August 9, 2004 of a registration statement on
form S-3 (the "Registration Statement", which term does not include any other
document or agreement whether or not specifically referred to therein or
attached as an exhibit or schedule thereto) relating to the registration under
the United States Securities Act of 1933 (the "Securities Act") of:-
(i) 8,957.34 Convertible Series A Preferred Shares;
(ii) 5,971.56 Convertible Series B Preferred Shares;
(iii) 2,985.78 Convertible Series C Preferred Shares;
(iv) 6,490,824 Convertible Class A Common Shares;
(v) 4,327,215 Convertible Class B Common Shares;
(vi) 2,163,607 Convertible Class C Common Shares; and
(vii) 12,981,646 Common Shares
The shares of the Company detailed in (i), (ii) and (iii) are hereinafter
referred to as the "Issued Shares", the shares of the Company detailed in (iv),
(v) and (vi) above are hereinafter referred to as the "Convertible Common
Shares" and the Common Shares detailed in (vii) are hereinafter referred to as
"Common Shares".
For the purposes of giving this opinion, we have examined a copy of the
Registration Statement. We have also reviewed the memorandum of association and
the bye-laws of the Company, each certified by the Secretary of the Company on
the date hereof, copies of minutes of a meeting of the board of directors of the
Company held on June 30, 2004 (the "Minutes") and such other documents and made
such enquiries as to questions of law as we have deemed necessary in order to
render the opinion set forth below.
We have assumed (a) the genuineness and authenticity of all signatures and the
conformity to the originals of all copies (whether or not certified) examined by
us and the authenticity and completeness of the originals from which such copies
were taken, (b) that where a document has been examined by us in draft form, it
will be or has been executed and/or filed in the form of that draft, and where a
number of drafts of a document have been examined by us all changes thereto have
been marked or otherwise drawn to our attention, (c) the accuracy and
completeness of all factual representations made in the Registration Statement
and other documents reviewed by us, (d) that the resolutions contained in the
Minutes remain in full force and effect and have not been rescinded or amended,
(e) that there is no provision of the law of any jurisdiction, other than
Bermuda, which would have any implication in relation to the opinions expressed
herein.
We have made no investigation of and express no opinion in relation to the laws
of any jurisdiction other than Bermuda. This opinion is to be governed by and
construed in accordance with the laws of Bermuda and is limited to and is given
on the basis of the current law and practice in Bermuda. This opinion is issued
solely for the purposes of the filing of the Registration Statement by the
Company and is not to be relied upon in respect of any other matter.
On the basis of and subject to the foregoing, we are of the opinion that:
1. The Company is duly incorporated and existing under the laws of Bermuda
in good standing (meaning solely that it has not failed to make any
filing with any Bermuda government authority or to pay any Bermuda
government fees or tax which would make it liable to be struck off the
Register of Companies and thereby cease to exist under the laws of
Bermuda).
2. The Issued Shares are validly issued, fully paid and non-assessable,
that is, no further sums are required to be paid by the holders thereof
in connection with the issue of such shares.
3. The Convertible Common Shares when issued as contemplated by the terms
of their issue, will be validly issued, fully paid and non-assessable,
that is, no further sums will be required to be paid by the holders
thereof in connection with the issue of such shares.
4. The Common Shares when issued as contemplated by the Registration
Statement will be validly issued, fully paid and non-assessable, that
is, no further sums will be required to be paid by the holders thereof
in connection with the issue of such shares.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm under the captions
"LEGAL MATTERS", "UNENFORCEABILILTY OF CERTAIN UNITED STATES JUDGMENTS" and
"Enforcement of Judgments and Other Matters" in the prospectus forming a part of
the Registration Statement. In giving this consent, we do not admit that we are
experts within the meaning of Section 11 of the Securities Act or that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act or the Rules and Regulations of the Commission promulgated
thereunder.
COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS TO FIXED
CHARGES AND RATIO OF CONSOLIDATED EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED DIVIDENDS
(IN THOUSANDS, EXCEPT RATIOS)
Six Months Ended Year ended December 31,
---------------------- -----------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
---- ---- ---- ---- ---- ---- ----
Net income $ 63,267 $ 45,085 $ 96,648 $ 64,545 $ (17,967) $ (10,800) $ (42,139)
Income taxes 1,313 1,880 841 17,829 (4,532) (12,006) (13,149)
---------- ---------- ------------ ------------ ------------- ----------- -------------
$ 64,580 $ 46,965 $ 97,489 $ 82,374 $ (22,499) $ (22,806) $ (55,288)
Fixed charges:
Interest expense 7,130 7,037 13,034 11,585 13,301 13,653 12,705
Appropriated portion (1/3) of rentals 321 366 997 1,205 873 953 718
Interest expense on premiums withheld
under ceded reinsurance contracts 4,441 4,683 9,078 9,846 - - -
---------- ---------- ------------ ------------ ------------- ----------- -------------
Total fixed charges 11,892 12,086 23,109 22,636 14,174 14,606 13,423
---------- ---------- ------------ ------------ ------------- ----------- -------------
Earnings (loss) before income taxes and
fixed charges $ 76,472 $ 59,051 $ 120,598 $ 105,010 $ (8,325) $ (8,200) $ (41,865)
---------- ---------- ------------ ------------ ------------- ----------- -------------
Preferred dividend requirements $ 6,956 $ 6,427 $ 13,113 $ 9,077 $ - $ - $ -
---------- ---------- ------------ ------------ ------------- ----------- -------------
Ratio of pre-tax income to net income 1.02 1.04 1.01 1.28 1.25 2.11 1.31
---------- ---------- ------------ ------------ ------------- ----------- -------------
Preferred dividend factor $ 7,100 $ 6,695 $ 13,227 $ 11,584 $ - $ - $ -
Total fixed charges 11,892 12,086 23,109 22,636 14,174 14,606 13,423
---------- ---------- ------------ ------------ ------------- ----------- -------------
Total fixed charges and preferred
dividends $ 18,992 $ 18,781 $ 36,336 $ 34,220 $ 14,174 $ 14,606 $ 13,423
---------- ---------- ------------ ------------ ------------- ----------- -------------
Ratio of earnings to fixed charges 6.43 4.89 5.22 4.64 (0.59) (0.56) (3.12)
---------- ---------- ------------ ------------ ------------- ----------- -------------
Ratio of earnings to combined
fixed charges and
preferred dividends 4.03 3.14 3.32 3.07 (0.59) (0.56) (3.12)
---------- ---------- ------------ ------------ ------------- ----------- -------------
Deficiency in ratio 22,499 22,806 55,288
============= =========== =============
Deficiency in combined ratio 22,499 22,806 55,288
============= =========== =============
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
PXRE Group Ltd.:
We consent to the incorporation by reference in the registration statement on
Form S-3 of PXRE Group Ltd. of our reports dated February 10, 2004, with respect
to the consolidated balance sheets of PXRE Group Ltd. as of December 31, 2003
and 2002, and the related consolidated statements of income and comprehensive
income, shareholders' equity and cash flows, for each of the years in the
three-year period ended December 31, 2003, and the related financial statement
schedules, which reports appear in the December 31, 2003, annual report on Form
10-K of PXRE Group Ltd. and to the reference to our firm under the heading
"Experts" in the prospectus.
As discussed in Note 1 to the consolidated financial statements, PXRE Group Ltd.
adopted the provisions of FAS 133 "Accounting For Derivative Instruments and
Hedging Activities," during 2001.
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