EXHIBIT 10.2
AMERICAN PHYSICIANS CAPITAL, INC.
20,000 CAPITAL SECURITIES
FLOATING RATE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000.00 PER CAPITAL SECURITY)
PLACEMENT AGREEMENT
October 16, 2003
FTN Financial Capital Markets
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
American Physicians Capital, Inc., incorporated and existing under the
laws of the State of Michigan (the "Company"), and its financing subsidiary,
American Physicians Capital Statutory Trust III, a Connecticut statutory trust
(the "Trust," and hereinafter together with the Company, the "Offerors"), hereby
confirm their agreement (this "Agreement") with you as placement agents (the
"Placement Agents"), as follows:
SECTION 1. ISSUANCE AND SALE OF SECURITIES.
1.1 INTRODUCTION. The Offerors propose to issue and sell at the
Closing (as defined in Section 2.3.1 hereof) 20,000 of the Trust's Floating Rate
Capital Securities, with a liquidation amount of $1,000.00 per capital security
(the "Capital Securities"), to I-Preferred Term Securities III, Ltd., a company
with limited liability established under the laws of the Cayman Islands (the
"Purchaser") pursuant to the terms of a Subscription Agreement entered into, or
to be entered into on or prior to the Closing Date (as defined in Section 2.3.1
hereof), between the Offerors and the Purchaser (the "Subscription Agreement"),
the form of which is attached hereto as Exhibit A and incorporated herein by
this reference.
1.2 OPERATIVE AGREEMENTS. The Capital Securities shall be fully
and unconditionally guaranteed on a subordinated basis by the Company with
respect to distributions and amounts payable upon liquidation, redemption or
repayment (the "Guarantee") pursuant and subject to the Guarantee Agreement (the
"Guarantee Agreement"), to be dated as of the Closing Date and
executed and delivered by the Company and U.S. Bank National Association ("U.S.
Bank"), as trustee (the "Guarantee Trustee"), for the benefit from time to time
of the holders of the Capital Securities. The entire proceeds from the sale by
the Trust to the Purchasers of the Capital Securities shall be combined with the
entire proceeds from the concurrent sale by the Trust to the Company of its
common securities (the "Common Securities"), and shall be used by the Trust to
purchase $20,619,000.00 in principal amount of the Floating Rate Junior
Subordinated Deferrable Interest Debentures (the "Debentures") of the Company.
The Capital Securities and the Common Securities for the Trust shall be issued
pursuant to an Amended and Restated Declaration of Trust among U.S. Bank, as
institutional trustee (the "Institutional Trustee"), the administrators of the
Trust named therein, and the Company, to be dated as of the Closing Date and in
substantially the form heretofore delivered to the Placement Agents (the "Trust
Agreement"). The Debentures shall be issued pursuant to an Indenture (the
"Indenture"), to be dated as of the Closing Date, between the Company and U.S.
Bank, as indenture trustee (the "Indenture Trustee"). This Agreement and the
documents identified in this Section 1.2 and in Section 1.1 are referred to
herein as the "Operative Documents."
1.3 RIGHTS OF PURCHASER. The Capital Securities shall be offered
and sold by the Trust directly to the Purchaser without registration of any of
the Capital Securities, the Debentures or the Guarantee under the Securities Act
of 1933, as amended (the "Securities Act"), or any other applicable securities
laws in reliance upon exemptions from the registration requirements of the
Securities Act and other applicable securities laws. The Offerors agree that
this Agreement shall be incorporated by reference into the Subscription
Agreement and the Purchaser shall be entitled to each of the benefits of the
Placement Agents and the Purchaser under this Agreement and shall be entitled to
enforce obligations of the Offerors under this Agreement as fully as if the
Purchaser were a party to this Agreement. The Offerors and the Placement Agents
have entered into this Agreement to set forth their understanding as to their
relationship and their respective rights, duties and obligations.
1.4 LEGENDS. Upon original issuance thereof, and until such time
as the same is no longer required under the applicable requirements of the
Securities Act, the Capital Securities and Debentures certificates shall each
contain a legend as required pursuant to any of the Operative Documents.
SECTION 2. PURCHASE OF CAPITAL SECURITIES.
2.1 EXCLUSIVE RIGHTS; PURCHASE PRICE. From the date hereof until
the Closing Date (which date may be extended by mutual agreement of the Offerors
and the Placement Agents), the Offerors hereby grant to the Placement Agents the
exclusive right to arrange for the sale of the Capital Securities to the
Purchaser at a purchase price of $1,000.00 per Capital Security.
2.2 SUBSCRIPTION AGREEMENT. The Offerors hereby agree to evidence
their acceptance of the subscription by countersigning a copy of the
Subscription Agreement and returning the same to the Placement Agents.
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2.3 CLOSING AND DELIVERY OF PAYMENT.
2.3.1 CLOSING; CLOSING DATE. The sale and purchase of the
Capital Securities by the Offerors to the Purchaser shall take place at a
closing (the "Closing") at the offices of LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
L.L.P., at 10:00 a.m. (New York City time) on October 29, 2003, or such other
business day as may be agreed upon by the Offerors and the Placement Agents (the
"Closing Date"); provided, however, that in no event shall the Closing Date
occur later than November 5, 2003 unless consented to by the Purchaser. Payment
by the Purchaser shall be payable in the manner set forth in the Subscription
Agreement and shall be made prior to or on the Closing Date.
2.3.2 DELIVERY. The certificate for the Capital Securities
shall be in definitive form, registered in the name of the Purchaser and in the
aggregate amount of the Capital Securities purchased by the Purchaser.
2.3.3 TRANSFER AGENT. The Offerors shall deposit the
certificate representing the Capital Securities with, or as instructed by, the
Institutional Trustee on the Closing Date.
2.4 PLACEMENT AGENTS' FEES AND EXPENSES.
2.4.1 PLACEMENT AGENTS' COMPENSATION. Because the proceeds
from the sale of the Capital Securities shall be used to purchase the Debentures
from the Company, the Company shall pay an aggregate of $30.00 for each
$1,000.00 of principal amount of Debentures sold to the Trust (excluding the
Debentures related to the Common Securities purchased by the Company). Of this
amount, $15.00 for each $1,000.00 of principal amount of Debentures shall be
payable to FTN Financial Capital Markets and $15.00 for each $1,000.00 of
principal amount of Debentures shall be payable to ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
Such amount shall be delivered to the Institutional Trustee or such other person
designated by the Placement Agents on the Closing Date and shall be allocated
between and paid to the respective Placement Agents as directed by the Placement
Agents.
2.4.2 COSTS AND EXPENSES. Whether or not this Agreement is
terminated or the sale of the Capital Securities is consummated, the Company
hereby covenants and agrees that it shall pay or cause to be paid (directly or
by reimbursement) all reasonable costs and expenses incident to the performance
of the obligations of the Offerors under this Agreement, including all fees,
expenses and disbursements of counsel and accountants for the Offerors; the
reasonable costs and charges of any trustee, transfer agent or registrar and the
fees and disbursements of counsel to any trustee, transfer agent or registrar in
each case only to the extent attributable to the Debentures and the Capital
Securities; all reasonable expenses incurred by the Offerors incident to the
preparation, execution and delivery of the Trust Agreement, the Indenture, and
the Guarantee; and all other reasonable costs and expenses incident to the
performance of the obligations of the Company hereunder and under the Trust
Agreement.
2.5 FAILURE TO CLOSE. If any of the conditions to the Closing
specified in this Agreement shall not have been fulfilled to the satisfaction of
the Placement Agents or if the Closing shall not have occurred on or before
10:00 a.m. (New York City time) on November 5, 2003, or such later Closing Date
consented to by the Purchaser pursuant to Section 2.3.1, then
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each party hereto, notwithstanding anything to the contrary in this Agreement,
shall be relieved of all further obligations under this Agreement without
thereby waiving any rights it may have by reason of such nonfulfillment or
failure; provided, however, that the obligations of the parties under Sections
2.4.2, 7.5 and 9 shall not be so relieved and shall continue in full force and
effect.
SECTION 3. CLOSING CONDITIONS. The obligations of the Purchaser and the
Placement Agents on the Closing Date shall be subject to the accuracy, at and as
of the Closing Date, of the representations and warranties of the Offerors
contained in this Agreement, to the accuracy, at and as of the Closing Date, of
the statements of the Offerors made in any certificates pursuant to this
Agreement, to the performance by the Offerors of their respective obligations
under this Agreement, to compliance, at and as of the Closing Date, by the
Offerors with their respective agreements herein contained, and to the following
further conditions:
3.1 OPINIONS OF COUNSEL. On the Closing Date, the Placement Agents
shall have received the following favorable opinions, each dated as of the
Closing Date: (a) from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC, counsel for the Offerors and
addressed to the Purchaser and the Placement Agents in substantially the form
set forth on Exhibit B-1 attached hereto and incorporated herein by this
reference, (b) from ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, special Connecticut counsel to the
Offerors and addressed to the Purchaser, the Placement Agents and the Offerors,
in substantially the form set forth on Exhibit B-2 attached hereto and
incorporated herein by this reference, and (c) from LeBoeuf, Lamb, ▇▇▇▇▇▇ &
▇▇▇▇▇▇, L.L.P., special tax counsel to the Offerors, and addressed to the
Placement Agents and the Offerors, in substantially the form set forth on
Exhibit B-3 attached hereto and incorporated herein by this reference, subject
to the receipt by LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. of a representation
letter from the Company in the form set forth in Exhibit B-3 completed in a
manner reasonably satisfactory to LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
(collectively, the "Offerors' Counsel Opinions"). In rendering the Offerors'
Counsel Opinions, counsel to the Offerors may rely as to factual matters upon
certificates or other documents furnished by officers, directors and trustees of
the Offerors (copies of which shall be delivered to the Placement Agents and the
Purchaser) and by government officials, and upon such other documents as counsel
to the Offerors may, in their reasonable opinion, deem appropriate as a basis
for the Offerors' Counsel Opinions. Counsel to the Offerors may specify the
jurisdictions in which they are admitted to practice and that they are not
admitted to practice in any other jurisdiction and are not experts in the law of
any other jurisdiction. If the Offerors' counsel is not admitted to practice in
the State of New York, the opinion of Offerors' counsel may assume, for purposes
of the opinion, that the laws of the State of New York are substantively
identical, in all respects material to the opinion, to the internal laws of the
state in which such counsel is admitted to practice. Such Offerors' Counsel
Opinions shall not state that they are to be governed or qualified by, or that
they are otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991).
3.2 OFFICER'S CERTIFICATE. At the Closing Date, the Purchaser and
the Placement Agents shall have received certificates from the Chief Executive
Officer of the Company, dated as of the Closing Date, stating that (a) the
representations and warranties of the Offerors set forth in Section 5 hereof are
true and correct as of the Closing Date and that the Offerors have complied with
all agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to the Closing Date, (b) since the date of this Agreement
the Offerors have
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not incurred any liability or obligation, direct or contingent, or entered into
any material transactions, other than in the ordinary course of business, which
is material to the Offerors, and (c) covering such other matters as the
Placement Agents may reasonably request.
3.3 ADMINISTRATOR'S CERTIFICATE. At the Closing Date, the
Purchaser and the Placement Agents shall have received a certificate of one or
more administrators of the Trust, dated as of the Closing Date, stating that the
representations and warranties of the Trust set forth in Section 5 are true and
correct as of the Closing Date and that the Trust has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date.
3.4 PURCHASE PERMITTED BY APPLICABLE LAWS; LEGAL INVESTMENT. The
purchase of and payment for the Capital Securities as described in this
Agreement and pursuant to the Subscription Agreement shall (a) not be prohibited
by any applicable law or governmental regulation, (b) not subject the Purchaser
or the Placement Agents to any penalty or, in the reasonable judgment of the
Purchaser and the Placement Agents, other onerous conditions under or pursuant
to any applicable law or governmental regulation, and (c) be permitted by the
laws and regulations of the jurisdictions to which the Purchaser and the
Placement Agents are subject.
3.5 CONSENTS AND PERMITS. The Company and the Trust shall have
received all consents, permits and other authorizations, and made all such
filings and declarations, as may be required from any person or entity pursuant
to any law, statute, regulation or rule (federal, state, local and foreign), or
pursuant to any agreement, order or decree to which the Company or the Trust is
a party or to which either is subject, in connection with the transactions
contemplated by this Agreement.
3.6 SALE OF PURCHASER SECURITIES. The Purchaser shall have sold
securities issued by the Purchaser in an amount such that the net proceeds of
such sale shall be (i) available on the Closing Date and (ii) in an amount
sufficient to purchase the Capital Securities and all other capital or similar
securities contemplated in agreements similar to this Agreement and the
Subscription Agreement.
3.7 INFORMATION. Prior to or on the Closing Date, the Offerors
shall have furnished to the Placement Agents such further information,
certificates, opinions and documents addressed to the Purchaser and the
Placement Agents, which the Placement Agents may reasonably request, including,
without limitation, a complete set of the Operative Documents or any other
documents or certificates required by this Section 3; and all proceedings taken
by the Offerors in connection with the issuance, offer and sale of the Capital
Securities as herein contemplated shall be reasonably satisfactory in form and
substance to the Placement Agents.
If any condition specified in this Section 3 shall not have been
fulfilled when and as required in this Agreement, or if any of the opinions or
certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Placement Agents, this
Agreement may be terminated by the Placement Agents by notice to the Offerors at
any time at or prior to the Closing Date. Notice of such termination shall be
given to the Offerors in writing or by telephone or facsimile confirmed in
writing.
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SECTION 4. CONDITIONS TO THE OFFERORS' OBLIGATIONS. The obligations of the
Offerors to sell the Capital Securities to the Purchaser and consummate the
transactions contemplated by this Agreement shall be subject to the accuracy, at
and as of the Closing Date, of the representations and warranties of the
Placement Agents contained in this Agreement and to the following further
conditions:
4.1 EXECUTED AGREEMENT. The Offerors shall have received from the
Placement Agents an executed copy of this Agreement.
4.2 FULFILLMENT OF OTHER OBLIGATIONS. The Placement Agents shall
have fulfilled all of their other obligations and duties required to be
fulfilled under this Agreement prior to or at the Closing.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE OFFERORS. Except as set forth
on the Disclosure Schedule (as defined in Section 11.1) attached hereto, if any,
the Offerors jointly and severally represent and warrant to the Placement Agents
and the Purchaser as of the date hereof and as of the Closing Date as follows:
5.1 SECURITIES LAW MATTERS; AUTHORIZATIONS.
(a) Neither the Company nor the Trust, nor any of their
"Affiliates" (as defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), nor any person acting on any of their behalf has, directly or
indirectly, made offers or sales of any security, or solicited offers to buy any
security, under circumstances that would require the registration under the
Securities Act of any of the Capital Securities, the Guarantee or the Debentures
(collectively, the "Securities") or any other securities to be issued, or which
may be issued, by the Purchaser.
(b) Neither the Company nor the Trust, nor any of their
Affiliates, nor any person acting on its or their behalf has (i) other than the
Placement Agents, offered for sale or solicited offers to purchase the
Securities, (ii) engaged or will engage, in any "directed selling efforts"
within the meaning of Regulation S under the Securities Act ("Regulation S")
with respect to the Securities, or (iii) engaged in any form of offering,
general solicitation or general advertising (within the meaning of Regulation D)
in connection with any offer or sale of any of the Securities.
(c) The Securities satisfy the eligibility requirements
of Rule 144A(d)(3) under the Securities Act.
(d) Neither the Company nor the Trust is or, after giving
effect to the offering and sale of the Capital Securities and the consummation
of the transactions described in this Agreement, will be an "investment company"
or an entity "controlled" by an "investment company," in each case within the
meaning of Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), without regard to Section 3(c) of the Investment
Company Act.
(e) Neither the Company nor the Trust has paid or agreed
to pay to any person or entity (other than the Placement Agents) any
compensation for soliciting another to purchase any of the Securities.
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(f) No authorization, approval, consent, order,
registration or qualification of or with any court or governmental authority or
agency (including, without limitation, any insurance regulatory agency or body)
is required in connection with the offering and sale of the Securities or the
Guarantee hereunder, or the consummation by the Company or the Trust of any
other transaction contemplated hereby, except such as have been obtained and
made under the federal securities laws or state insurance laws and such as may
be required under state or foreign securities or Blue Sky laws.
5.2 ORGANIZATION, STANDING AND QUALIFICATION OF THE TRUST. The
Trust has been duly created and is validly existing in good standing as a
statutory trust under the Connecticut Statutory Trust Act (the "Statutory Trust
Act") with the power and authority to own property and to conduct the business
it transacts and proposes to transact and to enter into and perform its
obligations under the Operative Documents. The Trust is duly qualified to
transact business as a foreign entity and is in good standing in each
jurisdiction in which such qualification is necessary, except where the failure
to so qualify or be in good standing would not have a material adverse effect on
the Trust. The Trust is not a party to or otherwise bound by any agreement other
than the Operative Documents. The Trust is and will, under current law, be
classified for federal income tax purposes as a grantor trust and not as an
association taxable as a corporation.
5.3 TRUST AGREEMENT. The Trust Agreement has been duly authorized
by the Company and, on the Closing Date, will have been duly executed and
delivered by the Company and the administrators of the Trust, and, assuming due
authorization, execution and delivery by the Institutional Trustee, will be a
valid and binding obligation of the Company and such administrators, enforceable
against them in accordance with its terms, subject to (a) applicable bankruptcy,
insolvency, moratorium, receivership, reorganization, liquidation and other laws
relating to or affecting creditors' rights generally, and (b) general principles
of equity (regardless of whether considered and applied in a proceeding in
equity or at law) ("Bankruptcy and Equity"). Each of the administrators of the
Trust is an employee or a director of the Company or of a subsidiary of the
Company and has been duly authorized by the Company to execute and deliver the
Trust Agreement.
5.4 GUARANTEE AGREEMENT AND THE INDENTURE. Each of the Guarantee
and the Indenture has been duly authorized by the Company and, on the Closing
Date will have been duly executed and delivered by the Company, and, assuming
due authorization, execution and delivery by the Guarantee Trustee, in the case
of the Guarantee, and by the Indenture Trustee, in the case of the Indenture,
will be a valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to Bankruptcy and Equity.
5.5 CAPITAL SECURITIES AND COMMON SECURITIES. The Capital
Securities and the Common Securities have been duly authorized by the Trust
Agreement and, when issued and delivered against payment therefor on the Closing
Date to the Purchaser, in the case of the Capital Securities, and to the
Company, in the case of the Common Securities, will be validly issued and
represent undivided beneficial interests in the assets of the Trust. None of the
Capital Securities or the Common Securities is subject to preemptive or other
similar rights. On the Closing Date, all of the issued and outstanding Common
Securities will be directly owned by the Company free and clear of any pledge,
security interest, claim, lien or other encumbrance.
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5.6 DEBENTURES. The Debentures have been duly authorized by the
Company and, at the Closing Date, will have been duly executed and delivered to
the Indenture Trustee for authentication in accordance with the Indenture, and,
when authenticated in the manner provided for in the Indenture and delivered
against payment therefor by the Trust, will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture enforceable
against the Company in accordance with their terms, subject to Bankruptcy and
Equity.
5.7 POWER AND AUTHORITY. This Agreement has been duly authorized,
executed and delivered by the Company and the Trust and constitutes the valid
and binding obligation of the Company and the Trust, enforceable against the
Company and the Trust in accordance with its terms, subject to Bankruptcy and
Equity and except as any indemnification or contribution provisions thereof may
be limited under applicable securities laws.
5.8 NO DEFAULTS. The Trust is not in violation of the Trust
Agreement or, to the knowledge of the administrators of the Trust, any provision
of the Statutory Trust Act. The execution, delivery and performance by the
Company or the Trust of this Agreement or the Operative Documents to which it is
a party, and the consummation of the transactions contemplated herein or therein
and the use of the proceeds therefrom, will not conflict with or constitute a
breach of, or a default under, or result in the creation or imposition of any
lien, charge or other encumbrance upon any property or assets of the Trust, the
Company or any of the Company's Significant Subsidiaries (as defined in Section
5.10 hereof) pursuant to any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Trust, the Company or any of its
Significant Subsidiaries is a party or by which it or any of them may be bound,
or to which any of the property or assets of any of them is subject, except for
a conflict, breach, default, lien, charge or encumbrance which could not, singly
or in the aggregate, reasonably be expected to have a Material Adverse Effect
nor will such action result in any violation of the Trust Agreement or the
Statutory Trust Act or require the consent, approval, authorization or order of
any court or governmental agency or body, except for those consents, approvals,
authorizations and orders that have been obtained or made. As used herein, the
term "Material Adverse Effect" means any one or more effects that individually
or in the aggregate are material and adverse to the Offerors' ability to
consummate the transactions contemplated herein or in the Operative Documents or
any one or more effects that individually or in the aggregate are material and
adverse to the condition (financial or otherwise), earnings, affairs, business
prospects or results of operations of the Company and its Significant
Subsidiaries taken as whole, whether or not occurring in the ordinary course of
business.
5.9 ORGANIZATION, STANDING AND QUALIFICATION OF THE COMPANY. The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Michigan, with all requisite
corporate power and authority to own its properties and conduct the business it
transacts and proposes to transact, and is duly qualified to transact business
and is in good standing as a foreign corporation in each jurisdiction where the
nature of its activities requires such qualification, except where the failure
of the Company to be so qualified would not, singly or in the aggregate, have a
Material Adverse Effect.
5.10 SUBSIDIARIES OF THE COMPANY. Each of the Company's significant
subsidiaries (as defined in Section 1-02(w) of Regulation S-X to the Securities
Act (the "Significant Subsidiaries")) is listed in Exhibit C attached hereto and
incorporated herein by this reference.
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Each Significant Subsidiary has been duly organized and is validly existing and
in good standing under the laws of the jurisdiction in which it is chartered or
organized, with all requisite power and authority to own its properties and
conduct the business it transacts and proposes to transact, and is duly
qualified to transact business and is in good standing as a foreign entity in
each jurisdiction where the nature of its activities requires such
qualification, except where the failure of any such Significant Subsidiaries to
be so qualified would not, singly or in the aggregate, have a Material Adverse
Effect. All of the issued and outstanding shares of capital stock of the
Significant Subsidiaries (a) have been duly authorized and are validly issued,
(b) are fully paid and nonassessable, and (c) are wholly owned, directly or
indirectly, by the Company free and clear of any security interest, mortgage,
pledge, lien, encumbrance, restriction upon voting or transfer, preemptive
rights, claim, equity or other defect.
5.11 PERMITS. The Company and each of its Significant Subsidiaries
have all requisite power and authority, and all necessary authorizations,
approvals, orders, licenses (including, without limitation, insurance licenses
from the insurance departments of the various states where the Significant
Subsidiaries write insurance business (the "Insurance Licenses")), certificates
and permits, including those that are necessary to own or lease their respective
properties (collectively, "Permits"), of and from regulatory or governmental
officials, bodies and tribunals that are material to the Company and its
Significant Subsidiaries taken as a whole and are necessary to conduct the
business now operated by them; the Company and its Significant Subsidiaries are
in compliance with the terms and conditions of all such Insurance Licenses and
Permits, except where the failure so to comply would not, singly or in the
aggregate, result in a Material Adverse Effect; all of the Insurance Licenses
and Permits are valid and in full force and effect, except where the invalidity
of such Insurance Licenses and Permits or the failure of such Insurance Licenses
and Permits to be in full force and effect would not result in a Material
Adverse Effect; and neither the Company nor any of its Significant Subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such Insurance Licenses and Permits which, singly or in the
aggregate, may reasonably be expected to result in a Material Adverse Effect.
5.12 CONFLICTS, AUTHORIZATIONS AND APPROVALS. Neither the Company
nor any of its Significant Subsidiaries is in violation of its respective
articles or certificate of incorporation, charter or by-laws or similar
organizational documents or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which either the Company or any of its Significant Subsidiaries is
a party, or by which it or any of them may be bound or to which any of the
property or assets of the Company or any of its Significant Subsidiaries is
subject, the effect of which violation or default in performance or observance
would have, singly or in the aggregate, a Material Adverse Effect.
5.13 FINANCIAL STATEMENTS.
(a) The consolidated balance sheets of the Company and
its Subsidiaries as of December 31, 2001 and December 31, 2002, and related
consolidated income statements and statements of changes in shareholders' equity
for the 3 years ended December 31, 2002 together with the notes thereto, and the
consolidated balance sheets of the Company and all of its Significant
Subsidiaries as of June 30, 2003 and the related consolidated income statements
and
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statements of changes in shareholders' equity for the 6 months then ended (the
"Financial Statements"), copies of each of which have been provided to the
Placement Agents, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be disclosed
therein) and fairly present in all material respects the financial position and
the results of operations and changes in shareholders' equity of the Company and
all of its Significant Subsidiaries as of the dates and for the periods
indicated (subject, in the case of interim financial statements, to normal
recurring year-end adjustments, none of which shall be material). The books and
records of the Company and all of its Significant Subsidiaries have been, and
are being, maintained in all material respects in accordance with generally
accepted accounting principles and any other applicable legal and accounting
requirements and reflect only actual transactions.
(b) The statutory financial statements as of December 31,
2001 and December 31, 2002 (the "Statutory Financial Statements") of each of the
Company's insurance company subsidiaries have for each relevant period been
prepared in accordance with accounting practices prescribed or permitted by the
National Association of Insurance Commissioners, and with respect to each
insurance subsidiary, the appropriate Insurance Department of the state of
domicile of such insurance subsidiary, and such accounting practices have been
applied on a consistent basis throughout the periods involved.
(c) Since the respective dates of the most recent
Financial Statements and the Statutory Financial Statements, there has been no
material adverse change or development with respect to the financial condition
or earnings of the Company and all of its Significant Subsidiaries, taken as a
whole.
(d) The accountants of the Company who certified the
Financial Statements are independent public accountants of the Company and its
Significant Subsidiaries within the meaning of the Securities Act and the rules
and regulations thereunder.
5.14 REGULATORY ENFORCEMENT MATTERS. Neither the Company nor any of
its Significant Subsidiaries is subject or is party to, or has received any
notice or advice that any of them may become subject or party to, any
investigation with respect to, any cease-and-desist order, agreement, consent
agreement, memorandum of understanding or other regulatory enforcement action,
proceeding or order with or by, or is a party to any commitment letter or
similar undertaking to, or is subject to any directive by, or has been since
January 1, 2001, a recipient of any supervisory letter from, or since January 1,
2001, has adopted any board resolutions at the request of, any agency charged
with the supervision or regulation of insurance companies (a "Regulatory
Agency") that currently restricts in any material respect the conduct of their
business or that in any material manner relates to their capital adequacy, their
ability or authority to pay dividends or make distributions to their
shareholders or make payments of principal or interest on their debt
obligations, their management or their business (each, a "Regulatory
Agreement"), nor has the Company or any of its Significant Subsidiaries been
advised since January 1, 2001, by any Regulatory Agency that it is considering
issuing or requesting any such Regulatory Agreement. There is no material
unresolved violation, criticism or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations of the Company
or any of its Significant Subsidiaries.
10
5.15 NO MATERIAL CHANGE. Since June 30, 2003, there has been no
material adverse change or development with respect to the condition (financial
or otherwise), earnings, affairs, business prospects or results of operations of
the Company or its Significant Subsidiaries on a consolidated basis, whether or
not arising in the ordinary course of business, provided, however, that no
representation or warranty is made in this Section 5.15 other than as of the
date hereof and as of the date of closing.
5.16 NO UNDISCLOSED LIABILITIES. Neither the Company nor any of its
Significant Subsidiaries has any material liability, whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its Significant Subsidiaries giving rise to any such liability),
except (i) for liabilities set forth in the Financial Statements and Statutory
Financial Statements, respectively, (ii) normal fluctuation in the amount of the
liabilities referred to in clause (i) above occurring in the ordinary course of
business of the Company and all of its Significant Subsidiaries since the date
of the most recent balance sheet included in the Financial Statements and
Statutory Financial Statements, respectively, and (iii) as may be specifically
disclosed in writing to the Placement Agents.
5.17 LITIGATION. No charge, investigation, action, suit or
proceeding (including, without limitation, any proceeding to revoke or deny
renewal of any Insurance Licenses) is pending or, to the knowledge of the
Offerors, threatened, against or affecting the Company or its Significant
Subsidiaries or any of their respective properties before or by (i) any court
wherein an unfavorable decision, ruling or finding could reasonably be expected
to have, singly or in the aggregate, a Material Adverse Effect, or (ii) any
regulatory, administrative or governmental official, commission, board, agency
or other authority or body, or any arbitrator, wherein an unfavorable decision,
ruling or finding could have, singly or in the aggregate, a Material Adverse
Effect.
5.18 DEFERRAL OF INTEREST PAYMENTS ON DEBENTURES. The Company has
no present intention to exercise its option to defer payments of interest on the
Debentures as provided in the Indenture. The Company believes that the
likelihood that it would exercise its right to defer payments of interest on the
Debentures as provided in the Indenture at any time during which the Debentures
are outstanding is remote because of the restrictions that would be imposed on
the Company's ability to declare or pay dividends or distributions on, or to
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Company's capital stock and on the Company's ability to make any payments of
principal, interest or premium on, or repay, repurchase or redeem, any of its
debt securities that rank pari passu in all respects with, or junior in interest
to, the Debentures.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENTS. Each
Placement Agent represents and warrants to the Offerors as to itself (but not as
to the other Placement Agent) as follows:
11
6.1 ORGANIZATION, STANDING AND QUALIFICATION.
(a) FTN Financial Capital Markets is a division of First
Tennessee Bank, N.A., a national banking association duly organized, validly
existing and in good standing under the laws of the United States, with full
power and authority to own, lease and operate its properties and conduct its
business as currently being conducted. FTN Financial Capital Markets is duly
qualified to transact business as a foreign corporation and is in good standing
in each other jurisdiction in which it owns or leases property or conducts its
business so as to require such qualification and in which the failure to so
qualify would, individually or in the aggregate, have a material adverse effect
on the condition (financial or otherwise), earnings, business, prospects or
results of operations of FTN Financial Capital Markets.
(b) ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with full power and authority to own, lease and operate its properties
and conduct its business as currently being conducted. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇,
Inc. is duly qualified to transact business as a foreign corporation and is in
good standing in each other jurisdiction in which it owns or leases property or
conducts its business so as to require such qualification and in which the
failure to so qualify would, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), earnings, business,
prospects or results of operations of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
6.2 POWER AND AUTHORITY. The Placement Agent has all requisite
power and authority to enter into this Agreement, and this Agreement has been
duly and validly authorized, executed and delivered by the Placement Agent and
constitutes the legal, valid and binding agreement of the Placement Agent,
enforceable against the Placement Agent in accordance with its terms, subject to
Bankruptcy and Equity and except as any indemnification or contribution
provisions thereof may be limited under applicable securities laws.
6.3 GENERAL SOLICITATION. In the case of the offer and sale of the
Capital Securities, no form of general solicitation or general advertising was
used by the Placement Agent or its representatives including, but not limited
to, advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Neither the Placement Agent nor its
representatives have engaged or will engage in any "directed selling efforts"
within the meaning of Regulation S with respect to the Capital Securities.
6.4 PURCHASER. The Placement Agent has made such reasonable
inquiry as is necessary to determine that the Purchaser is acquiring the Capital
Securities for its own account, that the Purchaser does not intend to distribute
the Capital Securities in contravention of the Securities Act or any other
applicable securities laws, and that the Purchaser is not a "U.S. person" as
that term is defined under Rule 902 of the Securities Act.
6.5 QUALIFIED PURCHASERS. The Placement Agent has not offered or
sold and will not arrange for the offer or sale of the Capital Securities except
(i) in an offshore transaction complying with Rule 903 of Regulation S, or (ii)
to those the Placement Agent reasonably
12
believes are "accredited investors" (as defined in Rule 501 of Regulation D), or
(iii) in any other manner that does not require registration of the Capital
Securities under the Securities Act. In connection with each such sale, the
Placement Agent has taken or will take reasonable steps to ensure that the
Purchaser is aware that (a) such sale is being made in reliance on an exemption
under the Securities Act, and (b) future transfers of the Capital Securities
will not be made except in compliance with applicable securities laws.
6.6. OFFERING CIRCULARS. Neither the Placement Agent nor its
representatives will include any non-public information about the Company, the
Trust or any of their affiliates in any registration statement, prospectus,
offering circular or private placement memorandum used in connection with any
purchase of Capital Securities without the prior written consent of the Trust
and the Company.
SECTION 7. COVENANTS OF THE OFFERORS. The Offerors covenant and agree with the
Placement Agents and the Purchaser as follows:
7.1 COMPLIANCE WITH REPRESENTATIONS AND WARRANTIES. During the
period from the date of this Agreement to the Closing Date, the Offerors shall
use their best efforts and take all action necessary or appropriate to cause
their representations and warranties contained in Section 5 hereof to be true as
of the Closing Date, after giving effect to the transactions contemplated by
this Agreement, as if made on and as of the Closing Date.
7.2 SALE AND REGISTRATION OF SECURITIES. The Offerors and their
Affiliates shall not nor shall any of them permit any person acting on their
behalf (other than the Placement Agents), to directly or indirectly (a) sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) that would or could be integrated
with the sale of the Capital Securities in a manner that would require the
registration under the Securities Act of the Securities, or (b) make offers or
sales of any such Security, or solicit offers to buy any such Security, under
circumstances that would require the registration of any of such Securities
under the Securities Act.
7.3 USE OF PROCEEDS. The Trust shall use the proceeds from the
sale of the Capital Securities to purchase the Debentures from the Company.
7.4 INVESTMENT COMPANY. The Offerors shall not engage, or permit
any subsidiary to engage, in any activity which would cause it or any subsidiary
to be an "investment company" under the provisions of the Investment Company
Act.
7.5 REIMBURSEMENT OF EXPENSES. If the sale of the Capital
Securities provided for herein is not consummated (a) because any condition set
forth in Section 3 hereof is not satisfied, or (b) because of any refusal,
inability or failure on the part of the Company or the Trust to perform any
agreement herein or comply with any provision hereof other than by reason of a
breach by the Placement Agents, the Company shall reimburse the Placement Agents
upon demand for all of their pro rata share of out-of-pocket expenses (including
reasonable fees and disbursements of counsel) in an amount not to exceed
$50,000.00 that shall have been incurred by them in connection with the proposed
purchase and sale of the Capital Securities. Notwithstanding the foregoing, the
Company shall have no obligation to reimburse the
13
Placement Agents for their out-of-pocket expenses if the sale of the Capital
Securities fails to occur because the condition set forth in Section 3.6 is not
satisfied or because either of the Placement Agents fails to fulfill a condition
set forth in Section 4.
7.6 DIRECTED SELLING EFFORTS, SOLICITATION AND ADVERTISING. In
connection with any offer or sale of any of the Securities, the Offerors shall
not, nor shall either of them permit any of their Affiliates or any person
acting on their behalf, other than the Placement Agents, to, (a) engage in any
"directed selling efforts" within the meaning of Regulation S, or (b) engage in
any form of general solicitation or general advertising (as defined in
Regulation D).
7.7 COMPLIANCE WITH RULE 144A(d)(4) UNDER THE SECURITIES ACT. So
long as any of the Securities are outstanding and are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, the Offerors
will, during any period in which they are not subject to and in compliance with
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the Offerors are not exempt from such reporting requirements
pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act,
provide to each holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted securities, upon the
request of such holder or prospective purchaser in connection with any proposed
transfer, any information required to be provided by Rule 144A(d)(4) under the
Securities Act, if applicable. This covenant is intended to be for the benefit
of the holders, and the prospective purchasers designated by such holders, from
time to time of such restricted securities. The information provided by the
Offerors pursuant to this Section 7.7 will not, at the date thereof, contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
7.8 QUARTERLY REPORTS. Within 50 days of the end of each of the
first three calendar year quarters and within 75 days of the end of each
calendar year during which the Debentures are issued and outstanding, the
Offerors shall submit to The Bank of New York a completed quarterly report in
the form attached hereto as Exhibit D. The Offerors acknowledge and agree that
The Bank of New York and its successors and assigns is a third party beneficiary
of this Section 7.8.
SECTION 8. COVENANTS OF THE PLACEMENT AGENTS. The Placement Agents covenant and
agree with the Offerors that, during the period from the date of this Agreement
to the Closing Date, the Placement Agents shall use their best efforts and take
all action necessary or appropriate to cause their representations and
warranties contained in Section 6 to be true as of Closing Date, after giving
effect to the transactions contemplated by this Agreement, as if made on and as
of the Closing Date. The Placement Agents further covenant and agree not to
engage in hedging transactions with respect to the Capital Securities unless
such transactions are conducted in compliance with the Securities Act.
SECTION 9. INDEMNIFICATION.
9.1 INDEMNIFICATION OBLIGATION. The Offerors shall jointly and
severally indemnify and hold harmless the Placement Agents and the Purchaser and
each of their respective agents, employees, officers and directors and each
person that controls either of the Placement Agents or
14
the Purchaser within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, and agents, employees, officers and directors or any
such controlling person of either of the Placement Agents or the Purchaser (each
such person or entity, an "Indemnified Party") from and against any and all
losses, claims, damages, judgments, liabilities or expenses, joint or several,
to which such Indemnified Party may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of the Offerors), insofar as such losses,
claims, damages, judgments, liabilities or expenses (or actions in respect
thereof) arise out of, or are based upon, or relate to, in whole or in part, (a)
any untrue statement or alleged untrue statement of a material fact contained in
any information (whether written or oral) or documents executed in favor of,
furnished or made available to the Placement Agents or the Purchaser by the
Offerors, or (b) any omission or alleged omission to state in any information
(whether written or oral) or documents executed in favor of, furnished or made
available to the Placement Agents or the Purchaser by the Offerors a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse each Indemnified Party for any legal and
other expenses as such expenses are reasonably incurred by such Indemnified
Party in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, judgment, liability, expense or action
described in this Section 9.1. In addition to their other obligations under this
Section 9, the Offerors hereby agree that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of, or based upon, or related to the matters described above in this
Section 9.1, they shall reimburse each Indemnified Party on a quarterly basis
for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, each Indemnified Party shall promptly return such amounts to the
Offerors together with interest, determined on the basis of the prime rate (or
other commercial lending rate for borrowers of the highest credit standing)
announced from time to time by First Tennessee Bank, N.A. (the "Prime Rate").
Any such interim reimbursement payments that are not made to an Indemnified
Party within 30 days of a request for reimbursement shall bear interest at the
Prime Rate from the date of such request.
9.2 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt
by an Indemnified Party under this Section 9 of notice of the commencement of
any action, such Indemnified Party shall, if a claim in respect thereof is to be
made against the Offerors under this Section 9, notify the Offerors in writing
of the commencement thereof; but, subject to Section 9.4, the omission to so
notify the Offerors shall not relieve them from any liability pursuant to
Section 9.1 which the Offerors may have to any Indemnified Party unless and to
the extent that the Offerors did not otherwise learn of such action and such
failure by the Indemnified Party results in the forfeiture by the Offerors of
substantial rights and defenses. In case any such action is brought against any
Indemnified Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to the
extent that they may wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Party; provided, however, if the defendants in
any such action include both the Indemnified Party and the Offerors and the
Indemnified Party shall have reasonably concluded
15
that there may be a conflict between the positions of the Offerors and the
Indemnified Party in conducting the defense of any such action or that there may
be legal defenses available to it and/or other Indemnified Parties which are
different from or additional to those available to the Offerors, the Indemnified
Party shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such Indemnified Party. Upon receipt of notice from the Offerors to such
Indemnified Party of their election to so assume the defense of such action and
approval by the Indemnified Party of counsel, the Offerors shall not be liable
to such Indemnified Party under this Section 9 for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof unless (a) the Indemnified Party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
in the preceding sentence (it being understood, however, that the Offerors shall
not be liable for the expenses of more than one separate counsel representing
the Indemnified Parties who are parties to such action), or (b) the Offerors
shall not have employed counsel reasonably satisfactory to the Indemnified Party
to represent the Indemnified Party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and expenses of
counsel of such Indemnified Party shall be at the expense of the Offerors.
9.3 CONTRIBUTION. If the indemnification provided for in this
Section 9 is required by its terms, but is for any reason held to be unavailable
to or otherwise insufficient to hold harmless an Indemnified Party under Section
9.1 in respect of any losses, claims, damages, judgments, liabilities or
expenses referred to herein or therein, then the Offerors shall contribute to
the amount paid or payable by such Indemnified Party as a result of any losses,
claims, damages, judgments, liabilities or expenses referred to herein (a) in
such proportion as is appropriate to reflect the relative benefits received by
the Offerors, on the one hand, and the Indemnified Party, on the other hand,
from the offering of such Capital Securities, or (b) if the allocation provided
by clause (a) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (a)
above but also the relative fault of the Offerors, on the one hand, and the
Placement Agents, on the other hand, in connection with the statements or
omissions or inaccuracies in the representations and warranties herein or other
breaches which resulted in such losses, claims, damages, judgments, liabilities
or expenses, as well as any other relevant equitable considerations. The
respective relative benefits received by the Offerors, on the one hand, and the
Placement Agents, on the other hand, shall be deemed to be in the same
proportion, in the case of the Offerors, as the total price paid to the Offerors
for the Capital Securities sold by the Offerors to the Purchaser (net of the
compensation paid to the Placement Agents hereunder, but before deducting
expenses), and in the case of the Placement Agents, as the compensation received
by them, bears to the total of such amounts paid to the Offerors and received by
the Placement Agents as compensation. The relative fault of the Offerors and the
Placement Agents shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact or the inaccurate or the
alleged inaccurate representation and/or warranty relates to information
supplied by the Offerors or the Placement Agents and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The provisions set forth in Section 9.2 with respect
to notice of commencement of any action shall apply if a claim for contribution
is made under this Section 9.3; provided, however, that no additional notice
shall be required with respect to any action for which notice has been given
under Section 9.2 for purposes of indemnification. The
16
Offerors and the Placement Agents agree that it would not be just and equitable
if contribution pursuant to this Section 9.3 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in this Section 9.3. The amount paid or
payable by an Indemnified Party as a result of the losses, claims, damages,
judgments, liabilities or expenses referred to in this Section 9.3 shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. In no event shall the
liability of the Placement Agents hereunder be greater in amount than the dollar
amount of the compensation (net of payment of all expenses) received by the
Placement Agents upon the sale of the Capital Securities giving rise to such
obligation. No person found guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.
9.4 ADDITIONAL REMEDIES. The indemnity and contribution agreements
contained in this Section 9 are in addition to any liability that the Offerors
may otherwise have to any Indemnified Party.
9.5 ADDITIONAL INDEMNIFICATION. The Company shall indemnify and
hold harmless the Trust against all loss, liability, claim, damage and expense
whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.
SECTION 10. RIGHTS AND RESPONSIBILITIES OF PLACEMENT AGENTS.
10.1 RELIANCE. In performing their duties under this Agreement, the
Placement Agents shall be entitled to rely upon any notice, signature or writing
which they shall in good faith believe to be genuine and to be signed or
presented by a proper party or parties. The Placement Agents may rely upon any
opinions or certificates or other documents delivered by the Offerors or their
counsel or designees to either the Placement Agents or the Purchaser.
10.2 RIGHTS OF PLACEMENT AGENTS. In connection with the performance
of their duties under this Agreement, the Placement Agents shall not be liable
for any error of judgment or any action taken or omitted to be taken unless the
Placement Agents were grossly negligent or engaged in willful misconduct in
connection with such performance or non-performance. No provision of this
Agreement shall require the Placement Agents to expend or risk their own funds
or otherwise incur any financial liability on behalf of the Purchaser in
connection with the performance of any of their duties hereunder. The Placement
Agents shall be under no obligation to exercise any of the rights or powers
vested in them by this Agreement.
SECTION 11. MISCELLANEOUS.
11.1 DISCLOSURE SCHEDULE. The term "Disclosure Schedule," as used
herein, means the schedule, if any, attached to this Agreement that sets forth
items the disclosure of which is necessary or appropriate as an exception to one
or more representations or warranties contained in Section 5 hereof; provided,
that any item set forth in the Disclosure Schedule as an exception to a
representation or warranty shall be deemed an admission by the Offerors that
such item represents an exception, fact, event or circumstance that is
reasonably likely to result in a
17
Material Adverse Effect. The Disclosure Schedule shall be arranged in paragraphs
corresponding to the section numbers contained in Section 5. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the immediately preceding
sentence, the mere listing (or inclusion of a copy) of a document or other item
in the Disclosure Schedule shall not be deemed adequate to disclose an exception
to a representation or warranty made herein unless the representation or
warranty has to do with the existence of the document or other item itself.
Information provided by the Company in response to any due diligence
questionnaire shall not be deemed part of the Disclosure Schedule and shall not
be deemed to be an exception to one or more representations or warranties
contained in Section 5 hereof unless such information is specifically included
on the Disclosure Schedule in accordance with the provisions of this Section
11.1.
11.2 NOTICES. Prior to the Closing, and thereafter with respect to
matters pertaining to this Agreement only, all notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier or overnight air courier guaranteeing next
day delivery:
if to the Placement Agents, to:
FTN Financial Capital Markets
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, General Counsel
with a copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
and
18
Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: 212-839-5599
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
if to the Offerors, to:
American Physicians Capital, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇, Esq.
All such notices and communications shall be deemed to have been duly
given (a) at the time delivered by hand, if personally delivered, (b) five
business days after being deposited in the mail, postage prepaid, if mailed, (c)
when answered back, if telexed, (d) the next business day after being
telecopied, or (e) the next business day after timely delivery to a courier, if
sent by overnight air courier guaranteeing next day delivery. From and after the
Closing, the foregoing notice provisions shall be superseded by any notice
provisions of the Operative Documents under which notice is given. The Placement
Agents, the Company, and their respective counsel, may change their respective
notice addresses from time to time by written notice to all of the foregoing
persons.
11.3 PARTIES IN INTEREST, SUCCESSORS AND ASSIGNS. Except as
expressly set forth herein, this Agreement is made solely for the benefit of the
Placement Agents, the Purchaser and the Offerors and any person controlling the
Placement Agents, the Purchaser or the Offerors and their respective successors
and assigns; and no other person shall acquire or have any right under or by
virtue of this Agreement. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties.
11.4 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.
11.5 HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
19
11.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO
CONFLICTS OF LAWS) OF THE STATE OF NEW YORK.
11.7 ENTIRE AGREEMENT. This Agreement, together with the other
Operative Documents and the other documents delivered in connection with the
transactions contemplated by this Agreement, is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, together with the other Operative Documents
and the other documents delivered in connection with the transaction
contemplated by this Agreement, supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
11.8 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected, it being intended that all of the Placement Agents' and the
Purchaser's rights and privileges shall be enforceable to the fullest extent
permitted by law.
11.9 SURVIVAL. The Placement Agents and the Offerors, respectively,
agree that the representations, warranties and agreements made by each of them
in this Agreement and in any certificate or other instrument delivered pursuant
hereto shall remain in full force and effect and shall survive the delivery of,
and payment for, the Capital Securities.
Signatures appear on the following page
20
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance of this Agreement and deliver such counterpart to the Offerors
whereupon this Agreement will become binding between us in accordance with its
terms.
Very truly yours,
AMERICAN PHYSICIANS CAPITAL, INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
AMERICAN PHYSICIANS CAPITAL
STATUTORY TRUST III
By:_______________________________________
Name:_____________________________________
Title: Administrator
CONFIRMED AND ACCEPTED,
as of the date first set forth above
FTN FINANCIAL CAPITAL MARKETS,
A DIVISION OF FIRST TENNESSEE BANK, N.A.,
AS A PLACEMENT AGENT
By: ______________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title Managing Director
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, INC.
A NEW YORK CORPORATION, AS A PLACEMENT AGENT
By: _____________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
21
EXHIBIT A
FORM OF SUBSCRIPTION AGREEMENT
AMERICAN PHYSICIANS CAPITAL STATUTORY TRUST III
AMERICAN PHYSICIANS CAPITAL, INC.
SUBSCRIPTION AGREEMENT
OCTOBER 29, 2003
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among American
Physicians Capital Statutory Trust III (the "Trust"), a statutory trust created
under the Connecticut Statutory Trust Act (Chapter 615 of Title 34 of the
Connecticut General Statutes, Section 500, et seq.), American Physicians
Capital, Inc., a Michigan corporation, with its principal offices located at
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company" and,
collectively with the Trust, the "Offerors"), and I-Preferred Term Securities
III, Ltd. (the "Purchaser").
RECITALS:
A. The Trust desires to issue 20,000 of its Floating Rate Capital
Securities (the "Capital Securities"), liquidation amount $1,000.00 per Capital
Security, representing an undivided beneficial interest in the assets of the
Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, U.S. Bank
National Association ("U.S. Bank"), the administrators named therein, and the
holders (as defined therein), which Capital Securities are to be guaranteed by
the Company with respect to distributions and payments upon liquidation,
redemption and otherwise pursuant to the terms of a Guarantee Agreement between
the Company and U.S. Bank, as trustee (the "Guarantee"); and
B. The proceeds from the sale of the Capital Securities will be
combined with the proceeds from the sale by the Trust to the Company of its
common securities, and will be used by the Trust to purchase an equivalent
amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of
the Company (the "Debentures") to be issued by the Company pursuant to an
indenture to be executed by the Company and U.S. Bank, as trustee (the
"Indenture"); and
C. In consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby
subscribes for and agrees to purchase from the Trust 20,000 Capital Securities
at a price equal to $1,000.00 per
Capital Security (the "Purchase Price") and the Trust agrees to sell such
Capital Securities to the Purchaser for said Purchase Price. The rights and
preferences of the Capital Securities are set forth in the Declaration. The
Purchase Price is payable in immediately available funds on October 29, 2003, or
such other business day as may be designated by the Purchaser, but in no event
later than November 5, 2003 (the "Closing Date"). The Offerors shall provide the
Purchaser wire transfer instructions no later than 1 day following the date
hereof.
1.2. The certificate for the Capital Securities shall be delivered
by the Trust on the Closing Date to the Purchaser or its designee.
1.3. The Placement Agreement, dated October 16, 2003 (the
"Placement Agreement"), among the Offerors and the Placement Agents identified
therein includes certain representations and warranties, covenants and
conditions to closing and certain other matters governing the Offering. The
Placement Agreement is hereby incorporated by reference into this Agreement and
the Purchaser shall be entitled to each of the benefits of the Placement Agents
and the Purchaser under the Placement Agreement and shall be entitled to enforce
the obligations of the Offerors under such Placement Agreement as fully as if
the Purchaser were a party to such Placement Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that neither the
Capital Securities, the Debentures nor the Guarantee have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable securities law, are being offered for sale by the Trust in
transactions not requiring registration under the Securities Act, and may not be
offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.
2.2. The Purchaser represents, warrants and certifies that (i) it
is not a "U.S. person" as such term is defined in Rule 902 under the Securities
Act, (ii) it is not acquiring the Capital Securities for the account or benefit
of any such U.S. person, (iii) the offer and sale of Capital Securities to the
Purchaser constitutes an "offshore transaction" under Regulation S of the
Securities Act, and (iv) it will not engage in hedging transactions with regard
to the Capital Securities unless such transactions are conducted in compliance
with the Securities Act and the Purchaser agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.
2.3. The Purchaser represents and warrants that it is purchasing
the Capital Securities for its own account, for investment, and not with a view
to, or for offer or sale in connection with, any distribution thereof in
violation of the Securities Act or other applicable securities laws, subject to
any requirement of law that the disposition of its property be at all times
within its control and subject to its ability to resell such Capital Securities
pursuant to an effective registration statement under the Securities Act or
under Rule 144A or any other exemption from registration available under the
Securities Act or any other applicable securities law.
A-2
2.4. The Purchaser represents and warrants that it has full power
and authority to execute and deliver this Agreement, to make the representations
and warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.
2.5. The Purchaser, a Cayman Islands company whose business
includes issuance of certain notes and acquiring the Capital Securities and
other similar securities, represents and warrants that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of purchasing the Capital Securities, has had the
opportunity to ask questions of, and receive answers and request additional
information from, the Offerors and is aware that it may be required to bear the
economic risk of an investment in the Capital Securities.
2.6. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.
2.7. The Purchaser represents and warrants that this Agreement has
been duly authorized, executed and delivered by the Purchaser.
2.8. The Purchaser represents and warrants that (i) the Purchaser
is not in violation or default of any term of its Memorandum of Association or
Articles of Association, of any provision of any mortgage, indenture, agreement,
instrument or contract to which it is a party or by which it is bound or of any
judgment, decree, order, writ or, to its knowledge, any statute, rule or
regulation applicable to the Purchaser which would prevent the Purchaser from
performing any material obligation set forth in this Agreement; and (ii) the
execution, delivery and performance of and compliance with this Agreement, and
the consummation of the transactions contemplated herein, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or the suspension, revocation, impairment, forfeiture or non-renewal of any
permit, license, authorization or approval applicable to the Purchaser, its
business or operations or any of its assets or properties which would prevent
the Purchaser from performing any material obligations set forth in this
Agreement.
2.9. The Purchaser represents and warrants that the Purchaser is an
exempted company with limited liability duly incorporated, validly existing and
in good standing under the laws of the Cayman Islands, with full power and
authority to perform its obligations under this Agreement.
2.10. The Purchaser understands and acknowledges that the Company
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that, if any of the
acknowledgments, representations, warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate, it
shall promptly notify the Company.
A-3
2.11. The Purchaser understands that no public market exists for any
of the Capital Securities, and that it is unlikely that a public market will
ever exist for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:
To the Offerors: American Physicians Capital, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To the Purchaser: I-Preferred Term Securities III, Ltd.
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇ House
South Church Street
▇▇▇▇▇▇ Town, Grand Cayman
Cayman Islands
Attention: The Directors
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Unless otherwise expressly provided herein, notices shall be deemed to
have been given on the date of mailing, except notice of change of address,
which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged, and this Agreement may
not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the
Purchaser, this Agreement shall become a binding obligation of the Purchaser
with respect to the purchase of Capital Securities as herein provided.
3.4. Notwithstanding anything expressed or implied to the contrary,
each Purchaser of Capital Securities (and each employee, representative or other
agent of a Purchaser) may disclose to any and all persons, without limitation of
any kind, the U.S. tax treatment and U.S. tax structure of the transactions
contemplated by this Agreement and all materials of any kind (including opinions
or other tax analyses) that are provided to the Purchasers relating to such U.S.
tax treatment and U.S. tax structure as such terms are defined in Treasury
Regulation
A-4
Section 1.6011-4; provided, that any such disclosure of the U.S. tax treatment
and U.S. tax structure and materials related thereto may not be made (i) in a
manner that would constitute an offer to sell or the solicitation of an offer to
buy the Capital Securities offered herein under applicable securities laws or
(ii) when nondisclosure is reasonably necessary to comply with applicable
securities laws. This authorization of tax disclosure is retroactively effective
to the commencement of the first discussions between the parties regarding the
transactions contemplated herein.
3.5. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED
BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.6. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
3.7. This Agreement may be executed in one or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
3.8. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Offerors' and the Purchaser's rights and
privileges shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
A-5
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed as of the day and year first written above.
I-PREFERRED TERM SECURITIES III, LTD.
By:___________________________________
Name:_________________________________
Title:________________________________
IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the
day and year first written above.
AMERICAN PHYSICIANS CAPITAL,
INC.
By:______________________________
Name:____________________________
Title:___________________________
AMERICAN PHYSICIANS CAPITAL
STATUTORY TRUST III
By:______________________________
Name:____________________________
Title: Administrator
▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF COMPANY COUNSEL OPINION
October ___, 2003
I-Preferred Term Securities III, Ltd. FTN Financial Capital Markets
c/o Maples Finance Limited ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
P. O. Box 1093 GT ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇▇▇▇ Town, Grand Cayman 787 7th Avenue, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel to American Physicians Capital, Inc. (the
"Company"), a Michigan corporation, in connection with a certain Placement
Agreement, dated October ___, 2003, (the "Placement Agreement"), between the
Company and American Physicians Capital Statutory Trust III (the "Trust"), on
one hand, and FTN Financial Capital Markets and ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
(the "Placement Agents"), on the other hand. Pursuant to the Placement
Agreement, and subject to the terms and conditions stated therein, the Trust
will issue and sell to I-Preferred Term Securities III, Ltd. (the "Purchaser") $
________ aggregate principal amount of Floating Rate Capital Securities
(liquidation amount $1,000.00 per capital security) (the "Capital Securities").
The proceeds from the sale by the Trust of the Capital Securities will
be combined with the proceeds from the sale by the Trust to the Company of the
Trust's common securities (the "Common Securities"), and used by the Trust to
purchase $ ____________ principal amount of Floating Rate Junior Subordinated
Deferrable Interest Debentures due 2033 (the "Debentures") of the Company. The
Capital Securities and the Common Securities of the Trust will be issued
pursuant to the Amended and Restated Declaration of Trust among U.S. Bank, as
institutional trustee (the "Institutional Trustee"), the Administrators named
therein, and the Company, to be dated as of the Closing Date and in
substantially the form previously delivered to the Placement Agents (the "Trust
Agreement"). The Debentures will be issued pursuant to an Indenture (the
"Indenture"), to be dated as of the Closing Date, between the Company and U.S.
Bank National Association, as indenture trustee (the "Indenture Trustee").
Capitalized terms used herein and not otherwise defined shall have the
same meanings ascribed to them in the Placement Agreement.
The law covered by the opinions expressed herein is limited to the law
of the United States of America and of the State of Michigan.
B-1-1
We have made such investigations of law as, in our judgment, were
necessary to render the following opinions. We have also reviewed (a) the
Indenture, (b) the Declaration of Trust, (c) the Guarantee Agreement, (d) the
Subscription Agreement among the Trust, the Company and the Purchaser (the
"Subscription Agreement") for the purchase of the Capital Securities
(collectively, the "Operative Documents"), (e) the Placement Agreement, (f) the
Company's Articles of Incorporation and its Amended and Restated Bylaws, and (g)
such corporate documents, records, information and certificates of the Company
and the Significant Subsidiaries, certificates of public officials or government
authorities and other documents as we have deemed necessary or appropriate as a
basis for the opinions set forth below. The term "Material Agreement" as used
herein means any agreement referenced as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 2002, or its Quarterly
Reports on Form 10-Q for the periods ended March 31, 2003 and June 30, 2003, as
filed with the Securities and Exchange Commission. As to certain facts material
to our opinions, we have assumed the truth of and relied, with your permission,
upon statements, certificates or representations, including those delivered or
made in the related documents executed and delivered in connection with the
above-referenced transactions, of officers and other representatives of the
Company, the Significant Subsidiaries and the Trust, certificates of public
officials or government authorities and other documents as we have deemed
necessary or appropriate as a basis for the opinions herein expressed.
Whenever our opinions or statements herein are indicated to be "to our
knowledge" or "to the best of our knowledge" or otherwise similarly qualified,
it is intended to signify that during the course of our representation as
described in this opinion letter, no information has come to the attention of
the attorneys in our firm who have provided substantive legal services in
connection with the transactions contemplated by the Placement Agreement and the
Operative Documents which would give such attorneys current actual knowledge of
the existence or absence of facts to the contrary of the facts so qualified.
Except to the extent expressly set forth herein, we have not undertaken any
independent investigation to determine the existence or absence of such facts,
and no inference as to our knowledge thereof should be drawn from the fact of
our representation of any party or otherwise.
In our examination, we have assumed (a) the authenticity of all
signatures, (b) the due execution and delivery of the documents which we have
examined by all persons other than the Company and the Trust and the legal
capacity of all natural persons, (c) that each person, other than the Company
and the Trust, that is a party to the documents which we have examined has
satisfied those legal requirements that are applicable to it to the extent
necessary to make the document enforceable against it, (d) the authenticity of
all original documents presented to us as originals, the conformity to the
originals of all documents delivered to us as copies, and the authenticity of
such latter originals, (e) that each party to the Placement Agreement and the
Operative Documents, other than the Company and the Trust, has the requisite
corporate power to enter into and perform all its obligations thereunder, (f)
the due authorization by all requisite corporate action and execution and
delivery of such documents by such parties and the validity and binding effect
thereof as against such parties, (g) that all such parties are duly authorized
under the laws of the jurisdiction of their incorporation or from which they are
acting to execute and deliver the Placement Agreement and the Operative
Documents and to perform the
B-1-2
transactions described therein or contemplated thereunder, and (h) that any
consents, approvals, registrations, licenses or other actions by or with any
governmental authority required to be obtained or made by such parties in any
such jurisdiction in order to execute, deliver or perform such agreements or
obligations has been or will be obtained or made at the appropriate times.
Based upon and subject to the foregoing and the further qualifications
set forth below, we are of the opinion as of the date hereof that:
1. The Company is validly existing and in good standing under the
laws of the State of Michigan. Each of the Significant Subsidiaries is validly
existing and in good standing under the laws of its jurisdiction of
organization. Each of the Company and the Significant Subsidiaries has full
corporate power and authority to own or lease its properties and to conduct its
business as such business is currently conducted in all material respects. To
the best of our knowledge, all outstanding shares of capital stock of the
Significant Subsidiaries have been duly authorized and validly issued, and are
fully paid and nonassessable and owned of record and beneficially, directly or
indirectly by the Company.
2. The issuance, sale and delivery of the Debentures in
accordance with the terms and conditions of the Placement Agreement and the
Operative Documents have been duly authorized by all necessary actions of the
Company. The issuance, sale and delivery of the Debentures by the Company and
the issuance, sale and delivery of the Trust Securities by the Trust do not give
rise to any preemptive or other rights to subscribe for or to purchase any
shares of capital stock or equity securities of the Company or the Significant
Subsidiaries pursuant to the Articles of Incorporation or Bylaws of the Company
or the Significant Subsidiaries, or, to the best of our knowledge, any Material
Agreement to which the Company or the Significant Subsidiaries is a party or by
which the Company or the Significant Subsidiaries may be bound.
3. The Company has all requisite corporate power to enter into
and perform its obligations under the Placement Agreement and the Subscription
Agreement, and the Placement Agreement and the Subscription Agreement have been
duly and validly authorized, executed and delivered by the Company and
constitute the valid and binding obligations of the Company enforceable in
accordance with their terms.
4. The Indenture and the Guarantee Agreement have each been duly
authorized, executed and delivered by the Company, and each is a valid and
binding obligation of the Company enforceable in accordance with its terms.
5. The Debentures have been duly authorized, executed and
delivered by the Company, are entitled to the benefits of the Indenture and are
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms.
6. The Declaration of Trust has been duly authorized, executed
and delivered by the Company and the Administrators and is a valid and binding
obligation of the Company enforceable in accordance with its terms.
B-1-3
7. To the best of our knowledge, neither the Company nor the
Trust is in breach or violation of, or default under, with or without notice or
lapse of time or both, its Articles of Incorporation or Charter, Bylaws or other
governing documents (including without limitation, the Trust Agreement). The
execution, delivery and performance of the Placement Agreement and the Operative
Documents and the consummation of the transactions contemplated by the Placement
Agreement and the Operative Documents do not and will not (i) result in the
creation or imposition of any material lien, claim, charge, encumbrance or
restriction upon any property or assets of the Company or its Significant
Subsidiaries, or (ii) conflict with, constitute a material breach or violation
of, or constitute a material default under, with or without notice or lapse of
time or both, any of the terms, provisions or conditions of (A) the Articles of
Incorporation or Bylaws of the Company or its Significant Subsidiaries, or (B)
to the best of our knowledge, any Material Agreement to which the Company or its
Significant Subsidiaries is a party or by which any of them or any of their
respective properties may be bound or (C) any order, decree, judgment,
franchise, license, permit, rule or regulation known to us of any court,
arbitrator, government, or governmental agency or instrumentality, domestic or
foreign, having jurisdiction over the Company or its Significant Subsidiaries or
any of their respective properties which, in the case of each of (i) or (ii)
above, is material to the Company and its Significant Subsidiaries on a
consolidated basis.
8. Except for filings, registrations or qualifications that may
be required by applicable securities laws, no authorization, approval, consent
or order of, or filing, registration or qualification with, any person
(including, without limitation, any court, governmental body or authority) is
required under the laws of the State of Michigan in connection with the
transactions contemplated by the Placement Agreement and the Operative Documents
in connection with the offer and sale of the Capital Securities as contemplated
by the Placement Agreement and the Operative Documents.
9. To the best of our knowledge, no action, suit or proceeding is
pending or threatened against or affecting the Offerors or their Significant
Subsidiaries or any of their properties, before or by any court or governmental
official, commission, board or other administrative agency, authority or body,
or any arbitrator, wherein an unfavorable decision, ruling or finding could
reasonably be expected to have a material adverse effect on the consummation of
the transactions contemplated by the Placement Agreement and the Operative
Documents or the issuance and sale of the Capital Securities as contemplated
therein or the condition (financial or otherwise), earnings, affairs, business,
or results of operations of the Offerors and their respective Subsidiaries on a
consolidated basis.
10. It is not necessary in connection with the offering, sale and
delivery of the Capital Securities, under the circumstances contemplated in the
Placement Agreement and the Subscription Agreement, the Debentures and the
Guarantee Agreement, to register the Capital Securities, the Guarantee Agreement
or the Debentures under the Securities Act of 1933, as amended.
11. Neither the Company nor the Trust is, and after giving effect
to the offering and sale of the Capital Securities and the consummation of the
transactions contemplated by
B-1-4
the Placement Agreement, neither the Company nor the Trust will be, an
"investment company" or an entity "controlled" by an "investment company," in
each case within the meaning of the Investment Company Act of 1940, as amended,
without regard to Section 3(c) of such Act.
The opinion expressed in the first two sentences of paragraph 1 of this
Opinion Letter is based solely upon certain certificates and confirmations
issued by the applicable governmental officer or authority with respect to each
of the Company and the Significant Subsidiaries.
The opinions in paragraphs 3, 4, 5 and 6 are subject to and limited by
(1) bankruptcy, insolvency, receivership, reorganization, liquidation, voidable
preference, moratorium or other laws (including the laws of fraudulent
conveyance and transfer) or judicial decisions affecting the enforcement of
creditors' rights generally or the reorganization of insurance companies, (2)
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), (3) the effect of certain laws
and judicial decisions upon the availability and enforceability of certain
remedies, including the remedies of specific performance and self-help, and (4),
with respect to rights to indemnity and contribution, applicable law or public
policy.
With respect to the foregoing opinions, we do not express any opinions
as to the laws of the State of Connecticut or the State of New York and have (i)
relied, with your approval, upon the opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP with
respect to matters of Connecticut law, and (ii) assumed, with your approval and
without rendering any opinion to such effect, that the laws of the State of New
York, in all respects material to this opinion, are substantively identical to
the laws of the State of Michigan, without regard to conflict of law provisions.
This opinion is rendered as of the date hereof, and we assume no
obligation to revise or supplement this opinion should any law now in effect be
changed by legislative action, judicial decision or otherwise.
This opinion is rendered to you solely pursuant to Section 3.1(a) of
the Placement Agreement. As such, it may be relied upon by you only and may not
be used or relied upon by any other person for any purpose whatsoever without
our prior written consent.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC
B-1-5
EXHIBIT B-2
FORM OF CONNECTICUT COUNSEL OPINION
_______ __, 2003
TO THE PARTIES LISTED
ON SCHEDULE I HERETO
Ladies and Gentlemen:
We have acted as special counsel in the State of Connecticut (the
"State") for American Physicians Statutory Trust III (the "Trust"), a
Connecticut statutory trust formed pursuant to the Amended and Restated
Declaration of Trust (the "Trust Agreement") dated as of the date hereof, among
American Physicians Capital, Inc., a Michigan corporation (the "Sponsor"), U.S.
Bank National Association, a national banking association ("U.S. Bank"), in its
capacity as Institutional Trustee (the "Institutional Trustee"), and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, each, an individual, (each, an "Administrator")
in connection with the issuance by the Trust to the Holders (as defined in the
Trust Agreement) of its capital securities (the "Capital Securities") pursuant
to the Placement Agreement dated as of October 16, 2003 (the "Placement
Agreement"), the issuance by the Trust to the Sponsor of its Common Securities,
pursuant to the Trust Agreement and the acquisition by the Trust from the
Sponsor of Debentures, issued pursuant to the Indenture dated as of the date
hereof (the "Indenture").
The Institutional Trustee has requested that we deliver this opinion to
you in accordance with Section 3.1 (b) of the Placement Agreement. Capitalized
terms not otherwise defined herein shall have the meanings specified in, or
defined by reference in or set forth in the Operative Documents (as defined
below).
Our representation of the Trust has been as special counsel for the
limited purposes stated above. As to all matters of fact (including factual
conclusions and characterizations and descriptions of purpose, intention or
other state of mind), we have relied, with your permission, entirely upon (i)
the representations and warranties of the parties set forth in the Operative
Documents and (ii) certificates delivered to us by the management of U.S. Bank,
and have assumed, with your permission, without independent inquiry, the
accuracy of those representations, warranties and certificates.
We have examined the following documents to which the Trust is a party,
each of which is dated the date hereof, unless otherwise noted:
(i) the Trust Agreement;
B-2-1
(ii) the Placement Agreement;
(iii) the Subscription Agreement;
(iv) the Certificate of Common Securities;
(v) the Certificate of Capital Securities;
(vi) the Guarantee Agreement;
(vii) the Certificate of Trust filed with the
Secretary of State of the State of
Connecticut dated ______ __, 2003; and
(viii) a Certificate of Legal Existence for the
Trust obtained from the Secretary of State
of the State of Connecticut dated ________
__, 2003 (the "Certificate of Legal
Existence").
The documents referenced in subparagraphs (i) through (vii) above are
hereinafter referred to collectively as the "Operative Documents."
We have also examined originals, or copies, certified or otherwise
identified to our satisfaction, of such other corporate and public records and
agreements, instruments, certificates and other documents as we have deemed
necessary or appropriate for the purposes of rendering this opinion. For
purposes of our opinion rendered in paragraph 1 below, with respect to the legal
existence of the Trust, our opinion relies entirely upon and is limited by the
Certificate of Legal Existence, which is attached hereto as Exhibit A.
We have assumed, with your permission, the genuineness of all
signatures (other than those on behalf of U.S. Bank, the Guarantee Trustee,
Indenture Trustee, Institutional Trustee and the Trust), the conformity of the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing any document.
When an opinion set forth below is given to the best of our knowledge,
or to our knowledge, or with reference to matters of which we are aware or which
are known to us, or with another similar qualification, the relevant knowledge
or awareness is limited to the actual knowledge or awareness of the individual
lawyers in the firm who have participated directly and substantively in the
specific transactions to which this opinion relates and without any special or
additional investigation undertaken for the purposes of this opinion except as
indicated herein.
For the purposes of this opinion we have made such examination of law
as we have deemed necessary. The opinions expressed below are limited solely to
the internal substantive laws of the State (as applied by courts located in the
State without regard to choice of law) and we express no opinion as to the laws
of any other jurisdiction. To the extent to which this opinion deals with
matters governed by or relating to the laws of any other state or jurisdiction,
B-2-2
we have assumed, with your permission, that the Operative Documents are governed
by the internal substantive laws of the State.
We express no opinion as to (i) the effect of suretyship defenses, or
defenses in the nature thereof, with respect to the obligations of any
applicable guarantor, joint obligor, surety, accommodation party, or other
secondary obligor or any provisions of the Trust Agreement with respect to
indemnification or contribution and (ii) the accuracy or completeness of any
exhibits or schedules to the Operative Documents. No opinion is given herein as
to the choice of law or internal substantive rules of law that any court or
other tribunal may apply to the transactions contemplated by the Operative
Documents. No opinion is expressed herein as to the application or effect of
federal securities laws or as to the securities or so-called "Blue Sky" laws of
Connecticut or of any other state or other jurisdiction.
Our opinion, with your permission, is further subject to the following
exceptions, qualifications and assumptions:
(a) We have assumed without any independent investigation
that (i) each party to the Operative Documents, other than U.S. Bank,
the Guarantee Trustee, Indenture Trustee, Institutional Trustee and the
Trust, as applicable, at all times relevant thereto, is validly
existing and in good standing under the laws of the jurisdiction in
which it is organized, and is qualified to do business and in good
standing under the laws of each jurisdiction where such qualification
is required generally or necessary in order for such party to enforce
its rights under such Operative Documents, (ii) each party to the
Operative Documents, at all times relevant thereto, had and has the
full power, authority and legal right under its certificate of
incorporation, partnership agreement, by-laws, and other governing
organizational documents, and the applicable corporate, partnership, or
other enterprise legislation and other applicable laws, as the case may
be (other than U.S. Bank, the Guarantee Trustee, Indenture Trustee,
Institutional Trustee or the Trust) to execute, deliver and to perform
its obligations under, the Operative Documents, and (iii) each party to
the Operative Documents other than U.S. Bank, the Guarantee Trustee,
Indenture Trustee, Institutional Trustee or the Trust has duly executed
and delivered each of such agreements and instruments to which it is a
party and that the execution and delivery of such agreements and
instruments and the transactions contemplated thereby have been duly
authorized by proper corporate or other organizational proceedings as
to each such party.
(b) We have assumed without any independent investigation
(i) that the Institutional Trustee, the Sponsor and the Administrators
have received the agreed to and stated consideration for the incurrence
of the obligations applicable to it under the Trust Agreement and each
of the other Operative Documents, (ii) that each of the Operative
Documents (other than the Trust Agreement) is a valid, binding and
enforceable obligation of each party thereto other than the Trust, U.S.
Bank and the Institutional Trustee, as applicable; and, for the
purposes of this opinion letter, we herein also assume that each of the
Operative Documents (other than the Trust Agreement) constitutes a
valid, binding and enforceable obligation of U.S. Bank, the Guarantee
Trustee and the
B-2-3
Indenture Trustee, as applicable under Connecticut and federal law (as to which
such matters we are delivering to you a separate opinion letter on this date,
which is subject to the assumptions, qualifications and limitations set forth
therein).
(c) The enforcement of any obligations of U.S. Bank, the
Sponsor and the Administrators, as applicable, under the Trust
Agreement and the obligations of the Trust under the other Operative
Documents may be limited by the receivership, conservatorship and
supervisory powers of depository institution regulatory agencies
generally, as well as by bankruptcy, insolvency, reorganization,
moratorium, marshaling or other laws and rules of law affecting the
enforcement generally of creditors' rights and remedies (including such
as may deny giving effect to waivers of debtors' or guarantors'
rights); and we express no opinion as to the status under any
fraudulent conveyance laws or fraudulent transfer laws of any of the
obligations of U.S. Bank, the Sponsor, the Administrators or the Trust
under any of the Operative Documents.
(d) We express no opinion as to the enforceability of any
particular provision of the Trust Agreement or the other Operative
Documents relating to remedies after default.
(e) We express no opinion as the availability of any
specific or equitable relief of any kind.
(f) The enforcement of any rights may in all cases be
subject to an implied duty of good faith and fair dealing and to
general principles of equity (regardless of whether such enforceability
is considered in a proceeding at law or in equity).
(g) We express no opinion as to the enforceability of any
particular provision of any of the Operative Documents relating to (i)
waivers of rights to object to jurisdiction or venue, or consents to
jurisdiction or venue, (ii) waivers of rights to (or methods of)
service of process, or rights to trial by jury, or other rights or
benefits bestowed by operation of law, (iii) waivers of any applicable
defenses, setoffs, recoupments, or counterclaims, (iv) waivers or
variations of provisions which are not capable of waiver or variation
under Sections 1-102, 9-602, 9-603 or other provisions of the Uniform
Commercial Code ("UCC") of the State, (v) the grant of powers of
attorney to any person or entity, or (vi) exculpation or exoneration
clauses, indemnity clauses, and clauses relating to releases or waivers
of unmatured claims or rights.
(h) We have made no examination of, and no opinion is
given herein as to the Trustee's or the Trust's title to or other
ownership rights in, or the existence of any liens, charges or
encumbrances on, or adverse claims against, any asset or property held
by the Institutional Trustee or the Trust. We express no opinion as to
the creation, validity, attachment, perfection or priority of any
mortgage, security interest or lien in any asset or property held by
the Institutional Trustee or the Trust.
B-2-4
(i) We express no opinion as to the effect of events
occurring, circumstances arising, or changes of law becoming effective
or occurring, after the date hereof on the matters addressed in this
opinion letter, and we assume no responsibility to inform you of
additional or changed facts, or changes in law, of which we may become
aware.
(j) We express no opinion as to any requirement that any
party to the Operative Documents (or any other persons or entities
purportedly entitled to the benefits thereof) qualify or register to do
business in any jurisdiction in order to be able to enforce its rights
thereunder or obtain the benefits thereof.
Based upon the foregoing and subject to the limitations and
qualifications set forth herein, we are of the opinion that:
1. The Trust has been duly formed and is validly existing as a
statutory trust under the Connecticut Statutory Trust Act, Chapter 615 of Title
34 of the Connecticut General Statutes, Section 500, et seq. (the "Act").
2. The Trust Agreement constitutes a valid and binding obligation
of U.S. Bank and the Institutional Trustee enforceable against U.S. Bank and the
Institutional Trustee in accordance with the terms thereof.
3. The Trust Agreement constitutes a valid and binding obligation
of the Sponsor and the Administrators, enforceable against the Sponsor and the
Administrators in accordance with its terms.
4. The Trust has the requisite trust power and authority to (a)
execute and deliver, and to perform its obligations under, the Operative
Documents, and (b) perform its obligations under such Operative Documents.
5. Each of the Operative Documents to which the Trust is a party
constitutes a valid and binding obligation of the Trust, enforceable against the
Trust in accordance with the terms thereof.
6. The Capital Securities have been duly authorized by the Trust
under the Trust Agreement, and the Capital Securities, when duly executed and
delivered to the Holders in accordance with the Trust Agreement, the Placement
Agreement and the Subscription Agreement, will be validly issued, fully paid and
nonassessable and will evidence undivided beneficial interests in the assets of
the Trust and will be entitled to the benefits of the Trust Agreement.
7. The Common Securities have been duly authorized by the Trust
Agreement, and the Common Securities, when duly executed and delivered to the
Company in accordance with the Trust Agreement, the Placement Agreement and the
Subscription Agreement and delivered and paid for in accordance therewith, will
be validly issued, fully paid and nonassessable (subject to Section 9.1(b) of
the Trust Agreement which provides that the Holders of Common Securities are
liable for debts and obligations of the Trust to the extent such debts and
obligations are not
B-2-5
satisfied out of the Trust's assets) and will evidence undivided beneficial
interests in the assets of the Trust and will be entitled to the benefits of the
Trust Agreement.
8. Neither the execution, delivery or performance by the Trust of
the Operative Documents, the consummation by the Trust of the transactions
contemplated thereby, nor compliance by the Trust with any of the terms and
provisions thereof, (a) violates the Trust Agreement, or, to the best of our
knowledge, contravenes or will contravene any provision of, or constitutes a
default under, or results in any breach of, or results in the creation of any
lien (other than as permitted under the Operative Documents) upon property of
the Trust under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement, license or other
agreement or instrument, in each case known to us, to which it is a party or by
which it is bound or (b) violates any applicable State law governing the Trust,
or, to the best of our knowledge, any judgment or order of any court or other
tribunal, in each case known to us, applicable to or binding on it.
9. No consent, approval, order or authorization of, giving of
notice to, or registration with, or taking of any other action in respect of,
any State governmental authority regulating the Trust is required for the
execution, delivery, validity or performance of, or the carrying out by, the
Trust of any of the transactions contemplated by the Operative Documents, other
than any such consent, approval, order, authorization, registration, notice or
action as has been duly obtained, given or taken.
10. The Holders, as the beneficial holders of the Capital
Securities, will be entitled to the same limitation of personal liability
extended to shareholders of domestic corporations organized under the laws of
the State.
11. Under the Trust Agreement, the issuance of the Capital
Securities is not subject to preemptive rights.
12. Assuming that the Trust will not be taxable as a corporation
for federal income tax purposes, but rather will be classified for such purposes
as a trust which is classified as a grantor trust under Subpart E, Part I of
Subchapter J of the Internal Revenue Code of 1986, as amended, the Trust will
not be subject to any tax, fee or other government charge under the laws of the
State of Connecticut or any political subdivision thereof.
This opinion is rendered solely for the benefit of those institutions
listed on Schedule I hereto and their successors and assigns in connection with
the transactions contemplated by the Operative Documents and may not be used or
relied upon by any other person or for any other purpose.
Very truly yours,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
B-2-6
SCHEDULE I
U.S. Bank National Association
FTN Financial Capital Markets
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
I-Preferred Term Securities III, Ltd.
I-Preferred Term Securities III, Inc.
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
American Physicians Capital, Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC
B-2-7
EXHIBIT A TO EXHIBIT B-2
CERTIFICATE OF LEGAL EXISTENCE
See attached
EXHIBIT B-3
FORM OF TAX COUNSEL OPINION
October 29, 2003
American Physicians Capital, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
American Physicians Capital Statutory Trust III
c/o American Physicians Capital, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FTN Financial Capital Markets
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
We are acting as special United States tax counsel to American
Physicians Capital, Inc., a corporation organized and existing under the laws of
Michigan (the "Company"), and to American Physicians Capital Statutory Trust
III, a statutory trust created under the laws of Connecticut (the "Trust"), in
connection with the proposed issuance of (i) Floating Rate Capital Securities,
liquidation amount $1,000.00 per Capital Security (the "Capital Securities") of
the Trust, pursuant to the terms of the Amended and Restated Declaration of
Trust dated as of the date hereof by and among the Company, U.S. Bank National
Association, as institutional trustee, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, as Administrators (the "Trust Agreement"), (ii) Floating Rate Common
Securities, liquidation amount $1,000 per common security (the "Common
Securities") of the Trust, pursuant to the terms of the Trust Agreement, (iii)
Floating Rate Junior Subordinated Deferrable Interest Debentures (the
"Corresponding Debentures") of the Company issued pursuant to the terms of an
Indenture dated as of the date hereof from the Company to U.S. Bank National
Association, as trustee (the "Indenture"), which Corresponding Debentures are to
be sold by the Company to the Trust, and (iv) the Guarantee Agreement of the
Company with respect to the Capital Securities dated as of the date hereof (the
"Guarantee") between the Company and U.S. Bank National Association, as
guarantee trustee. The Capital Securities, the Common Securities and the
Corresponding Debentures are to be issued as contemplated by the Offering
Circular (the "Offering Circular") dated [_______], 2003 prepared
by I-Preferred Term Securities III, Ltd., an entity formed under the Companies
Law of the Cayman Islands, and I-Preferred Term Securities III, Inc., a Delaware
corporation.
In formulating our opinions, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of documents, corporate
records and other instruments as we have deemed necessary or appropriate for
purposes of this opinion including (i) the Offering Circular, (ii) the
Indenture, (iii) the form of the Corresponding Debentures attached as an exhibit
to the Indenture, (iv) the Trust Agreement, (v) the Guarantee, and (vi) the
forms of Capital Securities Certificate and Common Securities Certificate
attached as exhibits to the Trust Agreement (collectively the "Documents").
Furthermore, we have relied upon certain representations made by the Company and
upon the opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP as to certain matters of Connecticut
law.
In such examination, we have assumed the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified photostatic copies, the authenticity of
the originals of such latter documents, the genuineness of all signatures and
the correctness of all representations made therein. We have further assumed
that there are no agreements or understandings contemplated therein other than
those contained in the Documents.
In rendering our opinions, we have assumed that the transactions
described in or contemplated by the Documents have been or will be carried out
strictly in accordance with the Documents, and that such Documents accurately
reflect the material facts of such transactions. Any variance in the facts may
result in United States federal income tax consequences that differ from those
reflected in the opinions set forth herein. Our opinion is also based on the
Internal Revenue Code of 1986, as amended, (the "Code"), Treasury regulations,
administrative rulings, judicial decisions, and other applicable authorities.
The statutory provisions, regulations and interpretations on which our opinion
is based are subject to change, possibly retroactively. In addition, there can
be no assurance that the Internal Revenue Service will not take positions
contrary to those stated in our opinion.
Subject to the foregoing, under current law and based upon the facts,
assumptions and qualifications contained herein, it is our opinion that:
The Corresponding Debentures will be classified as indebtedness of the
Company for United States federal income tax purposes.
The Trust will be characterized as a grantor trust and not as an
association taxable as a corporation for United States federal income
tax purposes.
The opinions we express herein are limited solely to matters governed
by the federal income tax laws of the United States. Our opinion is provided
solely to you as a legal opinion only, and not as a guaranty or warranty, and is
limited to the specific transactions, documents, and matters described above. No
opinion may be implied or inferred beyond that which is expressly stated in this
letter.
We express no opinion with respect to any matter not specifically
addressed by the foregoing opinions, including state or local tax consequences,
or any federal, state, or local issue
not specifically referred to and discussed above including, without limitation,
the effect on the matters covered by this opinion of the laws of any other
jurisdiction.
We are furnishing this opinion letter to you solely for your benefit in
connection with the issuance of the Capital Securities, the Common Securities
and the Corresponding Debentures and this opinion is not to be relied upon for
any other purpose or by any other person without our express written consent.
Notwithstanding the foregoing, [RATING AGENCY] shall be entitled to rely upon
this opinion as if it were addressed to them. We disclaim any obligation to
update this opinion for events occurring or coming to our attention after the
date hereof.
Very truly yours,
AMERICAN PHYSICIANS CAPITAL, INC.
October 29, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ A.N. ▇▇▇▇
Re: Representations Concerning the Issuance of Floating Rate
Junior Subordinated Deferrable Interest Debentures (the
"Corresponding Debentures") to American Physicians Capital
Statutory Trust III (the "Trust") and Sale of Trust Securities
(the "Trust Securities") of the Trust
Dear Sirs:
In accordance with your request, American Physicians Capital, Inc. (the
"Company") hereby makes the following representations in connection with the
preparation of your opinion letter as to the United States federal income tax
consequences of the issuance by the Company of the Corresponding Debentures to
the Trust and the sale of the Trust Securities.
The Company hereby represents that:
1. The sole assets of the Trust will be the Corresponding
Debentures, any interest paid on the Corresponding Debentures to the
extent not distributed, proceeds of the Corresponding Debentures, or
any of the foregoing.
2. The Company intends to use the net proceeds from the sale of
the Corresponding Debentures for general corporate purposes.
3. The Trust was not formed to conduct any trade or business and
is not authorized to conduct any trade or business. The Trust exists
for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of Trust Securities
to acquire the Corresponding Debentures, and (iii) engaging only in
activities necessary or incidental thereto.
4. The Trust was formed to facilitate direct investment in the
assets of the Trust, and the existence of multiple classes of ownership
is incidental to that purpose. There is no intent to provide holders of
such interests in the Trust with diverse interests in the assets of the
Trust.
5. The Company intends to create a debtor-creditor relationship
between the Company, as debtor, and the Trust, as a creditor, upon the
issuance and sale of the
Corresponding Debentures to the Trust by the Company. The Company will
(i) record and at all times continue to reflect the Corresponding
Debentures as indebtedness on its separate books and records for
financial accounting purposes, and (ii) treat the Corresponding
Debentures as indebtedness for all United States federal, state and
local income tax purposes.
6. During each year, the Trust's income will consist solely of
payments made by the Company with respect to the Corresponding
Debentures. Such payments will not be derived from the active conduct
of a financial business by the Trust. Both the Company's obligation to
make such payments and the measurement of the amounts payable by the
Company are defined by the terms of the Corresponding Debentures.
Neither the Company's obligation to make such payments nor the
measurement of the amounts payable by the Company is dependent on
income or profits of the Company or any affiliate of the Company.
7. The Company has reviewed projections of earnings, cash flow,
capital and surplus and other relevant financial and economic data
relating to the Company and its affiliates. Based on the current and
estimated net cash flow and the projections of earnings, cash flow,
capital and surplus of the Company and its affiliates, the Company
believes its net cash flow will be in excess of the amount of principal
and interest required to be paid in accordance with the terms of the
Corresponding Debentures and the Company expects that it will be able
to make, and will make, timely payment of principal and interest in
accordance with the terms of the Corresponding Debentures with
available capital or accumulated net cash flow.
8. The principal insurance operating subsidiary of the Company
has received either a financial strength rating of at least B+ with a
neutral or positive outlook from A.M. Best Company, Inc., or an
investment grade financial strength rating from either Standard &
Poor's Ratings Services, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
or Fitch Ratings.
9. The terms and conditions of the Corresponding Debentures,
including the interest rate, were determined on an arm's length basis.
10. The Company presently has no intention to defer interest
payments on the Corresponding Debentures, and it considers the
likelihood of such a deferral to be remote because, if it were to
exercise its right to defer payments of interest with respect to the
Corresponding Debentures, it would not be permitted to declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or
make a liquidation payment with respect to, any capital stock of the
Company or any affiliate of the Company (other than payments of
dividends or distributions to the Company) or make any payment of
principal of or interest or premium, if any, on or repay, repurchase,
or redeem any debt securities of the Company or any affiliate of the
Company that rank pari passu in all respects with or junior in interest
to the Corresponding Debentures, in each case subject to limited
exceptions stated in Section 2.11 of the Indenture to be entered into
in connection with the issuance of the Corresponding Debentures.
11. Immediately after the issuance of the Corresponding
Debentures, the debt-to-equity ratio of the Company (as determined for
financial accounting purposes) will be no higher than three to one (3 :
1). The Company has no plan or intention to issue debt that would cause
such ratio to exceed three to one (3 : 1). For purposes of this
paragraph 11, (i) the Corresponding Debentures will be treated as debt
and payments thereon will be treated as interest, (ii) other debt (as
determined for financial accounting purposes) shall include both
short-term and long-term indebtedness of the Company, and (iii) equity
(as determined for financial accounting purposes) shall include capital
stock, preferred stock, if any, paid in surplus and retained earnings
of the Company.
12. To the best of our knowledge, the Company's subsidiaries are
currently in compliance with all applicable federal, state, and local
capital requirements, except to the extent that failure to comply with
any such requirements would not have a material adverse effect on the
Company and its subsidiaries.
13. For purposes hereof, you may rely on the representations made
by the Company in Sections 5.16 and 5.17 of the Placement Agreement
dated as of October 16, 2003, by and among FTN Financial Capital
Markets, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc., the Trust and the Company.
14. The Company will not issue any class of common stock or
preferred stock senior in rights (such as payment rights and
liquidation preference) to the Corresponding Debentures during their
term.
15. The Internal Revenue Service has not challenged the interest
deduction on any class of the Company's subordinated debt in the last
ten (10) years on the basis that such debt constitutes equity for
federal income tax purposes.
The above representations are accurate as of the date hereof and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise notified by us in writing. The undersigned understands that you
will rely on the foregoing in connection with rendering certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company.
Very truly yours,
AMERICAN PHYSICIANS CAPITAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
EXHIBIT C
SIGNIFICANT SUBSIDIARIES
American Physicians Assurance Corporation (Michigan)
APSpecialty Insurance Corporation (Michigan)
Insurance Corporation of America (Michigan)
EXHIBIT D
FORM OF QUARTERLY REPORT
I-Preferred Term Securities III, Ltd.
▇/▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇▇
CDO ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
CDO Relationship Manager
PLEASE COMPLETE FOR THE PRINCIPAL INSURANCE OPERATING SUBSIDIARY
AS OF YEAR END _______, 20__
NAIC Risk Based Capital Ratio (authorized control level) _________ %
AS OF [MARCH 31, JUNE 30, SEPTEMBER 30, OR DECEMBER 31,] 20___
Total Policyholders' Surplus $__________
Consolidated Debt to Total Policyholders' Surplus ___________%
Total Assets $__________
NAIC Class 1 & 2 Rated Investments to Total Fixed Income Investments ___________%
NAIC Class 1 & 2 Rated Investments to Total Investments ___________%
Return on Policyholders' Surplus ___________%
For Property & Casualty Companies
Expense Ratio ___________%
Loss and LAE Ratio ___________%
Combined Ratio ___________%
Net Premiums Written (annualized) to Policyholders' Surplus ___________%
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NAIC RISK BASED CAPITAL RATIO-P&C (Total Adjusted Capital/Authorized Control Level Risk-Based
Capita/)/2
------------------------------------------------------------------------------------------------------------------------------------
NAIC RISK BASED CAPITAL RATIO-LIFE ((Total Adjusted Capital-Asset Valuation Reserve)/Authorized
Control Level Risk-Based Capita/)/2
------------------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS-LIFE Common Capital Stock + Preferred Capital Stock + Aggregate
Write-Ins for other than special surplus funds + Surplus Notes
+Gross Paid-In and Contributed Surplus + Aggregate Write-Ins for
Special Surplus Funds + Unassigned Funds (Surplus) - Treasury
Stock
------------------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS-P&C Aggregate Write-Ins for Special Surplus Funds + Common Capital
Stock + Preferred Capital Stock + Aggregate Write-Ins for other
than special surplus funds + Surplus Notes +Gross Paid-In and
Contributed Surplus + Unassigned Funds (Surplus) - Treasury Stock
------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS 1 & 2 RATED INVESTMENTS TO TOTAL FIXED INCOME (Total Class 1 + Total Class 2 Rated Investments)/Total Fixed
INVESTMENTS Income Investments
------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS 1 & 2 RATED INVESTMENTS TO TOTAL INVESTMENTS (Total Class 1 + Total Class 2 Rated Investments)/Total
Investments
------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS Total Assets
------------------------------------------------------------------------------------------------------------------------------------
RETURN ON POLICYHOLDERS' SURPLUS Net Income/Policyholders' Surplus
------------------------------------------------------------------------------------------------------------------------------------
EXPENSE RATIO Other Underwriting Expenses Incurred/Net premiums Earned
------------------------------------------------------------------------------------------------------------------------------------
LOSS AND LAE RATIO (Losses Incurred + Loss Expenses Incurred)/Net Premiums Earned
------------------------------------------------------------------------------------------------------------------------------------
COMBINED RATIO Expense Ratio + Loss and LAE Ratio
------------------------------------------------------------------------------------------------------------------------------------
NET PREMIUMS WRITTEN (ANNUALIZED) TO POLICYHOLDERS' SURPLUS Net Premiums Written/Policyholders' Surplus
------------------------------------------------------------------------------------------------------------------------------------
DISCLOSURE SCHEDULE
Section 5.10
There are restrictions on voting and transfer imposed by applicable law or
regulation generally applicable to insurance companies in a holding company
system in Michigan, the state in which the Company and each of its Significant
Subsidiaries are incorporated.
Section 5.14
There are general restrictions and limitations on the ability or authority of
insurance companies to pay dividends or make distributions to their shareholders
or make payments of principal or interest on their debt obligations, which
restrictions and limitations are generally applicable to insurance companies
domiciled in Michigan and in the other states in which the Significant
Subsidiaries are domiciled.