As filed with the Securities and Exchange Commission on October 31, 2001
File No. 333-71952
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
MARKEL CORPORATION Virginia 54-1959284
(Exact name of registrant as specified in charter) (State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
MARKEL CAPITAL TRUST II Delaware APPLIED FOR
(Exact name of registrant as specified in its (State of other jurisdiction of (I.R.S. Employer
certificate of trust) incorporation or organization) Identification No.)
4521 Highwoods Parkway, Glen Allen, Virginia 23060-6148 (804) 747-0136
(Address, including zip code, and telephone number, including area
code, of registrants' principal executive offices)
Gregory B. Nevers
Senior Vice President and General Counsel
Markel Corporation
4521 Highwoods Parkway, Glen Allen, Virginia 23060-6148 (804) 747-0136
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
________________________________
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement, as determined
by the Registrant.
The Registrants hereby amend 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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
As permitted by Rule 429 under the Securities Act of 1933, the Prospectus
contained in this Registration Statement also relates to $96,990,697.50 of
unsold and remaining unissued securities registered on the Registration
Statement on Form S-3 (Registration No. 333-52544). This Registration Statement
also constitutes post-effective Amendment No. 1 to such Registration Statement
No. 333-52544 and such post-effective Amendment No. 1 shall hereafter become
effective concurrently with the effectiveness of this Registration Statement and
in accordance with Section 8(c) of the Securities Act.
[The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.]
Subject to Completion, Dated October 31, 2001
PROSPECTUS
$ 650,000,000
Markel Corporation
Common Shares, Preferred Shares, Warrants, Debt Securities,
Trust Preferred Securities and Related Guarantee and
Agreement as to Expenses and Liabilities,
Share Purchase Contracts and Share Purchase Units
From time to time, we and Markel Capital Trust II may offer and sell:
. common shares,
. preferred shares,
. warrants,
. debt securities,
. trust preferred securities and related guarantee and agreement
as to expenses and liabilities,
. share purchase contracts and
. share purchase units.
We will provide specific terms of these securities in supplements to this
prospectus. The terms of the securities will include the initial offering price,
aggregate amount of the offering, listing on any securities exchange or
quotation system, investment considerations and the agents, dealers or
underwriters, if any, to be used in connection with the sale of these
securities. You should read this prospectus and any supplement carefully before
you invest.
In addition, up to 235,000 of our common shares may be offered by selling
security holders.
Our common shares are traded on the New York Stock Exchange under the
symbol "MKL."
Investing in our securities involves risks. See "Risk Factors" beginning on
page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is October , 2001.
MARKEL CORPORATION
General
We market and underwrite specialty insurance products and programs to a
variety of niche markets. In each of these markets, we seek to provide quality
products and excellent customer service so that we can be a market leader. Our
financial goals are to earn consistent underwriting profits and superior
investment returns to build shareholder value.
Markel North America includes the excess and surplus lines segment which is
comprised of four underwriting units and the specialty admitted segment which
consists of two underwriting units. The excess and surplus lines segment writes
property and casualty insurance for nonstandard and hard-to-place risks. The
specialty admitted segment writes risks that are unique and hard to place in the
standard market but must remain with an admitted insurance company for marketing
and regulatory reasons. These underwriting units write specialty program
insurance for well-defined niche markets and personal and commercial property
and liability coverages.
Markel International includes two segments: the London Company Market and
the Lloyd's Market. The London Company Market consists of the operations of
Terra Nova Insurance Company Limited. The Lloyd's Market includes Markel Capital
Limited, which is the corporate capital provider for Lloyd's syndicates managed
by Markel Syndicate Management Limited. Markel International's operating units
write specialty property, casualty, marine and aviation insurance and
reinsurance on a worldwide basis. The majority of Markel International's
business comes from the United Kingdom and the United States.
We are a Virginia corporation headquartered at 4521 Highwoods Parkway, Glen
Allen, Virginia 23060-6148, telephone number (804) 747-0136.
THE CAPITAL TRUST
Markel Capital Trust II is a statutory business trust newly formed under
Delaware law by us, as sponsor for the Capital Trust, and The Chase Manhattan
Bank USA, National Association, as trustee. The trust agreement for the Capital
Trust will be amended and restated substantially in the form filed as an exhibit
to the registration statement, effective when securities of the Capital Trust
are initially issued. The amended trust agreement will be qualified as an
indenture under the Trust Indenture Act of 1939.
The Capital Trust exists for the exclusive purposes of
. issuing two classes of trust securities, trust preferred securities
and trust common securities, which together represent undivided
beneficial interests in the assets of the Capital Trust;
. investing the gross proceeds of the trust securities in our junior
subordinated debt securities;
. making distributions; and
. engaging in only those other activities necessary, advisable or
incidental to the purposes listed above.
The junior subordinated debt securities will be the sole assets of the
Capital Trust, and our payments under the junior subordinated debt securities
and the agreement as to expenses and liabilities will be the sole revenue of the
Capital Trust.
No separate financial statements of the Capital Trust are included in this
prospectus. We consider that these financial statements would not be material to
holders of the trust preferred securities because the Capital Trust has no
independent operations and the purposes of the Capital Trust are as described
above. We do not expect that the Capital Trust will be filing annual, quarterly
or special reports with the SEC.
The principal place of business of the Capital Trust will be c/o Markel
Corporation, 4521 Highwoods Parkway, Glen Allen, Virginia 23060.
2
Unaudited Pro Forma Condensed
Financial Information
The following unaudited pro forma condensed financial information is based
on the historical consolidated statements of operations of Markel for the year
ended December 31, 2000 adjusted to give effect to the March 24, 2000
acquisition of Terra Nova Bermuda Holdings Ltd. assuming the acquisition had
occurred on January 1, 2000. The pro forma adjustments are based upon available
information and assumptions that management believes are reasonable.
We accounted for the acquisition of Terra Nova using the purchase method of
accounting. We allocated the purchase price for the acquisition to tangible and
identifiable intangible assets and liabilities based upon management estimates
of their fair value with the excess of purchase price over fair value of net
assets acquired allocated to goodwill and amortized over 20 years. For purposes
of presenting pro forma results, we made no changes in revenues and expenses to
reflect the results of any modification to operations that might have been made
had the acquisition been consummated on the assumed effective date of the
acquisition.
The unaudited pro forma condensed financial information does not purport to
represent what Markel's results of operations would actually have been had the
acquisition in fact occurred on January 1, 2000 or to project Markel's results
of operations for or at any future period or date.
MARKEL CORPORATION
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2000
(in thousands, except per share data)
(Unaudited)
Markel and
----------
Markel Terra Nova Pro Forma Terra Nova
------ ---------- --------- ----------
(historical) (historical)* Adjustments Pro Forma
------------ ------------- ------------- ------------
OPERATING REVENUES
Earned premiums .................................... $ 938,543 $ 142,833 $ -- $ 1,081,376
Net investment income .............................. 154,186 20,177 (1,474)A 172,889
Net realized gains (losses) from investment sales .. 1,478 (3,212) -- (1,734)
Other .............................................. 276 1,765 -- 2,041
------------ ------------- ------------- ------------
Total operating revenues ........................... 1,094,483 161,563 (1,474) 1,254,572
------------ ------------- ------------- ------------
OPERATING EXPENSES
Losses and loss adjustment expenses ................ 731,531 148,119 -- 879,650
Underwriting, acquisition and insurance expenses ... 339,089 54,078 -- 393,167
Amortization of intangible assets .................. 23,321 672 4,937 B 28,930
------------ ------------- ------------- ------------
Total operating expenses ........................... 1,093,941 202,869 4,937 1,301,747
------------ ------------- ------------- ------------
Operating income (loss) ............................ 542 (41,306) (6,411) (47,175)
Interest expense ................................... 52,348 2,862 3,164 C 58,374
------------ ------------- ------------- ------------
Loss before income taxes ........................... (51,806) (44,168) (9,575) (105,549)
Income taxes ....................................... (24,214) (21,822) 4,573 D (41,463)
------------ ------------- ------------- ------------
Loss from continuing operations .................... $ (27,592) $ (22,346) $ (14,148) $ (64,086)
============ ============= ============= ============
Loss from continuing operations per share:
Basic ......................................... $ (3.99) -- -- $ (8.78)
============ ============= ============= ============
Diluted ....................................... $ (3.99) -- -- $ (8.78)
============ ============= ============= ============
Weighted average shares:
Basic ......................................... 6,920 -- -- 7,302
============ ============= ============= ============
Diluted ....................................... 6,920 -- -- 7,302
============ ============= ============= ============
* Represents the period from January 1, 2000 through March 23, 2000. Terra
Nova was acquired by Markel Corporation on March 24, 2000 and is included
in Markel's results of operations since that date.
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Operations.
3
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
1. Basis of presentation
On March 24, 2000, Markel acquired Terra Nova. The Unaudited Pro Forma
Condensed Statement of Operations and related Notes were prepared based on
consideration to each Terra Nova shareholder of $13.00 in cash, .07027 of a
Markel common share and .07027 of a Markel contingent value right (CVR).
Consideration exchanged consisted of the following (in thousands, except per
share data):
Cash ................................................................................................. $ 356,500
Markel common shares and Markel contingent value rights issued to Terra Nova shareholders (1,769
shares at $148.00 per share and 1,769 contingent value rights at $19.00 per right) ................ 295,482
---------
Total purchase consideration ......................................................................... 651,982
Direct costs of acquisition .......................................................................... 6,423
---------
Total cost of acquisition ............................................................................ 658,405
Less: Fair value of Terra Nova net tangible and identifiable intangible assets as of purchase date ... 356,097
---------
Excess of cost over fair value of net assets acquired ................................................ $ 302,308
=========
The acquisition was funded as follows (in thousands):
Available cash ....................................................................................... $ 117,923
Borrowings under $400 million credit facility ........................................................ 245,000
Markel common shares and CVRs issued to Terra Nova shareholders ...................................... 295,482
---------
Total cost of acquisition ............................................................................ $ 658,405
=========
The accompanying Unaudited Pro Forma Condensed Consolidated Statement of
Operations is provided to illustrate the effect of the acquisition on Markel and
has been prepared using the purchase method of accounting. The unaudited pro
forma financial statement reflects how the statement of operations for the year
ended December 31, 2000 might have appeared had the acquisition of Terra Nova
been consummated on January 1, 2000. Reclassifications of Terra Nova's
historical financial statements have been made to conform with Markel's
historical presentation.
2. Adjustments
The accompanying Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 2000 reflects adjustments which are
explained below and are based on assumptions made by management. These
adjustments are required to give effect to matters directly attributable to the
acquisition. The explanations of these adjustments are as follows:
(A) Reduction in net investment income due to net cash used in funding the
transaction; the rate of return is calculated at 5%. The 5% rate of return is
based on historical average yields for Markel's investment portfolio.
(B) Excess of cost over fair value of net assets acquired is amortized on a
straight line basis over 20 years. The estimated life of the business acquired
was determined based on the value of the Lloyd's franchise, the investment
portfolio's earning power and profitable books of business acquired, as well as
the capital requirements and other barriers to entering the business acquired.
Effective January 1, 2002, the amortization of goodwill and intangibles with
indefinite lives will cease in accordance with Financial Accounting Standards
Board Statement of Financial Accounting Standards (Statement) No. 142, Goodwill
and Other Intangible Assets. Because of the extensive effort needed to comply
with adopting Statement 142, it is not practicable to reasonably estimate the
amount of amortization included in this Unaudited Pro Forma Statement of
Operations that will not continue in future periods.
(C) Interest on borrowed funds under revolving lines of credit is assumed
to be 4.50% which is calculated as LIBOR plus 1.25% as specified in the credit
facility. For the year ended December 31, 2000, a change of 1/8 percent in the
interest rate would result in a change in interest expense and loss from
continuing operations of $0.3 million and $0.2 million before and after taxes,
respectively. In addition, a fair value adjustment for Terra Nova's long term
debt, based on an independent third party quote, is amortized over the remaining
lives of those debt instruments.
(D) Taxes on the reduction in net investment income and increased interest
expense pro forma adjustments are calculated at an assumed 35% statutory rate.
In addition, as a result of the merger, Terra Nova's operations will be subject
to taxation in the United States. Taxes have been recorded for Terra Nova in
accordance with United States tax regulations assuming the transaction had
occurred on January 1, 2000.
4
RISK FACTORS
In addition to the matters addressed in the section entitled "Note On
Forward-Looking Statements" and other information included or incorporated in
this document, interested investors should consider the following risk factors
in determining whether to purchase securities described in this prospectus.
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 which 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 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.
5
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, Terra Nova 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.
Note On Forward-Looking Statements
This prospectus contains or incorporates by reference 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 our forward-looking statements on our
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 our companies, 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;
. 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 which could
lead to additional changes and expense;
. the impact of US tax laws on our foreign subsidiaries;
. changing rates of inflation and other economic conditions;
. losses due to foreign currency exchange 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 the distribution or placement of risks due to increased
consolidation of insurance and reinsurance brokers; and
. the effects of mergers, acquisitions and divestitures.
6
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 in this prospectus or in any supplement to this prospectus
might not occur. Readers are cautioned not to place undue reliance on any
forward-looking statements, which speak only as at their dates.
RATIO OF EARNINGS TO FIXED CHARGES
The results below include Terra Nova since its acquisition by us on March
24, 2000.
The following table sets forth the ratio of earnings to fixed charges for
each of the last five fiscal years and for the six month period ended June 30,
2001.
Six Months
Ended Year Ended December 31,
----------------------------------------------------------
June 30, 2001 2000 1999 1998 1997 1996
------------- ----------------------------------------------------------
Ratio of Earnings to Fixed Charges ............. 1.5 0.1 3.0 4.4 4.1 5.2
Deficiency in the coverage of fixed
charges by earnings before fixed
charges (000's) ................................ - $51,806 - - - -
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.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, we will
use the net proceeds from the sale of securities by us or the Capital Trust to
increase the capital of our insurance operations, to repay or refinance our
indebtedness, to fund working capital, and for other general corporate purposes,
including acquisitions. We will not receive any proceeds from the sale of common
shares that may be offered by selling security holders.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital consists of 50,000,000 common shares, no par value,
and 10,000,000 preferred shares, no par value. At September 30, 2001, 8,618,578
common shares were outstanding. At that date, no preferred shares were
outstanding.
Preferred Shares
Our preferred shares are issuable in one or more series from time to time
at the direction of the board of directors. The board of directors is
authorized, with respect to each series, to fix its:
. designation,
. relative rights, including voting, dividend, conversion, sinking fund
and redemption rights,
. preferences, including with respect to dividends and on liquidation,
and
. limitations.
The board of directors, without shareholder approval, can issue preferred
shares with voting and conversion rights that could adversely affect the voting
power of the holders of common shares. This right of issuance could be used as a
method of preventing a party from gaining control of us.
7
Common Shares
Each holder of our common shares is entitled to one vote for each share
held of record on each matter submitted to a vote of shareholders. Cumulative
voting in the election of directors is not permitted. As a result, the holders
of more than 50% of the outstanding shares have the power to elect all
directors. The quorum required at a shareholders' meeting for consideration of
any matter is a majority of the shares entitled to vote on that matter,
represented in person or by proxy. If a quorum is present, the affirmative vote
of a majority of the shares voting on the matter at the meeting is required for
shareholder approval. However, approval is required by the affirmative vote of
more than two-thirds of all shares entitled to vote, whether or not represented
at the meeting, in the case of major corporate actions, such as:
. a merger,
. a share exchange,
. the dissolution of Markel,
. an amendment to our articles of incorporation, or
. the sale of all or substantially all of our assets.
These provisions, together with our ability to issue preferred shares with
disproportionately high voting power could be used to, or have the effect of,
preventing or deterring a party from gaining control of Markel, whether or not
beneficial to public shareholders, and could discourage tactics that involve an
actual or threatened change of control of Markel.
Subject to the rights of any holders of our preferred shares, the holders
of common shares are entitled to receive dividends when, as, and if declared by
the board of directors out of funds legally available for that purpose and, in
the event of liquidation, dissolution or winding up of Markel, to share ratably
in all assets remaining after the payment of liabilities. There are no
preemptive or other subscription rights, conversion rights, or redemption or
sinking fund provisions with respect to common shares. All common shares
outstanding upon the consummation of any offering will be legally issued, fully
paid and nonassessable.
Our transfer agent and registrar for common shares is First Union National
Bank.
Voting Rights with Respect to
Extraordinary Corporate Transactions
Under Virginia law, a corporation may sell, lease, exchange or otherwise
dispose of all, or substantially all, of its property, other than in the usual
and regular course of business, if the proposed transaction is approved by more
than two-thirds of all of the votes entitled to be cast on that matter. A merger
or share exchange plan must be approved by each voting group entitled to vote
separately on the plan by more than two-thirds of all the votes entitled to be
cast on the plan by that voting group. The articles of incorporation may provide
for a greater or lesser vote, but not less than a majority of all the votes cast
on the transaction by each voting group entitled to vote on the transaction. Our
articles of incorporation do not provide for a greater or lesser vote.
Anti-takeover Statutes
Virginia law, except as to companies that elect not to be covered,
prohibits the following business combinations between a Virginia corporation and
any "interested shareholder:"
. mergers and statutory share exchanges;
. material dispositions of corporate assets not in the ordinary course
of business;
. any dissolution of the corporation proposed by or on behalf of an
interested shareholder; or
. any reclassification, including a reverse stock split,
recapitalization or merger of the corporation with its subsidiaries
that increases the percentage of voting shares beneficially owned by
an interested shareholder by more than 5%.
8
An interested shareholder is, among others, a person who is, or an
affiliate who was within three years of the transaction, a beneficial owner of
more than 10% of any class of the outstanding voting shares of the applicable
corporation. In these cases, unless the affiliated transaction satisfies "fair
price" criteria or comes within an applicable exemption, the affiliated
transaction must be approved by the affirmative vote of a majority of the
disinterested directors and by the affirmative vote of the holders of two-thirds
of the voting shares other than shares beneficially owned by the interested
shareholder. We have not made any election in our articles not to be covered by
this provision of the Virginia law.
Under Virginia law, voting rights for "control shares" must be approved by
a corporation's shareholders, not including the shares held by interested
parties. "Control shares" are shares whose acquisition entitles the acquiror to
between 1/5 and 1/3, between 1/3 and 1/2, or greater than 1/2 of a corporation's
voting power. If a shareholder has acquired control shares with a majority of
all voting power and these shares have been given voting rights, all other
shareholders have dissenters' rights. Virginia law exempts from these provisions
acquisitions where the corporation is a party to the governing agreement. We
have not made any election not to be governed by these provisions of Virginia
law. Our board of directors can elect not to be governed by these provisions at
any time before four days after receipt of a control share acquisition notice.
Insurance Holding Company Regulations
on Change of Control
We are regulated as an insurance holding company and are subject to state
and foreign laws that restrict the ability of any person to obtain control of an
insurance holding company without prior regulatory approval. Without this
approval or an exemption, no person may acquire any voting security of an
insurance holding company which controls an insurance subsidiary, or merge with
the holding company. "Control" is generally defined as the direct or indirect
power to direct or cause the direction of the management and policies of a
person and is usually presumed to exist if a person directly or indirectly owns
or controls 10% or more of the voting securities of another person.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of debt securities, preferred shares
or common shares. Warrants may be issued independently or together with debt
securities, preferred shares or common shares offered by any prospectus
supplement and may be attached to or separate from any of the offered
securities. Each warrant will entitle the holder to purchase the principal
amount of debt securities or number of preferred shares or common shares, as the
case may be, at the exercise price and in the manner specified in the prospectus
supplement relating to those warrants. Warrants will be issued under one or more
warrant agreements to be entered into between us and a bank or trust company, as
warrant agent. The warrant agent will act solely as our agent in connection with
the warrants and will not assume any obligation or relationship of agency or
trust for or with any holders or beneficial owners of warrants. If we offer
warrants, we will file the warrant agreement relating to the offered warrants as
an exhibit to, or incorporate it by reference in the registration statement of
which this prospectus is a part.
The prospectus supplement relating to a particular issue of warrants will
describe the terms of the warrants, including the following:
. the title of the warrants;
. the offering price for the warrants, if any;
. the aggregate number of the warrants;
. the designation and terms of the securities purchasable upon exercise
of the warrants;
. if applicable, the designation and terms of the securities with which
the warrants are issued and the number of such warrants issued with
each security;
. if applicable, the date from and after which the warrants and any
securities issued with the warrants will be separately transferable;
. the principal amount of debt securities purchasable upon exercise of a
warrant, if a debt warrant, and the price at which the principal
amount of securities may be purchased upon exercise, which price may
be payable in cash, securities, or other property;
9
. the date on which the right to exercise the warrants commences and the
date on which the right expires;
. if applicable, the number of common shares or preferred shares
purchasable upon exercise of a warrant and the price at which the
shares may be purchased upon exercise;
. if applicable, the minimum or maximum amount of the warrants that may
be exercised at any one time;
. the currency or currency units in which the offering price, if any,
and the exercise price are payable;
. if applicable, a discussion of material United States federal income
tax considerations;
. whether the debt warrants represented by the warrant certificates or
debt securities that may be issued upon exercise of the warrants will
be issued in registered or bearer form;
. information with respect to book-entry procedures, if any;
. the currency or currency units in which the offering price, if any,
and the exercise price are payable;
. the antidilution provisions of the warrants, if any;
. the redemption or call provisions, if any, applicable to the warrants;
and
. any additional terms of the warrants, including terms, procedures, and
limitations relating to the exchange and exercise of the warrants.
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of the debt
securities which may be offered by us from time to time. The prospectus
supplement will describe the specific terms of the debt securities offered by
that prospectus supplement.
We may issue debt securities either separately or together with, or upon
the conversion of, or in exchange for, other securities. The debt securities are
to be either senior obligations of ours issued in one or more series and
referred to herein as the "senior debt securities," subordinated obligations of
ours issued in one or more series and referred to herein as the "subordinated
debt securities," or our junior subordinated obligations issued in one or more
series and referred to herein as the "junior subordinated debt securities." The
senior debt securities, the subordinated debt securities and the junior
subordinated debt securities are collectively referred to as the "debt
securities." We will issue our senior debt securities under a senior indenture,
our subordinated debt securities under a subordinated indenture and our junior
subordinated debt securities under a junior subordinated indenture. The senior
indenture, the subordinated indenture and the junior subordinated indenture are
sometimes referred to herein collectively as the "indentures" and each
individually as an "indenture." Each indenture will be entered into by us and an
independent third party, known as a "trustee," who will be legally obligated to
carry out the terms of the indenture. The Chase Manhattan Bank is the trustee
under our senior indenture, our subordinated debt indenture and junior
subordinated debt indenture. The particular terms of the debt securities offered
by any prospectus supplement, and the extent to which the general provisions
described below may apply to the offered debt securities, will be described in
the prospectus supplement.
We have summarized certain terms and provisions of the indentures. The
summary is not complete. If we refer to particular provisions of the indentures,
the provisions, including definitions of certain terms, are incorporated by
reference as a part of this summary. The form of indentures are filed as an
exhibit to the registration statement of which this prospectus is a part, and
are incorporated by reference. The indentures are subject to and governed by the
Trust Indenture Act of 1939. You should refer to the applicable indenture for
the provisions that may be important to you.
The senior indenture and the subordinated indenture are substantially
identical, except for certain covenants of ours and provisions relating to
subordination. The subordinated indenture and the junior subordinated indenture
are substantially identical, except for certain rights and covenants of ours and
provisions relating to the issuance of securities to the Capital Trust.
10
General
The indentures will not limit the amount of debt securities that we may
issue. We may issue debt securities up to an aggregate principal amount as we
may authorize from time to time. Unless otherwise provided in a prospectus
supplement, our senior debt securities will be unsecured obligations of ours and
will rank equally with all of our other unsecured and unsubordinated
indebtedness. The subordinated debt securities will be unsecured obligations of
ours, subordinated in right of payment to the prior payment in full of all
senior indebtedness, which term includes the senior debt securities, of ours as
described below under "Subordination of the Subordinated and Junior Subordinated
Debt Securities" and in the applicable prospectus supplement.
In the event our junior subordinated debt securities are issued to the
Capital Trust in connection with the issuance of preferred securities and common
securities by the Capital Trust, these junior subordinated debt securities
subsequently may be distributed pro rata to the holders of the related preferred
securities and common securities in connection with the dissolution of the
Capital Trust upon the occurrence of specified events. These events will be
described in the prospectus supplement relating to the applicable preferred
securities and common securities. Only one series of our junior subordinated
debt securities will be issued to the Capital Trust in connection with the
issuance of preferred securities and common securities by the Capital Trust.
The applicable prospectus supplement will describe the terms of any debt
securities being offered, including:
. the designation, aggregate principal amount and authorized
denominations;
. the maturity date or method for determining the maturity date;
. the interest rate, if any, and the method for calculating the interest
rate;
. the interest payment dates and the record dates for the interest
payments;
. any mandatory or optional redemption terms or prepayment, conversion,
sinking fund or exchangeability or convertibility provisions;
. the places where the principal and interest will be payable;
. if other than denominations of $1,000 or multiples of $1,000, the
denominations the debt securities will be issued in;
. whether the debt securities will be issued in the form of global
securities, as defined below, or certificates;
. additional provisions, if any, relating to the defeasance and covenant
defeasance of the debt securities;
. whether the debt securities will be issuable in registered form,
referred to as the "registered securities," or bearer form, referred
to as the "bearer securities" or both and, if bearer securities are
issuable, any restrictions applicable to the exchange of one form for
another and the offer, sale and delivery of bearer securities;
. whether the debt securities will be senior debt securities,
subordinated debt securities or junior subordinated debt securities
and, if subordinated debt securities or junior subordinated debt
securities, the subordination provisions and the applicable definition
of "senior indebtedness;"
. any applicable material federal tax consequences;
. the dates on which premium, if any, will be payable;
. our right, if any, to defer payment of interest and the maximum length
of such deferral period;
. any listing on a securities exchange;
. if convertible into our common shares or preferred shares, the terms
on which such debt securities are convertible;
. the terms, if any, of any guarantee of the payment of principal of,
and premium, if any, and interest on debt securities of the series and
any corresponding changes to the provisions of the indenture as
currently in effect;
11
. the terms, if any, of the transfer, mortgage, pledge, or assignment as
security for the debt securities of the series of any properties,
assets, money, proceeds, securities or other collateral, including
whether certain provisions of the Trust Indenture Act are applicable,
and any corresponding changes to provisions of the indenture as
currently in effect;
. the initial public offering price; and
. other specific terms, including covenants and any additions or changes
to the events of default provided for with respect to the debt
securities.
If the purchase price of any debt securities is payable in a currency other
than U.S. dollars or if principal of, or premium, if any, or interest, if any,
on any of the debt securities is payable in any currency other than U.S.
dollars, the specific terms and other information with respect to the debt
securities and the foreign currency will be specified in the applicable
prospectus supplement.
Debt securities may be issued as original issue discount securities, as
defined in the indentures, to be sold at a substantial discount below their
principal amount. Original issue discount securities may include "zero coupon"
securities that do not pay any cash interest for the entire term of the
securities. In the event of an acceleration of the maturity of any original
issue discount security, the amount payable to the holder thereof upon an
acceleration will be determined in the manner described in the applicable
prospectus supplement. Conditions pursuant to which payment of the principal of
the subordinated debt securities may be accelerated will be set forth in the
applicable prospectus supplement. Material federal income tax and other
considerations applicable to original issue discount securities will be
described in the applicable prospectus supplement.
Under the indentures, the terms of the debt securities of any series may
differ and we, without the consent of the holders of the debt securities of any
series, may reopen a previous series of debt securities and issue additional
debt securities of that series or establish additional terms of that series,
unless otherwise indicated in the applicable prospectus supplement.
Covenants
Under the indentures, we will be required to:
. pay the principal, interest and any premium on the debt securities
when due;
. maintain a place of payment;
. deliver an officer's certificate to the applicable trustee within 120
days after the end of each fiscal year confirming our compliance with
our obligations under the applicable indenture; and
. deposit sufficient funds with any paying agent on or before the due
date for any principal, interest or any premium.
Any additional covenants will be described in the applicable prospectus
supplement.
Registration, Transfer, Payment
and Paying Agent
Unless otherwise indicated in a prospectus supplement, each series of debt
securities will be issued in registered form only, without coupons. We may also
issue debt securities in bearer form only, or in both registered and bearer
form. Bearer securities will not be offered, sold, resold or delivered in
connection with their original issuance in the United States or to any United
States person other than to the offices located outside the United States of
some United States financial institutions. Purchasers of bearer securities will
be subject to certification procedures and may be affected by limitations under
United States tax laws. These procedures and limitations will be described in
the prospectus supplement relating to the offering of the bearer securities.
Unless otherwise indicated in a prospectus supplement, registered
securities will be issued in denominations of $1,000 or any integral multiple
thereof, and bearer securities will be issued in denominations of $5,000.
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Unless otherwise indicated in a prospectus supplement, the principal,
premium, if any, and interest, if any, of or on the debt securities will be
payable, and debt securities may be surrendered for registration of transfer or
exchange, at an office or agency of the trustee in the Borough of Manhattan, The
City of New York, provided that payments of interest with respect to any
registered security may be made at our option by check mailed to the address of
the person entitled to payment or by transfer to an account maintained by the
payee with a bank located in the United States. No service charge will be made
for any registration of transfer or exchange of debt securities, but we may
require payment of a sum sufficient to cover any tax or other governmental
charge and any other expenses that may be imposed in connection with the
exchange or transfer.
Unless otherwise indicated in a prospectus supplement, payment of principal
of, premium, if any, and interest, if any, on bearer securities will be made,
subject to any applicable laws and regulations, at the office or agency outside
the United States as specified in the prospectus supplement and as we may
designate from time to time. Unless otherwise indicated in a prospectus
supplement, payment of interest due on bearer securities on any interest payment
date will be made only against surrender of the coupon relating to the interest
payment date. Unless otherwise indicated in a prospectus supplement, no payment
of principal, premium or interest with respect to any bearer security will be
made at any office or agency in the United States or by check mailed to any
address in the United States or by transfer to an account maintained with a bank
located in the United States; except that if amounts owing with respect to any
bearer securities will be payable in U.S. dollars, payment may be made at the
corporate trust office of the applicable trustee or at any office or agency
designated by us in the Borough of Manhattan, The City of New York, but only if,
payment of the full amount of the principal, premium or interest at all offices
outside of the United States maintained for this purpose by us is illegal or
effectively precluded by exchange controls or similar restrictions.
Unless otherwise indicated in the applicable prospectus supplement, we will
not be required to:
. issue, register the transfer of or exchange debt securities of any
series during a period beginning at the opening of business 15 days
before any selection of debt securities of that series of like tenor
to be redeemed and ending at the close of business on the day of that
selection;
. register the transfer of or exchange any registered security, or
portion thereof, called for redemption, except the unredeemed portion
of any registered security being redeemed in part;
. exchange any bearer security called for redemption, except to exchange
the bearer security for a registered security of that series and like
tenor that is simultaneously surrendered for redemption; or
. issue, register the transfer of or exchange any debt security which
has been surrendered for repayment at the option of the holder, except
the portion, if any, of the debt security not to be so repaid.
Ranking of Debt Securities; Holding Company Structure
The senior debt securities will be unsubordinated obligations of ours and
will rank equally in right of payment with all other unsubordinated indebtedness
of ours. The subordinated and junior subordinated debt securities will be
obligations of ours and will be subordinated in right of payment to all existing
and future senior indebtedness, as specified in the applicable prospectus
supplement. The prospectus supplement will describe the subordination provisions
and set forth the definition of "senior indebtedness" applicable to the
subordinated and junior subordinated debt securities, and the approximate amount
of the senior indebtedness outstanding as of a recent date.
Because we are a holding company that conducts all of our operations
through our subsidiaries, our ability to meet our obligations under the debt
securities 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 us. Payment of dividends or advances from our insurance subsidiaries may
require prior regulatory notice or approval. Holders of debt securities will
generally have a junior position to claims of creditors of our subsidiaries,
including trade creditors, debt holders, secured creditors, taxing authorities,
guarantee holders and any preferred shareholders.
Global Securities
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, a "depositary" identified in the prospectus supplement relating to that
series. Global debt securities may be issued in either registered or bearer form
and in either temporary or permanent form. Unless and until it is exchanged in
whole or in part for individual certificates evidencing debt securities, a
global debt security may not be transferred except as a whole
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[_] by the depositary to a nominee of the depositary;
[_] by a nominee of the depositary to the depositary or another nominee of
the depositary; or
[_] by the depositary or the nominee to a successor of the depositary or a
nominee of the successor.
The specific terms of the depositary arrangement with respect to a series
of global debt securities and material limitations and restrictions relating to
a series of global bearer securities will be described in the applicable
prospectus supplement.
Redemption and Repurchase
The debt securities may be redeemable at our option, in whole or in part,
or may be subject to mandatory redemption pursuant to a sinking fund or
otherwise, in each case upon the terms, at the times and at the redemption price
together with interest as set forth in the applicable prospectus supplement on
notice given at least 20 days prior to the date of redemption. Senior and
subordinated debt securities may be subject to repurchase by us at the option of
the holders upon the terms, at the times and at the price together with interest
set forth in the applicable prospectus supplement.
We must repay the senior and subordinated debt securities at the option of
the holders prior to the stated maturity date only if specified in the
applicable prospectus supplement. Unless otherwise provided in the prospectus
supplement, the senior and subordinated debt securities subject to repayment at
the option of the holder will be subject to repayment:
. on the specified repayment dates; and
. at a repayment price equal to 100% of the unpaid principal amount to
be repaid, together with unpaid interest accrued to the repayment
date.
For any senior or subordinated debt security to be repaid, the trustee must
receive, at its office maintained for that purpose in the Borough of Manhattan,
New York City not more than 60 nor less than 30 calendar days prior to the date
of repayment:
. in the case of a certificated senior or subordinated debt security,
the certificated senior or subordinated debt security and the form in
the senior or subordinated debt security entitled "Option of Holder to
Elect Repayment" duly completed; or
. in the case of a book-entry senior or subordinated debt security,
instructions to that effect from the beneficial owner to the
securities depositary and forwarded by the securities depositary.
Exercise of the repayment option by the holder will be irrevocable.
Only the securities depositary may exercise the repayment option in respect
of beneficial interests in the book-entry senior or subordinated debt
securities. Accordingly, beneficial owners that desire repayment in respect of
all or any portion of their beneficial interests must instruct the participants
through which they own their interests to direct the securities depositary to
exercise the repayment option on their behalf. All instructions given to
participants from beneficial owners relating to the option to elect repayment
will be irrevocable. In addition, at the time the instructions are given, each
beneficial owner will cause the participant through which it owns its interest
to transfer its interest in the book-entry senior or subordinated debt
securities or the global certificate representing the related book-entry senior
or subordinated debt securities, on the securities depositary's records, to the
trustee.
Conversion and Exchange
The applicable prospectus supplement will set forth the terms, if any, on
which debt securities of any series are convertible into or exchangeable for our
common shares, preferred shares, or other debt securities. The terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holders or at our option.
Absence of Limitation on Indebtedness and Liens; Absence of Event Risk
Protection
The applicable prospectus supplement will specify any prohibitions on the
amount of indebtedness, guarantees or other liabilities that may be incurred by
us and any prohibitions on our ability to create or assume liens on our
property. Unless otherwise provided in a prospectus supplement, the indentures
will not require the maintenance of any financial ratios, or specified levels of
our net worth, revenues, income, cash flow or liquidity, and will not contain
provisions which would give
14
holders of the debt securities the right to require us to repurchase their debt
securities in the event of a takeover, recapitalization or similar restructuring
or change in control of Markel.
Consolidation, Merger and Sale of Assets
Each indenture generally permits a consolidation or merger, subject to
specified limitations and conditions, between us and another corporation. They
also permit the sale by us of all or substantially all of our property and
assets. If this happens, the remaining or acquiring corporation must assume all
of our responsibilities and liabilities under the indentures including the
payment of all amounts due on the debt securities and performance of the
covenants in the indentures. Unless otherwise indicated in the applicable
prospectus supplement, we must also deliver an opinion of counsel to the
applicable trustee affirming our compliance with all conditions in the
applicable indenture relating to the transaction. When the conditions are
satisfied, the successor will succeed to and be substituted for us under the
applicable indenture, and we will be relieved of our obligations under the
applicable indenture and the debt securities issued under it.
Events of Default
Unless otherwise specified in the applicable prospectus supplement, an
event of default with respect to any debt securities will include:
. default for a period of 60 days in payment of any interest with
respect to any debt security of that series;
. default in payment of principal or any premium with respect to any
debt security of that series when due upon maturity, redemption,
repurchase at the option of the holder or otherwise;
. default in deposit of any sinking fund payment when due with respect
to any debt security of that series for a period of 60 days;
. default by us in the performance, or breach, of any other covenant or
warranty in the applicable indentures other than a covenant or
warranty included solely for the benefit of a series of debt
securities other than that particular series, which continues for 90
days after notice to us by the applicable trustee or the holders of
not less than a fixed percentage in aggregate principal amount of the
debt securities of all series issued under the applicable indenture;
. specified events of bankruptcy, insolvency or reorganization of us; or
. any other event of default that may be set forth in the applicable
prospectus supplement, including, but not limited to, an event of
default based on other debt being accelerated, or
"cross-acceleration."
No event of default with respect to any particular series of debt
securities necessarily constitutes an event of default with respect to any other
series of debt securities.
Each indenture provides that if an event of default with respect to any
series of debt securities issued under the indenture has occurred and is
continuing, either the relevant trustee or the holders of at least a fixed
percentage in principal amount of the debt securities of the series then
outstanding may declare the principal amount, or if any debt securities of the
series are original issue discount securities, a lesser amount as may be
specified in the applicable prospectus supplement, of all of the debt securities
of the series to be due and payable immediately. However, upon specified
conditions, the declaration and its consequences may be rescinded and annulled
by the holders of a majority in principal amount of the debt securities of all
series issued under the applicable indenture.
The applicable prospectus supplement will provide the terms pursuant to
which an event of default will result in an acceleration of the payment of
principal of subordinated or junior subordinated debt securities.
In the case of a default in the payment of principal of, or premium, if
any, or interest, if any, on any subordinated or junior subordinated debt
securities of any series, the applicable trustee, subject to specified
limitations and conditions, may institute a judicial proceeding for collection.
No holder of any of the debt securities of any series issued under any
indenture has any right to institute any proceeding with respect to that
indenture or any remedy under that indenture, unless the holders of at least a
fixed percentage in principal amount of the outstanding debt securities of that
series have made written request, and offered reasonable indemnity, to the
applicable trustee to institute a proceeding as trustee, the applicable trustee
has failed to institute a proceeding within 60
15
days after receipt of the notice and the applicable trustee has not within the
60-day period received directions inconsistent with the written request by
holders of a majority in principal amount of the outstanding debt securities of
the series. These limitations do not apply, however, to a suit instituted by a
holder of a debt security for the enforcement of the payment of the principal
of, premium, if any, or any accrued and unpaid interest on, the debt security on
or after the respective due dates expressed in the debt security.
Subject to the provisions of the applicable indenture relating to the
duties of the applicable trustee, if an event of default occurs and is
continuing, the applicable trustee is not under any obligation to exercise any
of its rights or powers under the indenture at the request or direction of any
of the holders unless those holders have offered to the applicable trustee
reasonable security or indemnity. Subject to provisions concerning the rights of
the applicable trustee, the holders of a majority in principal amount of the
outstanding debt securities of any series have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee, or exercising any trust, or power conferred on the applicable trustee
with respect to that series.
The applicable trustee may withhold notice to the holders of debt
securities of any default, except in the payment of principal or interest, if it
considers the withholding of notice to be in the best interests of the holders.
Other than its duties in case of a default, a trustee is not obligated to
exercise any of its rights or powers under the indentures at the request, order
or direction of any holders, unless the holders offer the trustee reasonable
indemnity. If they provide this reasonable indemnification, the holders of a
majority in principal amount of any series of debt securities may direct the
time, method and place of conducting any proceeding or any remedy available to
the applicable trustee, or exercising any power conferred upon the applicable
trustee, for any series of debt securities.
We are required to furnish to the trustees annually a statement as to
compliance with all conditions and covenants under the indentures.
Modification and Waivers
From time to time, we, when authorized by resolutions of our board of
directors, and the applicable trustee, without the consent of the holders of
debt securities of any series, may amend, waive or supplement the indentures and
the debt securities of the series for specified purposes, including, among other
things:
. to cure ambiguities, defects or inconsistencies;
. to provide for the assumption of our obligations to holders of the
debt securities of the series in the case of a merger, consolidation,
conveyance or transfer;
. to add to our events of default or our covenants or to make any change
that would provide any additional rights or benefits to the holders of
the debt securities of that series;
. to add or change any provisions of the indenture to facilitate the
issuance of bearer securities;
. to establish the form or terms of debt securities of any series and
any related coupons;
. to secure the debt securities of that series;
. to maintain the qualification of the indentures under the Trust
Indenture Act;
. to make any change that does not adversely affect the rights of any
holder;
. to appoint a successor trustee; or
. to make provisions with respect to the conversion or exchange rights
of holders.
Other amendments and modifications of the indentures or the related debt
securities may be made by us and the applicable trustee with the consent of the
holders of at least a majority of the aggregate principal amount of the
outstanding debt securities of each series that would be affected, with each
series voting as a separate class; provided that no modification or amendment
may, without the consent of the holder of each outstanding debt security that
would be affected:
16
. reduce the principal amount of, or change the stated maturity of the
principal of, or reduce the rate or modify the calculation of the rate
of interest of the debt securities or any additional amounts, or any
premium payable upon the redemption or repayment or otherwise, or
change our obligation to pay additional amounts;
. reduce the amount of the principal of an original issue discount
security that would be due and payable upon a declaration of
acceleration of the maturity, or the amount provable in bankruptcy;
. adversely affect the right of repayment at the option of any holder of
the debt securities;
. change the place of payment, currency in which the principal of, any
premium or interest on, or any additional amounts with respect to debt
securities are payable;
. impair the right of any holder of the debt securities to institute
suit for the enforcement of any payment on the debt securities or
after the stated maturity, or, in the case of redemption, on or after
the redemption date or, in the case of repayment at the option of any
holder of the debt securities, on or after the repayment date;
. reduce the percentage in principal amount of the outstanding debt
securities of any series, the consent of whose holder is required for
any supplemental indenture, or the consent of whose holder is required
for any waiver of specified defaults hereunder and their consequences
provided for in the indentures;
. reduce the requirements of quorum or voting under the indentures;
. make any change that adversely affects the right to convert or
exchange any of the debt securities for capital stock or other
securities in accordance with its terms; or
. modify the above provisions, except as permitted by the applicable
indenture.
The holders of a majority in aggregate principal amount of the outstanding
debt securities of any series may waive compliance by us with specified
restrictive provisions of the relevant indenture, including any other
restrictive covenants, if any, that may be set forth in the applicable
prospectus supplement. The holders of a majority in aggregate principal amount
of the outstanding debt securities of any series may, on behalf of all holders
of debt securities of that series, waive any past default under the applicable
indenture with respect to debt securities of that series and its consequences,
except a default in the payment of the principal of, or premium, if any, or
interest, if any, on any debt securities of that series or in respect of a
covenant or provision which cannot be modified or amended without the consent of
a larger fixed percentage or by the holder of each outstanding debt security of
the series affected.
Satisfaction; Discharge
Except as described in this section, we may discharge all of our
obligations to holders of the debt securities issued under the indentures, which
debt securities have not already been delivered to the applicable trustee for
cancellation and which either have become due and payable or are by their terms
due and payable within one year, or are to be called for redemption within one
year, by depositing with the applicable trustee an amount certified to be
sufficient to pay when due the principal, interest and premium, if any, on all
outstanding debt securities. However, some of our obligations under the
indentures will survive, including with respect to the following:
. remaining rights to register the transfer, conversion, substitution or
exchange of debt securities of the applicable series;
. rights of holders to receive payments of principal of, and any
interest on, the debt securities of the applicable series, and other
rights, duties and obligations of the holders of debt securities with
respect to any amounts deposited with the applicable trustee; and
. the rights, obligations and immunities of the applicable trustee under
the applicable indenture.
Defeasance
We will be discharged from our obligations on the debt securities of any
series at any time if we deposit with the applicable trustee sufficient cash or
government securities to pay the principal, interest, any premium and any other
sums due to the stated maturity date or a redemption date of the debt securities
of the series. If this happens, the holders of the debt
17
securities of the series will not be entitled to the benefits of the applicable
indenture except for registration of transfer and exchange of debt securities
and replacement of lost, stolen or mutilated debt securities.
Under federal income tax law as of the date of this prospectus, a
discharge may be treated as an exchange of the related debt securities. Each
holder might be required to recognize gain or loss equal to the difference
between the holder's cost or other tax basis for the debt securities and the
value of the holder's interest in the trust. Holders might be required to
include as income a different amount than would be includable without the
discharge. We urge prospective investors to consult their own tax advisers as to
the consequences of a discharge, including the applicability and effect of tax
laws other than the federal income tax law.
Governing Law
The indentures and the debt securities will be governed by, and
construed in accordance with, the laws of the State of New York.
Regarding the Trustees
The Trust Indenture Act contains limitations on the rights of a
trustee, should it become a creditor of ours, to obtain payment of claims in
some cases or to realize on some property received by it in respect of those
claims, as security or otherwise. Each trustee is permitted to engage in other
transactions with us and our subsidiaries from time to time, provided that if
that trustee acquires any conflicting interest it must eliminate that conflict
upon the occurrence of an event of default under the relevant indenture, or else
resign.
The Chase Manhattan Bank is the trustee under our senior indenture,
subordinated indenture and junior subordinated indenture. It is also the
property trustee and guarantee trustee and the The Chase Manhattan Bank USA,
National Association is the Delaware trustee for the Capital Trust. We and some
of our affiliates maintain banking relationships with The Chase Manhattan Bank.
The Chase Manhattan Bank also serves as trustee under other indentures pursuant
to which securities of ours and of some of our affiliates are outstanding. It
has purchased, and is likely to purchase in the future, our securities and
securities of our affiliates. The Chase Manhattan Bank administers its corporate
trust business at 450 West 33rd Street, New York, New York 10001, Attention:
Capital Markets Fiduciary Services.
Subordination of the Subordinated and
Junior Subordinated Debt Securities
Each series of subordinated and junior subordinated debt securities
will be subordinate and junior in right of payment, to the extent set forth in
the applicable indenture, to all senior indebtedness as defined below. If:
. we make a payment or distribution of any of our assets to creditors upon
our dissolution, winding-up, liquidation or reorganization, whether in
bankruptcy, insolvency or otherwise;
. a default beyond any grace period has occurred and is continuing with
respect to the payment of principal, interest or any other monetary amounts
due and payable on any senior indebtedness; or
. the maturity of any senior indebtedness has been accelerated because of a
default on that senior indebtedness,
then the holders of senior indebtedness generally will have the right to receive
payment, in the case of the first instance, of all amounts due or to become due
upon that senior indebtedness, and, in the case of the second and third
instances, of all amounts due on that senior indebtedness, or we will make
provision for those payments, before the holders of any subordinated or junior
subordinated debt securities have the right to receive any payments of principal
or interest on their subordinated or junior subordinated debt securities.
Senior indebtedness means, with respect to any series of subordinated
or junior subordinated debt securities, the principal, premium, interest and any
other payment in respect of any of the following:
. all of our indebtedness for borrowed or purchased money whether or not it
is evidenced by notes, debentures, bonds or other written instruments;
. our obligations for reimbursement under letters of credit, banker's
acceptances, security purchase facilities or similar facilities issued for
our account;
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. capitalized lease obligations;
. any of our other indebtedness or obligations with respect to commodity
contracts, interest rate commodity and currency swap agreements and other
similar agreements or arrangements; and
. all indebtedness of others of the kinds described in the preceding
categories which we have assumed or guaranteed.
Senior indebtedness will be entitled to the benefits of the
subordination provisions in the subordinated indenture irrespective of the
amendment, modification or waiver of any term of the senior indebtedness. We may
not amend the subordinated or junior subordinated indenture to change the
subordination of any outstanding subordinated or junior subordinated debt
securities without the consent of each holder of senior indebtedness that the
amendment would adversely affect.
The subordinated indenture does not limit the amount of senior
indebtedness that we may issue.
Additional Terms of the Junior Subordinated Debt Securities
Additional Covenants Applicable to Junior Subordinated Debt Securities
Under the junior subordinated indenture, we will:
. maintain 100% ownership of the Capital Trust while the junior subordinated
debt securities remain outstanding; and
. pay to the Capital Trust any taxes, duties, assessments or governmental
charges of whatever nature (other than withholding taxes) imposed by the
United States or any other taxing authority on that Capital Trust, so that
the net amounts received and retained by the Capital Trust, after paying
any taxes, duties, assessments or other governmental charges, will be not
less than the Capital Trust would have received had no such taxes, duties,
assessments or other governmental charges been imposed.
Option to Extend Interest Payment Period
We can defer interest payments by extending the interest payment
period for the number of consecutive extension periods specified in the
applicable prospectus supplement (each, an extension period). Other details
regarding the extension period will also be specified in the applicable
prospectus supplement. No extension period may extend beyond the maturity of the
junior subordinated debt securities. At the end of the extension period(s), we
will pay all interest then accrued and unpaid, together with interest compounded
quarterly at the rate for the junior subordinated debt securities, to the extent
permitted by applicable law.
During any extension period, we will not make distributions related to
our capital stock, including dividends, redemptions, repurchases, liquidation
payments, or guarantee payments. Also we will not make any payments, redeem or
repurchase any debt securities of equal or junior rank to the junior
subordinated debt securities or make any guarantee payments on any such debt
securities. We may, however, make the following types of distributions:
. dividends paid in common shares;
. dividends in connection with the implementation of a shareholder rights
plan;
. payments to a trust holding securities of the same series under a
guarantee;
. repurchases, redemptions or other acquisitions of shares of our capital
stock in connection with any employment contract, benefit plan or other
similar arrangement or in connection with a dividend reinvestment plan, or
. issuances resulting from the reclassification, exchange or conversion of
shares of capital stock.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The following is a summary of the principal terms of the trust
preferred securities. The form of amended trust agreement is filed as an exhibit
to the registration statement of which this prospectus forms a part, or is
incorporated by reference. The
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terms of the trust preferred securities will include those stated in the amended
trust agreement and those made part of the amended trust agreement by the Trust
Indenture Act.
General
The Capital Trust will exist until terminated as provided in its
amended trust agreement. Except under specified circumstances, we will be
entitled to appoint, remove, or replace trustees, who will conduct the business
and affairs of the Capital Trust. The trustees of the Capital Trust will consist
of:
. two employees, officers or affiliates of Markel as administrative trustees;
. a financial institution unaffiliated with us that will act as property
trustee and as indenture trustee for purposes of the Trust Indenture Act,
under the terms set forth in a prospectus supplement (the property
trustee); and
. one trustee with its principal place of business or who resides in the
State of Delaware and who will act under the terms set forth in a
prospectus supplement.
The amended trust agreement will authorize the administrative trustees
to issue, on behalf of the Capital Trust, two classes of trust securities, trust
preferred securities and trust common securities, each of which will have the
terms described in this prospectus and in the applicable prospectus supplement.
We will own all of the trust common securities. The trust common securities will
rank equally in right of payment, and payments will be made on the trust common
securities, proportionately with the trust preferred securities. However, if an
event of default occurs and is continuing under the amended trust agreement, the
rights of the holders of the trust common securities to payment for
distributions and payments upon liquidation, redemption and otherwise, will be
subordinated to the rights of the holders of the trust preferred securities. We
will acquire, directly or indirectly, trust common securities in a total
liquidation amount of approximately 3% of the total capital of the Capital
Trust.
The proceeds from the sale of the trust preferred securities will be
used by the Capital Trust to purchase our junior subordinated debt securities.
These junior subordinated debt securities will be held in trust by the property
trustee for the benefit of the holders of the trust securities. We will
guarantee the payments of distributions and payments on redemption or
liquidation with respect to the trust preferred securities, but only to the
extent the Capital Trust has funds available to make those payments and has not
made the payments. See "Description of the Guarantee."
The assets of the Capital Trust available for distribution to the
holders of trust preferred securities will be limited to payments from us under
the junior subordinated debt securities held by the Capital Trust. If we fail to
make a payment on the junior subordinated debt securities, the Capital Trust
will not have sufficient funds to make related payments, including
distributions, on its trust preferred securities.
The guarantee, when taken together with our obligations under the
junior subordinated debt securities, the subordinated indenture and the amended
trust agreement, will provide a full and unconditional guarantee of amounts due
on the trust preferred securities issued by the Capital Trust.
The trust preferred securities will have the terms, including
distributions, redemption, voting, liquidation rights and other preferred,
deferred or other special rights or restrictions that will be described in the
amended trust agreement or made part of the amended trust agreement by the Trust
Indenture Act or the Delaware Business Trust Act. The terms of the trust
preferred securities will mirror the terms of the junior subordinated debt
securities held by the Capital Trust. In other words, the distribution rate and
the distribution payment dates and other payment dates for the trust preferred
securities will correspond to the interest rate and interest payment dates and
other payment dates on the junior subordinated debt securities. Holders of trust
preferred securities have no preemptive or similar rights.
Provisions of a Particular Series
The Capital Trust may issue only one series of trust preferred
securities. The applicable prospectus supplement will set forth the principal
terms of the trust preferred securities that will be offered, including:
. the name of the trust preferred securities;
. the liquidation amount and number of trust preferred securities issued;
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. the annual distribution rate(s) or method of determining such rate(s), the
payment date(s) and the record dates used to determine the holders who are
to receive distributions;
. the date from which distributions will be cumulative;
. the optional redemption provisions, if any, including the prices, time
periods and other terms and conditions on which the trust preferred
securities will be purchased or redeemed, in whole or in part;
. the terms and conditions, if any, upon which the junior subordinated debt
securities and the related guarantee may be distributed to holders of those
trust preferred securities;
. any securities exchange on which the trust preferred securities will be
listed;
. whether the trust preferred securities are to be issued in book-entry form
and represented by one or more global certificates, and if so, the
depository for those global certificates and the specific terms of the
depositary arrangements; and
. any other relevant rights, preferences, privileges, limitations or
restrictions of the trust preferred securities.
The interest rate and interest and other payment dates of junior
subordinated debt securities issued to the Capital Trust will correspond to the
rate at which distributions will be paid and the distribution and other payment
dates of the trust preferred securities of that Trust.
Extensions
We have the right under the junior subordinated indenture to defer
payments of interest on the junior subordinated debt securities by extending the
interest payment period from time to time on the junior subordinated debt
securities. The administrative trustees will give the holders of the trust
preferred securities notice of any extension period upon their receipt of notice
from us. If distributions are deferred, the deferred distributions and accrued
interest will be paid to holders of record of the trust preferred securities as
they appear on the books and records of the Capital Trust on the record date
next following the termination of such deferral period. See "Additional Terms of
Junior Subordinated Debentures--Option to Extend Interest Payment Period."
Distributions
Distributions on the trust preferred securities will be made on the
dates payable to the extent that the Capital Trust has funds available for the
payment of distributions in the property account. The Capital Trust's funds
available for distribution to the holders of the trust securities will be
limited to payments received from us on the junior subordinated debt securities.
We have guaranteed the payment of distributions out of monies held by the
Capital Trust to the extent set forth under "Description of the Guarantee."
Distributions on the trust preferred securities will be payable to the
holders named on the securities register of the Capital Trust at the close of
business on the relevant record dates, which, as long as the trust preferred
securities remain in book-entry only form, will be one business day before the
relevant payment dates. Distributions will be paid through the property trustee
who will hold amounts received in respect of the junior subordinated debt
securities in the property account for the benefit of the holders of the trust
securities. If the trust preferred securities do not continue to remain in
book-entry only form, the relevant record dates will conform to the rules of any
securities exchange on which the trust preferred securities are listed and, if
none, the administrative trustees will have the right to select relevant record
dates, which will be more than 14 days but less than 60 days before the relevant
payment dates. If any date on which distributions are to be made on the trust
preferred securities is not a business day, then payment of the distributions
payable on that date will be made on the next succeeding day which is a business
day and without any interest or other payment in respect of that delay, except
that, if that business day is in the next succeeding calendar year, the payment
will be made on the immediately preceding business day, in each case with the
same force and effect as if made on the record date.
Mandatory Redemption of Trust Preferred Securities
The trust preferred securities have no stated maturity date, but will
be redeemed upon the maturity of the junior subordinated debt securities or to
the extent the junior subordinated debt securities are redeemed before maturity.
The junior subordinated debt securities will mature on the date specified in the
applicable prospectus supplement and may be redeemed at
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any time, in whole but not in part, in certain circumstances upon the occurrence
of a Tax Event or an Investment Company Event as described under "Special Event
Redemption."
Upon the maturity of the junior subordinated debt securities, the
proceeds of their repayment will simultaneously be applied to redeem all the
outstanding trust securities at the Redemption Price. Upon the redemption of the
junior subordinated debt securities, either at our option or as a result of a
Tax Event or an Investment Company Event, the proceeds from the redemption will
simultaneously be applied to redeem trust securities having a total liquidation
amount equal to the total principal amount of the junior subordinated debt
securities so redeemed at the redemption price; provided, that holders of trust
securities will be given not less than 20 nor more than 60 days' notice of the
redemption. If fewer than all of the outstanding trust securities are to be
redeemed, the trust securities will be redeemed proportionately.
Special Event Redemption
Both a Tax Event and an Investment Company Act Event constitute
Special Events for purposes of the redemption provisions described in the
preceding paragraph.
A Tax Event means that the administrative trustees have received an
opinion of independent tax counsel experienced in those matters to the effect
that, as a result of any amendment to, change or announced proposed change in:
. the laws or regulations of the United States or any of its political
subdivisions or taxing authorities, or
. any official administrative pronouncement, action or judicial decision
interpreting or applying those laws or regulations,
which amendment or change becomes effective or proposed change, pronouncement,
action or decision is announced on or after the date the trust preferred
securities are issued and sold, there is more than an insubstantial risk that:
. the Capital Trust is or within 90 days would be subject to U.S. federal
income tax with respect to income accrued or received on the junior
subordinated debt securities,
. interest payable to the Capital Trust on the junior subordinated debt
securities is not or within 90 days would not be deductible, in whole or in
part, by us for U.S. federal income tax purposes, or
. the Capital Trust is or within 90 days would be subject to a material
amount of other taxes, duties or other governmental charges.
Investment Company Event means that the administrative trustees have
received an opinion of a nationally recognized independent counsel to the effect
that, as a result of an amendment to or change in the Investment Company Act or
regulations thereunder on or after the date the trust preferred securities are
issued and sold, there is more than an insubstantial risk that the Capital Trust
is or will be considered an investment company and be required to be registered
under the Investment Company Act.
Redemption Procedures
The Capital Trust may not redeem fewer than all the outstanding trust
securities unless all accrued and unpaid distributions have been paid on all
trust securities for all distribution periods terminating on or before the date
of redemption. If fewer than all of the outstanding trust securities are to be
redeemed, the trust securities will be redeemed proportionately.
If the Capital Trust gives a notice of redemption in respect of the
trust securities (which notice will be irrevocable), and if we have paid to the
property trustee a sufficient amount of cash in connection with the related
redemption or maturity of the junior subordinated debt securities, then, by
12:00 noon New York City time on the redemption date, the property trustee will
irrevocably deposit with the depositary funds sufficient to pay the applicable
redemption price and will give the depositary irrevocable instructions and
authority to pay the redemption price to the holders of the trust preferred
securities, and the paying agent will pay the applicable redemption price to the
holders of the trust common securities by check. If notice of redemption has
been given and funds deposited as required, then, immediately before the close
of business on the date of the deposit, distributions will cease to accrue and
all rights of holders of trust preferred securities called for redemption will
cease, except the right of the holders of the trust preferred securities to
receive the redemption price but without interest on the redemption price. If
any date fixed for redemption of trust preferred securities is not a business
day, then payment of the redemption price payable on that date will be made on
the next succeeding day that is a business day, without any interest or other
payment in respect of any such delay, except that, if that business day falls in
the next calendar year, payment will be made on the
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immediately preceding business day. If payment of the redemption price in
respect of trust preferred securities is improperly withheld or refused and not
paid either by the Capital Trust or by us under the guarantee, distributions on
the trust preferred securities will continue to accrue at the then applicable
rate from the original redemption date to the date of payment, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the redemption price.
Subject to the foregoing and applicable law, including, without limitation,
U.S. federal securities laws, we or our subsidiaries may at any time, and from
time to time, purchase outstanding trust preferred securities by tender, in the
open market or by private agreement.
Distribution of the Junior Subordinated Debt Securities
We will have the right at any time to dissolve the Capital Trust and, after
satisfaction of the liabilities of creditors of the Capital Trust as provided by
applicable law, to cause junior subordinated debt securities to be distributed
to the holders of the trust preferred securities in a total stated principal
amount equal to the total stated liquidation amount of the trust preferred
securities then outstanding. Before any such dissolution, we will obtain any
required regulatory approvals. The right to dissolve the trust and distribute
the junior subordinated debt securities will be conditioned on our receipt of an
opinion rendered by an independent tax counsel that the distribution would not
result in the recognition of gain or loss for federal income tax purposes by the
holders.
Liquidation Distribution Upon Dissolution
The amended trust agreement will state that the Capital Trust will be
dissolved:
. upon our bankruptcy;
. upon the filing of a certificate of dissolution or its equivalent with
respect to us;
. upon the filing of a certificate of cancellation with respect to the Capital
Trust after obtaining the consent of at least a majority in liquidation
amount of the trust preferred securities, voting together as a single class;
. 90 days after the revocation of our charter, but only if the charter is not
reinstated during that 90-day period;
. upon the distribution of the related junior subordinated debt securities
directly to the holders of the trust securities;
. upon the redemption of all of the trust securities; or
. upon entry of a court order for the dissolution of us or the Capital Trust.
Upon a dissolution, after the Capital Trust pays all amounts owed to creditors,
the holders of the trust preferred securities will be entitled to receive:
. cash equal to the total liquidation amount of the trust preferred security
specified in an accompanying prospectus supplement, plus accumulated and
unpaid distributions to the date of payment, or
. junior subordinated debt securities in a total principal amount equal to the
total liquidation amount of the trust preferred securities.
If the Capital Trust cannot pay the full amount due on its trust securities
because insufficient assets are available for payment, then the amounts payable
by the Capital Trust on its trust securities will be paid proportionately.
However, if an event of default under the related amended trust agreement
occurs, the total amounts due on the trust preferred securities will be paid
before any distribution on the trust common securities. Under certain
circumstances involving the dissolution of the Capital Trust, subject to
obtaining any required regulatory approval, junior subordinated debt securities
will be distributed to the holders of the trust securities in liquidation of the
Capital Trust.
Trust Enforcement Events
An event of default under the junior subordinated indenture relating to the
junior subordinated debt securities will be an event of default under the
amended trust agreement (a trust enforcement event). See "Description of Debt
Securities--Events of Default."
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In addition, the voluntary or involuntary dissolution, winding up or
termination of the Capital Trust is also a trust enforcement event, except in
connection with:
. the distribution of the junior subordinated debt securities to holders of the
trust securities of the Capital Trust,
. the redemption of all of the trust securities of the Capital Trust, or
. mergers, consolidations or amalgamations permitted by the amended trust
agreement of the Capital Trust.
Under the amended trust agreement, the holder of the trust common
securities will be deemed to have waived any trust enforcement event with
respect to the trust common securities until all trust enforcement events with
respect to the trust preferred securities have been cured, waived or otherwise
eliminated. Until all trust enforcement events with respect to the trust
preferred securities have been so cured, waived, or otherwise eliminated, the
property trustee will be deemed to be acting solely on behalf of the holders of
the trust preferred securities and only the holders of the trust preferred
securities will have the right to direct the property trustee with respect to
certain matters under the amended trust agreement and the junior subordinated
indenture. If any trust enforcement event with respect to the trust preferred
securities is waived by the holders of the trust preferred securities as
provided in the amended trust agreement, under the amended trust agreement the
holders of trust common securities have agreed that the waiver also constitutes
a waiver of the trust enforcement event with respect to the trust common
securities for all purposes under the amended trust agreement without any
further act, vote or consent of the holders of trust common securities.
We and the administrative trustees must file annually with the property
trustee a certificate evidencing compliance with all the applicable conditions
and covenants under the amended trust agreement.
Upon the occurrence of a trust enforcement event the property trustee, as
the sole holder of the junior subordinated debt securities, will have the right
under the junior subordinated indenture to declare the principal of, interest
and premium, if any, on the junior subordinated debt securities to be
immediately due and payable.
If the property trustee fails to enforce its rights under the amended trust
agreement or the junior subordinated indenture to the fullest extent permitted
by law and subject to the terms of the amended trust agreement and the junior
subordinated indenture, any holder of trust preferred securities may sue us, or
seek other remedies, to enforce the property trustee's rights under the amended
trust agreement or the junior subordinated indenture without first instituting a
legal proceeding against the property trustee or any other person. If a trust
enforcement event occurs and is continuing as a result of our failure to pay
principal of or interest or premium, if any, on the junior subordinated debt
securities when payable, then a holder of the trust preferred securities may
directly sue us or seek other remedies, to collect its proportionate share of
payments owned. See "Relationship Among the Trust Preferred Securities, The
Guarantee and the Junior Subordinated Debentures Held by the Trust."
Removal and Replacement of Trustees
Only the holders of trust common securities have the right to remove or
replace the trustees of the Capital Trust, except that while an event of default
in respect of the junior subordinated debt securities has occurred or is
continuing, the holders of a majority of the trust preferred securities will
have this right. The resignation or removal of any trustee and the appointment
of a successor trustee will be effective only on the acceptance of appointment
by the successor trustee in accordance with the provisions of the amended trust
agreement.
Mergers, Consolidations or Amalgamations of the Capital Trust
The Capital Trust may not consolidate, amalgamate, merge with or into, or
be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other corporation or other body (each, a
merger event), except as described below. The Capital Trust may, with the
consent of a majority of its administrative trustees and without the consent of
the holders of its trust securities, consolidate, amalgamate, merge with or
into, or be replaced by another trust, provided that the following conditions
are met:
. the successor entity either
. assumes all of the obligations of the Capital Trust relating to its trust
securities, or
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. substitutes other securities for the trust securities that are
substantially similar to the trust securities, so long as the successor
securities rank the same as the trust securities for distributions and
payments upon liquidation, redemption and otherwise;
. we acknowledge a trustee of the successor entity who has the same powers and
duties as the property trustee of the Capital Trust, as the holder of the
junior subordinated debt securities;
. the trust preferred securities are listed, or any successor securities will
be listed, upon notice of issuance, on the same securities exchange or other
organization that the trust preferred securities are then listed;
. the merger event does not cause the trust preferred securities or successor
securities to be downgraded by any nationally recognized rating agency;
. the merger event does not adversely affect the rights, preferences and
privileges of the holders of the trust securities or successor securities in
any material way, other than with respect to any dilution of the holders'
interest in the new entity;
. the successor entity has a purpose identical to that of the Capital Trust;
. before the merger event, we have received an opinion of counsel from a
nationally recognized law firm stating that
. the merger event does not adversely affect the rights of the holders of
the trust preferred securities or any successor securities in any material
way, other than with respect to any dilution of the holders' interest in
the new entity, and
. following the merger event, neither the Capital Trust nor the successor
entity will be required to register as an investment company under the
Investment Company Act; and
. we guarantee the obligations of the successor entity under the successor
securities in the same manner as in the guarantee.
In addition, unless all of the holders of the trust preferred securities
and trust common securities approve otherwise, the Capital Trust will not
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it, if, in the opinion of a nationally recognized tax counsel
experienced in such matters, the transaction would cause the Capital Trust or
the successor entity to be classified other than as a grantor trust for U.S.
federal income tax purposes.
Voting Rights; Amendment of Trust Agreement
The holders of trust preferred securities have no voting rights except as
discussed under "Mergers, Consolidations or Amalgamations of the Trust and
Description of the Guarantee--Amendments," and as otherwise required by law and
the amended trust agreement.
The amended trust agreement may be amended if approved by a majority of the
administrative trustees of the Capital Trust. However, if any proposed amendment
provides for, or the administrative trustees otherwise propose to effect,
. any action that would adversely affect the powers, preferences or special
rights of the trust securities, whether by way of amendment to the amended
trust agreement or otherwise, or
. the dissolution, winding-up or termination of the Capital Trust other than
under the terms of its amended trust agreement,
then the holders of the trust preferred securities as a single class will be
entitled to vote on the amendment or proposal. In that case, the amendment or
proposal will only be effective if approved by at least a majority in
liquidation amount of the trust preferred securities affected by the amendment
or proposal.
No amendment may be made to the amended trust agreement if that amendment
would:
. cause the Capital Trust to be characterized as other than a grantor trust for
U.S. federal income tax purposes;
. reduce or otherwise adversely affect the powers of the property trustee; or
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. cause the Capital Trust to be deemed to be an investment company which is
required to be registered under the Investment Company Act.
The holders of a majority of the total liquidation amount of the trust
preferred securities have the right to:
. direct the time, method and place of conducting any proceeding for any remedy
available to the property trustee; or
. direct the exercise of any trust or power conferred upon the property trustee
under the amended trust agreement, including the right to direct the property
trustee, as the holder of the junior subordinated debt securities, to
. exercise the remedies available under the junior subordinated indenture
with respect to the junior subordinated debt securities,
. waive any event of default under the junior subordinated indenture that is
waivable, or
. cancel an acceleration of the principal of the junior subordinated debt
securities.
In addition, before taking any of the foregoing actions, the property
trustee must obtain an opinion of counsel stating that, as a result of that
action, the Capital Trust will continue to be classified as a grantor trust for
U.S. federal income tax purposes.
As described in the form of amended trust agreement, the property trustee
may hold a meeting to have holders of trust preferred securities vote on a
change or have them approve a change by written consent.
If a vote by the holders of trust preferred securities is taken or a
consent is obtained, any trust preferred securities owned by us or any of our
affiliates will, for purposes of the vote or consent, be treated as if they were
not outstanding, which will have the following consequences:
. we and any of our affiliates will not be able to vote on or consent to
matters requiring the vote or consent of holders of trust preferred
securities; and
. any trust preferred securities owned by us or any of our affiliates will not
be counted in determining whether the required percentage of votes or
consents has been obtained.
Information Concerning the Property Trustee
For matters relating to compliance with the Trust Indenture Act, the
property trustee will have all of the duties and responsibilities of an
indenture trustee under the Trust Indenture Act. The property trustee, other
than during the occurrence and continuance of a trust enforcement event,
undertakes to perform only the duties that are specifically described in the
amended trust agreement and, upon a trust enforcement event, must use the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the property
trustee is under no obligation to exercise any of the powers given it by the
applicable amended trust agreement at the request of any holder of trust
preferred securities unless it is offered reasonable security or indemnity
against the costs, expenses and liabilities that it might incur. However, the
holders of the trust preferred securities will not be required to offer such an
indemnity where the holders, by exercising their voting rights, direct the
property trustee to take any action following a trust enforcement event.
Information Concerning the Administrative Trustees
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the Capital Trust in a way that:
. will not cause it to be deemed to be an investment company required to be
registered under the Investment Company Act;
. will cause it to be classified as a grantor trust for U.S. federal income tax
purposes; and
. will cause the junior subordinated debt securities it holds to be treated as
our indebtedness for U.S. federal income tax purposes.
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We and the administrative trustees are authorized to take any action, so
long as it is consistent with applicable law or the certificate of trust or
amended trust agreement, that we and the administrative trustees determine to be
necessary or desirable for those purposes.
DESCRIPTION OF THE GUARANTEE
We will execute the guarantee for the benefit of the holders of the trust
preferred securities.
The Chase Manhattan Bank will act as guarantee trustee under the guarantee.
The guarantee trustee will hold the guarantee for the benefit of the holders of
the trust preferred securities.
The following description of the guarantee is only a summary. The form of
guarantee is an exhibit to the registration statement.
General
We will irrevocably and unconditionally agree under the guarantee to pay
the guarantee payments, to the extent specified in the guarantee, to the holders
of the trust preferred securities, but only to the extent that the guarantee
payments are not paid by or on behalf of the Capital Trust. We are required to
pay the guarantee payments to the extent specified in the guarantee regardless
of any defense, right of set-off or counterclaim that we may have or may assert
against any person.
The following payments and distributions on the trust preferred securities
are guarantee payments:
. any accrued and unpaid distributions required to be paid on the trust
preferred securities of the Capital Trust, but only to the extent that the
Capital Trust has funds legally and immediately available for those
distributions;
. the redemption price for any trust preferred securities that the Capital
Trust calls for redemption, including all accrued and unpaid distributions to
the redemption date, but only to the extent that the Capital Trust has funds
legally and immediately available for the payment; and
. upon a dissolution, winding-up or termination of the Capital Trust, other
than in connection with the distribution of junior subordinated debt
securities to the holders of trust securities of the Capital Trust or the
redemption of all the trust preferred securities of the Capital Trust, the
lesser of:
. the sum of the liquidation amount and all accrued and unpaid
distributions on the trust preferred securities of the Capital Trust
to the payment date, to the extent that the Capital Trust has funds
legally and immediately available for the payment; and
. the amount of assets of the Capital Trust remaining available for
distribution to holders of the trust preferred securities of the
Capital Trust in liquidation of the Capital Trust.
We may satisfy our obligation to make a guarantee payment by making that
payment directly to the holders of the trust preferred securities or by causing
the Capital Trust to make the payment to those holders.
The guarantee will be a full and unconditional guarantee, subject to
certain subordination provisions, of the guarantee payments with respect to the
trust preferred securities from the time of issuance of those trust preferred
securities, except that the guarantee will only apply to the payment of
distributions and other payments on the trust preferred securities when the
Capital Trust has sufficient funds legally and immediately available to make
those distributions or other payments.
If we do not make the required payments on the junior subordinated debt
securities that the property trustee holds under the Capital Trust, the Capital
Trust will not make the related payments on its trust preferred securities.
Subordination
Our obligations under the guarantee will be unsecured obligations of
Markel. Those obligations will rank:
. subordinate and junior in right of payment to all of our other liabilities,
other than obligations or liabilities that rank equal in priority or
subordinate by their terms;
27
. equal in priority with the junior subordinated debt securities that we may
issue and similar guarantees; and
. senior to our common shares.
The guarantee will be a guarantee of payment and not of collection. This
means that the guaranteed party may institute a legal proceeding directly
against us, as guarantor, to enforce its rights under the guarantee without
first instituting a legal proceeding against any other person or entity.
The terms of the trust preferred securities will provide that each holder
of the trust preferred securities, by accepting those trust preferred
securities, agrees to the subordination provisions and other terms of the
guarantee.
Amendments
We may amend the guarantee without the consent of any holder of the trust
preferred securities if the amendment does not materially and adversely affect
the rights of those holders. We may otherwise amend the guarantee with the
approval of the holders of at least 50% of the outstanding trust preferred
securities to which that guarantee relates.
Termination
The guarantee will terminate and be of no further effect when:
. the redemption price of the trust preferred securities is fully paid;
. we distribute the related junior subordinated debt securities to the holders
of those trust preferred securities; or
. the amounts payable upon liquidation of the Capital Trust are fully paid.
The guarantee will remain in effect or will be reinstated if at any time
any holder of the trust preferred securities must restore payment of any sums
paid to that holder with respect to the trust preferred securities or under the
guarantee.
Material Covenants
We will covenant that, so long as any trust preferred securities remain
outstanding, if there is an event of default under the guarantee or the amended
trust agreement:
. we will not make distributions related to our debt securities that rank
equally with or junior to the junior subordinated debt securities, including
any payment of interest, principal or premium, or repayments, repurchases or
redemptions; and
. we will not make distributions related to our capital stock, including
dividends, redemptions, repurchases, liquidation payments, or guarantee
payments. We may, however, make the following types of distributions:
. dividends paid in common shares;
. dividends in connection with the implementation of a shareholder rights
plan;
. payments to a trust holding securities of the same series under a
guarantee; and
. repurchases, redemptions or other acquisitions of shares of our capital
stock in connection with any benefit plan or other similar arrangement
with or for the benefit of employees, officers, directors or consultants.
Because we are a holding company that conducts all of our operations
through our subsidiaries, our ability to meet our obligations under the
guarantee 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 us. The Capital Trust, as holder of the guarantee and the junior subordinated
debt securities will generally have a junior position to claims of creditors of
our subsidiaries, including trade creditors, debtholders, secured creditors,
taxing authorities, guarantee holders and any preferred shareholders.
Events of Default
28
An event of default will occur under the guarantee if we fail to perform
any of our payment obligations under the guarantee. The holders of a majority of
the trust preferred securities of any series may waive any such event of default
and its consequences on behalf of all of the holders of the trust preferred
securities of that series. The guarantee trustee is entitled to enforce the
guarantee for the benefit of the holders of the trust preferred securities of a
series if an event of default occurs under the guarantee.
The holders of a majority of the trust preferred securities have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the guarantee trustee or to direct the exercise of any trust or
power that the guarantee trustee holds under the guarantee. Any holder of the
trust preferred securities may institute a legal proceeding directly against us
to enforce that holder's rights under the guarantee without first instituting a
legal proceeding against the guarantee trustee or any other person or entity.
Concerning the Guarantee Trustee
The Chase Manhattan Bank is the guarantee trustee. It is also the property
trustee, the junior subordinated indenture trustee, subordinated indenture
trustee and the senior indenture trustee. The Chase Manhattan Bank USA, National
Association is the Delaware trustee for the Capital Trust. We and some of our
affiliates maintain banking relationships with The Chase Manhattan Bank. The
Chase Manhattan Bank also serves as trustee under other indentures pursuant to
which securities of ours and our affiliates are outstanding. It has purchased,
and is likely to purchase in the future, our securities and securities of our
affiliates.
The guarantee trustee will perform only those duties that are specifically
set forth in the guarantee unless an event of default under the guarantee occurs
and is continuing. In case an event of default occurs and is continuing, the
guarantee trustee will exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to those
provisions, the guarantee trustee is under no obligation to exercise any of its
powers under the guarantee at the request of any holder of the trust preferred
securities unless that holder offers reasonable indemnity to the guarantee
trustee against the costs, expenses and liabilities which it might incur as a
result.
Agreements as to Expenses and Liabilities
We will enter into an agreement as to expenses and liabilities under the
trust agreement. The agreement as to expenses and liabilities will provide that
we will, with certain exceptions, irrevocably and unconditionally guarantee the
full payment of any indebtedness, expenses or liabilities of the Capital Trust
to each person or entity to whom the Capital Trust becomes indebted or liable.
The exceptions are the obligations of the Capital Trust to pay to the holders of
the trust common or other similar interests in the Capital Trust the amounts due
to the holders under the terms of the trust common securities or those similar
interests.
Relationship among the Trust Preferred Securities,
the Guarantee and the Junior Subordinated Debentures Held by the Trust
We will guarantee payments of distributions and redemption and liquidation
payments due on the trust preferred securities, to the extent the Capital Trust
has funds available for the payments, to the extent described under "Description
of the Guarantee." No single document executed by us in connection with the
issuance of the trust preferred securities will provide for our full,
irrevocable and unconditional guarantee of the trust preferred securities. It is
only the combined operation of our obligations under the guarantee, the amended
trust agreement and the junior subordinated indenture that has the effect of
providing a full, irrevocable and unconditional guarantee of the Capital Trust's
obligations under the trust preferred securities.
As long as we make payments of interest and other payments when due on the
junior subordinated debt securities held by the Capital Trust, those payments
will be sufficient to cover the payment of distributions and redemption and
liquidation payments due on the trust preferred securities issued by the Capital
Trust, primarily because:
. the total principal amount of the junior subordinated debt securities will be
equal to the sum of the total liquidation amount of the trust securities;
. the interest rate and interest and other payment dates on the junior
subordinated debt securities will match the distribution rate and
distribution and other payment dates for the trust preferred securities;
. we will pay for any and all costs, expenses and liabilities of the Capital
Trust except its obligations under its trust preferred securities; and
29
. the amended trust agreement will provide that the Capital Trust will not
engage in any activity that is not consistent with the limited purposes of
the Capital Trust.
If and to the extent that we do not make payments on the junior
subordinated debt securities, the Capital Trust will not have funds available to
make payments of distributions or other amounts due on its trust preferred
securities. In those circumstances, you will not be able to rely upon the
guarantee for payment of these amounts. Instead, you may directly sue us or seek
other remedies to collect your proportionate share of payments owed. If you sue
us to collect payment, then we will assume your rights as a holder of trust
preferred securities under the amended trust agreement to the extent we make a
payment to you in any such legal action.
Accounting Treatment
The Capital Trust will be treated as a subsidiary of ours for financial
reporting purposes. Accordingly, our consolidated financial statements will
include the accounts of the Capital Trust. The trust preferred securities, along
with other trust preferred securities that we guarantee on an equivalent basis,
will be presented as a separate line item in our consolidated balance sheets,
and appropriate disclosures about the trust preferred securities, the guarantee
and the junior subordinated debt securities will be included in the notes to the
consolidated financial statements. We will record distributions that the Capital
Trust pays on the trust preferred securities as an expense in our consolidated
statement of income.
DESCRIPTION OF SHARE PURCHASE CONTRACTS
AND SHARE PURCHASE UNITS
We may issue share purchase contracts, including contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of common shares at a future date or dates, which we refer to in this prospectus
as share purchase contracts. The price per common share and the number of common
shares may be fixed at the time the share purchase contracts are issued or may
be determined by reference to a specific formula set forth in the share purchase
contracts. The share purchase contracts may be issued separately or as part of
units consisting of a share purchase contract and beneficial interests in debt
securities, trust preferred securities, preferred shares or debt obligations of
third parties, including U.S. treasury securities, securing the holders'
obligations to purchase common shares under the share purchase contracts, which
we refer to in this prospectus as share purchase units. The share purchase
contracts may require us to make periodic payments to the holders of the share
purchase units or vice versa, and these payments may be unsecured or refunded on
some basis. The share purchase contracts may require holders to secure their
obligations under those contracts in a specified manner.
The applicable prospectus supplement will describe the terms of the share
purchase contracts or share purchase units, including, if applicable, collateral
or depositary arrangements, relating to the share purchase contracts or share
purchase units.
PLAN OF DISTRIBUTION
A prospectus supplement will set forth the terms of the offering of the
securities offered by that prospectus supplement, including:
. the name or names of any underwriters and the respective amounts
of the securities underwritten or purchased by each of them;
. the initial public offering price of those securities and the
proceeds to us, if any, and any discounts, commissions or
concessions allowed or paid to dealers;
. any securities exchanges on which those securities may be listed;
and
. the number of common shares to be sold by the selling security
holders, if any.
If underwriters are used in the sale of any securities, those
securities will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Those securities may be either offered to the public
through underwriting syndicates represented by managing underwriters, or
directly by underwriters. Unless otherwise set forth in the applicable
prospectus supplement, the obligations of the underwriters to purchase those
securities will be subject to conditions
30
precedent and the underwriters will be obligated to purchase all of those
securities if any are purchased. Any initial public offering price and any
discounts or concessions allowed or paid to dealers may be changed from time to
time.
The securities may be sold directly by us or through agents designated
by us from time to time. Any agent involved in the offer or sale of the
securities in respect of which a prospectus supplement is delivered will be
named, and any commissions payable by us to the agent will be set forth, in the
prospectus supplement. Unless otherwise indicated in the prospectus supplement,
any agent will be acting on a best efforts basis for the period of its
appointment.
If so indicated in the applicable prospectus supplement, we will
authorize underwriters, dealers or agents to solicit offers by institutional
investors to purchase the securities from us at the public offering price set
forth in the prospectus supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. There may
be limitations on the minimum amount that may be purchased by any institutional
investor or on the portion of the aggregate principal amount of the particular
securities that may be sold pursuant to those arrangements. Institutional
investors to which offers may be made, when authorized, include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions, and other institutions approved by us,
if applicable. The obligations of any purchasers pursuant to delayed delivery
and payment arrangements will be subject only to those conditions set forth in
the prospectus supplement, and the prospectus supplement will set forth the
commission payable for solicitation of those contracts.
Securities offered other than our common shares may be a new issue of
securities with no established trading market. Any underwriters to whom those
securities are sold by us for public offering and sale may make a market in
those securities, but those underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of or the trading markets for those securities.
Agents and underwriters may be entitled under agreements entered into
with us to indemnification by us against certain civil liabilities, including
liabilities under the Securities Act of 1933, or to contribution with respect to
payments which the agents or underwriters may be required to make. Agents and
underwriters may be customers of, engage in transactions with, or perform
services for us in the ordinary course of business.
Selling security holders, as described in the section below entitled
"Selling Security Holders," may sell their common shares, and this prospectus
may be delivered in conjunction with those sales. We will not receive any
proceeds from the sale of common shares by the selling security holders.
The selling security holders may sell their common shares in connection
with one or more offerings of common shares by Markel as described in the
applicable prospectus supplement. The selling security holders and any
underwriters, broker-dealers or agents that participate with the selling
security holders in the distribution of their common shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
received by them and any profit on the resale of any common shares purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.
The selling security holders will be subject to the applicable
provisions of the Securities Exchange Act, and the rules and regulations under
it, including the applicable provisions of Regulation M. Regulation M may
restrict specified activities of the selling security holders and may limit the
timing of purchases and sales of any common shares by the selling security
holders. Also, under Regulation M, persons engaged in a distribution of
securities are prohibited from simultaneously engaging in market making and
other activities with respect to those securities for a specified period of time
prior to the commencement of that distribution, subject to specified exceptions
or exemptions.
Agents and underwriters may be entitled under agreements entered into
with us to indemnification by us against certain civil liabilities, including
liabilities under the Securities Act of 1933, or to contribution with respect to
payments which the agents or underwriters may be required to make. Agents and
underwriters may be customers of, engage in transactions with, or perform
services for us in the ordinary course of business.
31
SELLING SECURITY HOLDERS
The following table sets forth, as of September 30, 2001, information
on common share ownership by the selling security holders. The registration of
the selling security holders' common shares does not necessarily mean that the
selling security holders will offer or sell any of their shares.
Name of Selling Security Relationship or Position Common Shares Common Common Shares to Percentage of
Holders with Markel for Beneficially Shares be Beneficially Common shares to
------- the Past Three Years Owned Prior to Offered Owned After be Owned After
-------------------- Offering (1) for Sale Offering (1) Offering (1),(2)
------------ -------- ------------ ----------------
Anthony F. Markel President and Chief
Operating Officer, Director 375,665 (3) 75,000 300,665 (3) 3.49%
Gary L. Markel Director 355,225 (4) 75,000 280,225 (4) 3.25%
Steven A. Markel Vice Chairman, Director 558,090 (5) 75,000 483,090 (5) 5.60%
Darrell D. Martin Executive Vice President
and Chief Financial
Officer, Director 59,293 (6) 10,000 49,293 (6) less than 1%
(1) In accordance with SEC rules, beneficial ownership means shared or sole
voting or investment power with respect to common shares shown in the
table.
(2) Assumes none of the securities registered and sold under this prospectus
are common shares.
(3) Includes 57,483 shares held in Grantor Retained Annuity Trusts for which
Mr. Anthony F. Markel is trustee and partial beneficiary. Includes 2,657
shares held as trustee for the benefit of Mr. Anthony F. Markel's children
as to which he disclaims beneficial ownership. Includes 5,300 shares held
as co-trustee with Gary Markel under trusts created under wills. Includes
2,850 shares held as trustee for the benefit of his children as to which he
disclaims beneficial ownership. Includes 6,000 shares held by Mr. Markel's
wife as to which shares he disclaims beneficial ownership.
(4) Includes 20,345 shares held as co-trustee with Steven A. Markel for the
benefit of Mr. Anthony F. Markel's children as to which he disclaims
beneficial ownership. Includes 320,730 shares held by the Markel Family
Limited Partnership. Gary Markel is the sole general partner of, and holder
of 99.9% of the beneficial interests in, the Markel Family Limited
Partnership. Includes 5,300 shares held as co-trustee with Anthony Markel
under trusts created under wills. Includes 2,850 shares held as trustee for
the benefit of his child.
(5) Includes 86,726 shares held as co-trustee for the benefit of the Lewis C.
Markel Residuary Trust, 24,245 shares held as co-trustee for the benefit of
Mr. Kirshner's children, 20,345 shares held as co-trustee with Gary L.
Markel for the benefit of Mr. Anthony F. Markel's children, 4,040 shares
owned by Mr. Steven A. Markel's children and 18,000 shares held as trustee
under a trust for non-employee directors under the Company's 1989 Stock
Option Plan, as to all of which shares Mr. Markel disclaims beneficial
ownership. Includes 2,600 shares held by a charitable remainder trust for
which Mr. Markel is co-trustee and in which he and his wife retain a
partial interest. Mr. Markel does not have investment discretion or voting
control over any shares held in the trust and accordingly he disclaims
beneficial ownership of the shares held by the trust.
(6) Includes 10,000 shares represented by options granted under our 1986 Stock
Option Plan which may be exercised within sixty days of September 30, 2001.
Includes 3,500 shares held by Mr. Martin's wife as to which shares he
disclaims beneficial ownership.
Gary Markel & Associates, Inc. and Gary Markel Surplus Lines Brokerage,
Inc., entities owned by Gary L. Markel, place insurance with and on behalf of
the Company.
32
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under the shelf process, we may sell any combination of the securities described
in this prospectus in one or more offerings up to a total dollar amount of
$650,000,000. In addition, the selling security holders may sell up to 235,000
of our common shares. This prospectus provides you with a general description of
the securities we or the selling security holders may offer. Each time we or the
selling security holders sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement, together with additional information described under the
heading "Where You Can Find More Information About Markel."
WHERE YOU CAN FIND MORE INFORMATION ABOUT MARKEL
We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, which requires us to file annual, quarterly and
special reports, proxy statements and other information with the Securities and
Exchange Commission. You may read and copy any document that we 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 our filings at the
regional offices of the SEC or over the Internet at the SEC's home page at
http://www.sec.gov.
Our common shares are listed on the New York Stock Exchange under the
symbol "MKL." Our reports, proxy statements and other information may also be
read and copied at the New York Stock Exchange at 20 Broad Street, New York, NY
10005.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information and the
information in the prospectus. We incorporate by reference the documents listed
below and any future filings made by Markel Corporation with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
we sell all of the securities covered by this prospectus:
Markel Corporation, formerly Markel Holdings, Inc., SEC filings, file
no. 001-15811:
1. Our Annual Report on Form 10-K for the year ended December 31,
2000;
2. Our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2001 and June 30, 2001;
3. Our Current Reports on Form 8-K dated March 1, 2001, June 5,
2001, June 12, 2001, October 19, 2001 and October 31, 2001; and
4. The description of our capital stock contained in our Form 8-A
filed on April 7, 2000 under Section 12(b) of the Securities Exchange
Act of 1934.
Terra Nova (Bermuda) Holdings Ltd., acquired on March 24, 2000, SEC
filings, file no. 1-13834:
1. Annual Report on Form 10-K for the year ended December 31,
2000.
You may request a copy of these filings at no cost, by writing or
telephoning the office of Investor Relations, Markel Corporation, 4521 Highwoods
Parkway, Glen Allen, Virginia 23060, telephone: (804) 747-0136, or e-mail Bruce
Kay, Vice President of Investor Relations at bkay@markelcorp.com.
33
LEGAL MATTERS
The validity of the securities in respect of which this prospectus is
being delivered will be passed on 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 our company. As Of October 18, 2001,
partners of McGuireWoods LLP owned 27,606 of our common shares, or less than 1%
of our common shares outstanding on that date. Certain matters relating to the
formation of the Markel Capital Trust II and the issuance of the trust preferred
securities under Delaware law and the amended trust agreement will be passed on
by Richards, Layton & Finger, special Delaware counsel to the Trusts and the
Company. Any underwriters will be advised about other issues relating to any
offering by their own legal counsel.
EXPERTS
The consolidated financial statements of Markel Corporation as of
December 31, 2000 and December 31, 1999 and for each of the years in the
three-year period ended December 31, 2000 and the consolidated financial
statements of Terra Nova (Bermuda) Holdings Ltd as of December 31, 2000 and for
the year then ended have been incorporated by reference herein in reliance upon
the reports of KPMG LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of that firm as experts in
accounting and auditing.
The consolidated financial statements of Terra Nova (Bermuda) Holdings,
Ltd. as of December 31, 1999 and for each of the years in the two-year period
ended December 31, 1999 have been incorporated by reference herein in reliance
upon the report of PricewaterhouseCoopers, independent certified public
accountants, incorporated by reference herein, and upon the authority of that
firm as experts in accounting and auditing.
34
TABLE OF CONTENTS
-----------------
Page
----
Markel Corporation - General ......................................... 2
The Capital Trust .................................................... 2
Unaudited Pro Forma Condensed Financial Information .................. 3
Risk Factors ......................................................... 5
Note on Forward-Looking Statements ................................... 6
Ratio of Earnings to Fixed Charges ................................... 7
Use of Proceeds ...................................................... 7
Description of Capital Stock ......................................... 7
Description of Warrants .............................................. 9
Description of Debt Securities ....................................... 10
Description of the Trust Preferred Securities ........................ 19
Description of the Guarantee ......................................... 27
Description of the Share Purchase Contract and Share Purchase Units... 30
Plan of Distribution ................................................. 30
Selling Security Holders ............................................. 32
About this Prospectus ................................................ 33
Where You Can Find More Information About Markel ..................... 33
Incorporation of Information We File with the SEC .................... 33
Legal Matters ........................................................ 34
Experts .............................................................. 34
35
Part II
Information Not Required In The Prospectus
Item 14. Other Expenses Of Issuance And Distribution.
Registration fee to the Securities and Exchange Commission ...... $125,916
Printing expenses ............................................... $ 35,000
Accounting fees and expenses .................................... $ 30,000
Legal fees and expenses ......................................... $100,000
New York Stock Exchange Listing Fee ............................. $ 5,000
Rating Agency Fees .............................................. $120,000
Miscellaneous expenses .......................................... $ 10,000
--------
Total ...................................................... $425,916
The foregoing items, except for the registration fee to the Securities and
Exchange Commission, are estimated.
Item 15. 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
indemnity, 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.
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.
(A) Exhibits
Exhibit
-------
Number Description
------ ----------------------------------------------------------------
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Articles of Incorporation of Markel Corporation
(incorporated by reference to Exhibit 3(i) of the Company'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 the Company's Registration Statement on Form S-4 filed as of October
7, 1999 (Registration No. 333-88609)).
4.1 Indenture dated as of June 5, 2001, between Markel Corporation and The
Chase Manhattan Bank, as Trustee (incorporated by reference to Exhibit
4.1 of the Company's report on Form 8-K dated May 30, 2001).
4.2 Form of Subordinated Indenture, filed herewith (incorporated by
reference to Exhibit 4.3 of the Company's Amendment No. 1 to
Registration Statement on Form S-3 filed January 19, 2001 (Registration
No. 333-52544))
4.3 Form of Junior Subordinated Indenture, previously filed.
4.4 Certificate of Trust of Markel Capital Trust II, previously filed.
4.5 Trust Agreement of Markel Capital Trust II, dated October 15, 2001,
previously filed.
4.6 Form of Amended and Restated Trust Agreement, previously filed.
4.7 Form of Guarantee Agreement to be delivered by Markel Corporation,
previously filed.
4.8 Form of Agreement as to Expenses and Liabilities, previously filed.
4.9 Form of Preferred Security (included as Exhibit A to the Form of Amended
and Restated Trust Agreement filed as Exhibit 4.6).
4.10 Form of Purchase Contract Agreement.*
4.11 Form of Pledge Agreement.*
5.1 Opinion of McGuireWoods LLP, counsel to the Issuer with respect to the
Offered Securities, previously filed.
5.2 Opinion of Richards, Layton & Finger, Delaware counsel to the Issuer
with respect to the Offered Securities, previously filed.
12 Statement re Computation of Ratios, previously filed.
23.1 Consent of KPMG LLP, filed herewith.
23.2 Consent of PricewaterhouseCoopers, filed herewith.
23.3 Consent of McGuireWoods LLP, (contained in Exhibit 5.1).
23.4 Consent of Richards, Layton & Finger (contained in Exhibit 5.2).
24.1 Power of Attorney from officers and directors, previously filed.
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of The
Chase Manahattan Bank, as Trustee relating to Markel Corporation,
previously filed.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of The
Chase Manhattan Bank as Trustee relating to Markel Capital Trust II,
previously filed.
*To be filed by amendment to the Registration Statement or incorporated by
reference from documents filed with the SEC under the Securities Exchange Act of
1934.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrants pursuant to the provisions described under Item 15, or otherwise,
the Registrants have been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is therefore unenforceable. In the event that
a claim for indemnification against these liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of the Registrants in the successful defense of any action,
suit or proceeding) is asserted by this director, officer or controlling person
in connection with the securities being registered, the Registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
this indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of this issue.
Each of the undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of 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 Securities and Exchange Commission
pursuant to Rule 424(b) under the Securities Act of 1933 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;
(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 (1)(i) and (1)(ii) do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrants pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
Each of the undersigned Registrants hereby undertake that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Each of the undersigned Registrants hereby undertake (1) to use its best
efforts to distribute prior to the opening of bids, to prospective bidders,
underwriters, and dealers, a reasonable number of copies of a prospectus which
at that time meets the requirements of section 10(a) of the Act, and relating to
the securities offered at competitive bidding, as contained in the registration
statement, together with any supplements thereto, and (2) to file an amendment
to the registration statement reflecting the results of bidding, the terms of
the reoffering and related matters to the extent required by the applicable
form, not later than the first use, authorized by the issuer after the opening
bids, of a prospectus relating to the securities offered at competitive bidding,
unless no further public offering of such securities by the issuer and no
reoffering of such securities by the purchasers is proposed to be made.
Each of the undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form 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 shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(2) 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 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.
Each of the undersigned Registrants hereby undertake 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 (the "Act") in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Markel
Corporation 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
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Richmond, State of
Virginia, on October 31, 2001.
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
--------------------
Alan I. Kirshner (Principal Executive Officer)
/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
---------------------
Darrell D. Martin Financial Officer (Principal Financial 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
/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
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Markel Capital
Trust II 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 Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Richmond, State of
Virginia, on October 31, 2001.
MARKEL CAPITAL TRUST II
By: Markel Corporation, as Sponsor
By: /s/ Darrell D. Martin
_____________________________________
Darrell D. Martin
Executive Vice President and Chief
Financial Officer