EXHIBIT 10.4
$15,000,000
InCapS(SM)
APCAPITAL TRUST II
PLACEMENT AGREEMENT
New York, New York
May 13, ▇▇▇▇
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇ & PARTNERS, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
APCapital Trust II (the "Trust"), a statutory trust organized
under the Delaware Statutory Trust Act, 12 Del. C. Section 3801 et seq. (the
"Delaware Act") and American Physicians Capital, Inc., a Michigan corporation
(the "Company" and together with the Trust, the "Offerors"), confirm their
agreement (the "Agreement") with Sandler ▇'▇▇▇▇▇ & Partners, L.P., as agent of
the Offerors (the "Placement Agent"), with respect to the issue and sale by the
Trust and the placement by the Placement Agent of 15,000 InCapSSM (liquidation
amount of $1,000 per security) of the Trust (the "Capital Securities"). The
Capital Securities will be guaranteed by the Company to the extent provided in
the Guarantee Agreement, to be dated as of the Closing Date (as defined in
Section 2(a) hereof) (the "Guarantee Agreement"), between the Company, as
guarantor, and Wilmington Trust Company, as guarantee trustee (the "Guarantee
Trustee"), with respect to distributions and payments upon liquidation,
redemption and otherwise.
The entire proceeds from the sale of the Capital Securities
will be combined with the entire proceeds from the sale by the Trust to the
Company of its common securities (the "Common Securities"), and will be used by
the Trust to purchase $15,464,000 aggregate principal amount of Floating Rate
Junior Subordinated Debt Securities due 2033 (the "Subordinated Debt
Securities") issued by the Company. The Capital Securities and the Common
Securities will be issued pursuant to the Amended and Restated Declaration of
Trust, to be dated as of the Closing Date (the "Declaration"), among the
Company, as sponsor, the Administrators named therein (the "Administrators"),
Wilmington Trust Company, as institutional trustee (the "Institutional
Trustee"), Wilmington Trust Company, as Delaware trustee (the "Delaware
Trustee"), and the holders, from time to time, of undivided beneficial interests
in the assets of the Trust. The Subordinated Debt Securities 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, the Guarantee Agreement, the Declaration,
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 Trust and the Company, jointly and severally,
represent and warrant to the Placement Agent and the Purchaser (as defined in
Section 2(a) hereof) of Capital Securities as of the date hereof and as of the
Closing Date, and agree 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 Offerors have 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 Capital Securities (including any securities of
the same or a similar class as the Capital Securities, other than the Capital
Securities) in a manner that would require the Capital Securities to be
registered under the Securities Act of 1933, as amended (the "1933 Act").
(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
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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; the statutory financial statements of
each of its insurance subsidiaries (the "Insurance Subsidiaries") 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
Trust or 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.
(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
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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.
(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 1(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 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,
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with such exceptions that would not, singularly or in the aggregate, have a
Material Adverse Effect; 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 Michigan 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 Subordinated Debt Securities.
(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) Good Standing of the Trust. The Trust has been
duly created and is validly existing in good standing as a statutory trust under
the Delaware Act with the power and authority to own property and to conduct its
business as provided in the Declaration, to enter into and perform its
obligations under the Operative Documents to which it is a party, and to issue
the Capital Securities and the Common Securities; the Trust is not a party to or
otherwise bound by any agreement other than the Operative Documents to which it
is a party; and the Trust
5
is, and will be, under current law, classified for United States federal income
tax purposes as a grantor trust and not as an association taxable as a
corporation.
(xvi) Authorization of Common Securities. On the
Closing Date, the Common Securities will have been duly authorized for issuance
by the Trust pursuant to the Declaration and, when duly issued and executed in
accordance with the Declaration and delivered by the Trust to the Company
against payment therefor in accordance with the subscription agreement therefor,
will be validly issued and fully paid and nonassessable undivided common
beneficial ownership interests in the assets of the Trust; the issuance of the
Common Securities is not subject to preemptive or other similar rights; and on
the Closing Date, all of the issued and outstanding Common Securities of the
Trust will be owned directly by the Company, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equitable right.
(xvii) Authorization of Capital Securities. On the
Closing Date, the Capital Securities will have been duly authorized for issuance
by the Trust pursuant to the Declaration and, when duly issued, executed and
authenticated in accordance with the Declaration and delivered by the Trust
against payment therefor as provided herein and in the Subscription Agreement,
will be validly issued and fully paid and nonassessable undivided preferred
beneficial ownership interests in the assets of the Trust; the issuance of the
Capital Securities will not be subject to preemptive or other similar rights;
and the Capital Securities will be in the form contemplated by, and entitled to
the benefits of, the Declaration.
(xviii) Authorization of this Agreement. This
Agreement has been duly authorized, executed and delivered by each of the
Offerors.
(xix) Authorization of Declaration. The Declaration
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, and assuming
due authorization, execution and delivery of the Declaration by the
Institutional Trustee and the Delaware Trustee, the Declaration 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 (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").
(xx) Authorization of Guarantee Agreement. The
Guarantee Agreement 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 Guarantee Agreement by the
Guarantee Trustee, the Guarantee 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.
(xxi) Authorization of Indenture. The Indenture has
been duly authorized by the Company and, on the Closing Date, will have been
duly executed and
6
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 Enforceability Exceptions.
(xxii) Authorization of Subordinated Debt Securities.
The Subordinated Debt Securities have been duly authorized by the Company; on
the Closing Date, the Subordinated Debt Securities 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 Trust against payment therefor as
contemplated in the subscription agreement therefor, 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; the Subordinated Debt Securities will
be in the form contemplated by, and entitled to the benefits of, the Indenture;
and the Company has no present intention to exercise its option to defer
payments of interest on the Subordinated Debt Securities as provided in the
Indenture.
(xxiii) Authorization of Administrators. Each of the
Administrators of the Trust is an officer or employee of the Company and has
been duly authorized by the Company to execute and deliver the Declaration.
(xxiv) Not an Investment Company. Neither the Trust
nor the Company is, and immediately following consummation of the transactions
contemplated hereby and the application of the net proceeds therefrom neither
the Trust nor the Company 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 "1940 Act"),
without regard to Section 3(c) of the 1940 Act.
(xxv) Absence of Defaults and Conflicts. The Trust is
not in violation of the trust certificate of the Trust filed with the State of
Delaware (the "Trust Certificate") or the Declaration, and neither the Company
nor any of its Significant Subsidiaries or Insurance Subsidiaries is in
violation of its charter, by-laws or code of regulations; none of the Trust, the
Company or any subsidiary of the Company 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 Trust or the Company, as the
case may be, the issuance, sale and delivery of the Capital Securities and the
Subordinated Debt Securities, the consummation of the transactions contemplated
by the Operative Documents, and compliance by the Trust and the Company with the
terms of the Operative Documents to which they are a party have been duly
authorized by all necessary corporate action on the part of the Company and, on
the Closing Date, will have been duly authorized by all necessary action on the
part of the Trust 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,
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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 Trust or 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 regulations of the Company or any of its Significant
Subsidiaries or Insurance Subsidiaries or the Declaration or the Trust
Certificate, 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
Trust or 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 Trust or the Company or any of its Significant Subsidiaries or Insurance
Subsidiaries prior to its scheduled maturity.
(xxvi) 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.
(xxvii) 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 (xxix) below)) before or brought by any Governmental Entity, now
pending, or, to the knowledge of the Trust or the Company, threatened, against
or affecting the Trust or the Company or any of its subsidiaries, which, in the
reasonable judgment of the Trust or 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 Trust, the Company or any Insurance Subsidiary of its obligations hereunder
or thereunder; and the aggregate of all pending legal or governmental
proceedings to which the Trust or 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 or the Trust, expected to result in a
Material Adverse Effect.
(xxviii) 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 Trust or the Company of their
respective obligations under the Operative Documents, the Subordinated Debt
Securities or the Capital Securities, as applicable, or the consummation by the
Trust or the Company of the transactions contemplated by the Operative
Documents.
(xxix) Possession of Licenses and Permits. Each of
the Trust, the Company and the subsidiaries of the Company, other than any
Insurance Subsidiary, possesses such permits, orders, certificates, licenses,
approvals, consents and other authorizations
8
(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; each of the
Trust, the Company and the subsidiaries of the Company is 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
none of the Trust, the Company or any subsidiary of the Company has received any
notice of proceedings, and to the knowledge of the Trust, the Company or any
subsidiary of the Company, 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 or the
Trust, is expected to result in a Material Adverse Effect.
(xxx) Title to Property. Each of the Trust, the
Company and the subsidiaries of the Company 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 Trust or 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 Trust, the Company or any subsidiary of the Company 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 none of the Trust, the Company or any subsidiary of the
Company has any notice of any claim of any sort that has been asserted by anyone
adverse to the rights of the Trust, the Company or any subsidiary of the Company
under any of the leases or subleases under which the Trust, the Company or any
subsidiary of the Company 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.
(xxxi) 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 Capital Securities.
(xxxii) No General Solicitation. Neither the Trust or
the Company nor any of their 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 Offerors make no
9
representation) has engaged or will engage, in connection with the offering of
the Capital Securities, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the 1933 Act.
(xxxiii) No Directed Selling Efforts. Neither the
Trust or the Company nor any of their Affiliates or any person acting on its or
any of their behalf (other than the Placement Agent, as to whom the Offerors
make 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 Capital Securities.
(xxxiv) No Registration. Subject 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 Capital
Securities by the Trust in the manner contemplated by this Agreement to register
the Capital Securities, the guarantee as described in the Guarantee Agreement or
the Subordinated Debt Securities under the 1933 Act or to qualify the
Declaration, the Guarantee Agreement or the Indenture under the Trust Indenture
Act of 1939, as amended.
(xxxv) Authorization of Subscription Agreement. The
Subscription Agreement has been duly authorized, executed and delivered by each
of the Offerors, 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 each of the Offerors,
enforceable against each of the Offerors in accordance with its terms, except to
the extent that enforceability may be limited by the Enforceability Exceptions.
(b) Any certificate signed by any Trustee of the Trust or 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 Trust or the Company, as the case may be, to
the Placement Agent as to the matters covered thereby.
SECTION 2. Sale and Delivery through Placement Agent; Closing.
(a) The Offerors propose to issue and sell the Capital
Securities on May 22, 2003 (or such other date mutually agreed to by the
Offerors 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 Capital
Securities Subscription Agreement, entered into on the date hereof (the
"Subscription Agreement"), between the Offerors and the Purchaser. In addition,
the Offerors agree 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 Capital Securities to be purchased by
the Purchaser.
(b) The Offerors hereby grant to the Placement Agent the
exclusive right to arrange the placement of the Capital Securities 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 Capital Securities
shall be made by the Trust to or on behalf of the Purchaser at the offices of
Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP in The
10
City of New York, and payment of the purchase price for the Capital Securities
shall be made by the Purchaser to the Trust by wire transfer of immediately
available funds to a bank designated by the Company contemporaneous with closing
on the Closing Date.
Certificates for the Capital Securities in the aggregate
liquidation amount thereof shall be registered in the name of the Purchaser.
(d) As compensation to the Placement Agent for its placement
of the Capital Securities and in view of the fact that the proceeds of the sale
of the Capital Securities will be used to purchase the Subordinated Debt
Securities of the Company, the Company hereby agrees to pay on the Closing Date
to the Placement Agent in immediately available funds a commission of $30.00 per
Capital Security to be delivered by the Trust 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 Offerors
or their 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.
SECTION 3. Notice of Material Events. The Offerors covenant
with the Placement Agent and the Purchaser that, prior to the completion of the
initial placement of the Capital Securities through the Placement Agent, the
Offerors 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 Expenses. Whether or not this Agreement
or the Subscription Agreement is terminated or the sale of the Capital
Securities is consummated, the Company, as borrower under the Subordinated Debt
Securities, 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 Capital Securities and Subordinated Debt Securities,
(ii) the fees and disbursements of the Company's counsel, accountants and other
advisors, and (iii) the fees and disbursements of counsel for any trustee
appointed under any of the Operative Documents 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 Offerors
contained in Section 1 hereof or in certificates of any Administrator of the
Trust or any officer of the Company or any of its subsidiaries delivered
pursuant to the provisions hereof, to the performance by the Offerors of their
obligations hereunder, and to the following further conditions:
11
(a) Opinion of Counsel for the Offerors. On the Closing Date,
the Placement Agent and the Purchaser shall have received the favorable opinion,
dated as of the Closing Date, of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC, special counsel for the
Offerors, 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 Administrators
of the Trust, officers of the Company or any of its subsidiaries and public
officials.
(b) Opinion of Special Delaware Counsel for the Trust. 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, special Delaware counsel for the Trust, in substantially the form
set out in Annex B hereto, in form and substance reasonably satisfactory to
counsel for the Placement Agent.
(c) Opinion of Special Tax Counsel for the Offerors. On the
Closing Date, the Placement Agent and the Purchaser shall have received an
opinion, dated as of the Closing Date, of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC, special tax
counsel for the Offerors, that (i) the Trust will be classified for United
States federal income tax purposes as a grantor trust and not as an association
taxable as a corporation and (ii) the Subordinated Debt Securities will
constitute indebtedness of the Company for United States federal income tax
purposes, in substantially the form set out in Annex C hereto. 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.
(d) Opinion of Counsel to the Guarantee Trustee, the
Institutional Trustee, the Delaware Trustee and 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 Guarantee Trustee, the Institutional Trustee, the
Delaware Trustee and the Indenture Trustee, in substantially the form set out in
Annex D hereto, in form and substance reasonably satisfactory to counsel for the
Placement Agent.
(e) 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 and a certificate of an Administrator of the Trust, 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
Offerors have complied with all agreements and satisfied all conditions on their
part to be performed or satisfied on or prior to the Closing Date.
(f) 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 or preferred stock of
the Trust, the Company or any Insurance
12
Subsidiary or the financial strength or claims paying ability of the Trust, 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, preferred stock or the financial strength or the claims paying ability
of the Trust, the Company or any Insurance Subsidiary.
(g) 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
Capital Securities and all other capital securities, surplus notes and senior
notes contemplated in agreements similar to this Agreement and the Subscription
Agreement.
(h) 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 Capital Securities; and all proceedings taken by the Offerors in connection
with the issuance, sale and placement of the Capital Securities shall be
satisfactory in form and substance to the Placement Agent and the Purchaser.
(i) Termination of Agreement. 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
Offerors at any time on or prior to the Closing Date. If the sale of the Capital
Securities provided for herein is not consummated because any condition set
forth in Section 5(a), (b), (c), (d), (e), (f) or (h) 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 Offerors 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 Capital
Securities. 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.
SECTION 6. Offers and Sales of the Capital Securities.
(a) Offer and Sale Procedures. The Placement Agent and the
Offerors hereby establish and agree to observe the following provisions with
respect to the offer, issue, sale and placement of the Capital Securities:
(i) Offers and Sales only to the Purchaser. Offers
and sales of the Capital Securities 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 Capital
Securities.
13
(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 Capital Securities.
(iv) Purchaser Notification. Prior to or
contemporaneously with the purchase of the Capital Securities by the Purchaser,
the Placement Agent will take reasonable steps to inform the Purchaser that the
Capital Securities (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 Declaration.
(b) Covenants of the Offerors. Each of the Offerors, jointly
and severally, covenant with the Placement Agent and the Purchaser as follows:
(i) Due Diligence. In connection with the initial
placement of the Capital Securities, the Offerors agree that, prior to any offer
or sale of the Capital Securities through the Placement Agent, the Placement
Agent and the Purchaser shall have the right to make reasonable inquiries into
the business of the Trust, the Company and the subsidiaries of the Company. The
Offerors also agree to provide answers to the Placement Agent and the Purchaser,
if requested, concerning the Trust, the Company and the subsidiaries of the
Company (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 Capital Securities and the Subordinated Debt
Securities.
(ii) Integration. The Offerors agree that they will
not, and will cause their Affiliates not to, make any offer or sale of
securities of the Offerors 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 Capital Securities, the Offerors will not, and will cause their Affiliates
not to, purchase or agree to purchase or otherwise acquire any Capital
Securities 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 Offerors or any Affiliate shall submit
such Capital Securities to the Institutional Trustee for cancellation.
SECTION 7. Indemnification.
(a) Indemnification of the Placement Agent and the Purchaser.
Each of the Offerors agrees, jointly and severally, 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
14
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 information (whether written or oral) or
documents executed in favor of or furnished or made available to the Placement
Agent or the Purchaser by the Offerors; (C) any omission or alleged omission to
state in any information (whether written or oral) or documents executed in
favor of or furnished or made available to the Placement Agent or the Purchaser
by the Offerors 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 any Offeror contained herein or in the Subscription Agreement;
(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
Offerors; 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;
provided, however, that the Company agrees, jointly and severally, to indemnify
and hold harmless the Trust against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, which is due from the Trust pursuant to the
foregoing.
(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
party) also be counsel to the indemnified party. In no event shall the
15
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.
(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
Offerors, on the one hand, and the Placement Agent, on the other hand, from the
offering of the Capital Securities 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 Offerors, 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 Offerors, on the one
hand, and the Placement Agent, on the other hand, in connection with the
offering of the Capital Securities pursuant to this Agreement shall be deemed to
be in the same respective proportions as the total net proceeds
16
from the offering of the Capital Securities pursuant to this Agreement (before
deducting expenses) received by the Offerors and the total commission received
by the Placement Agent bear to the aggregate of such net proceeds and
commissions.
The Offerors 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.
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, each Trustee of the Trust 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 Offerors.
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 or Trustees of the
Trust submitted pursuant hereto shall remain operative and in full force and
effect, and shall survive delivery of the Capital Securities by the Trust.
SECTION 10. Termination of Agreement.
(a) Termination; General. The Placement Agent may terminate
this Agreement, by notice to the Offerors, 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
17
market the Capital Securities or to enforce contracts for the sale of the
Capital Securities, 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.
(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.
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 Offerors shall be directed to
American Physicians Capital, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC, ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇.
SECTION 11. Parties. This Agreement shall inure to the benefit
of and be binding upon each of the Placement Agent and the Offerors 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 Offerors, 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 Offerors 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 12. 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.
EACH OF THE TRUST AND THE COMPANY, ON BEHALF OF ITSELF AND ITS
SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, THE TRUST), HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS
LOCATED IN THE CITY OF NEW YORK
18
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.
EACH OF THE TRUST AND THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES
(INCLUDING, WITHOUT LIMITATION, THE TRUST), 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 13. 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 14. Effect of Headings. The Section headings herein
are for convenience only and shall not affect the construction hereof.
19
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 among the Placement Agent and the Offerors in accordance with its
terms.
Very truly yours,
AMERICAN PHYSICIANS CAPITAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
APCAPITAL TRUST II
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Administrator
CONFIRMED AND ACCEPTED,
as of the date first above written:
SANDLER ▇'▇▇▇▇▇ & PARTNERS, L.P.
By: Sandler ▇'▇▇▇▇▇ & Partners Corp.,
the sole general partner
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
ANNEX A
Pursuant to Section 5(a) of the Placement Agreement, special counsel for the
Offerors 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 Michigan.
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 Subordinated Debt Securities.
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 is
organized in connection with the authorization, execution, delivery or
performance by the Company of the Operative Documents or the Subordinated Debt
Securities 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.
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8. The Declaration has been duly authorized, executed and
delivered by the Company and the Administrators.
9. Each of the Guarantee Agreement and the Indenture has been
duly authorized, executed, and delivered by the Company and, assuming due
authorization, execution and delivery by the Guarantee Trustee and the Indenture
Trustee, 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 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 Subordinated Debt Securities 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.
11. The execution, delivery and performance of the Operative
Documents, the Subordinated Debt Securities and the Capital Securities, as
applicable, by the Company and the Trust and the consummation by the Company and
the Trust of the transactions contemplated by the Operative Documents, as
applicable, will not result in any violation of the charter or bylaws of the
Company, any Significant Subsidiary or any Insurance Subsidiary, the Declaration
or the Trust Certificate.
12. 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 Capital Securities
are sold in the manner contemplated by, and in accordance with, the Placement
Agreement, the Subscription Agreement and the Declaration, it is not necessary
in connection with the offer, sale and delivery of the Capital Securities by the
Trust to the Purchaser to register the Capital Securities, the Guarantee
Agreement or the
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Subordinated Debt Securities under the 1933 Act or to qualify an indenture under
the Trust Indenture Act of 1939, as amended.
13. Neither the Company nor the Trust is, and, following the
issuance of the Capital Securities and the consummation of the transactions
contemplated by the Operative Documents and the application of the proceeds
therefrom, neither the Company nor the Trust will 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 Michigan 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, Michigan 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.
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ANNEX B
Pursuant to Section 5(b) of the Placement Agreement, special
Delaware counsel for the Trust shall deliver an opinion in substantially the
following form:
1. The Trust has been duly formed and is validly existing in
good standing as a statutory trust under the Delaware Act.
2. The Declaration constitutes a valid and binding obligation
of the Sponsor and Trustees party thereto, enforceable against such Sponsor and
Trustees in accordance with its terms.
3. Under the Delaware Act and the Declaration, the Trust has
the requisite trust power and authority (i) to own its properties and conduct
its business, all as described in the Declaration, (ii) to execute and deliver,
and perform its obligations under, the Operative Documents to which it is a
party, (iii) to authorize, issue, sell and perform its obligations under its
Capital Securities and Common Securities, and (iv) to purchase and hold the
Subordinated Debt Securities.
4. The Capital Securities have been duly authorized for
issuance by the Trust and, when issued, executed and authenticated in accordance
with the Declaration and delivered against payment therefor in accordance with
the Declaration and the Subscription Agreement, will be validly issued and,
subject to the qualifications set forth in paragraph 5 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust and the
holders of the Capital Securities will be entitled to the benefits provided by
the Declaration.
5. Each holder of Capital Securities, in such capacity, will
be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note, however, that the holders of
the Capital Securities may be required to make payment or provide indemnity or
security as set forth in the Declaration.
6. Under the Declaration and the Delaware Act, the issuance of
the Capital Securities and Common Securities is not subject to preemptive
rights.
7. The Common Securities have been duly authorized for
issuance by the Trust and, when issued and executed in accordance with the
Declaration and delivered against payment therefor in accordance with the
Declaration and the subscription agreement therefor, will be validly issued
undivided beneficial interests in the assets of the Trust and the holders of the
Common Securities will be entitled to the benefits provided by the Declaration.
8. Under the Declaration and the Delaware Act, the execution
and delivery by the Trust of the Operative Documents to which it is a party, and
the performance by the Trust of its obligations thereunder, have been duly
authorized by the requisite trust action on the part of the Trust.
9. The issuance and sale by the Trust of its Capital
Securities and Common Securities, the execution, delivery and performance by the
Trust of the Operative Documents to
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which it is a party, the consummation by the Trust of the transactions
contemplated by the Operative Documents to which it is party, and the compliance
by the Trust with its obligations thereunder are not prohibited by (i) the
Declaration or the Trust Certificate, or (ii) any law or administrative
regulation of the State of Delaware applicable to the Trust.
10. No authorization, approval, consent or order of any
Delaware court or Delaware governmental authority or Delaware agency is required
to be obtained by the Trust solely in connection with the issuance and sale by
the Trust of its Capital Securities and Common Securities, the due
authorization, execution and delivery by the Trust of the Operative Documents to
which it is a party or the performance by the Trust of its obligations under the
Operative Documents to which it is a party.
11. The holders of the Capital Securities (other than those
holders who reside or are domiciled in the State of Delaware) will have no
liability for income taxes imposed by the State of Delaware solely as a result
of their participation in the Trust, and the Trust will not be liable for any
income tax imposed by the State of Delaware.
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ANNEX C
Pursuant to Section 5(c) of the Placement Agreement, special
tax counsel for the Offerors shall deliver an opinion in substantially the
following form:
1. Under current law and assuming the performance of the
Operative Documents in accordance with the terms described therein, the
Subordinated Debt Securities will be treated for United States federal income
tax purposes as indebtedness of the Company.
2. The Trust will be classified for United States federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation.
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ANNEX D
Pursuant to Section 5(d) of the Placement Agreement, counsel
to the Guarantee Trustee, the Institutional Trustee, the Delaware Trustee and
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
Declaration, the Guarantee Agreement and the Indenture (collectively, the
"Transaction Documents").
2. The execution, delivery, and performance by WTC of the
Transaction Documents have been duly authorized by all necessary corporate
action on the part of WTC, and the Transaction Documents have been duly executed
and delivered by WTC.
3. The execution, delivery and performance of the Transaction
Documents 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 Subordinated Debt Securities delivered on the date
hereof have been authenticated by due execution thereof and delivered by WTC, as
Indenture Trustee, in accordance with the Indenture. The Capital Securities
delivered on the date hereof have been authenticated by due execution thereof
and delivered by WTC, as Institutional Trustee, in accordance with the
Declaration.
5. None of the execution, delivery and performance by WTC of
the Transaction Documents 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 the United States of America governing the banking and
trust powers of WTC, except for the filing of the Trust Certificate with the
Office of the Secretary of State of the State of Delaware pursuant to the
Delaware Act (which filing has been duly made).
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