Exhibit 10.01
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GUARANTEE AGREEMENT
by and between
TOWER GROUP, INC.
and
WILMINGTON TRUST COMPANY
Dated as of January 25, 2007
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION.................................................................1
Section 1.1 Definitions and Interpretation..............................................................1
ARTICLE II POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE.............................................5
Section 2.1 Powers and Duties of the Guarantee Trustee..................................................5
Section 2.2 Certain Rights of the Guarantee Trustee.....................................................6
Section 2.3 Not Responsible for Recitals or Issuance of Guarantee.......................................8
Section 2.4 Events of Default; Waiver...................................................................8
Section 2.5 Events of Default; Notice...................................................................8
ARTICLE III GUARANTEE TRUSTEE..............................................................................9
Section 3.1 Guarantee Trustee; Eligibility..............................................................9
Section 3.2 Appointment, Removal and Resignation of the Guarantee Trustee...............................9
ARTICLE IV GUARANTEE.....................................................................................10
Section 4.1 Guarantee..................................................................................10
Section 4.2 Waiver of Notice and Demand................................................................10
Section 4.3 Obligations Not Affected...................................................................10
Section 4.4 Rights of Holders..........................................................................11
Section 4.5 Guarantee of Payment.......................................................................12
Section 4.6 Subrogation................................................................................12
Section 4.7 Independent Obligations....................................................................12
Section 4.8 Enforcement by a Beneficiary...............................................................12
ARTICLE V LIMITATION OF TRANSACTIONS; SUBORDINATION.....................................................13
Section 5.1 Limitation of Transactions.................................................................13
Section 5.2 Ranking....................................................................................14
ARTICLE VI TERMINATION...................................................................................14
Section 6.1 Termination................................................................................14
ARTICLE VII INDEMNIFICATION...............................................................................15
Section 7.1 Exculpation................................................................................15
Section 7.2 Indemnification............................................................................15
Section 7.3 Compensation; Reimbursement of Expenses....................................................16
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ARTICLE VIII MISCELLANEOUS.................................................................................17
Section 8.1 Successors and Assigns.....................................................................17
Section 8.2 Amendments.................................................................................17
Section 8.3 Notices....................................................................................17
Section 8.4 Benefit....................................................................................18
Section 8.5 Governing Law..............................................................................18
Section 8.6 Counterparts...............................................................................18
Section 8.7 Separability...............................................................................18
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GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (this "Guarantee"), dated as of January 25, 2007,
is executed and delivered by Tower Group, Inc., a Delaware corporation (the
"Guarantor"), and Wilmington Trust Company, a Delaware banking corporation, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Capital Securities (as defined herein) of Tower
Group Statutory Trust VI, a Delaware statutory trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of the date hereof among Wilmington Trust Company, not
in its individual capacity but solely as institutional trustee, the
administrators of the Issuer named therein, the Guarantor, as sponsor, and the
holders from time to time of undivided beneficial interests in the assets of the
Issuer, the Issuer is issuing on the date hereof those undivided beneficial
interests, having an aggregate liquidation amount of $20,000,000 (the "Capital
Securities"); and
WHEREAS, as incentive for the Holders to purchase the Capital Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Guarantee, to pay to the Holders of Capital Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the purchase by each Holder of the
Capital Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions and Interpretation.
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In this Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee but not defined in the preamble
above have the respective meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Guarantee has the same meaning throughout;
(c) all references to "the Guarantee" or "this Guarantee" are to this Guarantee
as modified, supplemented or amended from time to time;
(d) all references in this Guarantee to "Articles" or "Sections" are to
Articles or Sections of this Guarantee, unless otherwise specified;
(e) terms defined in the Declaration as at the date of execution of this
Guarantee have the same meanings when used in this Guarantee, unless
otherwise defined in this Guarantee or unless the context otherwise
requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Beneficiaries" means any Person to whom the Issuer is or hereafter becomes
indebted or liable.
"Capital Securities" has the meaning set forth in the recitals to this
Guarantee.
"Common Securities" means the common securities issued by the Issuer to the
Guarantor pursuant to the Declaration.
"Corporate Trust Office" means the office of the Guarantee Trustee at which
the corporate trust business of the Guarantee Trustee shall, at any particular
time, be principally administered, which office at the date of execution of this
Guarantee is located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, Attention: Corporate Trust Administration.
"Covered Person" means any Holder of Capital Securities.
"Debentures" means the debt securities of the Guarantor designated the
Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures due 2037
held by the Institutional Trustee (as defined in the Declaration) of the Issuer.
"Declaration Event of Default" means an "Event of Default" as defined in
the Declaration.
"Event of Default" has the meaning set forth in Section 2.4(a).
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Capital Securities, to the extent not paid or
made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the
Declaration) which are required to be paid on such Capital Securities to the
extent the Issuer shall have funds available therefor, (ii) the Optional
Redemption Price to the extent the Issuer has funds available therefor, with
respect to any Capital Securities called for redemption by the Issuer, (iii) the
Special Redemption Price to the extent the Issuer has funds available therefor,
with respect to Capital Securities redeemed upon the occurrence of a Special
Event, and (iv) upon a voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Issuer (other than in connection with the
distribution of Debentures to the Holders of the Capital Securities in exchange
therefor as provided in the Declaration), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on the Capital
Securities to the date of payment, to the extent the Issuer shall have funds
available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer (in either
case, the "Liquidation Distribution").
"Guarantee Trustee" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.
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"Guarantor" means Tower Group, Inc. and each of its successors and assigns.
"Holder" means any holder, as registered on the books and records of the
Issuer, of any Capital Securities; provided, however, that, in determining
whether the Holders of the requisite percentage of Capital Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Guarantee
Trustee.
"Indenture" means the Indenture dated as of the date hereof between the
Guarantor and Wilmington Trust Company, not in its individual capacity but
solely as trustee, and any indenture supplemental thereto pursuant to which the
Debentures are to be issued to the institutional trustee of the Issuer.
"Independent Director" means a director of the Company who is not
interested in the specified transaction and meets the requirements of an
independent director as determined under the applicable provisions of the
Exchange Act and the rules and regulations of the NASDAQ stock exchange (or its
successor) or any other stock exchange in which the Company may later be listed,
provided that such stock exchange has substantially similar requirements of an
independent director as those required by the NASDAQ stock exchange.
"Issuer" has the meaning set forth in the opening paragraph to this
Guarantee.
"Liquidation Distribution" has the meaning set forth in the definition of
"Guarantee Payments" herein.
"Majority in liquidation amount of the Capital Securities" means Holder(s)
of outstanding Capital Securities, voting together as a class, but separately
from the holders of Common Securities, of more than 50% of the aggregate
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all Capital
Securities then outstanding.
"Obligations" means any costs, expenses or liabilities (but not including
liabilities related to taxes) of the Issuer other than obligations of the Issuer
to pay to holders of any Trust Securities the amounts due such holders pursuant
to the terms of the Trust Securities.
"Officer's Certificate" means, with respect to any Person, a certificate
signed by one Authorized Officer of such Person. Any Officer's Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee shall include:
(a) a statement that the officer signing the Officer's Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by the officer in rendering the Officer's
Certificate;
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(c) a statement that the officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of the officer, such
condition or covenant has been complied with.
"Optional Redemption Price" has the meaning set forth in the Indenture.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
officer within the Corporate Trust Office of the Guarantee Trustee including any
Vice President, Assistant Vice President, Secretary, Assistant Secretary or any
other officer of the Guarantee Trustee customarily performing functions similar
to those performed by any of the above designated officers and also, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Special Event" has the meaning set forth in the Indenture.
"Special Redemption Price" has the meaning set forth in the Indenture.
"Subsidiary" means with respect to any Person, (i) any corporation at least
a majority of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more of its subsidiaries, or by such
Person and one or more of its subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of the outstanding partnership or
similar interests of which shall at the time be owned by such Person, or by one
or more of its subsidiaries, or by such Person and one or more of its
subsidiaries and (iii) any limited partnership of which such Person or any of
its subsidiaries is a general partner. For the purposes of this definition,
"voting stock" means shares, interests, participations or other equivalents in
the equity interest (however designated) in such Person having ordinary voting
power for the election of a majority of the directors (or the equivalent) of
such Person, other than shares, interests, participations or other equivalents
having such power only by reason of the occurrence of a contingency.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 3.1.
"Trust Securities" means the Common Securities and the Capital Securities.
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ARTICLE II
POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
Section 2.1 Powers and Duties of the Guarantee Trustee.
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(a) This Guarantee shall be held by the Guarantee Trustee for the benefit of
the Holders of the Capital Securities, and the Guarantee Trustee shall not
transfer this Guarantee to any Person except a Holder of Capital Securities
exercising his or her rights pursuant to Section 4.4(b) or to a Successor
Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its
appointment to act as Successor Guarantee Trustee. The right, title and
interest of the Guarantee Trustee shall automatically vest in any Successor
Guarantee Trustee, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Guarantee Trustee has occurred and is continuing, the Guarantee Trustee
shall enforce this Guarantee for the benefit of the Holders of the Capital
Securities.
(c) The Guarantee Trustee, before the occurrence of any Event of Default and
after the curing or waiving of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically
set forth in this Guarantee, and no implied covenants shall be read into
this Guarantee against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.4)
and is actually known to a Responsible Officer of the Guarantee Trustee,
the Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Guarantee, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee shall be construed to relieve the Guarantee
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the curing
or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall be
determined solely by the express provisions of this Guarantee,
and the Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Guarantee, and no implied covenants or
obligations shall be read into this Guarantee against the
Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Guarantee Trustee,
the Guarantee Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Guarantee Trustee and conforming to the requirements of this
Guarantee; but in the case of any such certificates or opinions
that by any provision hereof are specifically required to be
furnished to the Guarantee Trustee, the Guarantee Trustee shall
be under a duty to examine the same to determine whether or not
they conform to the requirements of this Guarantee;
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(ii) the Guarantee Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Guarantee Trustee,
unless it shall be proved that such Responsible Officer of the
Guarantee Trustee or the Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the written direction of the Holders of not less than a Majority in
liquidation amount of the Capital Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee, or relating to the exercise of any trust or
power conferred upon the Guarantee Trustee under this Guarantee; and
(iv) no provision of this Guarantee shall require the Guarantee Trustee to
expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if the Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds is
not reasonably assured to it under the terms of this Guarantee or
security and indemnity, reasonably satisfactory to the Guarantee
Trustee, against such risk or liability is not reasonably assured to
it.
Section 2.2 Certain Rights of the Guarantee Trustee.
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(a) Subject to the provisions of Section 2.1:
(i) The Guarantee Trustee may conclusively rely, and shall be fully
protected in acting or refraining from acting upon, any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed, sent or presented by the proper party or
parties.
(ii) Any direction or act of the Guarantor contemplated by this Guarantee
shall be sufficiently evidenced by an Officer's Certificate.
(iii) Whenever, in the administration of this Guarantee, the Guarantee
Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officer's Certificate of the Guarantor
which, upon receipt of such request, shall be promptly delivered by
the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see to any recording,
filing or registration of any instrument (or any re-recording,
refiling or re-registration thereof).
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(v) The Guarantee Trustee may consult with counsel of its selection, and
the advice or opinion of such counsel with respect to legal matters
shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith
and in accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its Affiliates and may include any
of its employees. The Guarantee Trustee shall have the right at any
time to seek instructions concerning the administration of this
Guarantee from any court of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Guarantee at the request or
direction of any Holder, unless such Holder shall have provided to the
Guarantee Trustee such security and indemnity, reasonably satisfactory
to the Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the Guarantee
Trustee's agents, nominees or custodians) and liabilities that might
be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the
Guarantee Trustee; provided, however, that nothing contained in this
Section 2.2(a)(vi) shall relieve the Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Guarantee.
(vii) The Guarantee Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit.
(viii) The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents, nominees, custodians or attorneys, and the Guarantee
Trustee shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder.
(ix) Any action taken by the Guarantee Trustee or its agents hereunder
shall bind the Holders of the Capital Securities, and the signature of
the Guarantee Trustee or its agents alone shall be sufficient and
effective to perform any such action. No third party shall be required
to inquire as to the authority of the Guarantee Trustee to so act or
as to its compliance with any of the terms and provisions of this
Guarantee, both of which shall be conclusively evidenced by the
Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Guarantee the Guarantee Trustee
shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder,
the Guarantee Trustee (i) may request instructions from the Holders of
a Majority in liquidation amount of the Capital Securities, (ii) may
refrain from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii) shall be
protected in conclusively relying on or acting in accordance with such
instructions.
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(xi) The Guarantee Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith, without
negligence, and reasonably believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this
Guarantee.
(b) No provision of this Guarantee shall be deemed to impose any duty or
obligation on the Guarantee Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee
Trustee shall be construed to be a duty.
Section 2.3 Not Responsible for Recitals or Issuance of Guarantee.
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The recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee.
Section 2.4 Events of Default; Waiver.
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(a) An Event of Default under this Guarantee will occur upon the failure of the
Guarantor to perform any of its payment or other obligations hereunder.
(b) The Holders of a Majority in liquidation amount of the Capital Securities
may, voting or consenting as a class, on behalf of the Holders of all of
the Capital Securities, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to
exist, and shall be deemed to have been cured, for every purpose of this
Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
Section 2.5 Events of Default; Notice.
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(a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Capital Securities and the Guarantor, notices of all Events
of Default actually known to a Responsible Officer of the Guarantee
Trustee, unless such defaults have been cured before the giving of such
notice, provided, however, that the Guarantee Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer of the
Guarantee Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders of the Capital Securities.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of
Default unless the Guarantee Trustee shall have received written notice
from the Guarantor or a Holder of the Capital Securities (except in the
case of a payment default), or a Responsible Officer of the Guarantee
Trustee charged with the administration of this Guarantee shall have
obtained actual knowledge thereof.
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ARTICLE III
GUARANTEE TRUSTEE
Section 3.1 Guarantee Trustee; Eligibility.
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(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor, and
(ii) be a banking corporation or national association organized and doing
business under the laws of the United States of America or any State
or Territory thereof or of the District of Columbia, or Person
authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least fifty million U.S. dollars
($50,000,000), and subject to supervision or examination by Federal,
State, Territorial or District of Columbia authority. If such
corporation or national association publishes reports of condition at
least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then, for the
purposes of this Section 3.1(a)(ii), the combined capital and surplus
of such corporation or national association shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to so act
under Section 3.1(a), the Guarantee Trustee shall immediately resign in the
manner and with the effect set forth in Section 3.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee shall either eliminate such interest or resign to the
extent and in the manner provided by, and subject to this Guarantee.
Section 3.2 Appointment, Removal and Resignation of the Guarantee Trustee.
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(a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor except during an Event
of Default.
(b) The Guarantee Trustee shall not be removed in accordance with Section
3.2(a) until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal
or resignation. The Guarantee Trustee may resign from office (without need
for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation
shall not take effect until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by an instrument in writing
executed by such Successor Guarantee Trustee and delivered to the Guarantor
and the resigning Guarantee Trustee.
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(d) If no Successor Guarantee Trustee shall have been appointed and accepted
appointment as provided in this Section 3.2 within 60 days after delivery
of an instrument of removal or resignation, the Guarantee Trustee resigning
or being removed may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon,
after prescribing such notice, if any, as it may deem proper, appoint a
Successor Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or omissions to act of
any Successor Guarantee Trustee.
(f) Upon termination of this Guarantee or removal or resignation of the
Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to
the Guarantee Trustee all amounts owing to the Guarantee Trustee under
Sections 7.2 and 7.3 accrued to the date of such termination, removal or
resignation.
ARTICLE IV
GUARANTEE
Section 4.1 Guarantee.
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(a) The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense (except the
defense of payment by the Issuer), right of set-off or counterclaim that
the Issuer may have or assert. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders.
(b) The Guarantor hereby also agrees to assume any and all Obligations of the
Issuer and in the event any such Obligation is not so assumed, subject to
the terms and conditions hereof, the Guarantor hereby irrevocably and
unconditionally guarantees to each Beneficiary the full payment, when and
as due, of any and all Obligations to such Beneficiaries. This Guarantee is
intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice
hereof.
Section 4.2 Waiver of Notice and Demand.
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The Guarantor hereby waives notice of acceptance of this Guarantee and of
any liability to which it applies or may apply, presentment, demand for payment,
any right to require a proceeding first against the Issuer or any other Person
before proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.
Section 4.3 Obligations Not Affected.
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The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
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(a) the release or waiver, by operation of law or otherwise, of the performance
or observance by the Issuer of any express or implied agreement, covenant,
term or condition relating to the Capital Securities to be performed or
observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any portion
of the Distributions, Optional Redemption Price, Special Redemption Price,
Liquidation Distribution or any other sums payable under the terms of the
Capital Securities or the extension of time for the performance of any
other obligation under, arising out of or in connection with, the Capital
Securities (other than an extension of time for payment of Distributions,
Optional Redemption Price, Special Redemption Price, Liquidation
Distribution or other sum payable that results from the extension of any
interest payment period on the Debentures or any extension of the maturity
date of the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Capital
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Issuer
or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or hereby
incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a legal
or equitable discharge or defense of a guarantor, it being the intent of
this Section 4.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
Section 4.4 Rights of Holders.
------------------
(a) The Holders of a Majority in liquidation amount of the Capital Securities
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of
this Guarantee or to direct the exercise of any trust or power conferred
upon the Guarantee Trustee under this Guarantee; provided, however, that
(subject to Section 2.1) the Guarantee Trustee shall have the right to
decline to follow any such direction if the Guarantee Trustee being advised
by counsel determines that the action or proceeding so directed may not
lawfully be taken or if the Guarantee Trustee in good faith by its board of
directors or trustees, executive committees or a trust committee of
directors or trustees and/or Responsible Officers shall determine that the
action or proceedings so directed would involve the Guarantee Trustee in
personal liability.
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(b) Any Holder of Capital Securities may institute a legal proceeding directly
against the Guarantor to enforce the Guarantee Trustee's rights under this
Guarantee, without first instituting a legal proceeding against the Issuer,
the Guarantee Trustee or any other Person. The Guarantor waives any right
or remedy to require that any such action be brought first against the
Issuer, the Guarantee Trustee or any other Person before so proceeding
directly against the Guarantor.
Section 4.5 Guarantee of Payment.
---------------------
This Guarantee creates a guarantee of payment and not of collection.
Section 4.6 Subrogation.
------------
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Capital Securities against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by applicable provisions of
law) be entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee, if, after giving effect to any such
payment, any amounts are due and unpaid under this Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
Section 4.7 Independent Obligations.
------------------------
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Capital Securities and that
the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the
occurrence of any event referred to in subsections (a) through (g), inclusive,
of Section 4.3 hereof.
Section 4.8 Enforcement by a Beneficiary.
-----------------------------
A Beneficiary may enforce the obligations of the Guarantor contained in
Section 4.1(b) directly against the Guarantor and the Guarantor waives any right
or remedy to require that any action be brought against the Issuer or any other
person or entity before proceeding against the Guarantor. The Guarantor shall be
subrogated to all rights (if any) of any Beneficiary against the Issuer in
respect of any amounts paid to the Beneficiaries by the Guarantor under this
Guarantee; provided, however, that the Guarantor shall not (except to the extent
required by applicable provisions of law) be entitled to enforce or exercise any
rights that it may acquire by way of subrogation or any indemnity, reimbursement
or other agreement, in all cases as a result of payment under this Guarantee, if
at the time of any such payment, and after giving effect to such payment, any
amounts are due and unpaid under this Guarantee.
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ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 5.1 Limitation of Transactions.
---------------------------
So long as any Capital Securities remain outstanding, if (a) there shall
have occurred and be continuing an Event of Default or a Declaration Event of
Default or (b) the Guarantor shall have selected an Extension Period as provided
in the Declaration and such period, or any extension thereof, shall have
commenced and be continuing, then the Guarantor shall not and shall not permit
any Affiliate of the Guarantor controlled by the Guarantor to (x) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Guarantor's or such Affiliate's
capital stock (other than payments of dividends or distributions to the
Guarantor or a Subsidiary of the Guarantor) or make any guarantee payments with
respect to the foregoing; (y) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Guarantor or any Affiliate of the Guarantor controlled by the Guarantor that
rank pari passu in all respects with or junior in interest to the Debentures; or
(z) enter into any contracts with shareholders holding more than 10% of the
outstanding shares of common stock of the Company that could require cash
payments by the Guarantor to such shareholders, unless the transaction in which
such contract or amendment to or modification to such contract relates is
entered into on an arm's length basis in the ordinary course of business (it
being understood and agreed that for the purpose of this clause (z) a
transaction shall be conducted on an arm's length basis if such contract was
approved by a committee of the Guarantor's Independent Directors) (other than,
with respect to clauses (x) and (y) above, (i) repurchases, redemptions or other
acquisitions of shares of capital stock of the Guarantor or any Subsidiary of
the Guarantor in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Guarantor or of such Subsidiary (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the occurrence of the Event of Default,
Declaration Event of Default or Extension Period, as applicable, (ii) as a
result of any exchange or conversion of any class or series of the Guarantor's
capital stock (or any capital stock of a Subsidiary of the Guarantor) for any
class or series of the Guarantor's capital stock (or in the case of a Subsidiary
of the Guarantor, any class or series of such Subsidiary's capital stock) or of
any class or series of the Guarantor's indebtedness for any class or series of
the Guarantor's capital stock (or in the case of indebtedness of a Subsidiary of
the Guarantor, of any class or series of such Subsidiary's indebtedness for any
class or series of such Subsidiary's capital stock), (iii) the purchase of
fractional interests in shares of the Guarantor's capital stock (or the capital
stock of a Subsidiary of the Guarantor) pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(iv) any declaration of a dividend in connection with any stockholders' rights
plan, or the issuance of rights, stock or other property under any stockholders'
rights plan, or the redemption or repurchase of rights pursuant thereto, (v) any
dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock and any cash payments in lieu of
fractional shares issued in connection therewith, or (vi) payments under this
Guarantee).
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Section 5.2 Ranking.
--------
This Guarantee will constitute an unsecured obligation of the Guarantor and
will rank subordinate and junior in right of payment to all present and future
Senior Indebtedness (as defined in the Indenture) of the Guarantor. The
Guarantor's obligations in respect of this Guarantee shall rank pari passu with
the Guarantor's obligations (i) under the Guarantee Agreement by and between the
Guarantor and U.S. Bank National Association, dated as of May 15, 2003; (ii)
under the Guarantee Agreement by and between the Guarantor and ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Bank, dated as of September 30, 2003; (iii) under the Guarantee Agreement by and
between the Guarantor and Wilmington Trust Company, dated as of December 15,
2004; (iv) under the Guarantee Agreement by and between the Guarantor and ▇▇
▇▇▇▇▇▇ Chase Bank, National Association, dated as of December 21, 2004; and (v)
under the Guarantee Agreement by and between the Guarantor and ▇▇▇▇▇ Fargo
Delaware Trust Company, dated as of March 31, 2006. By their acceptance thereof,
each Holder of Capital Securities agrees to the foregoing provisions of this
Guarantee and the other terms set forth herein.
The right of the Guarantor to participate in any distribution of assets of
any of its Subsidiaries upon any such Subsidiary's liquidation or reorganization
or otherwise is subject to the prior claims of creditors of that Subsidiary,
except to the extent the Guarantor may itself be recognized as a creditor of
that Subsidiary. Accordingly, the Guarantor's obligations under this Guarantee
will be effectively subordinated to all existing and future liabilities of the
Guarantor's Subsidiaries, and claimants should look only to the assets of the
Guarantor for payments hereunder. This Guarantee does not limit the incurrence
or issuance of other secured or unsecured debt of the Guarantor, including
Senior Indebtedness of the Guarantor, under any indenture that the Guarantor may
enter into in the future or otherwise.
ARTICLE VI
TERMINATION
Section 6.1 Termination.
------------
This Guarantee shall terminate as to the Capital Securities (i) upon
full payment of the Optional Redemption Price or Special Redemption Price of all
Capital Securities then outstanding, (ii) upon the distribution of all of the
Debentures to the Holders of all of the Capital Securities or (iii) upon full
payment of the amounts payable in accordance with the Declaration upon
dissolution of the Issuer. This Guarantee will continue to be effective or will
be reinstated, as the case may be, if at any time any Holder of Capital
Securities must restore payment of any sums paid under the Capital Securities or
under this Guarantee.
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ARTICLE VII
INDEMNIFICATION
Section 7.1 Exculpation.
------------
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Guarantee and in a manner that such Indemnified Person reasonably believed
to be within the scope of the authority conferred on such Indemnified
Person by this Guarantee or by law, except that an Indemnified Person shall
be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to such
acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Issuer or the Guarantor and upon such information,
opinions, reports or statements presented to the Issuer or the Guarantor by
any Person as to matters the Indemnified Person reasonably believes are
within such other Person's professional or expert competence and who, if
selected by such Indemnified Person, has been selected with reasonable care
by such Indemnified Person, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets
from which Distributions to Holders of Capital Securities might properly be
paid.
Section 7.2 Indemnification.
----------------
(a) The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any and all loss, liability,
damage, claim or expense incurred without negligence or willful misconduct
on the part of the Indemnified Person, arising out of or in connection with
the acceptance or administration of the trust or trusts hereunder,
including, but not limited to, the costs and expenses (including reasonable
legal fees and expenses) of the Indemnified Person defending itself
against, or investigating, any claim or liability in connection with the
exercise or performance of any of the Indemnified Person's powers or duties
hereunder. The obligation to indemnify as set forth in this Section 7.2
shall survive the resignation or removal of the Guarantee Trustee and the
termination of this Guarantee.
(b) Promptly after receipt by an Indemnified Person under this Section 7.2 of
notice of the commencement of any action, such Indemnified Person will, if
a claim in respect thereof is to be made against the Guarantor under this
Section 7.2, notify the Guarantor in writing of the commencement thereof;
but the failure so to notify the Guarantor (i) will not relieve the
Guarantor from liability under paragraph (a) above unless and to the extent
that the Guarantor did not otherwise learn of such action and such failure
results in the forfeiture by the Guarantor of substantial rights and
defenses and (ii) will not, in any event, relieve the Guarantor from any
obligations to any Indemnified Person other than the indemnification
obligation provided in paragraph (a) above. The Guarantor shall be entitled
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to appoint counsel of the Guarantor's choice at the Guarantor's expense to
represent the Indemnified Person in any action for which indemnification is
sought (in which case the Guarantor shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by the Indemnified
Person or Persons except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the Indemnified Person.
Notwithstanding the Guarantor's election to appoint counsel to represent
the Guarantor in an action, the Indemnified Person shall have the right to
employ separate counsel (including local counsel), and the Guarantor shall
bear the reasonable fees, costs and expenses of such separate counsel if
(i) the use of counsel chosen by the Guarantor to represent the Indemnified
Person would present such counsel with a conflict of interest, (ii) the
actual or potential defendants in, or targets of, any such action include
both the Indemnified Person and the Guarantor and the Indemnified Person
shall have reasonably concluded that there may be legal defenses available
to it and/or other Indemnified Person(s) which are different from or
additional to those available to the Guarantor, (iii) the Guarantor shall
not have employed counsel satisfactory to the Indemnified Person to
represent the Indemnified Person within a reasonable time after notice of
the institution of such action or (iv) the Guarantor shall authorize the
Indemnified Person to employ separate counsel at the expense of the
Guarantor. The Guarantor will not, without the prior written consent of the
Indemnified Persons, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the Indemnified Persons are actual or
potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each Indemnified
Person from all liability arising out of such claim, action, suit or
proceeding.
Section 7.3 Compensation; Reimbursement of Expenses.
----------------------------------------
The Guarantor agrees:
(a) to pay to the Guarantee Trustee from time to time such compensation for all
services rendered by it hereunder as the parties shall agree to from time
to time (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust); and
(b) except as otherwise expressly provided herein, to reimburse the Guarantee
Trustee upon request for all reasonable expenses, disbursements and
advances incurred or made by it in accordance with any provision of this
Guarantee (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or willful
misconduct.
The provisions of this Section 7.3 shall survive the resignation or removal
of the Guarantee Trustee and the termination of this Guarantee.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 Successors and Assigns.
-----------------------
All guarantees and agreements contained in this Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor
and shall inure to the benefit of the Holders of the Capital Securities then
outstanding. Except in connection with any merger or consolidation of the
Guarantor with or into another entity or any sale, transfer or lease of the
Guarantor's assets to another entity, in each case, to the extent permitted
under the Indenture, the Guarantor may not assign its rights or delegate its
obligations under this Guarantee without the prior approval of the Holders of at
least a Majority in liquidation amount of the Capital Securities.
Section 8.2 Amendments.
-----------
Except with respect to any changes that do not adversely affect the rights
of Holders of the Capital Securities in any material respect (in which case no
consent of Holders will be required), this Guarantee may be amended only with
the prior approval of the Holders of not less than a Majority in liquidation
amount of the Capital Securities and the Guarantor. The provisions of the
Declaration with respect to amendments thereof apply to the giving of such
approval.
Section 8.3 Notices.
--------
All notices provided for in this Guarantee shall be in writing, duly signed
by the party giving such notice, and shall be delivered, telecopied or mailed by
first class mail, as follows:
(a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing
address set forth below (or such other address as the Guarantee Trustee may
give notice of to the Holders of the Capital Securities and the Guarantor):
Wilmington Trust Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust Administration
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(b) If given to the Guarantor, at the Guarantor's mailing address set forth
below (or such other address as the Guarantor may give notice of to the
Holders of the Capital Securities and to the Guarantee Trustee):
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Tower Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(c) If given to any Holder of the Capital Securities, at the address set forth
on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
Section 8.4 Benefit.
--------
This Guarantee is solely for the benefit of the Beneficiaries and, subject
to Section 2.1(a), is not separately transferable from the Capital Securities.
Section 8.5 Governing Law.
--------------
PURSUANT TO SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK, THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 8.6 Counterparts.
-------------
This Guarantee may be executed in one or more counterparts, each of which
shall be an original, but all of which taken together shall constitute one and
the same instrument.
Section 8.7 Separability.
-------------
In case one or more of the provisions contained in this Guarantee shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Guarantee, but this Guarantee shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein.
Signatures appear on the following page
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THIS GUARANTEE is executed as of the day and year first above written.
TOWER GROUP, INC., as Guarantor
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: Chief Executive Officer and President
WILMINGTON TRUST COMPANY, as
Guarantee Trustee
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Senior Financial Services Officer
19