Exhibit 4
PENN-AMERICA GROUP, INC.
15,000 Capital Securities
Floating Rate Capital Securities
(Liquidation Amount $1,000.00 per Capital Security)
PLACEMENT AGREEMENT
____________________
April 25, 2003
FTN Financial Capital Markets
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Penn-America Group, Inc., a Pennsylvania corporation (the "Company"),
and its financing subsidiary, Penn-America Statutory Trust II, a Connecticut
statutory trust (the "Trust," and hereinafter together with the Company, the
"Offerors"), hereby confirm their agreement (this "Agreement") with you as
placement agents (the "Placement Agents"), as follows:
Section 1. Issuance and Sale of Securities.
1.1 Introduction. The Offerors propose to issue and sell at the Closing
(as defined in Section 2.3.1 hereof) 15,000 of the Trust's Floating Rate Capital
Securities, with a liquidation amount of $1,000.00 per capital security (the
"Capital Securities"), to I-Preferred Term Securities II, Ltd., a company with
limited liability established under the laws of the Cayman Islands (the
"Purchaser") pursuant to the terms of a Subscription Agreement entered into, or
to be entered into on or prior to the Closing Date (as defined in Section 2.3.1
hereof), between the Offerors and the Purchaser (the "Subscription Agreement"),
the form of which is attached hereto as Exhibit A and incorporated herein by
this reference.
1.2 Operative Agreements. The Capital Securities shall be fully and
unconditionally guaranteed on a subordinated basis by the Company with respect
to distributions and amounts payable upon liquidation, redemption or repayment
(the "Guarantee") pursuant and subject to the Guarantee Agreement (the
"Guarantee Agreement"), to be dated as of the Closing Date and executed and
delivered by the Company and U.S. Bank National Association ("U.S. Bank"), as
trustee (the "Guarantee Trustee"), for the benefit from time to time of the
holders of the Capital Securities. The entire proceeds from the sale by the
Trust to the holders of the Capital Securities shall be combined with the entire
proceeds from the sale by the Trust to the Company of its common securities (the
"Common Securities"), and shall be used by the Trust to purchase $15,464,000.00
in principal amount of the Floating Rate Junior Subordinated Deferrable Interest
Debentures (the "Debentures") of the Company. The Capital Securities and the
Common Securities for the Trust shall be issued pursuant to an Amended and
Restated Declaration of Trust among U.S. Bank, as institutional trustee (the
"Institutional Trustee"), the Administrators named therein, and the Company, to
be dated as of the Closing Date and in substantially the form heretofore
delivered to the Placement Agents (the "Trust Agreement"). The Debentures shall
be issued pursuant to an Indenture (the "Indenture"), to be dated as of the
Closing Date, between the Company and U.S. Bank, as indenture trustee (the
"Indenture Trustee"). The documents identified in this Section 1.2 and in
Section 1.1 are referred to herein as the "Operative Documents."
1.3 Rights of Purchaser. The Capital Securities shall be offered and sold
by the Trust directly to the Purchaser without registration of any of the
Capital Securities, the Debentures or the Guarantee under the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities laws
in reliance upon exemptions from the registration requirements of the Securities
Act and other applicable securities laws. The Offerors agree that this Agreement
shall be incorporated by reference into the Subscription Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under this Agreement and shall be entitled to enforce obligations
of the Offerors under this Agreement as fully as if the Purchaser were a party
to this Agreement. The Offerors and the Placement Agents have entered into this
Agreement to set forth their understanding as to their relationship and their
respective rights, duties and obligations.
1.4 Legends. Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act, the Capital Securities and Debentures certificates shall each contain a
legend as required pursuant to any of the Operative Documents.
Section 2. Purchase of Capital Securities.
2.1 Exclusive Rights; Purchase Price. From the date hereof until the
Closing Date (which date may be extended by mutual agreement of the Offerors and
the Placement Agents), the Offerors hereby grant to the Placement Agents the
exclusive right to arrange for the sale of the Capital Securities to the
Purchaser at a purchase price of $1,000.00 per Capital Security.
2.2 Subscription Agreement. The Offerors hereby agree to evidence their
acceptance of the subscription by countersigning a copy of the Subscription
Agreement and returning the same to the Placement Agents.
2.3 Closing and Delivery of Payment.
2.3.1 Closing; Closing Date. The sale and purchase of the Capital
Securities by the Offerors to the Purchaser shall take place at a closing (the
"Closing") at the offices
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of LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., at 10:00 a.m. (New York City time) on
May 15, 2003, or such other business day as may be agreed upon by the Offerors
and the Placement Agents (the "Closing Date"); provided, however, that in no
event shall the Closing Date occur later than May 15, 2003 unless consented to
by the Purchaser. Payment by the Purchaser shall be payable in the manner set
forth in the Subscription Agreement and shall be made prior to or on the Closing
Date.
2.3.2 Delivery. The certificate for the Capital Securities shall be in
definitive form, registered in the name of the Purchaser and in the aggregate
amount of the Capital Securities purchased by the Purchaser.
2.3.3 Transfer Agent. The Offerors shall deposit the certificate
representing the Capital Securities with the Institutional Trustee or other
appropriate party prior to the Closing Date.
2.4 Placement Agents' Fees and Expenses.
2.4.1 Placement Agents' Compensation. Because the proceeds from the sale
of the Capital Securities shall be used to purchase the Debentures from the
Company, the Company shall pay an aggregate of $30.00 for each $1,000.00 of
principal amount of Debentures sold to the Trust (excluding the Debentures
related to the Common Securities purchased by the Company). Of this amount,
$15.00 for each $1,000.00 of principal amount of Debentures shall be payable to
FTN Financial Capital Markets and $15.00 for each $1,000.00 of principal amount
of Debentures shall be payable to ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. Such amount
shall be delivered to the Trustee or such other person designated by the
Placement Agents on the Closing Date and shall be allocated between and paid to
the respective Placement Agents as directed by the Placement Agents.
2.4.2 Costs and Expenses. Whether or not this Agreement is terminated or
the sale of the Capital Securities is consummated, the Company hereby covenants
and agrees that it shall pay or cause to be paid (directly or by reimbursement)
all reasonable costs and expenses incident to the performance of the obligations
of the Offerors under this Agreement, including all fees, expenses and
disbursements of counsel and accountants for the Offerors; the reasonable costs
and charges of any trustee, transfer agent or registrar and the fees and
disbursements of counsel to any trustee, transfer agent or registrar in each
case only to the extent attributable to the Debentures and the Capital
Securities; all reasonable expenses incurred by the Offerors incident to the
preparation, execution and delivery of the Trust Agreement, the Indenture, and
the Guarantee; and all other reasonable costs and expenses incident to the
performance of the obligations of the Company hereunder and under the Trust
Agreement.
2.5 Failure to Close. If any of the conditions to the Closing specified in
this Agreement shall not have been fulfilled to the satisfaction of the
Placement Agents or if the Closing shall not have occurred on or before 10:00
a.m. (New York City time) on May 15, 2003, then each party hereto,
notwithstanding anything to the contrary in this Agreement, shall be relieved of
all further obligations under this Agreement without thereby waiving any rights
it may have by reason of such nonfulfillment or failure; provided, however, that
the obligations of
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the parties under Sections 2.4.2, 7.5 and 9 shall not be so relieved and
shall continue in full force and effect.
Section 3. Closing Conditions. The obligations of the Purchaser and the
Placement Agents on the Closing Date shall be subject to the accuracy, at and as
of the Closing Date, of the representations and warranties of the Offerors
contained in this Agreement, to the accuracy, at and as of the Closing Date, of
the statements of the Offerors made in any certificates pursuant to this
Agreement, to the performance by the Offerors of their respective obligations
under this Agreement, to compliance, at and as of the Closing Date, by the
Offerors with their respective agreements herein contained, and to the following
further conditions:
3.1 Opinions of Counsel. On the Closing Date, the Placement Agents shall
have received the following favorable opinions, each dated as of the Closing
Date: (a) from ▇▇▇▇ ▇▇▇▇▇, counsel for the Offerors and addressed to the
Purchaser and the Placement Agents in substantially the form set forth on
Exhibit B-1 attached hereto and incorporated herein by this reference, (b) from
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP, special Connecticut counsel to the Offerors and addressed
to the Purchaser, the Placement Agents and the Offerors, in substantially the
form set forth on Exhibit B-2 attached hereto and incorporated herein by this
reference, and (c) from LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., special tax
counsel to the Offerors, and addressed to the Placement Agents and the Offerors,
in substantially the form set forth on Exhibit B-3 attached hereto and
incorporated herein by this reference, subject to the receipt by LeBoeuf, Lamb,
▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. of a representation letter from the Company in the form
set forth in Exhibit B-3 completed in a manner reasonably satisfactory to
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. (collectively, the "Offerors' Counsel
Opinions"). In rendering the Offerors' Counsel Opinions, counsel to the Offerors
may rely as to factual matters upon certificates or other documents furnished by
officers, directors and trustees of the Offerors (copies of which shall be
delivered to the Placement Agents and the Purchaser) and by government
officials, and upon such other documents as counsel to the Offerors may, in
their reasonable opinion, deem appropriate as a basis for the Offerors' Counsel
Opinions. Counsel to the Offerors may specify the jurisdictions in which they
are admitted to practice and that they are not admitted to practice in any other
jurisdiction and are not experts in the law of any other jurisdiction. If the
Offerors' counsel is not admitted to practice in the State of New York, the
opinion of Offerors' counsel may assume, for purposes of the opinion, that the
laws of the State of New York are substantively identical, in all respects
material to the opinion, to the internal laws of the state in which such counsel
is admitted to practice. Such Offerors' Counsel Opinions shall not state that
they are to be governed or qualified by, or that they are otherwise subject to,
any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
3.2 Officer's Certificate. At the Closing Date, the Purchaser and the
Placement Agents shall have received certificates from the Chief Executive
Officer of the Company, dated as of the Closing Date, stating that (a) the
representations and warranties of the Offerors set forth in Section 5 hereof are
true and correct as of the Closing Date and that the Offerors have complied with
all agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to the Closing Date, (b) since the date of this Agreement
the Offerors have not incurred any liability or obligation, direct or
contingent, or entered into any material
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transactions, other than in the ordinary course of business, which is material
to the Offerors, and (c) covering such other matters as the Placement Agents may
reasonably request.
3.3 Administrator's Certificate. At the Closing Date, the Purchaser and
the Placement Agents shall have received a certificate of one or more
Administrators of the Trust, dated as of the Closing Date, stating that the
representations and warranties of the Trust set forth in Section 5 are true and
correct as of the Closing Date and that the Trust has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date.
3.4 Purchase Permitted by Applicable Laws; Legal Investment. The purchase
of and payment for the Capital Securities as described in this Agreement and
pursuant to the Subscription Agreement shall (a) not be prohibited by any
applicable law or governmental regulation, (b) not subject the Purchaser or the
Placement Agents to any penalty or, in the reasonable judgment of the Purchaser
and the Placement Agents, other onerous conditions under or pursuant to any
applicable law or governmental regulation, and (c) be permitted by the laws and
regulations of the jurisdictions to which the Purchaser and the Placement Agents
are subject.
3.5 Consents and Permits. The Company and the Trust shall have received
all consents, permits and other authorizations, and made all such filings and
declarations, as may be required from any person or entity pursuant to any law,
statute, regulation or rule (federal, state, local and foreign), or pursuant to
any agreement, order or decree to which the Company or the Trust is a party or
to which either is subject, in connection with the transactions contemplated by
this Agreement.
3.6 Sale of Purchaser Securities. The Purchaser shall have sold securities
issued by the Purchaser in an amount such that the net proceeds of such sale
shall be (i) available on the Closing Date and (ii) in an amount sufficient to
purchase the Capital Securities and all other capital or similar securities
contemplated in agreements similar to this Agreement and the Subscription
Agreement.
3.7 Information. Prior to or on the Closing Date, the Offerors shall have
furnished to the Placement Agents such further information, certificates,
opinions and documents addressed to the Purchaser and the Placement Agents,
which the Placement Agents may reasonably request, including, without
limitation, a complete set of the Operative Documents or any other documents or
certificates required by this Section 3; and all proceedings taken by the
Offerors in connection with the issuance, offer and sale of the Capital
Securities as herein contemplated shall be reasonably satisfactory in form and
substance to the Placement Agents.
If any condition specified in this Section 3 shall not have been
fulfilled when and as required in this Agreement, or if any of the opinions or
certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Placement Agents, this
Agreement may be terminated by the Placement Agents by notice to the Offerors at
any time at or prior to the Closing Date. Notice of such termination shall be
given to the Offerors in writing or by telephone or facsimile confirmed in
writing.
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Section 4. Conditions to the Offerors' Obligations. The obligations of the
Offerors to sell the Capital Securities to the Purchaser and consummate the
transactions contemplated by this Agreement shall be subject to the accuracy, at
and as of the Closing Date, of the representations and warranties of the
Placement Agents contained in this Agreement and to the following further
conditions:
4.1 Executed Agreement. The Offerors shall have received from the
Placement Agents an executed copy of this Agreement.
4.2 Fulfillment of Other Obligations. The Placement Agents shall have
fulfilled all of their other obligations and duties required to be fulfilled
under this Agreement prior to or at the Closing.
Section 5. Representations and Warranties of the Offerors. Except as set forth
on the Disclosure Schedule (as defined in Section 11.1) attached hereto, if any,
the Offerors jointly and severally represent and warrant to the Placement Agents
and the Purchaser as of the date hereof and as of the Closing Date as follows:
5.1 Securities Law Matters; Authorizations.
(a) Neither the Company nor the Trust, nor any of their "Affiliates" (as
defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation
D")), nor any person acting on any of their behalf has, directly or indirectly,
made offers or sales of any security, or solicited offers to buy any security,
under circumstances that would require the registration under the Securities Act
of any of the Capital Securities, the Guarantee or the Debentures (collectively,
the "Securities") or any other securities to be issued, or which may be issued,
by the Purchaser.
(b) Neither the Company nor the Trust, nor any of their Affiliates, nor
any person acting on its or their behalf has (i) other than the Placement
Agents, offered for sale or solicited offers to purchase the Securities, (ii)
engaged or will engage, in any "directed selling efforts" within the meaning of
Regulation S under the Securities Act ("Regulation S") with respect to the
Securities, or (iii) engaged in any form of offering, general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of any of the Securities.
(c) The Securities satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.
(d) Neither the Company nor the Trust is or, after giving effect to the
offering and sale of the Capital Securities and the consummation of the
transactions described in this Agreement, will be an "investment company" or an
entity "controlled" by an "investment company," in each case within the meaning
of Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), without regard to Section 3(c) of the Investment
Company Act.
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(e) Neither the Company nor the Trust has paid or agreed to pay to any
person or entity (other than the Placement Agents) any compensation for
soliciting another to purchase any of the Securities.
(f) No authorization, approval, consent, order, registration or
qualification of or with any court or governmental authority or agency
(including, without limitation, any insurance regulatory agency or body) is
required in connection with the offering and sale of the Securities or the
Guarantee hereunder, or the consummation by the Company or the Trust of any
other transaction contemplated hereby, except such as have been obtained and
made under the federal securities laws or state insurance laws and such as may
be required under state or foreign securities or Blue Sky laws.
5.2 Organization, Standing and Qualification of the Trust. The Trust has
been duly created and is validly existing in good standing as a statutory trust
under the Connecticut Statutory Trust Act (the "Statutory Trust Act") with the
power and authority to own property and to conduct the business it transacts and
proposes to transact and to enter into and perform its obligations under the
Operative Documents. The Trust is duly qualified to transact business as a
foreign entity and is in good standing in each jurisdiction in which such
qualification is necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the Trust. The Trust is not
a party to or otherwise bound by any agreement other than the Operative
Documents. The Trust is and will, under current law, be classified for federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation.
5.3 Trust Agreement. The Trust Agreement has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company and the Administrators of the Trust, and, assuming due
authorization, execution and delivery by the Institutional Trustee, will be a
valid and binding obligation of the Company and such Administrators, enforceable
against them in accordance with its terms, subject to (a) applicable bankruptcy,
insolvency, moratorium, receivership, reorganization, liquidation and other laws
relating to or affecting creditors' rights generally, and (b) general principles
of equity (regardless of whether considered and applied in a proceeding in
equity or at law) ("Bankruptcy and Equity"). Each of the Administrators of the
Trust is an employee or a director of the Company or of a subsidiary of the
Company and has been duly authorized by the Company to execute and deliver the
Trust Agreement.
5.4 Guarantee Agreement and the Indenture. Each of the Guarantee and the
Indenture has been duly authorized by the Company and, on the Closing Date will
have been duly executed and delivered by the Company, and, assuming due
authorization, execution and delivery by the Guarantee Trustee, in the case of
the Guarantee, and by the Indenture Trustee, in the case of the Indenture, will
be a valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to Bankruptcy and Equity.
5.5 Capital Securities and Common Securities. The Capital Securities and
the Common Securities have been duly authorized by the Trust Agreement and, when
issued and delivered against payment therefor on the Closing Date to the
Purchaser, in the case of the Capital Securities, and to the Company, in the
case of the Common Securities, will be validly
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issued and represent undivided beneficial interests in the assets of the Trust.
None of the Capital Securities or the Common Securities is subject to preemptive
or other similar rights. On the Closing Date, all of the issued and outstanding
Common Securities will be directly owned by the Company free and clear of any
pledge, security interest, claim, lien or other encumbrance.
5.6 Debentures. The Debentures have been duly authorized by the Company
and, at the Closing Date, will have been duly executed and delivered to the
Indenture Trustee for authentication in accordance with the Indenture, and, when
authenticated in the manner provided for in the Indenture and delivered against
payment therefor by the Trust, will constitute valid and binding obligations of
the Company entitled to the benefits of the Indenture enforceable against the
Company in accordance with their terms, subject to Bankruptcy and Equity.
5.7 Power and Authority. This Agreement has been duly authorized, executed
and delivered by the Company and the Trust and constitutes the valid and binding
obligation of the Company and the Trust, enforceable against the Company and the
Trust in accordance with its terms, subject to Bankruptcy and Equity.
5.8 No Defaults. The Trust is not in violation of the Trust Agreement or,
to the knowledge of the Administrators, any provision of the Statutory Trust
Act. The execution, delivery and performance by the Company or the Trust of this
Agreement or the Operative Documents to which it is a party, and the
consummation of the transactions contemplated herein or therein and the use of
the proceeds therefrom, will not conflict with or constitute a breach of, or a
default under, or result in the creation or imposition of any lien, charge or
other encumbrance upon any property or assets of the Trust, the Company or any
of the Company's Significant Subsidiaries (as defined in Section 5.10 hereof)
pursuant to any contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which the Trust, the Company or any of its Significant
Subsidiaries is a party or by which it or any of them may be bound, or to which
any of the property or assets of any of them is subject, except for a conflict,
breach, default, lien, charge or encumbrance which could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect nor will
such action result in any violation of the Trust Agreement or the Statutory
Trust Act or require the consent, approval, authorization or order of any court
or governmental agency or body. As used herein, the term "Material Adverse
Effect" means any one or more effects that individually or in the aggregate are
material and adverse to the Offeror's ability to consummate the transactions
contemplated herein or in the Operative Documents or any one or more effects
that individually or in the aggregate are material and adverse to the condition
(financial or otherwise), earnings, affairs, business prospects or results of
operations of the Company and its Significant Subsidiaries taken as whole,
whether or not occurring in the ordinary course of business.
5.9 Organization, Standing and Qualification of the Company. The Company
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the Commonwealth of Pennsylvania, with all requisite
corporate power and authority to own its properties and conduct the business it
transacts and proposes to transact, and is duly qualified to transact business
and is in good standing as a foreign corporation in each jurisdiction where the
nature of its activities requires such qualification, except where the failure
of the Company to be so qualified would not, singly or in the aggregate, have a
Material Adverse Effect.
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5.10 Subsidiaries of the Company. Each of the Company's significant
subsidiaries (as defined in Section 1-02(w) of Regulation S-X to the Securities
Act (the "Significant Subsidiaries")) is listed in Exhibit C attached hereto and
incorporated herein by this reference. Each Significant Subsidiary has been duly
organized and is validly existing and in good standing under the laws of the
jurisdiction in which it is chartered or organized, with all requisite power and
authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign entity in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of any such
Significant Subsidiaries to be so qualified would not, singly or in the
aggregate, have a Material Adverse Effect. All of the issued and outstanding
shares of capital stock of the Significant Subsidiaries (a) have been duly
authorized and are validly issued, (b) are fully paid and nonassessable, and (c)
are wholly owned, directly or indirectly, by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance, restriction upon voting
or transfer, preemptive rights, claim, equity or other defect.
5.11 Permits. The Company and each of its Significant Subsidiaries have
all requisite power and authority, and all necessary authorizations, approvals,
orders, licenses (including, without limitation, insurance licenses from the
insurance departments of the various states where the Significant Subsidiaries
write insurance business (the "Insurance Licenses")), certificates and permits,
including those that are necessary to own or lease their respective properties
(collectively, "Permits"), of and from regulatory or governmental officials,
bodies and tribunals that are material to the Company and its Significant
Subsidiaries taken as a whole and are necessary to conduct the business now
operated by them; the Company and its Significant Subsidiaries are in compliance
with the terms and conditions of all such Insurance Licenses and Permits, except
where the failure so to comply would not, singly or in the aggregate, result in
a Material Adverse Effect; all of the Insurance Licenses and Permits are valid
and in full force and effect, except where the invalidity of such Insurance
Licenses and Permits or the failure of such Insurance Licenses and Permits to be
in full force and effect would not result in a Material Adverse Effect; and
neither the Company nor any of its Significant Subsidiaries has received any
notice of proceedings relating to the revocation or modification of any such
Insurance Licenses and Permits which, singly or in the aggregate, may reasonably
be expected to result in a Material Adverse Effect.
5.12 Conflicts, Authorizations and Approvals. Neither the Company nor any
of its Significant Subsidiaries is in violation of its respective articles or
certificate of incorporation, charter or by-laws or similar organizational
documents or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which either the
Company or any of its Significant Subsidiaries is a party, or by which it or any
of them may be bound or to which any of the property or assets of the Company or
any of its Significant Subsidiaries is subject, the effect of which violation or
default in performance or observance would have, singly or in the aggregate, a
Material Adverse Effect.
5.13 Financial Statements.
(a) The consolidated balance sheets of the Company and all of its Significant
Subsidiaries as of December 31, 2001 and December 31, 2002, and related
consolidated income
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statements and statements of changes in shareholders' equity for the 3 years
ended December 31, 2002 together with the notes thereto (the "Financial
Statements"), copies of each of which have been provided to the Placement
Agents, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be disclosed therein)
and fairly present in all material respects the financial position and the
results of operations and changes in shareholders' equity of the Company and all
of its Significant Subsidiaries as of the dates and for the periods indicated
(subject, in the case of interim financial statements, to normal recurring
year-end adjustments, none of which shall be material). The books and records of
the Company and all of its Significant Subsidiaries have been, and are being,
maintained in all material respects in accordance with generally accepted
accounting principles and any other applicable legal and accounting requirements
and reflect only actual transactions.
(b) The statutory financial statements as of December 31, 2001 and
December 31, 2002 (the "Statutory Financial Statements") of each of the
Company's insurance subsidiaries have for each relevant period been prepared in
accordance with accounting practices prescribed or permitted by the National
Association of Insurance Commissioners, and with respect to each insurance
subsidiary, the appropriate Insurance Department of the state of domicile of
such insurance subsidiary, and such accounting practices have been applied on a
consistent basis throughout the periods involved.
(c) Since the respective dates of the most recent Financial Statements and
the Statutory Financial Statements, there has been no material adverse change or
development with respect to the financial condition or earnings of the Company
and all of its Significant Subsidiaries, taken as a whole.
(d) The accountants of the Company who certified the Financial Statements
are independent public accountants of the Company and its Significant
Subsidiaries within the meaning of the Securities Act and the rules and
regulations thereunder.
5.14 Regulatory Enforcement Matters. Neither the Company nor any of its
Significant Subsidiaries is subject or is party to, or has received any notice
or advice that any of them may become subject or party to, any investigation
with respect to, any cease-and-desist order, agreement, consent agreement,
memorandum of understanding or other regulatory enforcement action, proceeding
or order with or by, or is a party to any commitment letter or similar
undertaking to, or is subject to any directive by, or has been since January 1,
2001, a recipient of any supervisory letter from, or since January 1, 2001, has
adopted any board resolutions at the request of, any agency charged with the
supervision or regulation of insurance companies (a "Regulatory Agency") that
currently restricts in any material respect the conduct of their business or
that in any material manner relates to their capital adequacy, their ability or
authority to pay dividends or make distributions to their shareholders or make
payments of principal or interest on their debt obligations, their management or
their business (each, a "Regulatory Agreement"), nor has the Company or any of
its Significant Subsidiaries been advised since January 1, 2001, by any
Regulatory Agency that it is considering issuing or requesting any such
Regulatory Agreement. There is no material unresolved violation, criticism or
exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of the Company or any of its Significant
Subsidiaries.
10
5.15 No Material Change. Since December 31, 2002, there has been no
material adverse change or development with respect to the condition (financial
or otherwise), earnings, affairs, business prospects or results of operations of
the Company or its Significant Subsidiaries on a consolidated basis, whether or
not arising in the ordinary course of business.
5.16 No Undisclosed Liabilities. Neither the Company nor any of its
Significant Subsidiaries has any material liability, whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its Significant Subsidiaries giving rise to any such liability),
except (i) for liabilities set forth in the Financial Statements and Statutory
Financial Statements, respectively, (ii) normal fluctuation in the amount of the
liabilities referred to in clause (i) above occurring in the ordinary course of
business of the Company and all of its Significant Subsidiaries since the date
of the most recent balance sheet included in the Financial Statements and
Statutory Financial Statements, respectively, and (iii) as may be specifically
disclosed in writing to the Placement Agents.
5.17 Litigation. No charge, investigation, action, suit or proceeding
(including, without limitation, any proceeding to revoke or deny renewal of any
Insurance Licenses) is pending or, to the knowledge of the Offerors, threatened,
against or affecting the Company or its Significant Subsidiaries or any of their
respective properties before or by (i) any court wherein an unfavorable
decision, ruling or finding could reasonably be expected to have, singly or in
the aggregate, a Material Adverse Effect, or (ii) any regulatory, administrative
or governmental official, commission, board, agency or other authority or body,
or any arbitrator, wherein an unfavorable decision, ruling or finding could
have, singly or in the aggregate, a Material Adverse Effect.
5.18 Deferral of Interest Payments on Debentures. The Company has no
present intention to exercise its option to defer payments of interest on the
Debentures as provided in the Indenture. The Company believes that the
likelihood that it would exercise its right to defer payments of interest on the
Debentures as provided in the Indenture at any time during which the Debentures
are outstanding is remote because of the restrictions that would be imposed on
the Company's ability to declare or pay dividends or distributions on, or to
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Company's capital stock and on the Company's ability to make any payments of
principal, interest or premium on, or repay, repurchase or redeem, any of its
debt securities that rank pari passu in all respects with, or junior in interest
to, the Debentures.
Section 6. Representations and Warranties of the Placement Agents. Each
Placement Agent represents and warrants to the Offerors as to itself (but not as
to the other Placement Agent) as follows:
6.1 Organization, Standing and Qualification.
(a) FTN Financial Capital Markets is a division of First Tennessee Bank,
N.A., a national banking association duly organized, validly existing and in
good standing under
11
the laws of the United States, with full power and authority to own, lease and
operate its properties and conduct its business as currently being conducted.
FTN Financial Capital Markets is duly qualified to transact business as a
foreign corporation and is in good standing in each other jurisdiction in which
it owns or leases property or conducts its business so as to require such
qualification and in which the failure to so qualify would, individually or in
the aggregate, have a material adverse effect on the condition (financial or
otherwise), earnings, business, prospects or results of operations of FTN
Financial Capital Markets.
(b) ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, with full
power and authority to own, lease and operate its properties and conduct its
business as currently being conducted. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. is duly
qualified to transact business as a foreign corporation and is in good standing
in each other jurisdiction in which it owns or leases property or conducts its
business so as to require such qualification and in which the failure to so
qualify would, individually or in the aggregate, have a material adverse effect
on the condition (financial or otherwise), earnings, business, prospects or
results of operations of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
6.2 Power and Authority. The Placement Agent has all requisite power and
authority to enter into this Agreement, and this Agreement has been duly and
validly authorized, executed and delivered by the Placement Agent and
constitutes the legal, valid and binding agreement of the Placement Agent,
enforceable against the Placement Agent in accordance with its terms, subject to
Bankruptcy and Equity and except as any indemnification or contribution
provisions thereof may be limited under applicable securities laws.
6.3 General Solicitation. In the case of the offer and sale of the Capital
Securities, no form of general solicitation or general advertising was used by
the Placement Agent or its representatives including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Neither the Placement Agent nor its
representatives have engaged or will engage in any "directed selling efforts"
within the meaning of Regulation S with respect to the Capital Securities.
6.4 Purchaser. The Placement Agent has made such reasonable inquiry as is
necessary to determine that the Purchaser is acquiring the Capital Securities
for its own account, that the Purchaser does not intend to distribute the
Capital Securities in contravention of the Securities Act or any other
applicable securities laws, and that the Purchaser is not a "U.S. person" as
that term is defined under Rule 902 of the Securities Act.
6.5 Qualified Purchasers. The Placement Agent has not offered or sold and
will not arrange for the offer or sale of the Capital Securities except (i) in
an offshore transaction complying with Rule 903 of Regulation S, or (ii) to
those the Placement Agent reasonably believes are "accredited investors" (as
defined in Rule 501 of Regulation D), or (iii) in any other manner that does not
require registration of the Capital Securities under the Securities Act. In
connection with each such sale, the Placement Agent has taken or will take
reasonable steps to ensure that the Purchaser is aware that (a) such sale is
being made in reliance on an exemption
12
under the Securities Act, and (b) future transfers of the Capital Securities
will not be made except in compliance with applicable securities laws.
6.6. Offering Circulars. Neither the Placement Agent nor its
representatives will include any non-public information about the Company, the
Trust or any of their affiliates in any registration statement, prospectus,
offering circular or private placement memorandum used in connection with any
purchase of Capital Securities without the prior written consent of the Trust
and the Company.
Section 7. Covenants of the Offerors. The Offerors covenant and agree with
the Placement Agents and the Purchaser as follows:
7.1 Compliance with Representations and Warranties. During the period from
the date of this Agreement to the Closing Date, the Offerors shall use their
best efforts and take all action necessary or appropriate to cause their
representations and warranties contained in Section 5 hereof to be true as of
the Closing Date, after giving effect to the transactions contemplated by this
Agreement, as if made on and as of the Closing Date.
7.2 Sale and Registration of Securities. The Offerors and their Affiliates
shall not nor shall any of them permit any person acting on their behalf (other
than the Placement Agents), to directly or indirectly (a) sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) that would or could be integrated with the sale
of the Capital Securities in a manner that would require the registration under
the Securities Act of the Securities, or (b) make offers or sales of any such
Security, or solicit offers to buy any such Security, under circumstances that
would require the registration of any of such Securities under the Securities
Act.
7.3 Use of Proceeds. The Trust shall use the proceeds from the sale of the
Capital Securities to purchase the Debentures from the Company.
7.4 Investment Company. The Offerors shall not engage, or permit any
subsidiary to engage, in any activity which would cause it or any subsidiary to
be an "investment company" under the provisions of the Investment Company Act.
7.5 Reimbursement of Expenses. If the sale of the Capital Securities
provided for herein is not consummated (a) because any condition set forth in
Section 3 hereof is not satisfied, or (b) because of any refusal, inability or
failure on the part of the Company or the Trust to perform any agreement herein
or comply with any provision hereof other than by reason of a breach by the
Placement Agents, the Company shall reimburse the Placement Agents upon demand
for all of their pro rata share of out-of-pocket expenses (including reasonable
fees and disbursements of counsel) in an amount not to exceed $50,000.00 that
shall have been incurred by them in connection with the proposed purchase and
sale of the Capital Securities. Notwithstanding the foregoing, the Company shall
have no obligation to reimburse the Placement Agents for their out-of-pocket
expenses if the sale of the Capital Securities fails to occur because the
condition set forth in Section 3.6 is not satisfied or because either of the
Placement Agents fails to fulfill a condition set forth in Section 4.
13
7.6 Directed Selling Efforts, Solicitation and Advertising. In connection
with any offer or sale of any of the Securities, the Offerors shall not, nor
shall either of them permit any of their Affiliates or any person acting on
their behalf, other than the Placement Agents, to, (a) engage in any "directed
selling efforts" within the meaning of Regulation S, or (b) engage in any form
of general solicitation or general advertising (as defined in Regulation D).
7.7 Compliance with Rule 144A(d)(4) under the Securities Act. So long as
any of the Securities are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, the Offerors will, during
any period in which they are not subject to and in compliance with Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or the Offerors are not exempt from such reporting requirements pursuant to and
in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder
of such restricted securities and to each prospective purchaser (as designated
by such holder) of such restricted securities, upon the request of such holder
or prospective purchaser in connection with any proposed transfer, any
information required to be provided by Rule 144A(d)(4) under the Securities Act,
if applicable. This covenant is intended to be for the benefit of the holders,
and the prospective purchasers designated by such holders, from time to time of
such restricted securities. The information provided by the Offerors pursuant to
this Section 7.7 will not, at the date thereof, contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
7.8 Quarterly Reports. Within 50 days of the end of each of the first
three calendar year quarters and within 75 days of the end of each calendar year
during which the Debentures are issued and outstanding, the Offerors shall
submit to The Bank of New York a completed quarterly report in the form attached
hereto as Exhibit D. The Offerors acknowledge and agree that The Bank of New
York and its successors and assigns is a third party beneficiary of this Section
7.8.
Section 8. Covenants of the Placement Agents. The Placement Agents
covenant and agree with the Offerors that, during the period from the date of
this Agreement to the Closing Date, the Placement Agents shall use their best
efforts and take all action necessary or appropriate to cause their
representations and warranties contained in Section 6 to be true as of Closing
Date, after giving effect to the transactions contemplated by this Agreement, as
if made on and as of the Closing Date. The Placement Agents further covenant and
agree not to engage in hedging transactions with respect to the Capital
Securities unless such transactions are conducted in compliance with the
Securities Act. Section 9. Indemnification.
9.1 Indemnification Obligation. The Offerors shall jointly and severally
indemnify and hold harmless the Placement Agents and the Purchaser and each of
their respective agents, employees, officers and directors and each person that
controls either of the Placement Agents or the Purchaser within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, and agents,
employees, officers and directors or any such controlling person of either of
the Placement Agents or the Purchaser (each such person or entity, an
"Indemnified Party") from and against any and all losses, claims, damages,
judgments, liabilities or expenses,
14
joint or several, to which such Indemnified Party may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Offerors), insofar as such losses, claims, damages, judgments, liabilities or
expenses (or actions in respect thereof) arise out of, or are based upon, or
relate to, in whole or in part, (a) any untrue statement or alleged untrue
statement of a material fact contained in any information (whether written or
oral) or documents executed in favor of, furnished or made available to the
Placement Agents or the Purchaser by the Offerors, or (b) any omission or
alleged omission to state in any information (whether written or oral) or
documents executed in favor of, furnished or made available to the Placement
Agents or the Purchaser by the Offerors a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall
reimburse each Indemnified Party for any legal and other expenses as such
expenses are reasonably incurred by such Indemnified Party in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, judgment, liability, expense or action described in this Section 9.1. In
addition to their other obligations under this Section 9, the Offerors hereby
agree that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of, or based upon, or
related to the matters described above in this Section 9.1, they shall reimburse
each Indemnified Party on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Indemnified Party
shall promptly return such amounts to the Offerors together with interest,
determined on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time by First
Tennessee Bank, N.A. (the "Prime Rate"). Any such interim reimbursement payments
that are not made to an Indemnified Party within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.
9.2 Conduct of Indemnification Proceedings. Promptly after receipt by an
Indemnified Party under this Section 9 of notice of the commencement of any
action, such Indemnified Party shall, if a claim in respect thereof is to be
made against the Offerors under this Section 9, notify the Offerors in writing
of the commencement thereof; but, subject to Section 9.4, the omission to so
notify the Offerors shall not relieve them from any liability pursuant to
Section 9.1 which the Offerors may have to any Indemnified Party unless and to
the extent that the Offerors did not otherwise learn of such action and such
failure by the Indemnified Party results in the forfeiture by the Offerors of
substantial rights and defenses. In case any such action is brought against any
Indemnified Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to the
extent that they may wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Party; provided, however, if the defendants in
any such action include both the Indemnified Party and the Offerors and the
Indemnified Party shall have reasonably concluded that there may be a conflict
between the positions of the Offerors and the Indemnified Party in conducting
the defense of any such action or that there may be legal defenses available to
it and/or other Indemnified Parties which are different from or additional to
those available to the Offerors, the Indemnified Party shall have the right to
select separate counsel to assume such
15
legal defenses and to otherwise participate in the defense of such action on
behalf of such Indemnified Party. Upon receipt of notice from the Offerors to
such Indemnified Party of their election to so assume the defense of such action
and approval by the Indemnified Party of counsel, the Offerors shall not be
liable to such Indemnified Party under this Section 9 for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof unless (a) the Indemnified Party shall have employed such
counsel in connection with the assumption of legal defenses in accordance with
the proviso in the preceding sentence (it being understood, however, that the
Offerors shall not be liable for the expenses of more than one separate counsel
representing the Indemnified Parties who are parties to such action), or (b) the
Offerors shall not have employed counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party within a reasonable time
after notice of commencement of the action, in each of which cases the fees and
expenses of counsel of such Indemnified Party shall be at the expense of the
Offerors.
9.3 Contribution. If the indemnification provided for in this Section 9 is
required by its terms, but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an Indemnified Party under Section 9.1
in respect of any losses, claims, damages, judgments, liabilities or expenses
referred to herein or therein, then the Offerors shall contribute to the amount
paid or payable by such Indemnified Party as a result of any losses, claims,
damages, judgments, liabilities or expenses referred to herein (a) in such
proportion as is appropriate to reflect the relative benefits received by the
Offerors, on the one hand, and the Indemnified Party, on the other hand, from
the offering of such Capital Securities, or (b) if the allocation provided by
clause (a) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (a)
above but also the relative fault of the Offerors, on the one hand, and the
Placement Agents, on the other hand, in connection with the statements or
omissions or inaccuracies in the representations and warranties herein or other
breaches which resulted in such losses, claims, damages, judgments, liabilities
or expenses, as well as any other relevant equitable considerations. The
respective relative benefits received by the Offerors, on the one hand, and the
Placement Agents, on the other hand, shall be deemed to be in the same
proportion, in the case of the Offerors, as the total price paid to the Offerors
for the Capital Securities sold by the Offerors to the Purchaser (net of the
compensation paid to the Placement Agents hereunder, but before deducting
expenses), and in the case of the Placement Agents, as the compensation received
by them, bears to the total of such amounts paid to the Offerors and received by
the Placement Agents as compensation. The relative fault of the Offerors and the
Placement Agents shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact or the inaccurate or the
alleged inaccurate representation and/or warranty relates to information
supplied by the Offerors or the Placement Agents and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The provisions set forth in Section 9.2 with respect
to notice of commencement of any action shall apply if a claim for contribution
is made under this Section 9.3; provided, however, that no additional notice
shall be required with respect to any action for which notice has been given
under Section 9.2 for purposes of indemnification. The Offerors and the
Placement Agents agree that it would not be just and equitable if contribution
pursuant to this Section 9.3 were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to in this Section 9.3. The amount paid or payable by an
Indemnified Party as a result of the losses,
16
claims, damages, judgments, liabilities or expenses referred to in this Section
9.3 shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim. In no event
shall the liability of the Placement Agents hereunder be greater in amount than
the dollar amount of the compensation (net of payment of all expenses) received
by the Placement Agents upon the sale of the Capital Securities giving rise to
such obligation. No person found guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.
9.4 Additional Remedies. The indemnity and contribution agreements
contained in this Section 9 are in addition to any liability that the Offerors
may otherwise have to any Indemnified Party.
9.5 Additional Indemnification. The Company shall indemnify and hold
harmless the Trust against all loss, liability, claim, damage and expense
whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.
Section 10. Rights and Responsibilities of Placement Agents.
10.1 Reliance. In performing their duties under this Agreement, the
Placement Agents shall be entitled to rely upon any notice, signature or writing
which they shall in good faith believe to be genuine and to be signed or
presented by a proper party or parties. The Placement Agents may rely upon any
opinions or certificates or other documents delivered by the Offerors or their
counsel or designees to either the Placement Agents or the Purchaser.
10.2 Rights of Placement Agents. In connection with the performance of
their duties under this Agreement, the Placement Agents shall not be liable for
any error of judgment or any action taken or omitted to be taken unless the
Placement Agents were grossly negligent or engaged in willful misconduct in
connection with such performance or non-performance. No provision of this
Agreement shall require the Placement Agents to expend or risk their own funds
or otherwise incur any financial liability on behalf of the Purchaser in
connection with the performance of any of their duties hereunder. The Placement
Agents shall be under no obligation to exercise any of the rights or powers
vested in them by this Agreement.
Section 11. Miscellaneous.
11.1 Disclosure Schedule. The term "Disclosure Schedule," as used herein,
means the schedule, if any, attached to this Agreement that sets forth items the
disclosure of which is necessary or appropriate as an exception to one or more
representations or warranties contained in Section 5 hereof; provided, that any
item set forth in the Disclosure Schedule as an exception to a representation or
warranty shall be deemed an admission by the Offerors that such item represents
an exception, fact, event or circumstance that is reasonably likely to result in
a Material Adverse Effect. The Disclosure Schedule shall be arranged in
paragraphs corresponding to the section numbers contained in Section 5. Nothing
in the Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein unless the Disclosure Schedule
identifies the exception with reasonable particularity and
17
describes the relevant facts in reasonable detail. Without limiting the
generality of the immediately preceding sentence, the mere listing (or inclusion
of a copy) of a document or other item in the Disclosure Schedule shall not be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the representation or warranty has to do with the existence of the
document or other item itself. Information provided by the Company in response
to any due diligence questionnaire shall not be deemed part of the Disclosure
Schedule and shall not be deemed to be an exception to one or more
representations or warranties contained in Section 5 hereof unless such
information is specifically included on the Disclosure Schedule in accordance
with the provisions of this Section 11.1.
11.2 Notices. Prior to the Closing, and thereafter with respect to matters
pertaining to this Agreement only, all notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier or overnight air courier guaranteeing next
day delivery:
if to the Placement Agents, to:
FTN Financial Capital Markets
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
General Counsel
with a copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
and
Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
18
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
if to the Offerors, to:
Penn-America Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
All such notices and communications shall be deemed to have been duly
given (a) at the time delivered by hand, if personally delivered, (b) five
business days after being deposited in the mail, postage prepaid, if mailed, (c)
when answered back, if telexed, (d) the next business day after being
telecopied, or (e) the next business day after timely delivery to a courier, if
sent by overnight air courier guaranteeing next day delivery. From and after the
Closing, the foregoing notice provisions shall be superseded by any notice
provisions of the Operative Documents under which notice is given. The Placement
Agents, the Company, and their respective counsel, may change their respective
notice addresses from time to time by written notice to all of the foregoing
persons.
11.3 Parties in Interest, Successors and Assigns. Except as expressly set
forth herein, this Agreement is made solely for the benefit of the Placement
Agents, the Purchaser and the Offerors and any person controlling the Placement
Agents, the Purchaser or the Offerors and their respective successors and
assigns; and no other person shall acquire or have any right under or by virtue
of this Agreement. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
11.4 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
11.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS OF
LAWS) OF THE STATE OF NEW YORK.
19
11.7 Entire Agreement. This Agreement, together with the other Operative
Documents and the other documents delivered in connection with the transactions
contemplated by this Agreement, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, together with the other Operative Documents and the
other documents delivered in connection with the transaction contemplated by
this Agreement, supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
11.8 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Placement Agents' and the Purchaser's rights and
privileges shall be enforceable to the fullest extent permitted by law.
11.9 Survival. The Placement Agents and the Offerors, respectively, agree
that the representations, warranties and agreements made by each of them in this
Agreement and in any certificate or other instrument delivered pursuant hereto
shall remain in full force and effect and shall survive the delivery of, and
payment for, the Capital Securities.
Signatures appear on the following page
20
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance of this Agreement and deliver such counterpart to the Offerors
whereupon this Agreement will become binding between us in accordance with its
terms.
Very truly yours,
PENN-AMERICA GROUP, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Penn-America STATUTORY TRUST II
By:
-----------------------------
Name:
-----------------------------
Title: Administrator
CONFIRMED AND ACCEPTED,
as of the date first set forth above
FTN FINANCIAL CAPITAL MARKETS,
a division of First Tennessee Bank, N.A.,
as a Placement Agent
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title Managing Director
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, INC.
a New York corporation, as a Placement Agent
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
21
EXHIBIT A
FORM OF SUBSCRIPTION AGREEMENT
[TRUST NAME] STATUTORY TRUST [I]
[COMPANY NAME]
SUBSCRIPTION AGREEMENT
[CLOSING], 2003
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among [TRUST NAME]
Statutory Trust [I] (the "Trust"), a statutory trust created under the
Connecticut Statutory Trust Act (Chapter 615 of Title 34 of the Connecticut
General Statutes, Section 500, et seq.), [COMPANY NAME], a [STATE] corporation,
with its principal offices located at [ADDRESS1], [ADDRESS2] (the "Company" and,
collectively with the Trust, the "Offerors"), and I-Preferred Term Securities
II, Ltd. (the "Purchaser").
RECITALS:
A. The Trust desires to issue [NUMBER OF CAPITAL SECURITIES] of its
Floating Rate Capital Securities (the "Capital Securities"), liquidation amount
$1,000.00 per Capital Security, representing an undivided beneficial interest in
the assets of the Trust (the "Offering"), to be issued pursuant to an Amended
and Restated Declaration of Trust (the "Declaration") by and among the Company,
U.S. Bank National Association ("U.S. Bank"), the administrators named therein,
and the holders (as defined therein), which Capital Securities are to be
guaranteed by the Company with respect to distributions and payments upon
liquidation, redemption and otherwise pursuant to the terms of a Guarantee
Agreement between the Company and U.S. Bank, as trustee (the "Guarantee"); and
B. The proceeds from the sale of the Capital Securities will be combined
with the proceeds from the sale by the Trust to the Company of its common
securities, and will be used by the Trust to purchase an equivalent amount of
Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company
(the "Debentures") to be issued by the Company pursuant to an indenture to be
executed by the Company and U.S. Bank, as trustee (the "Indenture"); and
C. In consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to
purchase from the Trust [NUMBER OF CAPITAL SECURITIES] Capital Securities at a
price equal to $1,000.00 per Capital Security (the "Purchase Price") and the
Trust agrees to sell such Capital
Securities to the Purchaser for said Purchase Price. The rights and preferences
of the Capital Securities are set forth in the Declaration. The Purchase Price
is payable in immediately available funds on [CLOSING], 2003, or such other
business day as may be designated by the Purchaser, but in no event later than
[LAST CLOSING], 2003 (the "Closing Date"). The Offerors shall provide the
Purchaser wire transfer instructions no later than 1 day following the date
hereof.
1.2. The certificate for the Capital Securities shall be delivered by the
Trust on the Closing Date to the Purchaser or its designee.
1.3. The Placement Agreement, dated [PRICING], 2003 (the "Placement
Agreement"), among the Offerors and the Placement Agents identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the Offering. The Placement
Agreement is hereby incorporated by reference into this Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors under such Placement Agreement as fully as if the
Purchaser were a party to such Placement Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that neither the Capital
Securities, the Debentures nor the Guarantee have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable securities law, are being offered for sale by the Trust in
transactions not requiring registration under the Securities Act, and may not be
offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.
2.2. The Purchaser represents, warrants and certifies that (i) it is not a
"U.S. person" as such term is defined in Rule 902 under the Securities Act, (ii)
it is not acquiring the Capital Securities for the account or benefit of any
such U.S. person, (iii) the offer and sale of Capital Securities to the
Purchaser constitutes an "offshore transaction" under Regulation S of the
Securities Act, and (iv) it will not engage in hedging transactions with regard
to the Capital Securities unless such transactions are conducted in compliance
with the Securities Act and the Purchaser agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.
2.3. The Purchaser represents and warrants that it is purchasing the
Capital Securities for its own account, for investment, and not with a view to,
or for offer or sale in connection with, any distribution thereof in violation
of the Securities Act or other applicable securities laws, subject to any
requirement of law that the disposition of its property be at all times within
its control and subject to its ability to resell such Capital Securities
pursuant to an effective registration statement under the Securities Act or
under Rule 144A or any other exemption from registration available under the
Securities Act or any other applicable Securities law.
A-2
2.4. The Purchaser represents and warrants that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.
2.5. The Purchaser, a Cayman Islands Company whose business includes
issuance of certain notes and acquiring the Capital Securities and other similar
securities, represents and warrants that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of purchasing the Capital Securities, has had the opportunity to ask
questions of, and receive answers and request additional information from, the
Offerors and is aware that it may be required to bear the economic risk of an
investment in the Capital Securities.
2.6. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.
2.7. The Purchaser represents and warrants that this Agreement has been
duly authorized, executed and delivered by the Purchaser.
2.8. The Purchaser represents and warrants that (i) the Purchaser is not
in violation or default of any term of its Memorandum of Association or Articles
of Association, of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is a party or by which it is bound
or of any judgment, decree, order, writ or, to its knowledge, any statute, rule
or regulation applicable to the Purchaser which would prevent the Purchaser from
performing any material obligation set forth in this Agreement; and (ii) the
execution, delivery and performance of and compliance with this Agreement, and
the consummation of the transactions contemplated herein, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or the suspension, revocation, impairment, forfeiture or non-renewal of any
permit, license, authorization or approval applicable to the Purchaser, its
business or operations or any of its assets or properties which would prevent
the Purchaser from performing any material obligations set forth in this
Agreement.
2.9. The Purchaser represents and warrants that the Purchaser is an
exempted company with limited liability duly incorporated, validly existing and
in good standing under the laws of the jurisdiction where it is organized, with
full power and authority to perform its obligations under this Agreement.
2.10. The Purchaser understands and acknowledges that the Company will
rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that, if any of the
acknowledgments, representations, warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate, it
shall promptly notify the Company.
A-3
2.11. The Purchaser understands that no public market exists for any of
the Capital Securities, and that it is unlikely that a public market will ever
exist for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:
To the Offerors: [COMPANY NAME]
[ADDRESS1]
[ADDRESS2]
Attention: [CONTACT]
Fax: [FAX]
To the Purchaser: I-Preferred Term Securities II, Ltd.
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇ House
South Church Street
▇▇▇▇▇▇ Town, Grand Cayman
Cayman Islands
Attention: The Directors
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Unless otherwise expressly provided herein, notices shall be deemed to
have been given on the date of mailing, except notice of change of address,
which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the Purchaser,
this Agreement shall become a binding obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
A-4
3.5. The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
3.6. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
3.7. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of the Offerors' and the Purchaser's rights and privileges
shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
A-5
IN WITNESS WHEREOF, I have set my hand the day and year first written
above.
I-PREFERRED TERM SECURITIES II, LTD.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the
day and year first written above.
[COMPANY NAME]
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
[TRUST NAME] STATUTORY TRUST [I]
By:
-----------------------------
Name:
-----------------------------
Title: Administrator
▇-▇
▇▇▇▇▇▇▇ ▇-▇
-----------
FORM OF COMPANY COUNSEL OPINION
-------------------------------
[CLOSING], 2003
I-Preferred Term Securities II, Ltd. FTN Financial Capital Markets
c/o Maples Finance Limited ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
P. O. Box 1093 GT ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇▇▇▇ Town, Grand Cayman 787 7th Avenue, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel to [COMPANY NAME] (the "Company"), a [STATE]
corporation in connection with a certain Placement Agreement, dated [PRICING],
2003, (the "Placement Agreement"), between the Company and [TRUST NAME]
Statutory Trust [I] (the "Trust"), on one hand, and FTN Financial Capital
Markets and ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. (the "Placement Agents"), on the other
hand. Pursuant to the Placement Agreement, and subject to the terms and
conditions stated therein, the Trust will issue and sell to I-Preferred Term
Securities II, Ltd. (the "Purchaser"), $[____________] aggregate principal
amount of Floating Rate Capital Securities (liquidation amount $1,000.00 per
capital security) (the "Capital Securities").
Capitalized terms used herein and not otherwise defined shall have the
same meanings ascribed to them in the Placement Agreement.
The law covered by the opinions expressed herein is limited to the law
of the United States of America and of the State[s] of [STATE OF INCORPORATION
AND STATE WHERE COMPANY'S PRINCIPAL BUSINESS IS LOCATED].
We have made such investigations of law as, in our judgment, were
necessary to render the following opinions. We have also reviewed (a) the
Company's Articles of Incorporation, as amended, and its By-Laws, as amended,
and (b) such corporate documents, records, information and certificates of the
Company and its Significant Subsidiaries, certificates of public officials or
government authorities and other documents as we have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed. As to certain
facts material to our opinions, we have relied, with your permission, upon
statements, certificates or representations, including those delivered or made
in connection with the above-referenced transaction, of officers and other
representatives of the Company and its Significant Subsidiaries and the Trust.
B-1-1
As used herein, the phrase "to our knowledge" or "to the best of our
knowledge" or other similar phrase means the actual knowledge of the attorneys
who have had active involvement in the transactions described above or who have
prepared or signed this opinion letter, or who otherwise have devoted
substantial attention to legal matters for the Company.
Based upon and subject to the foregoing and the further qualifications
set forth below, we are of the opinion as of the date hereof that:
1. The Company is validly existing and in good standing under the laws of
the State of [STATE]. Each of the Significant Subsidiaries is validly existing
and in good standing under the laws of its jurisdiction of organization. Each of
the Company and the Significant Subsidiaries has full corporate power and
authority to own or lease its properties and to conduct its business as such
business is currently conducted in all material respects. To the best of our
knowledge, all outstanding shares of capital stock of the Significant
Subsidiaries have been duly authorized and validly issued, and are fully paid
and nonassessable and owned of record and beneficially, directly or indirectly
by the Company.
2. The issuance, sale and delivery of the Debentures in accordance with
the terms and conditions of the Placement Agreement and the Operative Documents
have been duly authorized by all necessary actions of the Company. The issuance,
sale and delivery of the Debentures by the Company and the issuance, sale and
delivery of the Trust Securities by the Trust do not give rise to any preemptive
or other rights to subscribe for or to purchase any shares of capital stock or
equity securities of the Company or the Significant Subsidiaries pursuant to the
corporate Articles of Incorporation or Charter, By-Laws or other governing
documents of the Company or the Significant Subsidiaries, or, to the best of our
knowledge, any agreement or other instrument to which either Company or the
Significant Subsidiaries is a party or by which the Company or the Significant
Subsidiaries may be bound.
3. The Company has all requisite corporate power to enter into and perform
its obligations under the Placement Agreement and the Subscription Agreement,
and the Placement Agreement and the Subscription Agreement have been duly and
validly authorized, executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company enforceable in accordance
with their terms, except as the enforcement thereof may be limited by general
principles of equity and by bankruptcy or other laws affecting creditors' rights
generally, and except as the indemnification and contribution provisions thereof
may be limited under applicable laws and certain remedies may not be available
in the case of a non-material breach.
4. Each of the Indenture, the Trust Agreement and the Guarantee Agreement
has been duly authorized, executed and delivered by the Company, and is a valid
and legally binding obligation of the Company enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws affecting the rights and remedies of
creditors generally and of general principles of equity.
5. The Debentures have been duly authorized, executed and delivered by the
Company, are entitled to the benefits of the Indenture and are legal, valid and
binding obligations
B-1-2
of the Company enforceable against the Company in accordance with their terms,
subject to the effect of bankruptcy, insolvency, reorganization, receivership,
moratorium and other laws affecting the rights and remedies of creditors
generally and of general principles of equity.
6. To the best of our knowledge, neither the Company, the Trust, nor any
other Significant Subsidiaries of the Company is in breach or violation of, or
default under, with or without notice or lapse of time or both, its Articles of
Incorporation or Charter, By-Laws or other governing documents (including
without limitation, the Trust Agreement). The execution, delivery and
performance of the Placement Agreement and the Operative Documents and the
consummation of the transactions contemplated by the Placement Agreement and the
Operative Documents do not and will not (i) result in the creation or imposition
of any material lien, claim, charge, encumbrance or restriction upon any
property or assets of the Company or its Significant Subsidiaries, or (ii)
conflict with, constitute a material breach or violation of, or constitute a
material default under, with or without notice or lapse of time or both, any of
the terms, provisions or conditions of (A) the Articles of Incorporation or
Charter, By-Laws or other governing documents of the Company or its Significant
Subsidiaries, or (B) to the best of our knowledge, any material contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease,
franchise, license or any other agreement or instrument to which the Company or
its Significant Subsidiaries is a party or by which any of them or any of their
respective properties may be bound or (C) any order, decree, judgment,
franchise, license, permit, rule or regulation of any court, arbitrator,
government, or governmental agency or instrumentality, domestic or foreign,
known to us having jurisdiction over the Company or its Significant Subsidiaries
or any of their respective properties which, in the case of each of (i) or (ii)
above, is material to the Company and its Significant Subsidiaries on a
consolidated basis.
7. Except for filings, registrations or qualifications that may be
required by applicable securities laws, no authorization, approval, consent or
order of, or filing, registration or qualification with, any person (including,
without limitation, any court, governmental body or authority) is required under
the laws of the State of [STATE WHERE COMPANY'S PRINCIPAL BUSINESS IS LOCATED]
in connection with the transactions contemplated by the Placement Agreement and
the Operative Documents in connection with the offer and sale of the Capital
Securities as contemplated by the Placement Agreement and the Operative
Documents.
8. To the best of our knowledge (i) no action, suit or proceeding at law
or in equity is pending or threatened to which the Offerors or their Significant
Subsidiaries are or may be a party, and (ii) no action, suit or proceeding is
pending or threatened against or affecting the Offerors or their Significant
Subsidiaries or any of their properties, before or by any court or governmental
official, commission, board or other administrative agency, authority or body,
or any arbitrator, wherein an unfavorable decision, ruling or finding could
reasonably be expected to have a material adverse effect on the consummation of
the transactions contemplated by the Placement Agreement and the Operative
Documents or the issuance and sale of the Capital Securities as contemplated
therein or the condition (financial or otherwise), earnings, affairs, business,
or results of operations of the Offerors and their Significant Subsidiaries on a
consolidated basis.
B-1-3
9. Assuming the truth and accuracy of the representations and warranties
of the Placement Agents in the Placement Agreement and the Purchaser in the
Subscription Agreement, it is not necessary in connection with the offering,
sale and delivery of the Capital Securities, the Debentures and the Guarantee
Agreement (or the Guarantee) to register the same under the Securities Act of
1933, as amended, under the circumstances contemplated in the Placement
Agreement and the Subscription Agreement.
10. Neither the Company nor the Trust is or after giving effect to the
offering and sale of the Capital Securities and the consummation of the
transactions described in the Placement Agreement will be, an "investment
company" or an entity "controlled" by an "investment company," in each case
within the meaning of the Investment Company Act of 1940, as amended, without
regard to Section 3(c) of such Act .
The opinion expressed in the first two sentences of numbered paragraph
1 of this Opinion Letter is based solely upon certain certificates and
confirmations issued by the applicable governmental officer or authority with
respect to each of the Company and the Significant Subsidiaries.
With respect to the foregoing opinions, since no member of this firm is
actively engaged in the practice of law in the States of Connecticut or New
York, we do not express any opinions as to the laws of such states and have (i)
relied, with your approval, upon the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP with
respect to matters of Connecticut law, and (ii) assumed, with your approval and
without rendering any opinion to such effect, that the laws of the State of New
York, in all respects material to this opinion, are substantively identical to
the laws of the State of [STATE WHERE COMPANY'S PRINCIPAL BUSINESS IS LOCATED],
without regard to conflict of law provisions.
This opinion is rendered to you solely pursuant to Section 3.1(a) of
the Placement Agreement. As such, it may be relied upon by you only and may not
be used or relied upon by any other person for any purpose whatsoever without
our prior written consent.
Very truly yours,
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
-----------
FORM OF CONNECTICUT COUNSEL OPINION
-----------------------------------
TO THE PARTIES LISTED
ON SCHEDULE I HERETO
Ladies and Gentlemen:
We have acted as special counsel in the State of Connecticut (the
"State") for [TRUST NAME] Statutory Trust [I] (the "Trust"), a Connecticut
statutory trust formed pursuant to the Amended and Restated Declaration of Trust
(the "Trust Agreement") dated as of the date hereof, among [COMPANY NAME], a
[STATE] corporation (the "Sponsor"), U.S. Bank National Association, a national
banking association ("U.S. Bank"), in its capacity as Institutional Trustee (the
"Institutional Trustee"), and [NAMES OF ADMINISTRATORS], each, an individual,
(each, an "Administrator") in connection with the issuance by the Trust to the
Holders (as defined in the Trust Agreement) of its capital securities (the
"Capital Securities") pursuant to the Placement Agreement dated as of [PRICING],
2003 (the "Placement Agreement"), the issuance by the Trust to the Sponsor of
its Common Securities, pursuant to the Trust Agreement and the acquisition by
the Trust from the Sponsor of Debentures, issued pursuant to the Indenture dated
as of the date hereof (the "Indenture").
The Institutional Trustee has requested that we deliver this opinion to
you in accordance with Section 3.1(b) of the Placement Agreement. Capitalized
terms not otherwise defined herein shall have the meanings specified in, or
defined by reference in or set forth in the Operative Documents (as defined
below).
Our representation of the Trust has been as special counsel for the
limited purposes stated above. As to all matters of fact (including factual
conclusions and characterizations and descriptions of purpose, intention or
other state of mind), we have relied, with your permission, entirely upon (i)
the representations and warranties of the parties set forth in the Operative
Documents, and (ii) certificates delivered to us by the management of U.S. Bank,
and have assumed, with your permission, without independent inquiry, the
accuracy of those representations, warranties and certificates.
We have examined the following documents to which the Trust is a party,
each of which is dated the date hereof, unless otherwise noted:
(i) the Trust Agreement;
(ii) the Placement Agreement;
(iii) the Subscription Agreement;
(iv) the Certificate of Common Securities;
B-2-1
(v) the Certificate of Capital Securities;
(vi) the Guarantee Agreement;
(vii) the Certificate of Trust filed with the
Secretary of State of the State of
Connecticut dated [FILE DATE], 2003; and
(viii) a Certificate of Legal Existence for the
Trust obtained from the Secretary of State
of the State of Connecticut dated
[CERTIFICATE DATE], 2003 (the "Certificate
of Legal Existence").
The documents referenced in subparagraphs (i) through (vii) above are
hereinafter referred to collectively as the "Operative Documents."
We have also examined originals, or copies, certified or otherwise
identified to our satisfaction, of such other corporate and public records and
agreements, instruments, certificates and other documents as we have deemed
necessary or appropriate for the purposes of rendering this opinion. For
purposes of our opinion rendered in paragraph 1 below, with respect to the legal
existence of the Trust, our opinion relies entirely upon and is limited by the
Certificate of Legal Existence, which is attached hereto as Exhibit A.
We have assumed, with your permission, the genuineness of all
signatures (other than those on behalf of U.S. Bank, the Guarantee Trustee,
Indenture Trustee, Institutional Trustee and the Trust), the conformity of the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing any document (other than
those individuals executing documents on behalf of U.S. Bank, the Guarantee
Trustee, Indenture Trustee, Institutional Trustee and the Trust).
When an opinion set forth below is given to the best of our knowledge,
or to our knowledge, or with reference to matters of which we are aware or which
are known to us, or with another similar qualification, the relevant knowledge
or awareness is limited to the actual knowledge or awareness of the individual
lawyers in the firm who have participated directly and substantively in the
specific transactions to which this opinion relates and without any special or
additional investigation undertaken for the purposes of this opinion except as
indicated herein.
For the purposes of this opinion we have made such examination of law
as we have deemed necessary. The opinions expressed below are limited solely to
the internal substantive laws of the State (as applied by courts located in the
State without regard to choice of law) and we express no opinion as to the laws
of any other jurisdiction. To the extent to which this opinion deals with
matters governed by or relating to the laws of any other state or jurisdiction,
we have assumed, with your permission, that the Operative Documents are governed
by the internal substantive laws of the State.
B-2-2
We express no opinion as to (i) the effect of suretyship defenses, or
defenses in the nature thereof, with respect to the obligations of any
applicable guarantor, joint obligor, surety, accommodation party, or other
secondary obligor or any provisions of the Trust Agreement with respect to
indemnification or contribution, and (ii) the accuracy or completeness of any
exhibits or schedules to the Operative Documents. No opinion is given herein as
to the choice of law or internal substantive rules of law that any court or
other tribunal may apply to the transactions contemplated by the Operative
Documents. No opinion is expressed herein as to the application or effect of
federal securities laws or as to the securities or so-called "Blue Sky" laws of
Connecticut or of any other state or other jurisdiction.
Our opinion, with your permission, is further subject to the following
exceptions, qualifications and assumptions:
(a) We have assumed without any independent investigation that (i)
each party to the Operative Documents, other than U.S. Bank, the Guarantee
Trustee, Indenture Trustee, Institutional Trustee and the Trust, as
applicable, at all times relevant thereto, is validly existing and in good
standing under the laws of the jurisdiction in which it is organized, and
is qualified to do business and in good standing under the laws of each
jurisdiction where such qualification is required generally or necessary
in order for such party to enforce its rights under such Operative
Documents, (ii) each party to the Operative Documents, at all times
relevant thereto, had and has the full power, authority and legal right
under its certificate of incorporation, partnership agreement, by-laws,
and other governing organizational documents, and the applicable
corporate, partnership, or other enterprise legislation and other
applicable laws, as the case may be (other than U.S. Bank, the Guarantee
Trustee, Indenture Trustee, Institutional Trustee or the Trust) to
execute, deliver and to perform its obligations under, the Operative
Documents, and (iii) each party to the Operative Documents other than U.S.
Bank, the Guarantee Trustee, Indenture Trustee, Institutional Trustee or
the Trust has duly executed and delivered each of such agreements and
instruments to which it is a party and that the execution and delivery of
such agreements and instruments and the transactions contemplated thereby
have been duly authorized by proper corporate or other organizational
proceedings as to each such party.
(b) We have assumed without any independent investigation (i) that
the Institutional Trustee, the Sponsor and the Administrators have
received the agreed to and stated consideration for the incurrence of the
obligations applicable to it under the Trust Agreement and each of the
other Operative Documents, (ii) that each of the Operative Documents
(other than the Trust Agreement) is a valid, binding and enforceable
obligation of each party thereto other than the Trust, U.S. Bank and the
Institutional Trustee, as applicable, and (iii) for the purposes of this
opinion letter, we herein also assume that each of the Operative Documents
(other than the Trust Agreement) constitutes a valid, binding and
enforceable obligation of U.S. Bank, the Guarantee Trustee and the
Indenture Trustee, as applicable under Connecticut and federal law (as to
which such matters we are delivering to you a separate opinion letter on
this date, which is subject to the assumptions, qualifications and
limitations set forth therein).
B-2-3
(c) The enforcement of any obligations of U.S. Bank, the Sponsor and
the Administrators, as applicable, under the Trust Agreement and the
obligations of the Trust under the other Operative Documents may be
limited by the receivership, conservatorship and supervisory powers of
depository institution regulatory agencies generally, as well as by
bankruptcy, insolvency, reorganization, moratorium, marshaling or other
laws and rules of law affecting the enforcement generally of creditors'
rights and remedies (including such as may deny giving effect to waivers
of debtors' or guarantors' rights); and we express no opinion as to the
status under any fraudulent conveyance laws or fraudulent transfer laws of
any of the obligations of U.S. Bank, the Sponsor, the Administrators or
the Trust under any of the Operative Documents.
(d) We express no opinion as to the enforceability of any particular
provision of the Trust Agreement or the other Operative Documents relating
to remedies after default.
(e) We express no opinion as the availability of any specific or
equitable relief of any kind.
(f) The enforcement of any rights may in all cases be subject to an
implied duty of good faith and fair dealing and to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
(g) We express no opinion as to the enforceability of any particular
provision of any of the Operative Documents relating to (i) waivers of
rights to object to jurisdiction or venue, or consents to jurisdiction or
venue, (ii) waivers of rights to (or methods of) service of process, or
rights to trial by jury, or other rights or benefits bestowed by operation
of law, (iii) waivers of any applicable defenses, setoffs, recoupments, or
counterclaims, (iv) waivers or variations of provisions which are not
capable of waiver or variation under Sections 1-102(3), 9-501(3) or other
provisions of the Uniform Commercial Code ("UCC") of the State, (v) the
grant of powers of attorney to any person or entity, or (vi) exculpation
or exoneration clauses, indemnity clauses, and clauses relating to
releases or waivers of unmatured claims or rights.
(h) We express no opinion as to the effect of events occurring,
circumstances arising, or changes of law becoming effective or occurring,
after the date hereof on the matters addressed in this opinion letter, and
we assume no responsibility to inform you of additional or changed facts,
or changes in law, of which we may become aware.
(i) We express no opinion as to any requirement that any party to
the Operative Documents (or any other persons or entities purportedly
entitled to the benefits thereof) qualify or register to do business in
any jurisdiction in order to be able to enforce its rights thereunder or
obtain the benefits thereof.
Based upon the foregoing and subject to the limitations and
qualifications set forth herein, we are of the opinion that:
B-2-4
1. The Trust has been duly formed and is validly existing as a statutory
trust under the Connecticut Statutory Trust Act, Chapter 615 of Title 34 of the
Connecticut General Statutes, Section 500, et seq. (the "Act").
2. The Trust Agreement constitutes a valid and binding obligation of U.S.
Bank and the Institutional Trustee enforceable against U.S. Bank and the
Institutional Trustee in accordance with the terms thereof.
3. The Trust Agreement constitutes a valid and binding obligation of the
Sponsor and the Administrators, enforceable against the Sponsor and the
Administrators in accordance with its terms.
4. The Trust has the requisite trust power and authority to (a) execute
and deliver, and to perform its obligations under, the Operative Documents, and
(b) perform its obligations under such Operative Documents.
5. Each of the Operative Documents to which the Trust is a party
constitutes a valid and binding obligation of the Trust, enforceable against the
Trust in accordance with the terms thereof.
6. The Capital Securities have been duly authorized by the Trust under the
Trust Agreement, and the Capital Securities, when duly executed and delivered to
the Holders in accordance with the Trust Agreement, the Placement Agreement and
the Subscription Agreement, will be validly issued, fully paid and nonassessable
and will evidence undivided beneficial interests in the assets of the Trust and
will be entitled to the benefits of the Trust Agreement.
7. The Common Securities have been duly authorized by the Trust Agreement,
and the Common Securities, when duly executed and delivered to the Company in
accordance with the Trust Agreement, the Placement Agreement and the
Subscription Agreement and delivered and paid for in accordance therewith, will
be validly issued, fully paid and nonassessable (subject to Section 9.1(b) of
the Trust Agreement which provides that the Holders of Common Securities are
liable for debts and obligations of the Trust to the extent such debts and
obligations are not satisfied out of the Trust's assets) and will evidence
undivided beneficial interests in the assets of the Trust and will be entitled
to the benefits of the Trust Agreement.
8. Neither the execution, delivery or performance by the Trust of the
Operative Documents, the consummation by the Trust of the transactions
contemplated thereby, nor compliance by the Trust with any of the terms and
provisions thereof, (a) violates the Trust Agreement, or, to the best of our
knowledge, contravenes or will contravene any provision of, or constitutes a
default under, or results in any breach of, or results in the creation of any
lien (other than as permitted under the Operative Documents) upon property of
the Trust under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement, license or other
agreement or instrument, in each case known to us, to which it is a party or by
which it is bound, or (b) violates any applicable Connecticut law governing the
B-2-5
Trust, or, to the best of our knowledge, any judgment or order of any court or
other tribunal, in each case known to us, applicable to or binding on it.
9. No consent, approval, order or authorization of, giving of notice to,
or registration with, or taking of any other action in respect of, any
Connecticut governmental authority regulating the Trust is required for the
execution, delivery, validity or performance of, or the carrying out by, the
Trust of any of the transactions contemplated by the Operative Documents, other
than any such consent, approval, order, authorization, registration, notice or
action as has been duly obtained, given or taken.
10. The Holders, as the beneficial holders of the Capital Securities, will
be entitled to the same limitation of personal liability extended to
shareholders of domestic corporations organized under the laws of the State.
11. Under the Trust Agreement, the issuance of the Capital Securities is
not subject to preemptive rights.
12. Assuming that the Trust will not be taxable as a corporation for
federal income tax purposes, but rather will be classified for such purposes as
a grantor trust, the Trust will not be subject to any tax, fee or other
government charge under the laws of the State of Connecticut or any political
subdivision thereof.
This opinion is rendered solely for the benefit of those institutions
listed on Schedule I hereto and their successors and assigns in connection with
the transactions contemplated by the Operative Documents and may not be used or
relied upon by any other person or for any other purpose.
Very truly yours,
B-2-6
SCHEDULE I
----------
U.S. Bank National Association
FTN Financial Capital Markets
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
I-Preferred Term Securities II, Ltd.
I-Preferred Term Securities II, Inc.
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
[COMPANY NAME]
[NAME OF COUNSEL]
EXHIBIT A TO EXHIBIT B-2
------------------------
CERTIFICATE OF LEGAL EXISTENCE
------------------------------
See attached
EXHIBIT B-3
-----------
FORM OF TAX COUNSEL OPINION
---------------------------
[CLOSING], 2003
[COMPANY NAME]
[ADDRESS 1]
[ADDRESS 2]
[TRUST NAME] Statutory Trust [I]
c/o [COMPANY NAME]
[ADDRESS 1]
[ADDRESS 2]
FTN Financial Capital Markets
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
We are acting as special United States tax counsel to [COMPANY NAME], a
corporation organized and existing under the laws of [STATE] (the "Company"),
and to [TRUST NAME] Statutory Trust [I], a statutory trust created under the
laws of Connecticut (the "Trust"), in connection with the proposed issuance of
(i) Floating Rate Capital Securities, liquidation amount $1,000.00 per Capital
Security (the "Capital Securities") of the Trust, pursuant to the terms of the
Amended and Restated Declaration of Trust dated as of the date hereof by and
among the Company, U.S. Bank National Association, as institutional trustee, and
[ADMINISTRATORS], as Administrators (the "Trust Agreement"), (ii) Floating Rate
Common Securities, liquidation amount $1,000 per common security (the "Common
Securities") of the Trust, pursuant to the terms of the Trust Agreement, (iii)
Floating Rate Junior Subordinated Deferrable Interest Debentures (the
"Corresponding Debentures") of the Company issued pursuant to the terms of an
Indenture dated as of the date hereof from the Company to U.S. Bank National
Association, as trustee (the "Indenture"), which Corresponding Debentures are to
be sold by the Company to the Trust, and (iv) the Guarantee Agreement of the
Company with respect to the Capital Securities dated as of the date hereof (the
"Guarantee") between the Company and U.S. Bank National Association, as
guarantee trustee. The Capital Securities, the Common Securities and the
Corresponding Debentures are to be issued as contemplated by the Offering
Circular (the
B-3-1
"Offering Circular") dated [_______], 2003 prepared by I-Preferred
Term Securities II, Ltd., an entity formed under the Companies Law of the Cayman
Islands, and I-Preferred Term Securities II, Inc., a Delaware corporation.
In formulating our opinions, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of documents, corporate
records and other instruments as we have deemed necessary or appropriate for
purposes of this opinion including (i) the Offering Circular, (ii) the
Indenture, (iii) the form of the Corresponding Debentures attached as an exhibit
to the Indenture, (iv) the Trust Agreement, (v) the Guarantee, and (vi) the
forms of Capital Securities Certificate and Common Securities Certificate
attached as exhibits to the Trust Agreement (collectively the "Documents").
Furthermore, we have relied upon certain representations made by the Company and
upon the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP as to certain matters of Connecticut
law.
In such examination, we have assumed the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified photostatic copies, the authenticity of
the originals of such latter documents, the genuineness of all signatures and
the correctness of all representations made therein. We have further assumed
that there are no agreements or understandings contemplated therein other than
those contained in the Documents.
In rendering our opinions, we have assumed that the transactions
described in or contemplated by the Documents have been or will be carried out
strictly in accordance with the Documents, and that such Documents accurately
reflect the material facts of such transactions. Any variance in the facts may
result in United States federal income tax consequences that differ from those
reflected in the opinions set forth herein. Our opinion is also based on the
Internal Revenue Code of 1986, as amended, (the "Code"), Treasury regulations,
administrative rulings, judicial decisions, and other applicable authorities.
The statutory provisions, regulations and interpretations on which our opinion
is based are subject to change, possibly retroactively. In addition, there can
be no assurance that the Internal Revenue Service will not take positions
contrary to those stated in our opinion.
Subject to the foregoing, under current law and based upon the facts,
assumptions and qualifications contained herein, it is our opinion that:
The Corresponding Debentures will be classified as indebtedness of the
Company for United States federal income tax purposes.
The Trust will be characterized as a grantor trust and not as an
association taxable as a corporation for United States federal income
tax purposes.
The opinions we express herein are limited solely to matters governed
by the federal income tax laws of the United States. Our opinion is provided
solely to you as a legal opinion only, and not as a guaranty or warranty, and is
limited to the specific transactions, documents, and matters described above. No
opinion may be implied or inferred beyond that which is expressly stated in this
letter.
B-3-2
We express no opinion with respect to any matter not specifically
addressed by the foregoing opinions, including state or local tax consequences,
or any federal, state, or local issue not specifically referred to and discussed
above including, without limitation, the effect on the matters covered by this
opinion of the laws of any other jurisdiction.
We are furnishing this opinion letter to you solely for your benefit in
connection with the issuance of the Capital Securities, the Common Securities
and the Corresponding Debentures. Copies of this opinion letter may be provided
for the benefit of [RATING AGENCY]. No other person may rely upon this opinion
letter or the opinions set forth herein. We disclaim any obligation to update
this opinion for events occurring or coming to our attention after the date
hereof.
Very truly yours,
B-3-3
[COMPANY NAME]
[CLOSING], ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ A.N. ▇▇▇▇
Re: Representations Concerning the Issuance of Floating Rate
Junior Subordinated Deferrable Interest Debentures (the
"Corresponding Debentures") to [TRUST NAME] Statutory
Trust [I] (the "Trust") and Sale of Trust Securities
(the "Trust Securities") of the Trust
Dear Sirs:
In accordance with your request, [COMPANY NAME] (the "Company") hereby
makes the following representations in connection with the preparation of your
opinion letter as to the United States federal income tax consequences of the
issuance by the Company of the Corresponding Debentures to the Trust and the
sale of the Trust Securities.
The Company hereby represents that:
(1) The sole assets of the Trust will be the Corresponding Debentures, any
interest paid on the Corresponding Debentures to the extent not
distributed, proceeds of the Corresponding Debentures, or any of the
foregoing.
(2) The Company intends to use the net proceeds from the sale of the
Corresponding Debentures for general corporate purposes.
(3) The Trust was not formed to conduct any trade or business and is not
authorized to conduct any trade or business. The Trust exists for the
exclusive purposes of (i) issuing and selling the Trust Securities,
(ii) using the proceeds from the sale of Trust Securities to acquire
the Corresponding Debentures, and (iii) engaging only in activities
necessary or incidental thereto.
(4) The Trust was formed to facilitate direct investment in the assets of
the Trust, and the existence of multiple classes of ownership is
incidental to that purpose. There is no intent to provide holders of
such interests in the Trust with diverse interests in the assets of the
Trust.
(5) The Company intends to create a debtor-creditor relationship between
the Company, as debtor, and the Trust, as a creditor, upon the issuance
and sale of the
B-3-4
Corresponding Debentures to the Trust by the Company.
The Company will (i) record and at all times continue to reflect the
Corresponding Debentures as indebtedness on its separate books and
records for financial accounting purposes, and (ii) treat the
Corresponding Debentures as indebtedness for all United States federal,
state and local income tax purposes.
(6) During each year, the Trust's income will consist solely of payments
made by the Company with respect to the Corresponding Debentures. Such
payments will not be derived from the active conduct of a financial
business by the Trust. Both the Company's obligation to make such
payments and the measurement of the amounts payable by the Company are
defined by the terms of the Corresponding Debentures. Neither the
Company's obligation to make such payments nor the measurement of the
amounts payable by the Company is dependent on income or profits of the
Company or any affiliate of the Company.
(7) The Company has reviewed projections of earnings, cash flow, capital
and surplus and other relevant financial and economic data relating to
the Company and its affiliates. Based on the current and estimated net
cash flow and the projections of earnings, cash flow, capital and
surplus of the Company and its affiliates, the Company believes its net
cash flow will be in excess of the amount of principal and interest
required to be paid in accordance with the terms of the Corresponding
Debentures and the Company expects that it will be able to make, and
will make, timely payment of principal and interest in accordance with
the terms of the Corresponding Debentures with available capital or
accumulated net cash flow.
(8) The principal insurance operating subsidiary of the Company has
received either a financial strength rating of at least B+ with a
neutral or positive outlook from A.M. Best Company, Inc., or an
investment grade financial strength rating from either Standard &
Poor's Ratings Services, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
or Fitch Ratings.
(9) The terms and conditions of the Corresponding Debentures, including the
interest rate, were determined on an arm's length basis.
(10) The Company presently has no intention to defer interest payments on
the Corresponding Debentures, and it considers the likelihood of such a
deferral to be remote because, if it were to exercise its right to
defer payments of interest with respect to the Corresponding
Debentures, it would not be permitted to declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any capital stock of the Company
or any affiliate of the Company (other than payments of dividends or
distributions to the Company) or make any payment of principal of or
interest or premium, if any, on or repay, repurchase, or redeem any
debt securities of the Company or any affiliate of the Company that
rank pari passu in all respects with or junior in interest to the
Corresponding Debentures, in each case subject to limited exceptions
stated in Section 2.11 of the Indenture to be entered into in
connection with the issuance of the Corresponding Debentures.
B-3-5
(11) Immediately after the issuance of the Corresponding Debentures, the
debt-to-equity ratio of the Company (as determined for financial
accounting purposes) will be no higher than three to one (3 : 1). The
Company has no plan or intention to issue debt that would cause such
ratio to exceed three to one (3 : 1). For purposes of this paragraph
11, (i) the Corresponding Debentures will be treated as debt and
payments thereon will be treated as interest, (ii) other debt (as
determined for financial accounting purposes) shall include both
short-term and long-term indebtedness of the Company, and (iii) equity
(as determined for financial accounting purposes) shall include capital
stock, preferred stock, if any, paid in surplus and retained earnings
of the Company.
(12) To the best of our knowledge, the Company's subsidiaries are currently
in compliance with all applicable federal, state, and local capital
requirements, except to the extent that failure to comply with any such
requirements would not have a material adverse effect on the Company
and its subsidiaries.
(13) For purposes hereof, you may rely on the representations made by the
Company in Sections 5.16 and 5.17 of the Placement Agreement dated as
of [PRICING], 2003, by and among FTN Financial Capital Markets, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc., the Trust and the Company.
(14) The Company will not issue any class of common stock or preferred stock
senior in rights (such as payment rights and liquidation preference) to
the Corresponding Debentures during their term.
(15) The Internal Revenue Service has not challenged the interest deduction
on any class of the Company's subordinated debt in the last ten (10)
years on the basis that such debt constitutes equity for federal income
tax purposes.
The above representations are accurate as of the date hereof and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise notified by us in writing. The undersigned understands that you
will rely on the foregoing in connection with rendering certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company.
Very truly yours,
[COMPANY NAME]
By:
-----------------------------
Name:
Title:
B-3-6
EXHIBIT C
---------
SIGNIFICANT SUBSIDIARIES
------------------------
Penn-America Insurance Company (Pennsylvania)
Penn Star Insurance Company (Pennsylvania)
EXHIBIT D
FORM OF QUARTERLY REPORT
I-Preferred Term Securities II, Ltd.
▇/▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇▇
CDO ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
CDO Relationship Manager
PLEASE COMPLETE FOR THE PRINCIPAL INSURANCE OPERATING SUBSIDIARY
As of Year End _______, 20__
NAIC Risk Based Capital Ratio (authorized control level) _________ %
As of [March 31, June 30, September 30, or December 31,] 20___
Total Policyholders' Surplus $__________
Consolidated Debt to Total Policyholders' Surplus ___________%
Total Assets $__________
NAIC Class 1 & 2 Rated Investments to Total Fixed Income Investments ___________%
NAIC Class 1 & 2 Rated Investments to Total Investments ___________%
Return on Policyholders' Surplus ___________%
For Property & Casualty Companies
Expense Ratio ___________%
Loss and LAE Ratio ___________%
Combined Ratio ___________%
Net Premiums Written (annualized) to Policyholders' Surplus ___________%
----------------------------------------------------------------- ---------------------------------------------------------------
NAIC Risk Based Capital Ratio-P&C (Total Adjusted Capital/Authorized Control Level Risk-Based
Capita/)/2
----------------------------------------------------------------- ---------------------------------------------------------------
NAIC Risk Based Capital Ratio-Life ((Total Adjusted Capital-Asset Valuation Reserve)/Authorized
Control Level Risk-Based Capita/)/2
----------------------------------------------------------------- ---------------------------------------------------------------
Total Capital and Surplus-Life Common Capital Stock + Preferred Capital Stock + Aggregate
Write-Ins for other than special surplus funds + Surplus Notes
+Gross Paid-In and Contributed Surplus + Aggregate Write-Ins for
Special Surplus Funds + Unassigned Funds (Surplus) - Treasury
Stock
----------------------------------------------------------------- ---------------------------------------------------------------
Total Capital and Surplus-P&C
Aggregate Write-Ins for Special Surplus Funds + Common Capital
Stock + Preferred Capital Stock + Aggregate Write-Ins for other
than special surplus funds + Surplus Notes +Gross Paid-In and
Contributed Surplus + Unassigned Funds (Surplus) - Treasury Stock
----------------------------------------------------------------- ---------------------------------------------------------------
Total Class 1 & 2 Rated Investments to Total Fixed Income (Total Class 1 + Total Class 2 Rated Investments)/Total Fixed
Investments Income Investments
----------------------------------------------------------------- ---------------------------------------------------------------
Total Class 1 & 2 Rated Investments to Total Investments (Total Class 1 + Total Class 2 Rated Investments)/Total
Investments
----------------------------------------------------------------- ---------------------------------------------------------------
Total Assets Total Assets
----------------------------------------------------------------- ---------------------------------------------------------------
Return on Policyholders' Surplus Net Income/Policyholders' Surplus
----------------------------------------------------------------- ---------------------------------------------------------------
Expense Ratio Other Underwriting Expenses Incurred/Net premiums Earned
----------------------------------------------------------------- ---------------------------------------------------------------
Loss and LAE Ratio (Losses Incurred + Loss Expenses Incurred)/Net Premiums Earned
----------------------------------------------------------------- ---------------------------------------------------------------
Combined Ratio Expense Ratio + Loss and LAE Ratio
----------------------------------------------------------------- ---------------------------------------------------------------
Net Premiums Written (annualized) to Policyholders' Surplus Net Premiums Written/Policyholders' Surplus
----------------------------------------------------------------- ---------------------------------------------------------------