EXHIBIT 10.11
$15,000,000
FINANCIAL INDUSTRIES CORPORATION
PLACEMENT AGREEMENT
New York, New York
May 13, ▇▇▇▇
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇ & PARTNERS, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Financial Industries Corporation, a Texas corporation (the "Company")
confirms its agreement (the "Agreement") with Sandler ▇'▇▇▇▇▇ & Partners, L.P.,
as agent of the Company (the "Placement Agent"), with respect to the issue and
sale by the Company and the placement by the Placement Agent of $15,000,000
aggregate principal amount of Floating Rate Senior Notes (principal amount of
$1,000 per security) of the Company (the "Senior Notes").
The Senior Notes will be issued pursuant to the Indenture, to be dated as
of the Closing Date (the "Indenture"), between the Company and Wilmington Trust
Company, as indenture trustee (the "Indenture Trustee"). The Indenture, this
Agreement and the Subscription Agreement (as defined in Section 2(a) hereof) are
hereinafter referred to collectively as the "Operative Documents."
SECTION 1. Representations and Warranties.
(a) The Company represents and warrants to the Placement Agent and the
Purchaser (as defined in Section 2(a) hereof) of Senior Notes as of the date
hereof and as of the Closing Date, and agrees with the Placement Agent and the
Purchaser, as follows:
(i) Similar Offerings. Within a period of six months before or
after the date hereof, the Company has not, directly or indirectly,
solicited any offer to buy or offered to sell, and will not, directly
or indirectly, solicit any offer to buy or offer to sell, in the
United States or to any United States citizen or resident, any
security which is or would be integrated with the sale of the Senior
Notes (including any securities of the same or a similar class as the
Senior Notes, other than the Senior Notes) in a manner that would
require the Senior Notes to be registered under the Securities Act of
1933, as amended (the "1933 Act").
- 1 -
(ii) Incorporated Documents. The documents of the Company filed
with the Securities and Exchange Commission (the "Commission") in
accordance with the Securities Exchange Act of 1934, as amended (the
"1934 Act"), from and including the commencement of the fiscal year
covered by the Company's most recent Annual Report on Form 10-K, at
the time they were or hereafter are filed by the Company with the
Commission (collectively, the "1934 Act Reports"), complied and will
comply in all material respects with the requirements of the 1934 Act
and the rules and regulations of the Commission thereunder (the "1934
Act Regulations"), and, at the date of this Agreement and on the
Closing Date, do not and will not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and
other than such instruments, agreements, contracts and other documents
as are filed as exhibits to the Company's Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, there
are no instruments, agreements, contracts or documents of a character
described in Item 601 of Regulation S-K promulgated by the Commission
to which the Company or any of its subsidiaries is a party.
(iii) Independent Accountants. The accountants of the Company who
certified the financial statements included in the 1934 Act Reports
(the "Independent Accountants") are independent public accountants of
the Company and its subsidiaries within the meaning of the 1933 Act
and the rules and regulations of the Commission thereunder (the "1933
Act Regulations").
(iv) Financial Statements and Information. The consolidated
historical financial statements of the Company, together with the
related schedules and notes, included in the 1934 Act Reports present
fairly, in all material respects, the respective consolidated
financial positions of the Company and its consolidated subsidiaries
at the respective dates indicated, and the consolidated statements of
income, changes in stockholders' equity and cash flows of the Company
and its consolidated subsidiaries for the respective periods
specified; said financial statements have been prepared in conformity
with generally accepted accounting principles in the United States
applied on a consistent basis throughout the periods involved, except
as disclosed in the notes to such financial statements; the supporting
schedules, if any, included in the 1934 Act Reports present fairly, in
all material respects, the information required to be stated therein
and any pro forma financial statements and the related notes thereto
included in the 1934 Act Reports present fairly the information shown
therein, have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements and have
been properly compiled on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein; except as modified
- 2 -
by the statutory financial statements relating to the first quarter of
2003, which financial statements will be consistent with the
restatements as filed by the Company on its most recent annual report
filed on Form 10-K, the statutory financial statements of each
subsidiary that is engaged in an insurance business (each, an
"Insurance Subsidiary") as filed with the applicable insurance
regulatory authorities in the jurisdiction in which each such
Insurance Subsidiary is organized (each such regulatory authority, a
"State Regulatory Authority") for the years ended December 31, 2002,
2001 and 2000 and for any quarters ended subsequent to December 31,
2002, including all supporting documents filed therewith
(collectively, the "Insurance Subsidiary Financial Statements"): (i)
have been prepared in accordance with statutory accounting principles
promulgated by the National Association of Insurance Commissioners, as
applied, with respect to each Insurance Subsidiary, by the applicable
State Regulatory Authority of such entity, consistently applied for
the periods covered thereby and present fairly the statutory financial
position of such Insurance Subsidiaries as at the respective dates
thereof and the results of operations of such Insurance Subsidiaries
for the respective periods then ended; and (ii) complied in all
material respects with all applicable laws, rules and regulations when
filed, and, to the knowledge of the Company, no material deficiency
has been asserted with respect to any Insurance Subsidiary Financial
Statements by any applicable Regulatory Agency. As used herein, the
term "Regulatory Agency" means any federal or state agency charged
with the supervision or regulation of insurance companies, or any
court, administrative agency or commission or other governmental
agency, authority or instrumentality having supervisory or regulatory
authority with respect to the Company or any of its subsidiaries.
(v) No Material Adverse Change. Since the respective dates as of
which information is given in the 1934 Act Reports, there has not been
(A) any material adverse change in the condition, financial,
regulatory or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect") or (B) any dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock other than regular dividends on the
Company's common stock declared and paid consistent with past
practice.
- 3 -
(vi) Internal Controls. Each of the Company and its subsidiaries
maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with the management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with the management's general
or specific authorization, (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences, (v)
material information relating to the Company and its subsidiaries is
made known to management, (vi) management has evaluated the
effectiveness of such internal accounting controls and (vii)
management has disclosed to the Independent Accountants and the audit
committee (A) all significant deficiencies in the design or operation
of internal controls which could adversely affect the ability of the
Company and its subsidiaries to record, process, summarize, and report
financial data, and have identified for the Independent Accountants
any material weaknesses in internal controls and (B) any fraud,
whether or not material, that involves management or other employees
who have a significant role in the internal controls of the Company
and its subsidiaries, and any such deficiencies or fraud would not,
singularly or in the aggregate, be expected to result in a Material
Adverse Effect.
(vii) Regulatory Matters. Neither the Company nor any of its
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 corrective, suspension or cease
and-desist order, agreement, consent agreement 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 a recipient of any supervisory letter from,
or has adopted any board resolutions at the request of, any Regulatory
Agency that currently relates to or restricts in any material respect
their business or that in any manner relates to their capital and
surplus adequacy or their management (each, a "Regulatory Agreement"),
nor has the Company or any of its subsidiaries been advised by any
Regulatory Agency that it is considering issuing or requesting any
such Regulatory Agreement; there is no 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
subsidiaries which, in the reasonable judgment of the Company, is
expected to result in a Material Adverse Effect; and without limiting
the generality of the foregoing, there are no restrictions or
limitations on the authority of any Insurance Subsidiary to pay
dividends, other than general restrictions and limitations applicable
to all insurance companies domiciled in the state of organization of
such Insurance Subsidiary pursuant to applicable law.
- 4 -
(viii) No Undisclosed Liabilities. Neither the Company nor any of
its 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
subsidiaries giving rise to any such liability), except (i) for
liabilities set forth in the financial statements referred to in
Section I (a)(iv) above and (ii) normal fluctuations 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 subsidiaries
since the date of the most recent balance sheet included in such
financial statements.
(ix) Insurance Reserving Practices. The Company and its Insurance
Subsidiaries have made no material change in their insurance reserving
practices since the respective dates as of which information is given
in the 1934 Act Reports.
(x) Reinsurance Treaties. All reinsurance and retrocessional
treaties, contracts, agreements and arrangements to which any
Insurance Subsidiary is a party are in full force and effect and no
Insurance Subsidiary is in violation of, or in default in the
performance, observance or fulfillment of, any obligation, agreement,
covenant or condition contained therein, with such exceptions that
would not, singularly or in the aggregate, have a Material Adverse
Effect; and no Insurance Subsidiary has received any notice from any
of the other parties to such treaties, contracts, agreements or
arrangements that such other party intends not to perform thereunder
and, to the best knowledge of the Company and the Insurance
Subsidiaries, none of the other parties to such treaties, contracts,
agreements or arrangements will be unable to perform thereunder except
to the extent adequately and properly reserved for in the consolidated
financial statements of the Company, with such exceptions that would
not, singularly or in the aggregate, have a Material Adverse Effect.
(xi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Texas and has full power and authority
under such laws to own, lease and operate its properties and to
conduct its business, to enter into and perform its obligations under
each of the Operative Documents to which it is a party, and to issue
the Senior Notes.
- 5 -
(xii) Good Standing of the Subsidiaries. Each "significant
subsidiary" (as defined in Rule 1-02 of Regulation S-X) of the Company
(a "Significant Subsidiary") and each Insurance Subsidiary has been
duly organized and is validly existing as an entity in good standing
under the laws of the jurisdiction in which it is chartered and has
full power and authority under such laws to own, lease and operate its
properties and to conduct its current and contemplated business.
(xiii) Foreign Qualifications. Each of the Company and its
subsidiaries is duly qualified as a foreign entity to transact
business and is each in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure to be so qualified would not singularly, or in the aggregate,
in the reasonable judgment of the Company, be expected to result in a
Material Adverse Effect.
(xiv) Capital Stock Duly Authorized and Validly Issued. All of
the issued and outstanding capital stock of the Company has been duly
authorized and validly issued and is fully paid and nonassessable; all
of the issued and outstanding capital stock of each subsidiary of the
Company has been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equitable right; and none of the
issued and outstanding capital stock of the Company or its Significant
Subsidiaries was issued in violation of any preemptive or similar
rights arising by operation of law, under the charter, by-laws or code
of regulations of the Company or any of its Significant Subsidiaries
or under any agreement to which the Company or any of its Significant
Subsidiaries is a party.
(xv) Authorization of this Agreement. This Agreement has been
duly authorized, executed and delivered the Company.
(xvi) Authorization of Indenture. 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 of the Indenture by the
Indenture Trustee, the Indenture will constitute a valid, legal and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforceability
may be limited by the (a) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity) (collectively, the
"Enforceability Exceptions").
- 6 -
(xvii) Authorization of Senior Notes. The Senior Notes have been
duly authorized by the Company; on the Closing Date, the Senior Notes
will have been duly executed by the Company and, when authenticated in
the manner provided for in the Indenture and delivered by the Company
to the Purchaser against payment therefor as contemplated in the
Subscription Agreement, will constitute valid, legal and binding
obligations of the Company, enforceable against the Company in
accordance with their terms, except to the extent that enforceability
may be limited by the Enforceability Exceptions; and the Senior Notes
will be in the form contemplated by, and entitled to the benefits of,
the Indenture.
(xviii) Not an Investment Company. The Company is not, and
immediately following consummation of the transactions contemplated
hereby and the application of the net proceeds therefrom the Company
will not 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 "1940 Act")
without regard to Section 3(c) of the 1940 Act.
(xix) Absence of Defaults and Conflicts. Neither the Company nor
any of its Significant Subsidiaries or Insurance Subsidiaries is in
violation of its charter, by-laws or code of regulations; neither the
Company nor any of its subsidiaries is in default in the performance
or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to
which it is a party or by which it or any of them may be bound or to
which any of its properties or assets is subject (collectively,
"Agreements and Instruments"), except for such defaults under
Agreements and Instruments that, in the reasonable judgment of the
Company, are not expected to result in a Material Adverse Effect; and
the execution, delivery and performance of the Operative Documents by
the Company, the issuance, sale and delivery of the Senior Notes, the
consummation of the transactions contemplated by the Operative
Documents, and compliance by the Company with the terms of the
Operative Documents to which it is a party have been duly authorized
by all necessary corporate action on the part of the Company, and do
not and will not, whether with or without the giving of notice or
passage of time or both, violate, conflict with or constitute a breach
of, or default or Repayment Event (as defined below) under, or result
in the creation or imposition of any, security interest, mortgage,
pledge, lien, charge, encumbrance, claim or equitable right upon any
properties or assets of the Company or any of its Significant
Subsidiaries or Insurance Subsidiaries pursuant to any of the
Agreements and Instruments, nor will such action result in any
violation of the provisions of the charter, by-laws or code of
- 7 -
regulations of the Company or any of its Significant Subsidiaries or
Insurance Subsidiaries, or violation by the Company or any of its
Significant Subsidiaries or Insurance Subsidiaries of any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government authority, agency (including, without
limitation, each applicable Regulatory Agency) or instrumentality or
court, domestic or foreign, having jurisdiction over the Company or
any of its Significant Subsidiaries or Insurance Subsidiaries or their
respective properties or assets (collectively, "Governmental
Entities"). As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment
of all or a portion of such indebtedness by the Company or any of its
Significant Subsidiaries or Insurance Subsidiaries prior to its
scheduled maturity.
(xx) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any of its subsidiaries exists or, to the
knowledge of the executive officers of the Company, is imminent,
which, in the reasonable judgment of the Company, is expected to
result in a Material Adverse Effect.
(xxi) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation (including, without limitation,
any action to revoke or deny renewal of any Insurance License (as
defined in paragraph (xxiii) below)) before or brought by any
Governmental Entity, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any of its
subsidiaries, which, in the reasonable judgment of the Company, is
expected to result in a Material Adverse Effect or materially and
adversely affect the consummation of the transactions contemplated by
the Operative Documents or the performance by the Company of its
obligations hereunder or thereunder; and the aggregate of all pending
legal or governmental proceedings to which the Company or any of its
subsidiaries is a party or of which any of their respective properties
or assets is the subject, including ordinary routine litigation
incidental to the business, are not, in the reasonable judgment of the
Company, expected to result in a Material Adverse Effect.
(xxii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any Governmental Entity, other than those
that have been made or obtained, is necessary or required for the
authorization, execution, delivery or performance by the Company of
its obligations under the Operative Documents or the Senior Notes, or
the consummation by the Company of the transactions contemplated by
the Operative Documents.
- 8 -
(xxiii) Possession of Licenses and Permits. Each of the Company
and its subsidiaries, other than any Insurance Subsidiary, possesses
such permits, orders, certificates, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate Governmental Entities necessary to conduct the
business now operated by it, with such exceptions that would not, in
the reasonable judgment of the Company, be expected to, singularly or
in the aggregate, have a Material Adverse Effect; each Insurance
Subsidiary is duly licensed or authorized (including, without
limitation, from its applicable State Regulatory Authority) as an
insurer in each jurisdiction where it is required to be so licensed or
authorized to conduct its business (collectively "Insurance
Licenses"), with such exceptions that would not, in the reasonable
judgment of the Company, be expected to, singularly or in the
aggregate, have a Material Adverse Effect; the Company and its
subsidiaries are in compliance with the terms and conditions of all of
its Governmental Licenses and Insurance Licenses, as applicable,
except where the failure so to comply, in the reasonable judgment of
the Company, is not expected to, singularly or in the aggregate, have
a Material Adverse Effect; all of the Governmental Licenses and
Insurance Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or Insurance Licenses or
the failure of such Governmental Licenses or Insurance Licenses to be
in full force and effect, in the reasonable judgment of the Company,
is not expected to have a Material Adverse Effect; and neither the
Company nor any of its subsidiaries has received any notice of
proceedings, and to the knowledge of the Company or any of its
subsidiaries, there has been no threatened action, suit, proceeding or
investigation, relating to the revocation, termination, suspension or
modification of any such Governmental Licenses or Insurance Licenses
which, singularly or in the aggregate, in the reasonable judgment of
the Company, is expected to result in a Material Adverse Effect.
(xxiv) Title to Property. Each of the Company and its
subsidiaries has good and marketable title to all of its respective
real and personal properties, in each case free and clear of all
liens, encumbrances and defects, except such as, in the reasonable
judgment of the Company, singularly or in the aggregate, are not
expected to result in a Material Adverse Effect; and all of the leases
and subleases under which the Company or any of its subsidiaries holds
properties are in full force and effect, except when the failure of
such leases and subleases to be in full force and effect, in the
reasonable judgment of the Company, singularly or in the aggregate, is
not expected to have a Material Adverse Effect, and neither the
Company nor any of its subsidiaries has any notice of any claim of any
sort that has been asserted by anyone adverse to the rights of the
- 9 -
Company or any of its subsidiaries under any of the leases or
subleases under which the Company or any of its subsidiaries holds
properties, or affecting or questioning the rights of such entity to
the continued possession of the leased or subleased premises under any
such lease or sublease, except when such claim, in the reasonable
judgment of the Company, singularly or in the aggregate, is not
expected to have a Material Adverse Effect.
(xxv) Stabilization. The Company has not taken and will not take,
directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or
manipulation of the price of the Senior Notes.
(xxvi) No General Solicitation. Neither the Company nor any of
its Affiliates (as defined in Rule 501(b) under the ▇▇▇▇ ▇▇▇) or any
person acting on its or any of their behalf (other than the Placement
Agent, as to whom the Company makes no representation) has engaged or
will engage, in connection with the offering of the Senior Notes, in
any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the 1933 Act.
(xxvii) No Directed Selling Efforts. Neither the Company nor any
of its Affiliates or any person acting on its or any of their behalf
(other than the Placement Agent, as to whom the Company makes no
representation) has engaged or will engage in any directed selling
efforts within the meaning of Regulation S under the 1933 Act
("Regulation S") with respect to the offering of the Senior Notes.
(xxviii) No RegiatrSlmbject to compliance by the Placement Agent
with the relevant provisions of Section 6 hereof, it is not necessary
in connection with the offer, sale and delivery of the Senior Notes by
the Company in the manner contemplated by this Agreement to register
the Senior Notes under the 1933 Act or to qualify the Indenture under
the Trust Indenture Act of 1939, as amended.
(xxix) Authorization of Subscription Agreement. The Subscription
Agreement has been duly authorized, executed and delivered by the
Company, and assuming due authorization, execution and delivery of the
Subscription Agreement by the Purchaser, the Subscription Agreement
will constitute a valid, legal and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
to the extent that enforceability may be limited by the Enforceability
Exceptions.
(b) Any certificate signed by the Company, any duly authorized officer of
the Company or any of its subsidiaries and delivered to the Placement Agent or
to counsel for the Placement Agent shall be deemed a representation and warranty
by the Company, to the Placement Agent as to the matters covered thereby.
- 10 -
SECTION 2. Sale and Delivery through Placement Agent; Closing.
(a) The Company proposes to issue and sell the Senior Notes on May 22, 2003
(or such other date mutually agreed to by the Company and the Placement Agent)
(the "Closing Date") to InCapS Funding I, Ltd., a newly formed company with
limited liability incorporated under the laws of the Cayman Islands (the
"Purchaser"), pursuant to the terms of the Senior Notes Subscription Agreement,
entered into on the date hereof (the "Subscription Agreement"), between the
Company and the Purchaser. In addition, the Company agrees that the Purchaser
shall be entitled to the benefit of, and to rely on, the provisions of this
Agreement to the extent such provisions address or relate to the Purchaser or
the Senior Notes to be purchased by the Purchaser.
(b) The Company hereby grants to the Placement Agent the exclusive right to
arrange the placement of the Senior Notes with the Purchaser on their behalf.
The Placement Agent accepts such right and agrees to use its best efforts, on
and prior to the Closing Date, to effect such placement.
(c) Deliveries of certificates for the Senior Notes shall be made by the
Company to or on behalf of the Purchaser at the offices of Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ &
▇▇▇▇ LLP in The City of New York, and payment of the purchase price for the
Senior Notes shall be made by the Purchaser to the Company by wire transfer of
immediately available funds to a bank designated by the Company contemporaneous
with closing on the Closing Date.
Certificates for the Senior Notes in the aggregate principal amount thereof
shall be registered in the name of the Purchaser.
(d) As compensation to the Placement Agent for its placement of the Senior
Notes, the Company hereby agrees to pay on the Closing Date to the Placement
Agent in immediately available funds a commission of 3% of the aggregate
principal amount of Senior Notes to be delivered by the Company hereunder on the
Closing Date.
(e) In performing its duties under this Agreement, the Placement Agent
shall be entitled to rely upon any notice, signature or writing which the
Placement Agent shall in good faith believe to be genuine and to be signed or
presented by a proper party or parties. The Placement Agent may rely upon any
opinions or certificates or other documents delivered by the Company or its
counsel or designees either to it or the Purchaser. In addition, in connection
with the performance of its duties under this Agreement, the Placement Agent
shall not be liable for any error of judgment or any action taken or omitted to
be taken unless it was grossly negligent or engaged in willful misconduct in
connection with such performance or non-performance. No provision of this
Agreement shall require the Placement Agent to expend or risk its own funds or
otherwise incur any financial liability on behalf of the Purchaser in connection
with the performance of any of its duties hereunder. The Placement Agent shall
be under no obligation to exercise any of the rights or powers vested in it by
this Agreement.
- 11 -
SECTION 3. Notice of Material Events. The Company covenants with the
Placement Agent and the Purchaser that, prior to the completion of the initial
placement of the Senior Notes through the Placement Agent, the Company will
immediately notify the Placement Agent, and confirm such notice in writing, of
any event or development that, in the reasonable judgment of the Company, is
expected to result in a Material Adverse Effect.
SECTION 4. Payment of Ex ep nses. Whether or not this Agreement or the
Subscription Agreement is terminated or the sale of the Senior Notes is
consummated, the Company will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the preparation, issuance
and delivery of the certificates for the Senior Notes, (ii) the fees and
disbursements of the Company's counsel, accountants and other advisors, and
(iii) the fees and disbursements of counsel for the Indenture Trustee incurred
on or prior to the Closing Date.
SECTION 5. Conditions of Placement Agent's Obligations. The obligations of
the Placement Agent and the Purchaser on the Closing Date are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or any officer of the Company or any of its subsidiaries
delivered pursuant to the provisions hereof, to the performance by the Company
of its obligations hereunder, and to the following further conditions:
(a) Opinion of Counsel for the Company. On the Closing Date, the Placement
Agent and the Purchaser shall have received the favorable opinion, dated as of
the Closing Date, of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, special counsel for the
Company, in substantially the form set out in Annex A hereto, in form and
substance reasonably satisfactory to counsel for the Placement Agent. Such
counsel may state that, insofar as such opinion involves factual matters, they
have relied, to the extent they deem proper, upon certificates of officers of
the Company or any of its subsidiaries and public officials.
(b) Opinion of Special Tax Counsel for the Company. On the Closing Date,
the Placement Agent and the Purchaser shall have received an opinion, dated as
of the Closing Date, of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, special tax counsel for the
Company, in form and substance satisfactory to counsel for the Placement Agent,
to the effect that the Senior Notes will constitute indebtedness of the Company
for United States federal income tax purposes. Such opinion may be conditioned
on, among other things, the initial and continuing accuracy of the facts,
financial and other information, covenants and representations set forth in
certificates of officers of the Company and other documents deemed necessary for
such opinion.
(c) Opinion of Counsel to the Indenture Trustee. On the Closing Date, the
Placement Agent and the Purchaser shall have received the favorable opinion,
dated as of the Closing Date, of Morris, James, Hitchens & ▇▇▇▇▇▇▇▇ LLP, counsel
for the Indenture Trustee, in substantially the form set out in Annex B hereto,
in form and substance reasonably satisfactory to counsel for the Placement
Agent.
- 12 -
(d) Certificates. On the Closing Date, there shall not have been, since the
date hereof or since the respective dates as of which information is given in
the 1934 Act Reports, any Material Adverse Effect, and the Placement Agent shall
have received a certificate of the Chairman, the Chief Executive Officer, the
President, any Executive Vice President or any Vice President of the Company and
of the Chief Financial Officer or Chief Accounting Officer of the Company, dated
as of the Closing Date, to the effect that (i) there has been no such Material
Adverse Effect, (ii) the representations and warranties in Section 1 hereof were
true and correct when made and are true and correct with the same force and
effect as though expressly made on and as of the Closing Date, and (iii) the
Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied on or prior to the Closing Date.
(e) Maintenance of Ratings. From the date of this Agreement through the
Closing Date, (i) there shall not have occurred a downgrading in or withdrawal
of the rating assigned to the debt securities of the Company or any Insurance
Subsidiary or the financial strength or claims paying ability of the Company or
any Insurance Subsidiary, in each case by A.M. Best & Co. or any "nationally
recognized statistical rating organization," as that term is defined by the
Commission for the purposes of Rule 436(g)(2) under the 1933 Act, and (ii)
neither A.M. Best & Co. nor any such organization shall have publicly announced
that it has under surveillance or review its rating of any debt security or the
financial strength or the claims paying ability of the Company or any Insurance
Subsidiary.
(f) Purchaser's Sale of Securities. The Purchaser shall have sold
securities issued by it in such an amount that the net proceeds therefrom shall
be available on the Closing Date and shall be sufficient to purchase the Senior
Notes and all other senior notes, surplus notes and capital securities
contemplated in agreements similar to this Agreement and the Subscription
Agreement.
(g) Additional Documents. On the Closing Date, the Placement Agent and the
Purchaser shall have been furnished such documents and opinions as they may
reasonably request in connection with the issue, sale and placement of the
Senior Notes; and all proceedings taken by the Company in connection with the
issuance, sale and placement of the Senior Notes shall be satisfactory in form
and substance to the Placement Agent and the Purchaser.
(h) Termination ofAgreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Placement Agent by notice to the Company at
any time on or prior to the Closing Date. If the sale of the Senior Notes
provided for herein is not consummated because any condition set forth in
Section 5(a), (b), (c), (d), (e) or (g) is not satisfied, because of any
termination pursuant to Section 10(a) hereof or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof, the Company will reimburse the Placement
Agent upon demand for all documented out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
the Placement Agent in connection with the proposed offering of the Senior
Notes. In addition, such termination shall be subject to Section 4 hereof, and
Sections 7 and 8 hereof shall survive any such termination and remain in full
force and effect.
- 13 -
SECTION 6. Offers and Sales of the Senior Notes.
(a) Offer and Sale Procedures. The Placement Agent and the Company hereby
establish and agree to observe the following provisions with respect to the
offer, issue, sale and placement of the Senior Notes:
(i) Offers and Sales only to the Purchaser. Offers and sales of
the Senior Notes will be made only to the Purchaser in a transaction
not requiring registration under the 1933 Act.
(ii) No General Solicitation. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the ▇▇▇▇ ▇▇▇) has
been or will be used in connection with the offering of the Senior
Notes.
(iii) No Directed Selling Efforts. No directed selling efforts
(within the meaning of Regulation S) has been or will be used with
respect to the offering of the Senior Notes.
(iv) Purchaser Notification. Prior to or contemporaneously with
the purchase of the Senior Notes by the Purchaser, the Placement Agent
will take reasonable steps to inform the Purchaser that the Senior
Notes (A) have not been and will not be registered under the 1933 Act,
(B) are being sold to them without registration under the 1933 Act in
accordance with an exemption from registration under the 1933 Act and
(C) may not be offered, sold or otherwise transferred except in
accordance with the legend set forth in the Indenture.
(b) Covenants of the Company. The Company covenants with the Placement
Agent and the Purchaser as follows:
(i) Due Diligence. In connection with the initial placement of
the Senior Notes, the Company agrees that, prior to any offer or sale
of the Senior Notes through the Placement Agent, the Placement Agent
and the Purchaser shall have the right to make reasonable inquiries
into the business of the Company and its subsidiaries. The Company
also agrees to provide answers to the Placement Agent and the
Purchaser, if requested, concerning the Company and its subsidiaries
(to the extent that such information is available or can be acquired
and made available without unreasonable effort or expense and to the
extent the provision thereof is not prohibited by applicable law) and
the terms and conditions of the offering of the Senior Notes.
- 14 -
(ii) Integration. The Company agrees that it will not, and will
cause its Affiliates not to, make any offer or sale of securities of
the Company of any class if, as a result of the doctrine of
"integration" referred to in Rule 502 under the 1933 Act, such offer
or sale would render invalid the exemption from the registration
requirements of the 1933 Act provided by Section 4(2) thereof or by
Rule 144A or otherwise.
(iii) Restriction on Repurchases. Until the expiration of two (2)
years (or such shorter period as may hereafter be referred to in Rule
144(k) (or similar successor rule)) after the original issuance of the
Senior Notes, the Company will not, and will cause its Affiliates not
to, purchase or agree to purchase or otherwise acquire any Senior
Notes which are "restricted securities" (as such term is defined under
Rule 144(a)(3) under the 1933 Act), whether as beneficial owner or
otherwise, unless, immediately upon any such purchase, the Company or
any Affiliate shall submit such Senior Notes to the Indenture Trustee
for cancellation.
SECTION 7. Indemnification.
(a) Indemnification of the Placement Agent and the Purchaser. The Company
agrees to indemnify and hold harmless: (x) the Placement Agent and the
Purchaser, (y) each person, if any, who controls (within the meaning of Section
15 of the 1933 Act or ▇▇▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇) the Placement Agent or the
Purchaser (each such person, a "controlling person") and (z) the respective
partners, directors, officers, employees and agents of the Placement Agent and
the Purchaser or any such controlling person, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, relating to or arising out of, or
based upon, in whole or in part, (A) any untrue statement or alleged
untrue statement of a material fact included in the 1934 Act Reports,
or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; (B) any
untrue statement or alleged untrue statement of material fact
contained in any written information or documents executed in favor of
or furnished or made available to the Placement Agent or the Purchaser
by the Company; (C) any omission or alleged omission to state in any
written information or documents executed in favor of or furnished or
made available to the Placement Agent or the Purchaser by the Company
a material fact necessary to make the statements therein not
misleading; or (D) the breach or alleged breach of any representation,
warranty and agreement of the Company contained herein or in the
Subscription Agreement;
- 15 -
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, or breach or alleged breach of any such representation,
warranty or agreement; provided, that (subject to Section 7(c) hereof)
any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the
Placement Agent), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, or breach or alleged
breach of any such representation, warranty or agreement, to the
extent that any such expense is not paid under (i) or (ii) above.
(b) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof, and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. Counsel to the indemnified parties shall be selected by the Placement
Agent. An indemnifying party may participate at its own expense in the defense
of any such action; provided, however, that counsel to the indemnifying party
shall not (except with the consent of the indemnified parry) also be counsel to
the indemnified parry. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 7 or Section 8 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
- 16 -
(c) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have validly requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement, provided, however, that an indemnifying party shall
not be liable for any such settlement effected without its consent if such
indemnifying party (1) reimburses such indemnified party with respect to those
fees and expenses of counsel that it determines in good faith are reasonable and
(2) provides written notice within 10 days after receipt of the request for
reimbursement to the indemnified party substantiating the unpaid balance as
unreasonable, in each case prior to the date of such settlement.
SECTION 8. Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnification provided for in
Section 7 hereof is for any reason held to be unenforceable for the benefit of
an indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Placement Agent, on the other hand, from the offering of the
Senior Notes pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, on the one hand, and the
Placement Agent, on the other hand, in connection with the statements, omissions
or breaches which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and the
Placement Agent, on the other hand, in connection with the offering of the
Senior Notes pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the Senior
Notes pursuant to this Agreement (before deducting expenses) received by the
Company and the total commission received by the Placement Agent bear to the
aggregate of such net proceeds and commissions.
The Company and the Placement Agent agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 8. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 8 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement, omission or alleged omission or breach or alleged breach.
- 17 -
Notwithstanding the provisions of this Section 8, the Placement Agent shall
not be required to contribute any amount in excess of the total commissions
received by it.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11 (f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, the Purchaser, each person, if any, who
controls the Placement Agent or the Purchaser within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act and the respective partners,
directors, officers, employees and agents of the Placement Agent, the Purchaser
or any such controlling person shall have the same rights to contribution as the
Placement Agent, while each officer and director of the Company and each person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
the Company.
SECTION 9. Representations Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company submitted pursuant hereto shall remain
operative and in full force and effect, and shall survive delivery of the Senior
Notes by the Company.
SECTION 10. Termination of Agreement.
(a) Termination; General. The Placement Agent may terminate this Agreement,
by notice to the Company, at any time on or prior to the Closing Date if, since
the time of execution of this Agreement or, in the case of (i), since the
respective dates as of which information is given in the 1934 Act Reports, (i)
there has occurred any Material Adverse Effect, or (ii) there has occurred any
material adverse change in the financial markets in the United States, any
outbreak of hostilities or escalation thereof or any other calamity or crisis,
or any change or development involving political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Placement Agent, impracticable to market the Senior Notes or to
enforce contracts for the sale of the Senior Notes, or (iii) trading in any
securities of the Company has been suspended or limited by the Commission or any
national stock exchange or market on or in which such securities are traded or
quoted, or if trading generally on the American Stock Exchange, the New York
Stock Exchange or the Nasdaq National Market has been suspended or limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers or any
other governmental authority, or (iv) a banking moratorium has been declared by
United States federal, Delaware or New York authorities.
- 18 -
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 and Section 5 hereof, and provided further that
Sections 1, 7 and 8 hereof shall survive such termination and remain in full
force and effect.
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Placement
Agent shall be directed to Sandler ▇'▇▇▇▇▇ & Partners, L.P., as follows: ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Principal, with a copy to Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; and notices to the
Company shall be directed to Financial Industries Corporation, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, with
a copy to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇.
SECTION 12. Parties. This Agreement shall inure to the benefit of and be
binding upon each of the Placement Agent and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Placement Agent, the Purchaser and the Company, and their respective successors
and the controlling persons and other persons referred to in Sections 1, 7 and 8
hereof and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Placement Agent, the Purchaser
and the Company and their respective successors, and said controlling persons
and other persons and their heirs and legal representatives, and for the benefit
of no other person, firm or corporation.
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES OF SAID STATE OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW.
- 19 -
THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES, HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS
LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY,
IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION AND IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN ANY SUCH COURT. THE COMPANY, ON BEHALF OF ITSELF AND ITS
SUBSIDIARIES, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 14. Disclosure of Tax Treatment and Tax Structure. Notwithstanding
anything herein to the contrary, any party to this Agreement (and. each
employee, representative or other agent of any party to this Agreement) may
disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure of the offering and all materials of any kind
(including opinions or other tax analyses) that are provided to it relating to
such tax treatment and tax structure. However, such information relating to the
tax treatment or tax structure is required to be kept confidential to the extent
necessary to comply with any applicable federal or state securities laws. For
this purpose, "tax structure" means any facts relevant to the federal income tax
treatment of the offering contemplated by this Agreement but does not include
information relating to the identity of the Offeror.
SECTION 15. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
- 20 -
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Placement Agent and the Company in accordance with its terms.
Very truly yours,
FINANCIAL INDUSTRIES CORPORATION
By: ____________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
SANDLER ▇'▇▇▇▇▇ & PARTNERS, L.P.
By: Sandler ▇'▇▇▇▇▇ & Partners Corp.,
the sole general partner
By: _________________________________
Name:
Title:
- 21 -
ANNEX A
Pursuant to Section 5(a) of the Placement Agreement, special counsel for
the Company shall deliver an opinion in substantially the following form:
1. The Company is incorporated and is validly existing as a corporation in
good standing under the laws of the State of Texas.
2. The Company has corporate power and authority to (i) execute and
deliver, and to perform its obligations under, the Operative Documents to which
it is a party and (ii) issue and perform its obligations under the Senior Notes.
3. (i) Each Significant Subsidiary is validly existing and in good standing
under the laws of the jurisdiction of its organization; and (ii) to the best of
our knowledge, all of the issued and outstanding shares of capital stock of each
Significant Subsidiary are owned of record by the Company, directly or through
other subsidiaries.
4. To our knowledge, there are no restrictions or limitations on the
authority of any of the Insurance Subsidiaries to pay dividends, other than
general restrictions and limitations applicable to all insurance companies
domiciled in the state of organization of such Insurance Subsidiary pursuant to
applicable law.
5. To our knowledge, no Insurance License of any of the Insurance
Subsidiaries has been suspended, revoked, withdrawn, surrendered or limited in
anyway.
6. No consent, approval, authorization or order of or filing, registration
or qualification with any Governmental Entity is required under any law or
regulation of the United States or the states in which the Company and any
Insurance Subsidiary is organized in connection with the authorization,
execution, delivery and performance by the Company or the Insurance Subsidiaries
of the Operative Documents or the Senior Notes and the consummation of the
transactions contemplated thereby except as have already been obtained or made.
7. Each of the Placement Agreement and the Subscription Agreement has been
duly authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Placement Agent and the Purchaser,
respectively, constitutes a valid and binding instrument of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution thereunder may be limited under applicable law or
public policy, and subject to the qualifications that (i) enforcement thereof
may be limited by 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 financial
institutions and (ii) the enforceability of the obligations of the Company
thereunder is subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law) and to
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.
A-1
8. The Indenture has been duly authorized, executed, and delivered by the
Company and, assuming due authorization, execution and delivery by the Indenture
Trustee constitutes a valid and binding instrument of the Company, enforceable
against the Company in accordance with its terms, except as rights to indemnity
and contribution thereunder may be limited under applicable law or public
policy, and subject to the qualifications that (i) enforcement thereof may be
limited by 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 financial institutions and
(ii) the enforceability of the Company's obligations thereunder is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and to 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.
9. The Senior Notes have been duly authorized for issuance by the Company
pursuant to the Indenture and, when executed, authenticated and delivered in the
manner provided for in the Indenture and paid for in accordance with the
Subscription Agreement therefor, will constitute valid and binding obligations
of the Company and will entitle the holders thereof to the benefits of the
Indenture, enforceable against the Company in accordance with their terms,
except as rights to indemnity and contribution thereunder may be limited under
applicable law or public policy, and subject to the qualifications that (i)
enforcement thereof may be limited by 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 financial institutions and (ii) the enforceability of the Company's
obligations thereunder is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and to 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.
10. The execution, delivery and performance of the Operative Documents and
the Senior Notes by the Company and the consummation by the Company of the
transactions contemplated by the Operative Documents will not result in any
violation of the charter or bylaws of the Company, any Significant Subsidiary or
any Insurance Subsidiary.
11. Assuming (i) the accuracy of the representations and warranties, and
compliance with the agreements, contained in the Placement Agreement and the
Subscription Agreement and (ii) that the Senior Notes are sold in the manner
contemplated by, and in accordance with, the Placement Agreement, the
Subscription Agreement and the Indenture, it is not necessary in connection with
the offer, sale and delivery of the Senior Notes by the Company to the Purchaser
to register the Senior Notes under the 1933 Act or to qualify an indenture under
the Trust Indenture Act of 1939, as amended.
A-2
12. The Company is not, and, following the issuance of the Senior Notes and
the consummation of the transactions contemplated by the Operative Documents and
the application of the proceeds therefrom, the Company will not be, an
"investment company" or entity "controlled" by an "investment company", in each
case within the meaning of Section 3(a) of the 1940 Act, without regard to
Section 3(c) of such Act.
In rendering such opinions, such counsel may (A) state that its opinion is
limited to the laws of New York, the laws of the State of Texas and the Federal
laws of the United States and (B) rely as to matters involving the application
of laws of any jurisdiction other than New York, Texas or the United States, to
the extent deemed proper and specified in such opinion, upon the opinion of
other counsel of good standing believed to be reliable and who are satisfactory
to you and as to matters of fact, to the extent deemed proper, on certificates
of responsible officers of the Company, the Insurance Subsidiaries and public
officials.
A-3
Annex B
Pursuant to Section 5(c) of the Placement Agreement, counsel to the
Indenture Trustee shall deliver an opinion in substantially the following form:
1. Wilmington Trust Company ("WTC") is a Delaware banking corporation with
trust powers, duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, with requisite corporate power and authority to
execute and deliver, and to perform its obligations under, the Indenture.
2. The execution, delivery, and performance by WTC of the Indenture have
been duly authorized by all necessary corporate action on the part of WTC, and
the Indenture has been duly executed and delivered by WTC.
3. The execution, delivery and performance of the Indenture by WTC and the
consummation of any of the transactions by WTC contemplated thereby are not
prohibited by (i) the charter or bylaws of WTC, (ii) any law or administrative
regulation of the State of Delaware or the United States of America governing
the banking and trust powers of WTC, or (iii) to our knowledge (based and
relying solely on the Officer Certificates), any agreements or instruments to
which WTC is a party or by which WTC is bound or any judgments or order
applicable to WTC.
4. The Senior Notes delivered on the date hereof have been authenticated by
due execution thereof and delivered by WTC, as Indenture Trustee, in accordance
with the Indenture.
5. None of the execution, delivery and performance by WTC of the Indenture
and the consummation of any of the transactions by WTC contemplated thereby
requires the consent, authorization, order or approval of, the withholding of
objection on the part of, the giving of notice to, the registration with or the
taking of any other action in respect of, any governmental authority or agency,
under any law or administrative regulation of the State of Delaware or United
States of America governing the banking and trust powers of WTC.
B-1