EXHIBIT 10.12
$15,000,000
InCapS(SM)
PXRE CAPITAL TRUST III
PLACEMENT AGREEMENT
New York, New York
May 13, ▇▇▇▇
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇ & PARTNERS, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
PXRE Capital Trust III (the "Trust"), a statutory trust organized under
the Delaware Statutory Trust Act, 12 Del. C. ss. 3801 et seq. (the "Delaware
Act") and PXRE Group Ltd., a Bermuda company (the "Company" and together with
the Trust, the "Offerors"), confirm their agreement (the "Agreement") with
Sandler ▇'▇▇▇▇▇ & Partners, L.P., as agent of the Offerors (the "Placement
Agent"), with respect to the issue and sale by the Trust and the placement by
the Placement Agent of 15,000 InCapSSM (liquidation amount of $1,000 per
security) of the Trust (the "Capital Securities"). The Capital Securities will
be guaranteed by the Company to the extent provided in the Guarantee Agreement,
to be dated as of the Closing Date (as defined in Section 2(a) hereof) (the
"Guarantee Agreement"), between the Company, as guarantor, and Wilmington Trust
Company, as guarantee trustee (the "Guarantee Trustee"), with respect to
distributions and payments upon liquidation, redemption and otherwise.
The entire proceeds from the sale of the Capital Securities will be
combined with the entire proceeds from the sale by the Trust to the Company of
its common securities (the "Common Securities"), and will be used by the Trust
to purchase $15,464,000 aggregate principal amount of Fixed Rate Junior
Subordinated Debt Securities, Series C due 2033 (the "Subordinated Debt
Securities") issued by the Company. The Capital Securities and the Common
Securities will be issued pursuant to the Amended and Restated Declaration of
Trust, to be dated as of the Closing Date (the "Declaration"), among the
Company, as sponsor, the Administrators named therein (the "Administrators"),
Wilmington Trust Company, as institutional trustee (the "Institutional
Trustee"), Wilmington Trust Company, as Delaware trustee (the "Delaware
Trustee"), and the holders, from time to time, of undivided beneficial interests
in the assets of the Trust. The Subordinated Debt Securities will be issued
pursuant to the Indenture, to be dated as of the Closing Date (the "Indenture"),
between the Company and Wilmington Trust Company, as indenture trustee (the
"Indenture Trustee"). The Indenture, the Guarantee Agreement, the Declaration,
this Agreement and the Subscription Agreement (as defined in Section 2(a)
hereof) are hereinafter referred to collectively as the "Operative Documents."
SECTION 1. Representations and Warranties.
(a) The Trust and the Company, jointly and severally, represent and
warrant to the Placement Agent and the Purchaser (as defined in Section 2(a)
hereof) of Capital Securities as of the date hereof and as of the Closing Date,
and agree with the Placement Agent and the Purchaser, as follows:
(i) Similar Offerings. Within a period of six months before or after
the date hereof, the Offerors have not, directly or indirectly, solicited any
offer to buy or offered to sell, and will not, directly or indirectly, solicit
any offer to buy or offer to sell, in the United States or to any United States
citizen or resident, any security which is or would be integrated with the sale
of the Capital Securities (including any securities of the same or a similar
class as the Capital Securities, other than the Capital Securities) in a manner
that would require the Capital Securities to be registered under the Securities
Act of 1933, as amended (the "1933 Act").
(ii) Incorporated Documents. The documents of the Company filed with
the Securities and Exchange Commission (the "Commission") in accordance with the
Securities Exchange Act of 1934, as amended (the "1934 Act"), from and including
the commencement of the fiscal year covered by the Company's most recent Annual
Report on Form 10-K, at the time they were or hereafter are filed by the Company
with the Commission (collectively, the "1934 Act Reports"), complied and will
comply in all material respects with the requirements of the 1934 Act and the
rules and regulations of the Commission thereunder as of the date of filing (the
"1934 Act Regulations"), and, at the date of this Agreement and on the Closing
Date, do not and will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and other than such instruments, agreements, contracts and
other documents as are filed as exhibits to the Company's 1934 Act Reports,
there are no instruments, agreements, contracts or documents of a character
described in Item 601 of Regulation S-K promulgated by the Commission to which
the Company or any of its subsidiaries is a party.
(iii) Independent Accountants. The accountants of the Company who
certified the financial statements included in the 1934 Act Reports (the
"Independent Accountants") are independent public accountants of the Company and
its subsidiaries within the meaning of the 1933 Act and the rules and
regulations of the Commission thereunder (the "1933 Act Regulations").
(iv) Financial Statements and Information. The consolidated historical
financial statements of the Company, together with the related schedules and
notes, included in the 1934 Act Reports present fairly, in all material
respects, the consolidated financial position of the Company and its
consolidated subsidiaries at the respective dates indicated, and the
consolidated statements of income, changes in stockholders' equity and cash
flows of the Company and its consolidated subsidiaries for the respective
periods specified; said financial statements have been prepared in conformity
with generally accepted accounting principles in the United States applied on a
consistent basis throughout the periods involved, except as disclosed in the
notes to such financial statements; the supporting schedules, if any, included
in
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the 1934 Act Reports present fairly, in all material respects, the information
required to be stated therein and any pro forma financial statements and the
related notes thereto included in the 1934 Act Reports present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial statements
and have been properly compiled on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the adjustments
used therein are appropriate to give effect to the transactions and
circumstances referred to therein; the statutory financial statements of each of
its insurance subsidiaries (the "Insurance Subsidiaries") as filed with the
applicable insurance regulatory authorities in the jurisdiction in which each
such Insurance Subsidiary is organized (each such regulatory authority, a
"Regulatory Authority") for the years ended December 31, 2001 and 2000 and for
any quarters ended subsequent to December 31, 2001, including all supporting
documents filed therewith (collectively, the "Insurance Subsidiary Financial
Statements"): (i) have been prepared in accordance with statutory accounting
principles promulgated by the National Association of Insurance Commissioners,
as applied, with respect to each Insurance Subsidiary, by the applicable
Regulatory Authority of such entity, in the case of Insurance Subsidiaries
organized in the United States, or promulgated by the applicable Regulatory
Authority, in the case of Insurance Subsidiaries organized outside of the United
States, as the case may be, consistently applied for the periods covered thereby
and present fairly the statutory financial position of such Insurance
Subsidiaries as at the respective dates thereof and the results of operations of
such Insurance Subsidiaries for the respective periods then ended; and (ii)
complied in all material respects with all applicable laws, rules and
regulations when filed, and, to the knowledge of the Company, no material
deficiency has been asserted with respect to any Insurance Subsidiary Financial
Statements by any applicable Regulatory Agency. As used herein, the term
"Regulatory Agency" means any court, administrative agency or commission or
other governmental agency, authority or instrumentality having supervisory or
regulatory authority with respect to the Company or any of its subsidiaries.
(v) No Material Adverse Change. Since the respective dates as of which
information is given in the 1934 Act Reports, or, where any information has been
updated in or superseded by a subsequent 1934 Act Report, since the date of such
subsequent 1934 Act Report, there has not been (A) any material adverse change
in the condition, financial, regulatory or otherwise, or in the earnings,
business affairs or business prospects of the Trust or of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect") or (B) any dividend or
distribution of any kind declared, paid or made by the Company on any class of
its share capital other than regular dividends on the Company's share capital
declared and paid consistent with past practice.
(vi) Internal Controls. Each of the Company and its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with the
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with the management's
general or specific authorization, (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences, (v) material information
relating to the Company and its subsidiaries is made known to management, (vi)
management has evaluated the effectiveness of such internal accounting controls
and (vii) management has disclosed to the Independent Accountants and the audit
committee (A) all significant deficiencies in the design or operation of
internal controls which could adversely affect the ability of the Company and
its subsidiaries to record, process, summarize, and report financial data, and
have identified for the Independent Accountants any material weaknesses in
internal controls and (B) any fraud, whether or not material, that involves
management or other employees who have a significant role in the internal
controls of the Company and its subsidiaries, and any such deficiencies or fraud
would not, singularly or in the aggregate, be expected to result in a Material
Adverse Effect.
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(vii) Regulatory Matters. Neither the Company nor any of its
subsidiaries is subject or is party to, or has received any notice or advice
that any of them may become subject or party to any investigation with respect
to, any corrective, suspension or cease-and-desist order, agreement, consent
agreement or other regulatory enforcement action, proceeding or order with or
by, or is a party to any commitment letter or similar undertaking to, or is
subject to any directive by, or has been a recipient of any supervisory letter
from, or has adopted any board resolutions at the request of, any Regulatory
Agency that currently relates to or restricts in any material respect their
business or that in any manner relates to their capital and surplus adequacy or
their management (each, a "Regulatory Agreement"), nor has the Company or any of
its subsidiaries been advised by any Regulatory Agency that it is considering
issuing or requesting any such Regulatory Agreement; there is no unresolved
violation, criticism or exception by any Regulatory Agency with respect to any
report or statement relating to any examinations of the Company or any of its
subsidiaries which, in the reasonable judgment of the Company, is expected to
result in a Material Adverse Effect; and without limiting the generality of the
foregoing, there are no restrictions or limitations on the authority of any
Insurance Subsidiary to pay dividends, other than general restrictions and
limitations applicable to all insurance companies domiciled in the state of
organization of such Insurance Subsidiary pursuant to applicable law.
(viii) No Undisclosed Liabilities. Neither the Company nor any of its
subsidiaries has any material liability, whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its subsidiaries giving rise to any such liability), except (i)
for liabilities set forth in the financial statements referred to in Section
1(a)(iv) above and (ii) normal fluctuations in the amount of the liabilities
referred to in clause (i) above occurring in the ordinary course of business of
the Company and all of its subsidiaries since the date of the most recent
balance sheet included in such financial statements.
(ix) Insurance Reserving Practices. The Company and its Insurance
Subsidiaries have made no material change in their insurance reserving practices
since the respective dates as of which information is given in the 1934 Act
Reports.
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(x) Reinsurance Treaties. All reinsurance and retrocessional treaties,
contracts, agreements and arrangements to which any Insurance Subsidiary is a
party are in full force and effect and no Insurance Subsidiary is in violation
of, or in default in the performance, observance or fulfillment of, any
obligation, agreement, covenant or condition contained therein, with such
exceptions that would not, singularly or in the aggregate, have a Material
Adverse Effect; and no Insurance Subsidiary has received any notice from any of
the other parties to such treaties, contracts, agreements or arrangements that
such other party intends not to perform thereunder and, to the best knowledge of
the Company and the Insurance Subsidiaries, none of the other parties to such
treaties, contracts, agreements or arrangements will be unable to perform
thereunder except to the extent adequately and properly reserved for in the
consolidated financial statements of the Company, with such exceptions that
would not, singularly or in the aggregate, have a Material Adverse Effect.
(xi) Good Standing of the Company. The Company has been duly organized
and is validly existing as a company in good standing under the laws of Bermuda
and has full power and authority under such laws to own, lease and operate its
properties and to conduct its business, to enter into and perform its
obligations under each of the Operative Documents to which it is a party, and to
issue the Subordinated Debt Securities.
(xii) Good Standing of the Subsidiaries. Each "significant subsidiary"
(as defined in Rule 1-02 of Regulation S-X) of the Company (a "Significant
Subsidiary") and each Insurance Subsidiary has been duly organized and is
validly existing as an entity in good standing under the laws of the
jurisdiction in which it is chartered and has full power and authority under
such laws to own, lease and operate its properties and to conduct its current
and contemplated business.
(xiii) Foreign Qualifications. Each of the Company and its subsidiaries
is duly qualified as a foreign entity to transact business and is each in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure to be so qualified would not singularly, or in the
aggregate, in the reasonable judgment of the Company, be expected to result in a
Material Adverse Effect.
(xiv) Share Capital Duly Authorized and Validly Issued. All of the
issued and outstanding shares of the Company have been duly authorized and
validly issued and are fully paid and nonassessable; all of the issued and
outstanding shares of each subsidiary of the Company have been duly authorized
and validly issued, are fully paid and nonassessable and are owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equitable right; and
none of the issued and outstanding shares of the Company or its Significant
Subsidiaries were issued in violation of any preemptive or similar rights
arising by operation of law, under the charter, by-laws or code of regulations
of the Company or any of its Significant Subsidiaries or under any agreement to
which the Company or any of its Significant Subsidiaries is a party.
(xv) Good Standing of the Trust. The Trust has been duly created and is
validly existing in good standing as a statutory trust under the Delaware Act
with the power and authority to own property and to conduct its business as
provided in the Declaration, to enter into and perform its obligations under the
Operative Documents to which it is a party, and to issue the Capital Securities
and the Common Securities; the Trust is not a party to or otherwise bound by any
agreement other than the Operative Documents to which it is a party.
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(xvi) Authorization of Common Securities. On the Closing Date, the
Common Securities will have been duly authorized for issuance by the Trust
pursuant to the Declaration and, when duly issued and executed in accordance
with the Declaration and delivered by the Trust to the Company against payment
therefor in accordance with the subscription agreement therefor, will be validly
issued and fully paid and nonassessable undivided common beneficial ownership
interests in the assets of the Trust; the issuance of the Common Securities is
not subject to preemptive or other similar rights; and on the Closing Date, all
of the issued and outstanding Common Securities of the Trust will be owned
directly by the Company, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equitable right.
(xvii) Authorization of Capital Securities. On the Closing Date, the
Capital Securities will have been duly authorized for issuance by the Trust
pursuant to the Declaration and, when duly issued, executed and authenticated in
accordance with the Declaration and delivered by the Trust against payment
therefor as provided herein and in the Subscription Agreement, will be validly
issued and fully paid and nonassessable undivided preferred beneficial ownership
interests in the assets of the Trust; the issuance of the Capital Securities
will not be subject to preemptive or other similar rights; and the Capital
Securities will be in the form contemplated by, and entitled to the benefits of,
the Declaration.
(xviii) Authorization of this Agreement. This Agreement has been duly
authorized, executed and delivered by each of the Offerors.
(xix) Authorization of Declaration. The Declaration has been duly
authorized by the Company and, on the Closing Date, will have been duly executed
and delivered by the Company and the Administrators, and assuming due
authorization, execution and delivery of the Declaration by the Institutional
Trustee and the Delaware Trustee, the Declaration will constitute a valid, legal
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity)
(collectively, the "Enforceability Exceptions").
(xx) Authorization of Guarantee Agreement. The Guarantee Agreement has
been duly authorized by the Company and, on the Closing Date, will have been
duly executed and delivered by the Company, and assuming due authorization,
execution and delivery of the Guarantee Agreement by the Guarantee Trustee, the
Guarantee Agreement will constitute a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that enforceability may be limited by the Enforceability Exceptions.
(xxi) Authorization of Indenture. The Indenture has been duly
authorized by the Company and, on the Closing Date, will have been duly executed
and delivered by the Company, and assuming due authorization, execution and
delivery of the Indenture by the Indenture Trustee, the Indenture will
constitute a valid, legal and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
enforceability may be limited by the Enforceability Exceptions.
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(xxii) Authorization of Subordinated Debt Securities. The Subordinated
Debt Securities have been duly authorized by the Company; on the Closing Date,
the Subordinated Debt Securities will have been duly executed by the Company
and, when authenticated in the manner provided for in the Indenture and
delivered by the Company to the Trust against payment therefor as contemplated
in the subscription agreement therefor, will constitute valid, legal and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except to the extent that enforceability may be limited by the
Enforceability Exceptions; the Subordinated Debt Securities will be in the form
contemplated by, and entitled to the benefits of, the Indenture; and the Company
has no present intention to exercise its option to defer payments of interest on
the Subordinated Debt Securities as provided in the Indenture.
(xxiii) Authorization of Administrators. Each of the Administrators of
the Trust is an officer or employee of the Company and has been duly authorized
by the Company to execute and deliver the Declaration.
(xxiv) Not an Investment Company. Neither the Trust nor the Company is,
and immediately following consummation of the transactions contemplated hereby
and the application of the net proceeds therefrom neither the Trust nor the
Company will be, an "investment company" or an entity "controlled" by an
"investment company", in each case within the meaning of Section 3(a) of the
Investment Company Act of 1940, as amended (the "1940 Act"), without regard to
Section 3(c) of the 1940 Act.
(xxv) Absence of Defaults and Conflicts. The Trust is not in violation
of the trust certificate of the Trust filed with the State of Delaware (the
"Trust Certificate") or the Declaration, and neither the Company nor any of its
Significant Subsidiaries or Insurance Subsidiaries is in violation of its
charter, by-laws or code of regulations; none of the Trust, the Company or any
subsidiary of the Company is in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or
other agreement or instrument to which it is a party or by which it or any of
them may be bound or to which any of its properties or assets is subject
(collectively, "Agreements and Instruments"), except for such defaults under
Agreements and Instruments that, in the reasonable judgment of the Company, are
not expected to result in a Material Adverse Effect; and the execution, delivery
and performance of the Operative Documents by the Trust or the Company, as the
case may be, the issuance, sale and delivery of the Capital Securities and the
Subordinated Debt Securities, the consummation of the transactions contemplated
by the Operative Documents, and compliance by the Trust and the Company with the
terms of the Operative Documents to which they are a party have been duly
authorized by all necessary corporate action on the part of the Company and, on
the Closing Date, will have been duly authorized by all necessary action on the
part of the Trust, and do not and will not, whether with or without the giving
of notice or passage of time or both, violate, conflict with or constitute a
breach of, or default or Repayment Event (as defined below) under, or result in
the creation or imposition of any, security interest, mortgage, pledge, lien,
charge, encumbrance, claim or equitable right upon any properties or assets of
the Trust or the Company or any of its Significant Subsidiaries or Insurance
Subsidiaries pursuant to any of the Agreements and Instruments, nor will such
action result in any violation of the provisions of the charter, by-laws or code
of regulations of the Company or any of its Significant Subsidiaries or
Insurance Subsidiaries or the Declaration or the Trust Certificate, or violation
by the Company or any of its Significant Subsidiaries or Insurance Subsidiaries
of any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government authority, agency (including, without
limitation, each applicable Regulatory Agency) or instrumentality or court,
domestic or foreign, having jurisdiction over the Trust or the Company or any of
its Significant Subsidiaries or Insurance Subsidiaries or their respective
properties or assets (collectively, "Governmental Entities"). As used herein, a
"Repayment Event" means any event or condition which gives the holder of any
note, debenture or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Trust or the Company or any of its
Significant Subsidiaries or Insurance Subsidiaries prior to its scheduled
maturity.
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(xxvi) Absence of Labor Dispute. No labor dispute with the employees of
the Company or any of its subsidiaries exists or, to the knowledge of the
executive officers of the Company, is imminent, which, in the reasonable
judgment of the Company, is expected to result in a Material Adverse Effect.
(xxvii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation (including, without limitation, any action to revoke or
deny renewal of any Insurance License (as defined in paragraph (xxix) below))
before or brought by any Governmental Entity, now pending, or, to the knowledge
of the Trust or the Company, threatened, against or affecting the Trust or the
Company or any of its subsidiaries, which, in the reasonable judgment of the
Trust or the Company, is expected to result in a Material Adverse Effect or
materially and adversely affect the consummation of the transactions
contemplated by the Operative Documents or the performance by the Trust or the
Company of its obligations hereunder or thereunder; and the aggregate of all
pending legal or governmental proceedings to which the Trust or the Company or
any of its subsidiaries is a party or of which any of their respective
properties or assets is the subject, including ordinary routine litigation
incidental to the business, are not, in the reasonable judgment of the Company
or the Trust, expected to result in a Material Adverse Effect.
(xxviii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any Governmental Entity, other than those that have been made or
obtained, is necessary or required for the authorization, execution, delivery or
performance by the Trust or the Company of their respective obligations under
the Operative Documents, the Subordinated Debt Securities or the Capital
Securities, as applicable, or the consummation by the Trust or the Company of
the transactions contemplated by the Operative Documents.
(xxix) Possession of Licenses and Permits. Each of the Trust, the
Company and the subsidiaries of the Company, other than any Insurance
Subsidiary, possesses such permits, orders, certificates, licenses, approvals,
consents and other authorizations (collectively, "Governmental Licenses") issued
by the appropriate Governmental Entities necessary to conduct the business now
operated by it, with such exceptions that would not, in the reasonable judgment
of the Company, be expected to, singularly or in the aggregate, have a Material
Adverse Effect; each Insurance Subsidiary is duly licensed or authorized
(including, without limitation, from its applicable Regulatory Authority) as an
insurer in each jurisdiction where it is required to be so licensed or
authorized to conduct its business (collectively "Insurance Licenses"), with
such exceptions that would not, in the reasonable judgment of the Company, be
expected to, singularly or in the aggregate, have a Material Adverse Effect;
each of the Trust, the Company and the subsidiaries of the Company is in
compliance with the terms and conditions of all of its Governmental Licenses and
Insurance Licenses, as applicable, except where the failure so to comply, in the
reasonable judgment of the Company, is not expected to, singularly or in the
aggregate, have a Material Adverse Effect; all of the Governmental Licenses and
Insurance Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or Insurance Licenses or the failure of
such Governmental Licenses or Insurance Licenses to be in full force and effect,
in the reasonable judgment of the Company, is not expected to have a Material
Adverse Effect; and none of the Trust, the Company or any subsidiary of the
Company has received any notice of proceedings, and to the knowledge of the
Trust, the Company or any subsidiary of the Company, there has been no
threatened action, suit, proceeding or investigation, relating to the
revocation, termination, suspension or modification of any such Governmental
Licenses or Insurance Licenses which, singularly or in the aggregate, in the
reasonable judgment of the Company or the Trust, is expected to result in a
Material Adverse Effect.
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(xxx) Title to Property. Each of the Trust, the Company and the
subsidiaries of the Company has good and marketable title to all of its
respective real and personal properties, in each case free and clear of all
liens, encumbrances and defects, except such as, in the reasonable judgment of
the Trust or the Company, singularly or in the aggregate, are not expected to
result in a Material Adverse Effect; and all of the leases and subleases under
which the Trust, the Company or any subsidiary of the Company holds properties
are in full force and effect, except when the failure of such leases and
subleases to be in full force and effect, in the reasonable judgment of the
Company, singularly or in the aggregate, is not expected to have a Material
Adverse Effect, and none of the Trust, the Company or any subsidiary of the
Company has any notice of any claim of any sort that has been asserted by anyone
adverse to the rights of the Trust, the Company or any subsidiary of the Company
under any of the leases or subleases under which the Trust, the Company or any
subsidiary of the Company holds properties, or affecting or questioning the
rights of such entity to the continued possession of the leased or subleased
premises under any such lease or sublease, except when such claim, in the
reasonable judgment of the Company, singularly or in the aggregate, is not
expected to have a Material Adverse Effect.
(xxxi) Stabilization. The Company has not taken and will not take,
directly or indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the price of
the Capital Securities.
(xxxii) No General Solicitation. Neither the Trust or the Company nor
any of their Affiliates (as defined in Rule 501(b) under the 1933 Act), nor any
person acting on its or any of their behalf (other than the Placement Agent, as
to whom the Offerors make no representation) has engaged or will engage, in
connection with the offering of the Capital Securities, in any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the
1933 Act.
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(xxxiii) No Directed Selling Efforts. Neither the Trust or the Company
nor any of their Affiliates or any person acting on its or any of their behalf
(other than the Placement Agent, as to whom the Offerors make no representation)
has engaged or will engage in any directed selling efforts within the meaning of
Regulation S under the 1933 Act ("Regulation S") with respect to the offering of
the Capital Securities.
(xxxiv) No Registration. Subject to compliance by the Placement Agent
with the relevant provisions of Section 6 hereof, it is not necessary in
connection with the offer, sale and delivery of the Capital Securities by the
Trust in the manner contemplated by this Agreement to register the Capital
Securities, the guarantee as described in the Guarantee Agreement or the
Subordinated Debt Securities under the 1933 Act or to qualify the Declaration,
the Guarantee Agreement or the Indenture under the Trust Indenture Act of 1939,
as amended.
(xxxv) Authorization of Subscription Agreement. The Subscription
Agreement has been duly authorized, executed and delivered by each of the
Offerors, and assuming due authorization, execution and delivery of the
Subscription Agreement by the Purchaser, the Subscription Agreement will
constitute a valid, legal and binding agreement of each of the Offerors,
enforceable against each of the Offerors in accordance with its terms, except to
the extent that enforceability may be limited by the Enforceability Exceptions.
(xxxvi) Withholding Taxes. Under current law, any and all payments of
principal, premium, if any, interest and other amounts payable in respect of the
Subordinated Debt Securities, the Capital Securities and the Guarantee Agreement
will be made free and clear of, and without deduction or withholding for or on
account of, all taxes, duties, assessments or other governmental charges of
whatever nature imposed or levied by or on behalf of the United States or any
political subdivision or taxing authority thereof or therein or Bermuda or any
political subdivision or taxing authority thereof or therein.
(xxxvii) Trust Not Subject to Tax. Under current law, the Trust is not
subject to, or otherwise required to pay, more than a de minimis amount of
taxes, duties, assessments or other governmental charges of whatever nature
imposed or levied by or on behalf of the United States or any political
subdivision taxing authority thereof or therein or Bermuda or any political
subdivision or taxing authority thereof or therein.
(xxxviii) Stamp Duty. Except as has already been paid or authorized for
payment, no stamp duty or similar tax or duty is payable under any applicable
law or regulation in connection with the creation, issuance, delivery and
performance of the Subordinated Debt Securities or the Capital Securities, the
transfer of the Subordinated Debt Securities or the Capital Securities or the
execution, delivery and performance by the Company of this Agreement or any
other Operative Document.
10
(xxxix) Choice of Law; Consent to Jurisdiction; Appointment of Agent to
Accept Service of Process. The choice of the laws of the State of New York as
the governing law of the Operative Documents (other than the Declaration) and
the Subordinated Debt Securities and the choice of the laws of the State of
Delaware as the governing law of the Declaration and the Capital Securities is a
valid choice of law under the laws of Bermuda; the Company has the power to
submit and has legally, validly, effectively and irrevocably submitted to the
non-exclusive personal jurisdiction of the U.S. federal and New York state
courts located in The City of New York (including, in each case, any appellate
courts therefrom) in any suit, action or proceeding against it with respect to
its obligations or liabilities under, or any other matter arising out of or in
connection with, this Agreement, any other Operative Document, the Subordinated
Debt Securities or the Capital Securities and has legally, validly, effectively
and irrevocably waived any objection to the venue of a proceeding in any such
court; and the Company has the power to designate, appoint and empower and has
legally, validly, effectively and irrevocably designated, appointed and
empowered an agent for service of process in any suit, action or proceeding
against it with respect to its obligations or liabilities under, or any other
matter arising out of or in connection with, this Agreement, any other Operative
Document, the Subordinated Debt Securities or the Capital Securities in any U.S.
federal or state court in the State of New York.
(xl) Waiver of Immunities. The Company, and its obligations under the
Operative Documents, the Subordinated Debt Securities and the Capital
Securities, are subject to civil and commercial law and to suit and none of the
Company or any of its properties, assets or revenues has any right of immunity,
on the grounds of sovereignty or otherwise, from any action, suit or proceeding,
from the giving of any relief in any such action, suit or proceeding, from
setoff or counterclaim, from the jurisdiction of any court, from service of
process, attachment upon or prior to judgment, or attachment in aid of execution
of judgment, or from execution of judgment, or other legal process or proceeding
for the giving of any relief or for the enforcement of a judgment, in any
jurisdiction in which proceedings may at any time be commenced, with respect to
its obligations or liabilities under, or any other matter under or arising out
of or in connection with, this Agreement, any other Operative Document, the
Subordinated Debt Securities or the Capital Securities; and, to the extent that
the Company or any of its properties, assets or revenues may have or may
hereafter become entitled to any such right of immunity in any such proceedings,
the Company has waived and agreed not to plead or claim any such right and has
consented to such relief and enforcement.
(xli) Enforceability of New York Judgment. Any final judgment for a
fixed or readily calculable sum of money rendered by any court of the State of
New York or of the United States located in the State of New York having
jurisdiction under its own domestic laws in respect of any suit, action or
proceeding against the Company based upon this Agreement, any other Operative
Document, the Subordinated Debt Securities or the Capital Securities would be
declared enforceable against the Company by the courts of Bermuda without
reexamination, review of the merits of the cause of action in respect of which
the original judgment was given or relitigation of the matters adjudicated upon
or payment of any stamp, registration or similar tax or duty.
(xlii) Validity under the Laws of Bermuda. It is not necessary under
the laws of Bermuda or any political subdivision thereof or authority or agency
therein in order to enable the Trust or the Purchaser to enforce any rights
under the Subordinated Debt Securities, the Capital Securities, this Agreement
or any other Operative Document that it should, as a result solely of its
holding of the Subordinated Debt Securities or the Capital Securities,
respectively, be licensed, qualified, or otherwise entitled to carry on business
in such jurisdiction or any political subdivision thereof or authority or agency
therein; each of the Subordinated Debt Securities, the Capital Securities, this
Agreement and any other Operative Document is in proper legal form under the
laws of such jurisdiction and any political subdivision thereof or authority or
agency therein for the enforcement thereof against the Company; and it is not
necessary to ensure the legality, validity, enforceability or admissibility in
evidence of the Subordinated Debt Securities, the Capital Securities, this
Agreement or any other Operative Document in any such jurisdiction or any
political subdivision thereof or agency therein that any of them be filed or
recorded with any court, authority or agency in, or that any stamp, registration
or similar taxes or duties be paid to any court, authority or agency of any such
jurisdiction or any political subdivision thereof.
11
(b) Any certificate signed by any Trustee of the Trust or any duly
authorized officer of the Company or any of its subsidiaries and delivered to
the Placement Agent or to counsel for the Placement Agent shall be deemed a
representation and warranty by the Trust or the Company, as the case may be, to
the Placement Agent as to the matters covered thereby.
SECTION 2. Sale and Delivery through Placement Agent; Closing.
(a) The Offerors propose to issue and sell the Capital Securities on
May 22, 2003 (or such other date mutually agreed to by the Offerors and the
Placement Agent) (the "Closing Date") to InCapS Funding I, Ltd., a newly formed
company with limited liability incorporated under the laws of the Cayman Islands
(the "Purchaser"), pursuant to the terms of the Capital Securities Subscription
Agreement, entered into on the date hereof (the "Subscription Agreement"),
between the Offerors and the Purchaser. In addition, the Offerors agree that the
Purchaser shall be entitled to the benefit of, and to rely on, the provisions of
this Agreement to the extent such provisions address or relate to the Purchaser
or the Capital Securities to be purchased by the Purchaser.
(b) The Offerors hereby grant to the Placement Agent the exclusive
right to arrange the placement of the Capital Securities with the Purchaser on
their behalf. The Placement Agent accepts such right and agrees to use its best
efforts, on and prior to the Closing Date, to effect such placement.
(c) Deliveries of certificates for the Capital Securities shall be made
by the Trust to or on behalf of the Purchaser at the offices of Sidley ▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇ LLP in The City of New York, and payment of the purchase price for
the Capital Securities shall be made by the Purchaser to the Trust by wire
transfer of immediately available funds to a bank designated by the Company
contemporaneous with closing on the Closing Date.
Certificates for the Capital Securities in the aggregate liquidation
amount thereof shall be registered in the name of the Purchaser.
(d) As compensation to the Placement Agent for its placement of the
Capital Securities and in view of the fact that the proceeds of the sale of the
Capital Securities together with the proceeds of the sale of the Common
Securities will be used to purchase the Subordinated Debt Securities of the
Company, the Company hereby agrees to pay on the Closing Date to the Placement
Agent in immediately available funds a commission of $30.00 per Capital Security
to be delivered by the Trust hereunder on the Closing Date.
12
(e) In performing its duties under this Agreement, the Placement Agent
shall be entitled to rely upon any notice, signature or writing which the
Placement Agent shall in good faith believe to be genuine and to be signed or
presented by a proper party or parties. The Placement Agent may rely upon any
opinions or certificates or other documents delivered by the Offerors or their
counsel or designees either to it or the Purchaser. In addition, in connection
with the performance of its duties under this Agreement, the Placement Agent
shall not be liable for any error of judgment or any action taken or omitted to
be taken unless it was grossly negligent or engaged in willful misconduct in
connection with such performance or non-performance. No provision of this
Agreement shall require the Placement Agent to expend or risk its own funds or
otherwise incur any financial liability on behalf of the Purchaser in connection
with the performance of any of its duties hereunder. The Placement Agent shall
be under no obligation to exercise any of the rights or powers vested in it by
this Agreement.
SECTION 3. Notice of Material Events. The Offerors covenant with the
Placement Agent and the Purchaser that, prior to the completion of the initial
placement of the Capital Securities through the Placement Agent, the Offerors
will immediately notify the Placement Agent, and confirm such notice in writing,
of any event or development that, in the reasonable judgment of the Company, is
expected to result in a Material Adverse Effect.
SECTION 4. Payment of Expenses. Whether or not this Agreement or the
Subscription Agreement is terminated or the sale of the Capital Securities is
consummated, the Company, as borrower under the Subordinated Debt Securities,
will pay all expenses incident to the performance of its obligations under this
Agreement, including (i) the preparation, issuance and delivery of the
certificates for the Capital Securities and Subordinated Debt Securities, (ii)
the fees and disbursements of the Company's counsel, accountants and other
advisors, and (iii) the fees and disbursements of counsel for any trustee
appointed under any of the Operative Documents incurred on or prior to the
Closing Date.
SECTION 5. Conditions of Placement Agent's Obligations. The obligations
of the Placement Agent and the Purchaser on the Closing Date are subject to the
accuracy of the representations and warranties of the Offerors contained in
Section 1 hereof or in certificates of any Administrator of the Trust or any
officer of the Company or any of its subsidiaries delivered pursuant to the
provisions hereof, to the performance by the Offerors of their obligations
hereunder, and to the following further conditions:
(a) Opinion of U.S. Counsel for the Offerors. On the Closing Date, the
Placement Agent and the Purchaser shall have received the favorable opinion,
dated as of the Closing Date, of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, special U.S.
counsel for the Offerors, in substantially the form set out in Annex A hereto,
in form and substance reasonably satisfactory to counsel for the Placement
Agent. Such counsel may state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates of
Administrators of the Trust, officers of the Company or any of its subsidiaries
and public officials.
13
(b) Opinion of Bermuda Counsel for the Company. On the Closing Date,
the Placement Agent and the Purchaser shall have received the favorable opinion,
dated as of the Closing Date, of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇, special Bermuda counsel
for the Company, in substantially the form set out in Annex B hereto, in form
and substance reasonably satisfactory to counsel for the Placement Agent. Such
counsel may state that, insofar as such opinion involves factual matters, they
have relied, to the extent they deem proper, upon certificates of officers of
the Company or any of its subsidiaries and public officials.
(c) Opinion of Bermuda Tax Counsel for the Offerors. On the Closing
Date, the Placement Agent and the Purchaser shall have received an opinion,
dated as of the Closing Date, of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇, special Bermuda tax
counsel for the Offerors, that (i) all payments of principal, premium, if any,
interest and other amounts payable in respect of the Subordinated Debt
Securities and Capital Securities will not be subject to any taxes (including
withholding taxes), duties, assessments or other governmental charges of any
type imposed or levied by or on behalf of Bermuda or any political subdivision
or taxing authority thereof or therein, and (ii) the Trust will not be subject
to, or otherwise required to pay, more than a de minimis amount of taxes,
duties, assessments or other governmental charges of any type imposed or levied,
by or on behalf of Bermuda or any political subdivision or taxing authority
thereof or therein, in substantially the form set out in Annex C hereto. Such
opinion may be conditioned on, among other things, the initial and continuing
accuracy of the facts, financial and other information, covenants and
representations set forth in certificates of officers of the Company and other
documents deemed necessary for such opinion.
(d) Opinion of Special Delaware Counsel for the Trust. On the Closing
Date, the Placement Agent and the Purchaser shall have received the favorable
opinion, dated as of the Closing Date, of Morris, James, Hitchens & ▇▇▇▇▇▇▇▇
LLP, special Delaware counsel for the Trust, in substantially the form set out
in Annex D hereto, in form and substance reasonably satisfactory to counsel for
the Placement Agent.
(e) Opinion of Counsel to the Guarantee Trustee, the Institutional
Trustee, the Delaware Trustee and the Indenture Trustee. On the Closing Date,
the Placement Agent and the Purchaser shall have received the favorable opinion,
dated as of the Closing Date, of Morris, James, Hitchens & ▇▇▇▇▇▇▇▇ LLP, counsel
for the Guarantee Trustee, the Institutional Trustee, the Delaware Trustee and
the Indenture Trustee, in substantially the form set out in Annex E hereto, in
form and substance reasonably satisfactory to counsel for the Placement Agent.
(f) Certificates. On the Closing Date, there shall not have been, since
the date hereof or since the respective dates as of which information is given
in the 1934 Act Reports, or, where any information has been updated in or
superseded by a subsequent 1934 Act Report, since the date of such subsequent
1934 Act Report, any Material Adverse Effect, and the Placement Agent shall have
received a certificate of the Chairman, the Chief Executive Officer, the
President, any Executive Vice President or any Vice President of the Company and
of the Chief Financial Officer or Chief Accounting Officer of the Company and a
certificate of an Administrator of the Trust, dated as of the Closing Date, to
the effect that (i) there has been no such Material Adverse Effect, (ii) the
representations and warranties in Section 1 hereof were true and correct when
made and are true and correct with the same force and effect as though expressly
made on and as of the Closing Date, and (iii) the Offerors have complied with
all agreements and satisfied all conditions on their part to be performed or
satisfied on or prior to the Closing Date.
14
(g) Maintenance of Ratings. From the date of this Agreement through the
Closing Date, (i) there shall not have occurred a downgrading in or withdrawal
of the rating assigned to the debt securities or preferred stock of the Trust,
the Company or any Insurance Subsidiary or the financial strength or claims
paying ability of the Trust, the Company or any Insurance Subsidiary, in each
case by A.M. Best & Co. or any "nationally recognized statistical rating
organization," as that term is defined by the Commission for the purposes of
Rule 436(g)(2) under the 1933 Act, and (ii) neither A.M. Best & Co. nor any such
organization shall have publicly announced that it has under surveillance or
review its rating of any debt security, preferred stock or the financial
strength or the claims paying ability of the Trust, the Company or any Insurance
Subsidiary.
(h) Purchaser's Sale of Securities. The Purchaser shall have sold
securities issued by it in such an amount that the net proceeds therefrom shall
be available on the Closing Date and shall be sufficient to purchase the Capital
Securities and all other capital securities, surplus notes and senior notes
contemplated in agreements similar to this Agreement and the Subscription
Agreement.
(i) Additional Documents. On the Closing Date, the Placement Agent and
the Purchaser shall have been furnished such documents and opinions as they may
reasonably request in connection with the issue, sale and placement of the
Capital Securities; and all proceedings taken by the Offerors in connection with
the issuance, sale and placement of the Capital Securities shall be satisfactory
in form and substance to the Placement Agent and the Purchaser.
(j) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Placement Agent by notice to the Offerors at
any time on or prior to the Closing Date. If the sale of the Capital Securities
provided for herein is not consummated because any condition set forth in
Section 5(a), (b), (c), (d), (e), (f), (g) or (i) is not satisfied, because of
any termination pursuant to Section 10(a) hereof or because of any refusal,
inability or failure on the part of the Offerors to perform any material
agreement herein or comply with any material provision hereof, the Company will
reimburse the Placement Agent upon demand for all documented out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by the Placement Agent and are reasonably attributable to the
proposed offering of the Capital Securities. In addition, such termination shall
be subject to Section 4 hereof, and Sections 7 and 8 hereof shall survive any
such termination and remain in full force and effect.
SECTION 6. Offers and Sales of the Capital Securities.
(a) Offer and Sale Procedures. The Placement Agent and the Offerors
hereby confirm and agree to observe the following provisions with respect to the
offer, issue, sale and placement of the Capital Securities:
15
(i) Offers and Sales only to the Purchaser. Offers and sales
of the Capital Securities will be made only to the Purchaser in a
transaction not requiring registration under the 1933 Act.
(ii) No General Solicitation. No general solicitation or
general advertising (within the meaning of Rule 502(c) under the ▇▇▇▇
▇▇▇) has been or will be used in connection with the offering of the
Capital Securities.
(iii) No Directed Selling Efforts. No directed selling efforts
(within the meaning of Regulation S) has been or will be used with
respect to the offering of the Capital Securities.
(iv) Purchaser Notification. Prior to or contemporaneously
with the purchase of the Capital Securities by the Purchaser, the
Placement Agent will take reasonable steps to inform the Purchaser that
the Capital Securities (A) have not been and will not be registered
under the 1933 Act, (B) are being sold to them without registration
under the 1933 Act in accordance with an exemption from registration
under the 1933 Act and (C) may not be offered, sold or otherwise
transferred except in accordance with the legend set forth in the
Declaration.
(b) Covenants of the Offerors. Each of the Offerors, jointly and
severally, covenant with the Placement Agent and the Purchaser as follows:
(i) Due Diligence. In connection with the initial placement of
the Capital Securities, the Offerors agree that, prior to any offer or
sale of the Capital Securities through the Placement Agent, the
Placement Agent and the Purchaser shall have the right to make
reasonable inquiries into the business of the Trust, the Company and
the subsidiaries of the Company. The Offerors also agree to provide
answers to the Placement Agent and the Purchaser, if requested,
concerning the Trust, the Company and the subsidiaries of the Company
and the terms and conditions of the offering of the Capital Securities
and the Subordinated Debt Securities (to the extent that such
information is available or can be acquired and made available without
unreasonable effort or expense and to the extent the provision thereof
is not prohibited by applicable law).
(ii) Integration. The Offerors agree that they will not, and
will cause their Affiliates not to, make any offer or sale of
securities of the Offerors of any class if, as a result of the doctrine
of "integration" referred to in Rule 502 under the 1933 Act, such offer
or sale would render invalid the exemption from the registration
requirements of the 1933 Act provided by Section 4(2) thereof or by
Rule 144A or otherwise.
(iii) Restriction on Repurchases. Until the expiration of two
(2) years (or such shorter period as may hereafter be referred to in
Rule 144(k) (or similar successor rule)) after the original issuance of
the Capital Securities, the Offerors will not, and will cause their
Affiliates not to, purchase or agree to purchase or otherwise acquire
any Capital Securities which are "restricted securities" (as such term
is defined under Rule 144(a)(3) under the 1933 Act), whether as
beneficial owner or otherwise, unless, immediately upon any such
purchase, the Offerors or any Affiliate shall submit such Capital
Securities to the Institutional Trustee for cancellation.
16
SECTION 7. Indemnification.
(a) Indemnification of the Placement Agent and the Purchaser. Each of
the Offerors agrees, jointly and severally, to indemnify and hold harmless: (x)
the Placement Agent and the Purchaser, (y) each person, if any, who controls
(within the meaning of Section 15 of the 1933 Act or ▇▇▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇)
the Placement Agent or the Purchaser (each such person, a "controlling person")
and (z) the respective partners, directors, officers, employees and agents of
the Placement Agent and the Purchaser or any such controlling person, as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, relating to or arising out of, or
based upon, in whole or in part, (A) any untrue statement or alleged
untrue statement of a material fact included in the 1934 Act Reports,
or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; (B) any
untrue statement or alleged untrue statement of material fact contained
in any written information or documents executed in favor of or
furnished or made available to the Placement Agent or the Purchaser by
the Offerors; (C) any omission or alleged omission to state in any
written information or documents executed in favor of or furnished or
made available to the Placement Agent or the Purchaser by the Offerors
a material fact necessary to make the statements therein not
misleading; or (D) the breach or alleged breach of any representation,
warranty and agreement of any Offeror contained herein or in the
Subscription Agreement;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, or breach
or alleged breach of any such representation, warranty or agreement;
provided, that (subject to Section 7(c) hereof) any such settlement is
effected with the written consent of the Offerors; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the
Placement Agent), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, or breach or alleged breach
of any such representation, warranty or agreement, to the extent that
any such expense is not paid under (i) or (ii) above;
provided, however, that the Company agrees to indemnify and hold harmless the
Trust against any and all loss, liability, claim, damage and expense whatsoever,
as incurred, which is due from the Trust pursuant to the foregoing.
17
(b) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof, and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. Counsel to the indemnified parties shall be selected by the Placement
Agent. An indemnifying party may participate at its own expense in the defense
of any such action; provided, however, that counsel to the indemnifying party
shall not (except with the consent of the indemnified party) also be counsel to
the indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 7 or Section 8 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(c) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have validly requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement, provided, however, that an indemnifying party shall
not be liable for any such settlement effected without its consent if such
indemnifying party (1) reimburses such indemnified party with respect to those
fees and expenses of counsel that it determines in good faith are reasonable and
(2) provides written notice within 10 days after receipt of the request for
reimbursement to the indemnified party substantiating the unpaid balance as
unreasonable, in each case prior to the date of such settlement.
SECTION 8. Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnification provided for in
Section 7 hereof is for any reason held to be unenforceable for the benefit of
an indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Offerors, on the
one hand, and the Placement Agent, on the other hand, from the offering of the
Capital Securities pursuant to this Agreement or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Offerors, on the one hand, and the
Placement Agent, on the other hand, in connection with the statements, omissions
or breaches which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
18
The relative benefits received by the Offerors, on the one hand, and
the Placement Agent, on the other hand, in connection with the offering of the
Capital Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Capital Securities pursuant to this Agreement (before deducting expenses)
received by the Offerors and the total commission received by the Placement
Agent bear to the aggregate of such net proceeds and commissions.
The Offerors and the Placement Agent agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 8. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 8 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement, omission or alleged omission or breach or alleged breach.
Notwithstanding the provisions of this Section 8, the Placement Agent
shall not be required to contribute any amount in excess of the total
commissions received by it.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, the Purchaser, each person, if any, who
controls the Placement Agent or the Purchaser within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act and the respective partners,
directors, officers, employees and agents of the Placement Agent, the Purchaser
or any such controlling person shall have the same rights to contribution as the
Placement Agent, while each officer and director of the Company, each Trustee of
the Trust and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Offerors.
SECTION 9. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or Trustees of the Trust
submitted pursuant hereto shall remain operative and in full force and effect,
and shall survive delivery of the Capital Securities by the Trust.
19
SECTION 10. Termination of Agreement.
(a) Termination; General. The Placement Agent may terminate this
Agreement, by notice to the Offerors, at any time on or prior to the Closing
Date if, since the time of execution of this Agreement or, in the case of (i),
since the respective dates as of which information is given in the 1934 Act
Reports, (i) there has occurred any Material Adverse Effect, or (ii) there has
occurred any material adverse change in the financial markets in the United
States, any outbreak of hostilities or escalation thereof or any other calamity
or crisis, or any change or development involving political, financial or
economic conditions, in each case the effect of which is such as to make it, in
the judgment of the Placement Agent, impracticable to market the Capital
Securities or to enforce contracts for the sale of the Capital Securities, or
(iii) trading in any securities of the Company has been suspended or limited by
the Commission or any stock exchange or market on or in which such securities
are traded or quoted, or if trading generally on the American Stock Exchange,
the New York Stock Exchange, the Nasdaq National Market or any stock exchange on
which any of the Company's securities are traded has been suspended or limited,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers or any
other governmental authority, (iv) a banking moratorium has been declared by
United States federal, Delaware, New York or Bermuda authorities or (v) a change
or development involving a prospective change in Bermuda taxation has occurred
affecting the Company, the Trust, the Purchaser, the Subordinated Debt
Securities, the Capital Securities or transfers thereof.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 and Section 5 hereof, and provided further
that Sections 1, 7 and 8 hereof shall survive such termination and remain in
full force and effect.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Placement
Agent shall be directed to Sandler ▇'▇▇▇▇▇ & Partners, L.P., as follows: ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Principal, with a copy to Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; and notices to the
Offerors shall be directed to PXRE Group Ltd., Swan Building, ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, Attention: Chief Financial Officer, with a copy
to ▇▇▇▇▇▇ ▇▇▇▇▇ & Bockius LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
SECTION 12. Parties. This Agreement shall inure to the benefit of and
be binding upon each of the Placement Agent and the Offerors and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Placement Agent, the Purchaser and the Offerors, and their respective
successors and the controlling persons and other persons referred to in Sections
1, 7 and 8 hereof and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the Placement
Agent, the Purchaser and the Offerors and their respective successors, and said
controlling persons and other persons and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation.
20
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES OF SAID STATE OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW.
EACH OF THE TRUST AND THE COMPANY, ON BEHALF OF ITSELF AND ITS
SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, THE TRUST), HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE
COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY,
IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION AND IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN ANY SUCH COURT. EACH OF THE TRUST AND THE COMPANY, ON BEHALF
OF ITSELF AND ITS SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, THE TRUST),
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 14. Appointment of Agent. The Company hereby irrevocably
designates, appoints and empowers CT Corporation System, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as its designee, appointee and agent to
receive, accept and acknowledge for and on its behalf, and its properties,
assets and revenues, service of any and all legal process, summons, notices and
documents which may be served in any action, suit or proceeding against it with
respect to its obligations or liabilities under, or any other matter arising out
of or in connection with, this Agreement that is brought in any United States
federal court or New York state court, in each case located in the Borough of
Manhattan, The City of New York, which may be made on such designee, appointee
and agent in accordance with legal procedures prescribed for such courts. If for
any reason such designee, appointee and agent shall cease to be available to act
as such, the Company hereby agrees to designate a new designee, appointee and
agent in The City of New York on the terms and for the purposes of this Section.
The Company hereby further irrevocably agrees to the service of any and all
legal process, summons, notices and documents in any such action, suit or
proceeding by serving a copy thereof upon the relevant agent for service of
process referred to in this Section (whether or not the appointment of such
agent shall for any reason prove to be ineffective or such agent shall accept or
acknowledge such service) or by mailing copies thereof by registered or
certified air mail, first class, postage prepaid, to the Company at Swan
Building, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, Attention: Chief Financial
Officer. The Company hereby further agrees that service of process as
aforementioned shall be deemed in every respect effective service of process
upon it in any such action, suit or proceeding and that the failure of any such
designee, appointee and agent to give any notice of such service to it shall not
impair or affect in any way the validity of such service or any judgment
rendered in any action, suit or proceeding based thereon. Nothing herein shall
in any way be deemed to limit the ability of any Person to serve any such legal
process, summons, notices and documents in any other manner permitted by
applicable law or to obtain jurisdiction over the Company or bring actions,
suits or proceedings against the Company in any jurisdiction, and in such
manner, as may be permitted by applicable law.
21
SECTION 15. Waiver of Immunities. To the extent that the Company or any
of its properties, assets or revenues may have or may hereafter become entitled
to, or have attributed to it, any right of immunity, on the grounds of
sovereignty or otherwise, from any action, suit or proceeding, from the giving
of any relief in any action, suit or proceeding, from set-off or counterclaim,
from the jurisdiction of any court, from service of process, from attachment
upon or prior to judgment, or from attachment in aid of execution of judgment,
or from execution of judgment, or other legal process or proceeding for the
giving of any relief or for the enforcement of any judgment, in any jurisdiction
in which proceedings may at any time be commenced, with respect to its
obligations or liabilities under, or any other matter arising out of or in
connection with, this Agreement, the Company hereby irrevocably and
unconditionally, to the extent permitted by applicable law, waives, and agrees
not to plead or claim, any such immunity and consents to such relief and
enforcement.
SECTION 16. Additional Amounts. All payments required to be made by the
Company under this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any and all present and future
taxes, duties, assessments or other governmental charges of whatever nature
(collectively, "Foreign Taxes") now or hereinafter imposed or levied by or on
behalf of Bermuda or any political subdivision or taxing authority thereof or
therein unless required under applicable law. If such a withholding or deduction
is required under applicable law, the Company shall pay such additional amounts
to the party entitled to receive the related payment under this Agreement as
shall be required so that the net amounts received and retained by such party,
after paying all Foreign Taxes, will be equal to the amounts that such party
would have received and retained had no Foreign Taxes been imposed.
SECTION 17. Disclosure of Tax Treatment and Tax Structure.
Notwithstanding anything herein to the contrary, any party to this Agreement
(and each employee, representative or other agent of any party to this
Agreement) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the offering and all materials of any
kind (including opinions or other tax analyses) that are provided to it relating
to such tax treatment and tax structure. However, such information relating to
the tax treatment or tax structure is required to be kept confidential to the
extent necessary to comply with any applicable federal or state securities laws.
For this purpose, "tax structure" means any facts relevant to the federal income
tax treatment of the offering contemplated by this Agreement but does not
include information relating to the identity of the Offerors.
SECTION 18. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
22
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement among the Placement Agent and the Offerors in accordance with its
terms.
Very truly yours,
PXRE GROUP LTD.
By: _________________________________
Name:
Title:
PXRE CAPITAL TRUST III
By: _________________________________
Name:
Title: Administrator
CONFIRMED AND ACCEPTED, as of the date first above written:
SANDLER ▇'▇▇▇▇▇ & PARTNERS, L.P.
By: Sandler ▇'▇▇▇▇▇ & Partners Corp.,
the sole general partner
By: ___________________________
Name:
Title:
ANNEX A
Pursuant to Section 5(a) of the Placement Agreement, special U.S. counsel for
the Offerors shall deliver an opinion in substantially the following form:
[TO COME]
A-1
ANNEX B
Pursuant to Section 5(b) of the Placement Agreement, special
Bermuda counsel for the Company shall deliver an opinion in substantially the
following form:
[TO COME]
B-1
ANNEX C
Pursuant to Section 5(c) of the Placement Agreement, special Bermuda
tax counsel for the Offerors shall deliver an opinion in substantially the
following form:
1. All payments of principal, premium, if any, interest and other
amounts payable in respect of the Subordinated Debt Securities, the Capital
Securities or the Guarantee Agreement will not be subject to any taxes
(including withholding taxes), duties, assessments or other governmental charges
of any type imposed or levied by or on behalf of Bermuda or any political
subdivision or taxing authority thereof or therein.
2. The Trust will not be subject to, or otherwise required to pay, more
than a de minimis amount of taxes, duties, assessments or other governmental
charges of any type imposed or levied by or on behalf of Bermuda or any
political subdivision or taxing authority thereof or therein.
C-1
ANNEX D
Pursuant to Section 5(d) of the Placement Agreement, special Delaware
counsel for the Trust shall deliver an opinion in substantially the following
form:
1. The Trust has been duly formed and is validly existing in good
standing as a statutory trust under the Delaware Act.
2. The Declaration constitutes a valid and binding obligation of the
Sponsor and Trustees party thereto, enforceable against such Sponsor and
Trustees in accordance with its terms.
3. Under the Delaware Act and the Declaration, the Trust has the
requisite trust power and authority (i) to own its properties and conduct its
business, all as described in the Declaration, (ii) to execute and deliver, and
perform its obligations under, the Operative Documents to which it is a party,
(iii) to authorize, issue, sell and perform its obligations under its Capital
Securities and Common Securities, and (iv) to purchase and hold the Subordinated
Debt Securities.
4. The Capital Securities have been duly authorized for issuance by the
Trust and, when issued, executed and authenticated in accordance with the
Declaration and delivered against payment therefor in accordance with the
Declaration and the Subscription Agreement, will be validly issued and, subject
to the qualifications set forth in paragraph 5 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust and the
holders of the Capital Securities will be entitled to the benefits provided by
the Declaration.
5. Each holder of Capital Securities, in such capacity, will be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware. We note, however, that the holders of the Capital
Securities may be required to make payment or provide indemnity or security as
set forth in the Declaration.
6. Under the Declaration and the Delaware Act, the issuance of the
Capital Securities and Common Securities is not subject to preemptive rights.
7. The Common Securities have been duly authorized for issuance by the
Trust and, when issued and executed in accordance with the Declaration and
delivered against payment therefor in accordance with the Declaration and the
subscription agreement therefor, will be validly issued undivided beneficial
interests in the assets of the Trust and the holders of the Common Securities
will be entitled to the benefits provided by the Declaration.
8. Under the Declaration and the Delaware Act, the execution and
delivery by the Trust of the Operative Documents to which it is a party, and the
performance by the Trust of its obligations thereunder, have been duly
authorized by the requisite trust action on the part of the Trust.
D-1
9. The issuance and sale by the Trust of its Capital Securities and
Common Securities, the execution, delivery and performance by the Trust of the
Operative Documents to which it is a party, the consummation by the Trust of the
transactions contemplated by the Operative Documents to which it is party, and
the compliance by the Trust with its obligations thereunder are not prohibited
by (i) the Declaration or the Trust Certificate, or (ii) any law or
administrative regulation of the State of Delaware applicable to the Trust.
10. No authorization, approval, consent or order of any Delaware court
or Delaware governmental authority or Delaware agency is required to be obtained
by the Trust solely in connection with the issuance and sale by the Trust of its
Capital Securities and Common Securities, the due authorization, execution and
delivery by the Trust of the Operative Documents to which it is a party or the
performance by the Trust of its obligations under the Operative Documents to
which it is a party.
11. The holders of the Capital Securities (other than those holders who
reside or are domiciled in the State of Delaware) will have no liability for
income taxes imposed by the State of Delaware solely as a result of their
participation in the Trust, and the Trust will not be liable for any income tax
imposed by the State of Delaware.
D-2
ANNEX E
Pursuant to Section 5(e) of the Placement Agreement, counsel to the
Guarantee Trustee, the Institutional Trustee, the Delaware Trustee and the
Indenture Trustee shall deliver an opinion in substantially the following form:
1. Wilmington Trust Company ("WTC") is a Delaware banking corporation
with trust powers, duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, with requisite corporate power and
authority to execute and deliver, and to perform its obligations under, the
Declaration, the Guarantee Agreement and the Indenture (collectively, the
"Transaction Documents").
2. The execution, delivery, and performance by WTC of the Transaction
Documents have been duly authorized by all necessary corporate action on the
part of WTC, and the Transaction Documents have been duly executed and delivered
by WTC.
3. The execution, delivery and performance of the Transaction Documents
by WTC and the consummation of any of the transactions by WTC contemplated
thereby are not prohibited by (i) the charter or bylaws of WTC, (ii) any law or
administrative regulation of the State of Delaware or the United States of
America governing the banking and trust powers of WTC, or (iii) to our knowledge
(based and relying solely on the Officer Certificates), any agreements or
instruments to which WTC is a party or by which WTC is bound or any judgments or
order applicable to WTC.
4. The Subordinated Debt Securities delivered on the date hereof have
been authenticated by due execution thereof and delivered by WTC, as Indenture
Trustee, in accordance with the Indenture. The Capital Securities delivered on
the date hereof have been authenticated by due execution thereof and delivered
by WTC, as Institutional Trustee, in accordance with the Declaration.
5. None of the execution, delivery and performance by WTC of the
Transaction Documents and the consummation of any of the transactions by WTC
contemplated thereby requires the consent, authorization, order or approval of,
the withholding of objection on the part of, the giving of notice to, the
registration with or the taking of any other action in respect of, any
governmental authority or agency, under any law or administrative regulation of
the State of Delaware or the United States of America governing the banking and
trust powers of WTC, except for the filing of the Trust Certificate with the
Office of the Secretary of State of the State of Delaware pursuant to the
Delaware Act (which filing has been duly made).
E-1