EXHIBIT 4.1
PROASSURANCE CORPORATION
3.90% CONVERTIBLE SENIOR DEBENTURES DUE 2023
PURCHASE AGREEMENT
DATED JULY 1, 2003
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TABLE OF CONTENTS
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ........................................... 2
(a) No Registration ................................................................................ 2
(b) No Integration ................................................................................. 2
(c) Rule 144A ...................................................................................... 3
(d) Offering Memorandum ............................................................................ 3
(e) Offering Materials Furnished to the Initial Purchasers ......................................... 3
(f) Authorization of the Purchase Agreement ........................................................ 3
(g) Authorization of the Indenture ................................................................. 3
(h) Authorization of the Debentures ................................................................ 3
(i) Authorization of the Conversion Shares and Put Shares .......................................... 4
(j) Authorization of the Registration Rights Agreement ............................................. 4
(k) No Material Adverse Change ..................................................................... 4
(l) Independent Accountants ........................................................................ 4
(m) Preparation of the Financial Statements ........................................................ 5
(n) Incorporation and Good Standing of the Company and its Subsidiaries ............................ 5
(o) Capitalization and Other Capital Stock Matters ................................................. 5
(p) Stock Exchange Listing ......................................................................... 6
(q) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required ..... 6
(r) No Material Actions or Proceedings ............................................................. 6
(s) Intellectual Property Rights ................................................................... 7
(t) Governmental Licenses .......................................................................... 7
(u) Absence of Labor Dispute ....................................................................... 7
(v) Title to Properties ............................................................................ 7
(w) Tax Law Compliance ............................................................................. 8
(x) Company Not an "Investment Company" ............................................................ 8
(y) Insurance ...................................................................................... 8
(z) No Price Stabilization or Manipulation ......................................................... 9
(aa) Related Party Transactions .................................................................... 9
(bb) No General Solicitation ....................................................................... 9
(cc) Reporting Company ............................................................................. 9
(dd) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ ................................................................................ 9
(ee) Exchange Act Compliance ....................................................................... 9
(ff) No Unlawful Contributions or Other Payments ................................................... 9
(gg) Company's Accounting System and Internal Controls ............................................. 9
(hh) ERISA Compliance .............................................................................. 10
(ii) Brokers ....................................................................................... 10
(jj) Divided Payments .............................................................................. 10
(kk) No Outstanding Loans or Other Indebtedness .................................................... 10
(ll) Compliance with Laws .......................................................................... 10
(mm) Statutory Insurance Filings ................................................................... 11
(nn) Reserving Practices ........................................................................... 11
(oo) Claims-paying Ability Rating .................................................................. 11
(pp) Validity of Reinsurance Treaties .............................................................. 11
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE DEBENTURES ........................................... 12
(a) The Firm Debentures ............................................................................ 12
(b) The First Closing Date ......................................................................... 12
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(c) The Optional Debentures; the Second Closing Date ............................................... 12
(d) Payment for the Debentures ..................................................................... 12
(e) Delivery of the Debentures ..................................................................... 13
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY ..................................................... 13
(a) Initial Purchasers' Review of Proposed Amendments and Supplements .............................. 13
(b) Amendments and Supplements to the Offering Memorandum and Other Securities Law Matters ......... 13
(c) Notice of Filings .............................................................................. 13
(d) Copies of Offering Memorandum .................................................................. 14
(e) Blue Sky Compliance ............................................................................ 14
(f) Rule 144A Information .......................................................................... 14
(g) Legends ........................................................................................ 14
(h) No General Solicitation ........................................................................ 14
(i) No Integration ................................................................................. 14
(j) Rule 144 Tolling ............................................................................... 14
(k) Use of Proceeds ................................................................................ 15
(l) Transfer Agent ................................................................................. 15
(m) The Depository Trust Company ................................................................... 15
(n) Reservation of Common Stock .................................................................... 15
(o) Rating of Debentures ........................................................................... 15
(p) PORTAL Designation ............................................................................. 15
(q) Earnings Statement ............................................................................. 15
(r) Company to Provide Interim Financial Statements ................................................ 15
(s) New York Stock Exchange Listing ................................................................ 15
(t) Agreement Not to Offer or Sell Additional Securities ........................................... 15
(u) Future Reports to the Representatives .......................................................... 16
(v) Investment Limitation .......................................................................... 16
(w) No Manipulation of Price ....................................................................... 16
(x) Existing Lock-Up Agreement ..................................................................... 16
SECTION 4. PAYMENT OF EXPENSES ..................................................................... 16
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASERS ................................. 17
(a) Accountants' Comfort Letter .................................................................... 17
(b) No Material Adverse Change or Ratings Agency Change ............................................ 17
(c) Opinion of External and Internal Counsel for the Company ....................................... 17
(d) Opinion of Counsel for the Initial Purchasers .................................................. 18
(e) Officers' Certificate .......................................................................... 18
(f) Bring-down Comfort Letter ...................................................................... 18
(g) Registration Rights Agreement .................................................................. 18
(h) Lock-Up Agreement from Officers and Directors of the Company ................................... 18
(i) PORTAL Designation ............................................................................. 19
(j) Additional Documents ........................................................................... 19
SECTION 6. SUBSEQUENT OFFERS AND RESALES OF THE SECURITIES ......................................... 19
(a) Offer and Sale Procedures ...................................................................... 19
(b) Covenants of the Company ....................................................................... 20
(c) Qualified Institutional Buyer .................................................................. 21
(d) Restricted Securities .......................................................................... 21
SECTION 7. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES ........................................... 21
SECTION 8. INDEMNIFICATION ......................................................................... 21
(a) Indemnification of the Initial Purchasers by the Company ....................................... 21
(b) Indemnification of the Company, its Directors and Officers ..................................... 22
(c) Notifications and Other Indemnification Procedures ............................................. 22
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(d) Settlements .................................................................................... 23
SECTION 9. CONTRIBUTION ............................................................................ 23
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL PURCHASERS ............................... 24
SECTION 11. TERMINATION OF THIS AGREEMENT .......................................................... 26
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY .................................... 26
SECTION 13. NOTICES ................................................................................ 26
SECTION 14. SUCCESSORS ............................................................................. 28
SECTION 15. PARTIAL UNENFORCEABILITY ............................................................... 28
SECTION 16. GOVERNING LAW .......................................................................... 28
SECTION 17. GENERAL PROVISIONS ..................................................................... 28
PURCHASE AGREEMENT
July 1, ▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ SECURITIES LLC
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ SECURITIES LLC
▇/▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ SECURITIES LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
INTRODUCTORY. ProAssurance Corporation, a Delaware corporation
(the "COMPANY"), proposes to issue and sell to the several purchasers named in
Schedule A (the "INITIAL PURCHASERS") $100,000,000 in aggregate principal amount
of its 3.90% Convertible Senior Debentures due 2023 (the "FIRM DEBENTURES"). In
addition, the Company has granted to the Initial Purchasers an option to
purchase up to an additional $35,000,000 in aggregate principal amount of its
3.90% Convertible Senior Debentures due 2023, as provided in Section 2 of this
Agreement. The additional $35,000,000 in aggregate principal amount to be sold
by the Company pursuant to such option are called the "OPTIONAL DEBENTURES". The
Firm Debentures and, if and to the extent such option is exercised, the Optional
Debentures are collectively called the "DEBENTURES". Banc of America Securities
LLC ("BAS") and ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Securities LLC have agreed to act as
representatives of the several Initial Purchasers (in such capacity, the
"REPRESENTATIVES") in connection with the offering and sale of the Debentures.
The Debentures will be convertible into fully paid,
non-assessable shares of common stock, par value $0.01 per share, of the Company
(the "COMMON STOCK"). The Debentures will be convertible initially at a
conversion rate of 23.9037 shares per $1,000 principal amount of the Debentures,
on the terms, and subject to the conditions, set forth in the Indenture (as
defined below). As used herein, "CONVERSION SHARES" means the shares of Common
Stock into which the Debentures are convertible. The Debentures will be issued
pursuant to an indenture (the "INDENTURE") to be dated as of the First Closing
Date (as defined in Section 2 of this Agreement), between the Company and
SouthTrust Bank, a banking corporation, as trustee (the "TRUSTEE").
The Debentures will be offered and sold to the Initial
Purchasers without being registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), and the rules and regulations (the "RULES AND
REGULATIONS") of the Securities and Exchange Commission (the "COMMISSION")
thereunder, in reliance upon an exemption therefrom.
Holders of the Debentures (including the Initial Purchasers
and their direct and indirect transferees) will be entitled to the benefits of a
Resale Registration Rights Agreement, dated the First Closing Date, between the
Company and the Initial Purchasers (the "REGISTRATION RIGHTS AGREEMENT") in the
form of Exhibit C attached hereto. In accordance with the Registration Rights
Agreement, pursuant to which the Company will agree to file with the Commission
a shelf registration statement pursuant to Rule 415 under the Securities Act
(the "REGISTRATION STATEMENT") covering the resale of the Debentures and the
Conversion Shares, and
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to use its best efforts to cause the Registration Statement to be declared
effective. This Agreement, the Indenture, the Debentures and the Registration
Rights Agreement are referred to herein collectively as the "OPERATIVE
DOCUMENTS".
The Company understands that the Initial Purchasers
propose to make an offering of the Debentures on the terms and in the manner set
forth herein and in the Offering Memorandum (as defined below) and agrees that
the Initial Purchasers may resell, subject to the conditions set forth herein,
all or a portion of the Debentures to purchasers (the "SUBSEQUENT PURCHASERS")
at any time after the date of this Agreement. The terms of the Debentures and
the Indenture will require that investors that acquire the Debentures expressly
agree that the Debentures (and any Conversion Shares) may only be resold or
otherwise transferred, after the date hereto, if such Debentures (or Conversion
Shares) are registered for sale under the Securities Act or if an exemption from
the registration requirements of the Securities Act is available (including the
exemption afforded by Rule 144A ("RULE 144A") thereunder).
The Company has prepared an offering memorandum dated
the date hereof setting forth information concerning the Company, the
Debentures, the Registration Rights Agreement and the Common Stock (including
the Conversion Shares and the Put Shares (as defined below) in form and
substance reasonably satisfactory to the Initial Purchasers. As used in this
Agreement, "OFFERING MEMORANDUM" means, collectively, the preliminary offering
memorandum dated as of June 30, 2003 (the "PRELIMINARY OFFERING MEMORANDUM") and
the final offering memorandum dated the date hereof (the "FINAL OFFERING
MEMORANDUM"), each as amended or supplemented by the Company. As used herein,
each of the terms "Offering Memorandum", "Preliminary Offering Memorandum" and
"Final Offering Memorandum" shall include in each case the documents
incorporated or deemed to be incorporated by reference therein.
The Company hereby confirms its agreements with the
Initial Purchasers as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents, warrants and covenants to the Initial Purchasers as
follows:
(a) No Registration. Assuming the accuracy of the representations and
warranties of the Initial Purchasers contained in Section 6 of this Agreement
and their compliance with the conditions and agreements set forth herein, it is
not necessary, in connection with the issuance and sale of the Debentures to the
Initial Purchasers, the offer, resale and delivery of the Debentures by the
Initial Purchasers and the conversion of the Debentures into Conversion Shares,
in each case in the manner contemplated by this Agreement, the Indenture and the
Offering Memorandum, to register the Debentures or the Conversion Shares under
the Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended (the "TRUST INDENTURE ACT"). In accordance with the
Registration Rights Agreement, the Debentures will be registered under the
Securities Act and the Trust Indenture Act.
(b) No Integration. None of the Company or any of its subsidiaries, nor
any person acting on its or their behalf (other than the Initial Purchasers in
connection with the transactions contemplated by this Agreement, about which no
representation is made by the Company) has, directly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any "security" (as defined in the Securities Act) that is or will be integrated
with the sale of the Debentures or the Conversion Shares in a manner that would
require registration under the Securities Act of the Debentures or the
Conversion Shares.
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(c) Rule 144A. No securities of the same class (within the meaning of
Rule 144A(d)(3) under the Securities Act) as the Debentures are listed on any
national securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or quoted on an automated
inter-dealer quotation system.
(d) Offering Memorandum. The Company hereby confirms that it has
authorized the use of the Offering Memorandum in connection with the offer and
sale of the Debentures by the Initial Purchasers. Each document, if any, filed
or to be filed pursuant to the Exchange Act and incorporated by reference in the
Offering Memorandum complied or will comply when it is filed in all material
respects with the Exchange Act and the rules and regulations of the commission
thereunder. The Preliminary Offering Memorandum and the Final Offering
Memorandum as of their respective dates do not contain, and the Final Offering
Memorandum as of the First Closing Date (as defined in Section 2 of this
Agreement) and as of the Second Closing Date (as defined in Section 2 of this
Agreement) will not contain, any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided
that the Company makes no representation or warranty as to information contained
in or omitted from the Offering Memorandum in reliance upon and in conformity
with written information furnished to the Company by or on the behalf of the
Initial Purchasers specifically for inclusion therein.
(e) Offering Materials Furnished to the Initial Purchasers. The Company
has delivered to the Initial Purchasers Preliminary Offering Memorandums and
Final Offering Memorandums, as amended or supplemented, in such quantities and
at such places as the Initial Purchasers have reasonably requested for each of
the Initial Purchasers.
(f) Authorization of the Purchase Agreement. This Agreement has been
duly authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, except as to rights
of indemnification hereunder which may be limited by applicable law and except
as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.
(g) Authorization of the Indenture. The Indenture has been duly
authorized by the Company and, upon the effectiveness of the Registration
Statement, will be qualified under the Trust Indenture Act; on the First Closing
Date, the Indenture will have been duly executed and delivered by the Company
and, assuming due authorization, execution and delivery of the Indenture by the
Trustee, will constitute a legally valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles; and the Indenture
conforms in all material respects to the description thereof contained in the
Offering Memorandum.
(h) Authorization of the Debentures. The Debentures have been duly
authorized by the Company; when the Debentures are executed, authenticated and
issued in accordance with the terms of the Indenture and delivered to and paid
for by the Initial Purchasers pursuant to this Agreement on the respective
Closing Date (assuming due authentication of the Debentures by the Trustees),
such Debentures will constitute legally valid and binding obligations of the
Company, entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights and remedies
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of creditors or by general equitable principles; and the Debentures will conform
in all material respects to the description thereof contained in the Offering
Memorandum.
(i) Authorization of the Conversion Shares and Put Shares. The
Conversion Shares have been duly and validly authorized and reserved for
issuance upon conversion of the Debentures and are free of preemptive rights;
and all Conversion Shares and the shares of Common Stock that may be delivered
by the Company to holders of Debentures upon the exercise by such holders of
certain repurchase rights upon the terms and conditions set forth in the
Indenture (such shares, the "PUT SHARES" and, together with the Conversion
Shares, the "SECURITIES"), when so issued and delivered upon such conversion or
repurchase in accordance with the terms of the Indenture, will be duly and
validly authorized and issued, fully paid and nonassessable and free and clear
of all liens, encumbrances, equities or claims; no holder of such shares will be
subject to personal liability by reason of being such a holder; the issuance of
such shares upon such conversion will not be subject to the preemptive or other
similar rights of any securityholder of the Company; and the Securities conform
in all material respects to the description thereof contained in the Offering
Memorandum.
(j) Authorization of the Registration Rights Agreement. The
Registration Rights Agreement has been duly authorized, executed and delivered
by, and is a valid and binding agreement of, the Company, enforceable against
the Company in accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles. The Registration Rights Agreement conforms in all
material respects to the description thereof contained in the Offering
Memorandum. Except as described in the Offering Memorandum, there are no holders
of securities (debt or equity) of the Company or holders of rights (including,
without limitation, preemptive rights) with registration or other similar rights
to have any securities registered by the Company under the Securities Act.
(k) No Material Adverse Change. Except as otherwise disclosed in the
Offering Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), subsequent to the respective dates as
of which information is given in the Offering Memorandum: (i) there has been no
material adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or otherwise,
or in the earnings, business, operations or prospects, whether or not arising
from transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change is called a "MATERIAL
ADVERSE CHANGE"); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect, direct
or contingent, not in the ordinary course of business, nor entered into any
material transaction or agreement not in the ordinary course of business; and
(iii) there has been no dividend or distribution of any kind declared, paid or
made by the Company or, except for dividends paid to the Company or other
subsidiaries, any of its subsidiaries on any class of capital stock or
repurchase or redemption by the Company or any of its subsidiaries of any class
of capital stock, except with respect to cashless exercises of stock options
under our employee stock option plans.
(l) Independent Accountants. Ernst & Young LLP who have expressed their
opinions with respect to certain sections of the Offering Memorandum as well as
the financial statements (which term as used in this Agreement includes the
related notes thereto) and supporting schedules filed with the Commission as a
part of the Registration Statement, or included or incorporated by reference in
the Offering Memorandum, are independent public or certified public accountants
as required by the Securities Act and the Exchange Act. Ernst & Young LLP
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has not provided any audit-related or non-audit services to the Company or its
subsidiaries since December 31, 2001, except for tax, actuarial, cash management
services, audits of employee benefit plans, acquisition due diligence and audits
of acquired businesses, as well as services provided in conjunction with the
Debentures offering provided for herein.
(m) Preparation of the Financial Statements. The financial statements
included or incorporated by reference in the Offering Memorandum present fairly
the consolidated financial position of the Company and its consolidated
subsidiaries as of and at the dates indicated and the results of their
operations and cash flows for the periods specified. The supporting schedules
included or incorporated by reference in the Offering Memorandum present fairly
the information required to be stated therein. Such financial statements and
supporting schedules have been prepared in conformity with generally accepted
accounting principles as applied in the United States applied on a consistent
basis throughout the periods involved, except as may be expressly stated in the
related notes thereto. The financial data set forth in the Offering Memorandum
under the captions "Summary Consolidated Financial Information" and
"Capitalization" fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained or
incorporated by reference in the Offering Memorandum. The Company's ratios of
earnings to fixed charges set forth in the Offering Memorandum have been
calculated in compliance with Item 503(d) of Regulation S-K under the Securities
Act.
(n) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum and, in the case of the Company, to
enter into and perform its obligations under this Agreement. Each of the Company
and each subsidiary is duly qualified as a foreign corporation to transact
business and is 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 for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change. All of the issued and
outstanding capital stock of each subsidiary has been duly authorized and
validly issued, is fully paid and nonassessable and is owned by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or claim, except that the shares of capital
stock of Medical Assurance, Inc., Professionals Group, Inc., The Medical
Assurance Company, Inc. and ProNational Insurance Company are subject to a
pledge and security agreement with SouthTrust Bank, as Administrative Agent, for
the ratable benefit of certain lenders under a credit facility dated May 10,
2001. The Company owns, directly or through its subsidiaries, 100% of the
outstanding common stock of MEEMIC Holdings, Inc., free and clear of any
security interest, mortgage, pledge, lien, encumbrance or other claim. The
Company does not own or control, directly or indirectly, any corporation,
association or other entity other than the subsidiaries listed in Exhibit 22 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002.
(o) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Offering Memorandum under the caption "Capitalization" (other than for
subsequent issuances, if any, pursuant to employee benefit plans described in
the Offering Memorandum or upon exercise of outstanding options described in the
Offering Memorandum). The Common Stock conforms in all material respects to the
description thereof contained in the Offering Memorandum. All of the issued and
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable and have been issued in compliance with federal
and state securities laws.
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None of the outstanding shares of Common Stock were issued in violation of any
preemptive rights, rights of first refusal or other similar rights to subscribe
for or purchase securities of the Company. There are no authorized or
outstanding options, warrants, preemptive rights, rights of first refusal or
other rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any capital stock of the Company or any of its
subsidiaries other than those accurately described in the Offering Memorandum,
including rights granted pursuant to this Agreement. The description of the
Company's stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted thereunder, set forth in the Offering
Memorandum accurately and fairly presents the information required to be shown
with respect to such plans, arrangements, options and rights, other than options
to acquire [] shares of common stock issued since December 31, 2002.
(p) Stock Exchange Listing. The Conversion Shares, if any, have been
approved for listing on the New York Stock Exchange.
(q) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default (or,
with the giving of notice or lapse of time, would be in default) ("DEFAULT")
under any indenture, mortgage, loan or credit agreement, note, contract,
franchise, lease or other instrument to which the Company or any of its
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 subsidiaries is
subject (each, an "EXISTING INSTRUMENT"), except for such Defaults as would not,
individually or in the aggregate, result in a Material Adverse Change. The
Company's execution, delivery and performance of the Operative Documents and
consummation of the transactions contemplated thereby and by the Offering
Memorandum (i) have been duly authorized by all necessary corporate action and
will not result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary, (ii) will not conflict with or constitute a
breach of, or Default or a Debt Repayment Triggering Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, or require the consent of any other party to, any
Existing Instrument, except for such conflicts, breaches, Defaults, liens,
charges or encumbrances as would not, individually or in the aggregate, result
in a Material Adverse Change and (iii) will not result in any violation of any
law, administrative regulation or administrative or court decree applicable to
the Company or any subsidiary. No consent, approval, authorization or other
order of, or registration or filing with, any court or other governmental or
regulatory authority or agency, is required for the Company's execution,
delivery and performance of the Operative Documents and consummation of the
transactions contemplated thereby and by the Offering Memorandum, except (i)
with respect to the transactions contemplated by the Registration Rights
Agreement, as may be required under the Securities Act, the Trust Indenture Act
and the rules and regulations promulgated thereunder and (ii) such as have been
obtained or made by the Company and are in full force and effect under the
Securities Act, applicable state securities or blue sky laws and from the New
York Stock Exchange (the "NYSE") and the National Association of Securities
Dealers, Inc. (the "NASD"). As used herein, a "DEBT REPAYMENT TRIGGERING EVENT"
means any event or condition which gives, or with the giving of notice or lapse
of time would give, the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such indebtedness
by the Company or any of its subsidiaries.
(r) No Material Actions or Proceedings. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or affecting the Company or any of
its subsidiaries, (ii) which has as the subject thereof any officer
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or director of, or property owned or leased by, the Company or any of its
subsidiaries or (iii) relating to environmental or discrimination matters, where
in any such case (A) there is a reasonable possibility that such action, suit or
proceeding might be determined adversely to the Company or such subsidiary and
(B) any such action, suit or proceeding, if so determined adversely, would
reasonably be expected to result in a Material Adverse Change or adversely
affect the consummation of the transactions contemplated by this Agreement.
(s) Intellectual Property Rights. The Company and its subsidiaries own
or possess sufficient trademarks, trade names, patent rights, copyrights, domain
names, licenses, approvals, trade secrets and other similar rights
(collectively, "INTELLECTUAL PROPERTY RIGHTS") reasonably necessary to conduct
their businesses as now conducted; and the expected expiration of any of such
Intellectual Property Rights would not result in a Material Adverse Change.
Neither the Company nor any of its subsidiaries has received any notice of
infringement or conflict with asserted Intellectual Property Rights of others,
which infringement or conflict, if the subject of an unfavorable decision, would
result in a Material Adverse Change. The Company is not a party to or bound by
any options, licenses or agreements with respect to the Intellectual Property
Rights of any other person or entity that are required to be set forth in the
Offering Memorandum and are not described in all material respects. None of the
technology employed by the Company has been obtained or is being used by the
Company in violation of any contractual obligation binding on the Company or, to
the Company's knowledge, any of its officers, directors or employees or
otherwise in violation of the rights of any persons.
(t) Governmental Licenses. The Company and each of its subsidiaries
possess such valid and current certificates, permits, licenses, approvals,
consents and other authorizations (collectively, "GOVERNMENTAL LICENSES") issued
by the appropriate federal, state, provincial, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by them except
where the failure to possess such Governmental Licenses would not, individually
or in the aggregate, result in a Material Adverse Change. The Company and its
subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure to so comply would not,
individually or in the aggregate, result in a Material Adverse Change. All of
the Governmental Licenses are valid and in full force and effect, except where
the invalidity of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect would not, individually or in the
aggregate, result in a Material Adverse Change. Neither the Company nor any of
its subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, individually
or in the aggregate, if the subject of an unfavorable decision, ruling or
filing, would result in a Material Adverse Change. No insurance regulatory
authority having jurisdiction over the Company or any of its subsidiaries has
issued any order or decree impairing, restricting or prohibiting (i) the payment
of dividends by any of the subsidiaries to its parent, other than those
restrictions applicable to insurance or reinsurance companies generally, or (ii)
the continuation of the business of the Company or any of the subsidiaries in
all material respects as presently conducted.
(u) Absence of Labor Dispute. No labor dispute with the employees of
the Company, nor any of its subsidiaries exists or, to the knowledge of the
Company, is imminent, and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its subsidiaries' principal
customers or contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Change.
(v) Title to Properties. The Company and each of its subsidiaries has
good and marketable title to all the properties and assets reflected as owned by
each of them in the financial
8
statements referred to in Section 1(A)(m) above (or elsewhere in the Offering
Memorandum), in each case free and clear of any security interests, mortgages,
liens, encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property by the
Company or such subsidiary. The real property, improvements, equipment and
personal property held under lease by the Company or any subsidiary are held
under valid and enforceable leases, with such exceptions as are not material and
do not materially interfere with the use made or proposed to be made of such
real property, improvements, equipment or personal property by the Company or
such subsidiary.
(w) Tax Law Compliance. The Company and its subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns and have
paid all taxes required to be paid by any of them and, if due and payable, any
related or similar assessment, fine or penalty levied against any of them. The
Company has made adequate charges, accruals and reserves in the applicable
financial statements referred to in Section 1(A)(m) above in respect of all
federal, state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company or any of its subsidiaries has not been
finally determined.
(x) Company Not an "Investment Company". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "INVESTMENT COMPANY ACT"). The Company is not, and after receipt of
payment for the Debentures will not be, required to register as an "investment
company" within the meaning of Investment Company Act and will conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(y) Insurance. Each of the Company and its subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes. The Company has no reason to believe that it or any subsidiary will
not be able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar institutions
as may be necessary or appropriate to conduct its business as now conducted and
at a cost that would not result in a Material Adverse Change. Neither of the
Company nor any subsidiary has been denied any insurance coverage which it has
sought or for which it has applied. The term insurance as applied in this
section (y) is deemed not to include reinsurance contracts or treaties.
9
(z) No Price Stabilization or Manipulation. 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 any security of the Company to facilitate the sale or resale of the
Debentures.
(aa) Related Party Transactions. No relationship, direct or indirect,
exists between or among any of the Company or any affiliate of the Company, on
the one hand, and any director, officer, stockholder, customer or supplier of
any of them, on the other hand, which, if the Debentures were being registered
under the Securities Act, would be required by the Securities Act or the rules
and regulations thereunder to be described in the applicable registration
statement which is not so described in the Offering Memorandum.
(bb) No General Solicitation. None of the Company or any of its
affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act
("REGULATION D")), has, directly or through an agent, engaged in any form of
general solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offering of the Debentures or the
Conversion Shares or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act; the Company has not entered into
any contractual arrangement with respect to the distribution of the Debentures
or the Conversion Shares except for this Agreement, and the Company will not
enter into any such arrangement except for the Registration Rights Agreement and
as may be contemplated thereby.
(cc) Reporting Company. The Company is subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act.
(dd) ▇▇▇▇▇▇▇▇-▇▇▇▇▇. The Company is in material compliance with all
applicable provisions of the U.S. ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are effective.
(ee) Exchange Act Compliance. The documents incorporated at the time
they were or hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the Exchange Act, and, when
read together with the other information in the Offering Memorandum, at the date
of the Offering Memorandum and at the First Closing Date and the Second Closing
Date, as the case may be, will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the facts 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, with respect to any financial statements and other
financial information, fairly present in all material respects the financial
condition, results of operations and cash flows of the company as of, and for,
the periods so presented.
(ff) No Unlawful Contributions or Other Payments. Neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Offering Memorandum.
(gg) Company's Accounting System and Internal Controls. The Company
maintains a system of accounting and internal controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles as applied in the United States and to
10
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences; (v) financial statement certification requirements under the
Exchange Act or otherwise are accurate and all requisite pre-certification
procedures are adequately performed; (vi) an industry-standard code of ethics is
consistently reviewed and followed without exception; and (vii) NYSE corporate
governance requirements are complied with, in all material respects, including,
without limitation, audit and other board of directors committee composition
requirements, except as permitted by any applicable NYSE waiting period.
(hh) ERISA Compliance. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained by
the Company, its subsidiaries or their "ERISA Affiliates" (as defined below) are
in compliance in all material respects with ERISA and the Internal Revenue Code
of 1986, as amended, and the regulations and published interpretations
thereunder (the "CODE"). "ERISA AFFILIATE" means, with respect to the Company or
a subsidiary, any member of any group of organizations described in Sections
414(b),(c),(m) or (o) of the Code of which the Company or such subsidiary is a
member. No "reportable event" (as defined under ERISA) has occurred or is
reasonably expected to occur with respect to any "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates. No "employee benefit plan" established or maintained by the Company,
its subsidiaries or any of their ERISA Affiliates, if such "employee benefit
plan" were terminated, would have any "amount of unfunded benefit liabilities"
(as defined under ERISA). Neither the Company, its subsidiaries nor any of their
ERISA Affiliates has incurred or reasonably expects to incur any liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal from, any
"employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code.
Each "employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates that is intended to be qualified
under Section 401(a) of the Code is so qualified and nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification.
(ii) Brokers. There is no broker, finder or other party that is
entitled to receive from the Company any brokerage or finder's fee or other fee
or commission as a result of any transactions contemplated by this Agreement.
(jj) Dividend Payments. No subsidiary of the Company is currently
prohibited, directly or indirectly under any agreement or other instrument to
which it is a party or is subject, from paying any dividends to the Company,
from making any other distribution on such subsidiary's capital stock or from
repaying to the Company any loans or advances to such subsidiary from the
Company.
(kk) No Outstanding Loans or Other Indebtedness. There are no
outstanding loans, advances (except normal advances for business expenses in the
ordinary course of business) or guarantees or indebtedness by the Company to or
for the benefit of any of the officers or directors of the Company or any of the
members of any of them, except as disclosed in the Offering Memorandum.
(ll) Compliance with Laws. The Company and each of its subsidiaries is
conducting its business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting business, except
where failure to be so in compliance would not result in a Material Adverse
Change. In particular, without limitation, each of the subsidiaries of the
11
Company is in compliance with the requirements of the insurance laws and
regulations of its jurisdiction of incorporation and the insurance laws and
regulations of other jurisdictions which are applicable to each such subsidiary,
and has filed all notices, reports, documents or other information required to
be filed thereunder, except where the failure to so comply or file would not
have, individually or in the aggregate with other such failures, result in a
Material Adverse Change.
(mm) Statutory Insurance Filings. The 2002 statutory annual statements
of each regulated insurance subsidiary of the Company and the statutory balance
sheets and income statements included in such statutory annual statements
together with related schedules and notes, have been prepared, in all material
respects, in conformity with statutory accounting principles or practices
required or permitted by the appropriate insurance regulator of the jurisdiction
of domicile of each such subsidiary, and such statutory accounting practices
have been applied on a consistent basis throughout the periods involved, except
as may otherwise be indicated therein or in the notes thereto, and present
fairly, in all material respects, the statutory financial position of such
insurance subsidiaries as of the dates thereof, and the statutory basis results
of operations of such insurance subsidiaries for the periods covered thereby.
(nn) Reserving Practices. The Company and its insurance subsidiaries
have made no material changes in their insurance reserving practices since
December 31, 2002, except where such change in such insurance reserving
practices would not reasonably be expected to result in a Material Adverse
Change.
(oo) Claims-paying Ability Rating. The Company is not aware of any
threatened or pending downgrading of any of its subsidiary's claims-paying
ability rating by A.M. Best Company, Inc. or any other "nationally recognized
statistical rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Securities Act.
(pp) Validity of Reinsurance Treaties. All reinsurance treaties and
arrangements to which the Company or any subsidiary is a party are in full force
and effect and neither the Company nor any subsidiary is in violation of or in
default in the performance, observance or fulfillment of, any obligation,
agreement, covenant or condition contained therein; neither the Company nor any
subsidiary has received any notice from any of the other parties to such
treaties, contracts or agreements that such other party intends not to perform
such treaty and, to the best knowledge of the Company and its subsidiaries, the
Company and its subsidiaries have no reason to believe that any of the other
parties to such treaties or arrangements will be unable to perform such treaty
or arrangement; except, in each of the above cases, (i) to the extent adequately
and properly reserved for in the financial statements of the Company included or
incorporated by reference in the Offering Memorandum and (ii) for such
violations or defaults that would not result in a Material Adverse Change.
Any certificate signed by an officer of the Company and
delivered to the Representatives or to counsel for the Initial Purchasers shall
be deemed to be a representation and warranty by the Company to each Initial
Purchaser as to the matters set forth therein.
The Company acknowledges that the Initial Purchasers and, for
purposes of the opinions to be delivered pursuant to Section 5 hereof, counsel
to the Company and counsel to the Initial Purchasers, will rely upon the
accuracy and truthfulness of the foregoing representations and hereby consents
to such reliance.
12
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE DEBENTURES.
(a) The Firm Debentures. The Company agrees to issue and sell to the
Initial Purchasers the Firm Debentures upon the terms herein set forth. On the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Initial
Purchasers agree, severally and not jointly, to purchase from the Company the
respective principal amount of Firm Debentures set forth opposite their names on
Schedule A at a purchase price of 97.25 % of the aggregate principal amount
thereof.
(b) The First Closing Date. Delivery of the Firm Debentures to be
purchased by the Initial Purchasers and payment therefore shall be made at the
offices of the Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (or such
other place as may be agreed to by the Company and the Representatives) at 9:00
a.m. New York time, on July 7, 2003, or such other time and date not later than
1:30 p.m. New York time, on July 21, 2003, as the Representatives and the
Company shall agree upon (the time and date of such closing are called the
"FIRST CLOSING DATE").
(c) The Optional Debentures; the Second Closing Date. In addition, on
the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the Initial Purchasers to purchase, severally and not
jointly, up to $35,000,000 aggregate principal amount of Optional Debentures
from the Company at the same price per Optional Note as the purchase price to be
paid by the Initial Purchasers per Firm Note. The option granted hereunder may
be exercised at any time (but not more than once) upon notice by the
Representatives to the Company, which notice may be given at any time within 13
days from the date of this Agreement. Such notice shall set forth (i) the amount
(which shall be an integral multiple of $1,000 in aggregate principal amount) of
Optional Debentures as to which the Initial Purchasers are exercising the
option, (ii) the names and denominations in which the Optional Debentures are to
be registered and (iii) the time, date and place at which such Debentures will
be delivered (which time and date may be simultaneous with, but not earlier
than, the First Closing Date; and in such case the term "First Closing Date"
shall refer to the time and date of delivery of the Firm Debentures and the
Optional Debentures). Such time and date of delivery, if subsequent to the First
Closing Date, is called the "SECOND CLOSING DATE" and shall be determined by the
Representatives. Such date may be the same as the First Closing Date but not
earlier than the First Closing Date nor later than 14 days after the First
Closing Date. If any Optional Debentures are to be purchased, each Initial
Purchaser agrees, severally and not jointly, to purchase the principal amount of
Optional Debentures (subject to such adjustments to eliminate fractional amounts
as the Representatives may determine) that bears the same proportion to the
total principal amount of Optional Debentures to be purchased as the principal
amount of Firm Debentures set forth on Schedule A opposite the name of such
Initial Purchaser bears to the total principal amount of Firm Debentures. The
Representatives may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company.
(d) Payment for the Debentures. Payment for the Firm Debentures shall
be made at the First Closing Date (and, if applicable, for Optional Debentures
at the Second Closing Date) by wire transfer of immediately available funds to a
bank account designated in writing by the Company or in such manner of payment
as the Company and the Representatives may agree.
It is understood that the Representatives have been
authorized, for their own account and the accounts of the Initial Purchasers, to
accept delivery of and receipt for, and make payment of the purchase price for,
the Firm Debentures and any Optional Debentures the Initial
13
Purchasers have agreed to purchase. BAS, individually and not as one of the
Representatives, may (but shall not be obligated to) make payment for any
Debentures to be purchased by any Initial Purchaser whose funds shall not have
been received by the Representatives by the First Closing Date or the Second
Closing Date, as the case may be, for the account of such Initial Purchaser, but
any such payment shall not relieve such Initial Purchaser from any of its
obligations under this Agreement.
(e) Delivery of the Debentures. The Company shall deliver, or cause to
be delivered, to the Representatives for the accounts of the Initial Purchasers
certificates for the Firm Debentures at the First Closing Date, against the
irrevocable release of a wire transfer of immediately available funds for the
amount of the purchase price therefor or in such manner of payment as the
Company and the Representatives may agree. The Company shall also deliver, or
cause to be delivered, to the Representatives for the accounts of the Initial
Purchasers, certificates for the Optional Debentures the Initial Purchasers have
agreed to purchase at the First Closing Date or the Second Closing Date, as the
case may be, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefore or in such other
manner of payment as the Company and the Initial Purchasers may agree. The
Debentures shall be registered in such names and denominations as the
Representatives shall have requested at least two full business days prior to
the First Closing Date (or the Second Closing Date, as the case may be) and
shall be made available for inspection on the business day preceding the First
Closing Date (or the Second Closing Date, as the case may be) at a location in
New York City as the Representatives may designate. Time shall be of the
essence, and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Initial Purchasers.
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY. The Company
further covenants and agrees with the Initial Purchasers as follows:
(a) Initial Purchasers' Review of Proposed Amendments and Supplements.
During such period beginning on the date hereof and ending upon completion of
the resale of the Debentures by the Initial Purchases (as notified by the
Initial Purchasers to the Company), prior to amending or supplementing the
Offering Memorandum, the Company shall furnish to the Initial Purchasers for
review a copy of each such proposed amendment or supplement, and the Company
shall not print or distribute such proposed amendment or supplement to which the
Representatives reasonably object.
(b) Amendments and Supplements to the Offering Memorandum and Other
Securities Law Matters. If, at any time prior to the completion of the resale of
the Debentures by the Initial Purchasers (as notified by the Initial Purchasers
to the Company), any event shall occur or condition exist as a result of which
it is necessary to amend or supplement the Offering Memorandum in order that the
Offering Memorandum will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances existing at the time it is delivered to a
purchaser, not misleading, or if in the opinion of the Representatives or
counsel for the Initial Purchasers it is otherwise necessary to amend or
supplement the Offering Memorandum to comply with law, the Company shall
promptly notify the Initial Purchasers and prepare, subject to Section 3(a)
hereof, such amendment or supplement as may be necessary to correct such untrue
statement or omission.
(c) Notice of Filings. The Company will promptly notify the
Representatives of any filing made by the Company of information relating to the
offering of the Debentures with any securities exchange or any other regulatory
body in the United States or any other jurisdiction.
14
(d) Copies of Offering Memorandum. The Company agrees to furnish the
Initial Purchasers without charge, until the earlier of nine months after the
date hereof or the completion of the resale of the Debentures by the Initial
Purchasers (as notified by the Initial Purchasers to the Company) as many copies
of the Offering Memorandum and any amendments and supplements thereto as the
Initial Purchasers may reasonably request.
(e) Blue Sky Compliance. The Company shall cooperate with the Initial
Purchasers and counsel for the Initial Purchasers, as the Initial Purchasers may
reasonably request from time to time, to qualify or register the Debentures for
sale under (or obtain exemptions from the application of) the state securities
or blue sky laws of those jurisdictions designated by the Initial Purchasers,
shall comply with such laws and shall continue such qualifications,
registrations and exemptions in effect so long as required for the distribution
of the Debentures. Notwithstanding the foregoing, the Company shall not be
required to qualify as a foreign corporation or to take any action that would
subject it to general service of process in any such jurisdiction, where it is
not presently qualified or where it would be subject to taxation as a foreign
corporation. The Company will advise the Initial Purchasers promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Debentures for offering, sale or trading in any jurisdiction or
any initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification, registration
or exemption, the Company shall use its best efforts to obtain the withdrawal
thereof at the earliest possible moment.
(f) Rule 144A Information. For so long as any of the Debentures are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Company shall provide to any holder of the Debentures or to
any prospective purchaser of the Debentures designated by any holder, upon
request of such holder or prospective purchaser, information required to be
provided by Rule 144A(d)(4) of the Securities Act if, at the time of such
request, the Company is not subject to the reporting requirements under Section
13 or 15(d) of the Exchange Act.
(g) Legends. Each of the Debentures will bear, to the extent
applicable, the legend contained in "Notice to Investors" in the Offering
Memorandum for the time period and upon the other terms stated therein.
(h) No General Solicitation. Except following the effectiveness of the
Registration Statement (as defined in the Registration Rights Agreement), the
Company will not, and will cause its subsidiaries not to, solicit any offer to
buy or offer to sell the Debentures by means of any form of general solicitation
or general advertising (as those terms are used in Regulation D) or in any
manner that would require registration of the Debentures under the Securities
Act.
(i) No Integration. The Company will not, and will cause its
subsidiaries not to, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Securities Act) in a
transaction that could be integrated with the sale of the Debentures in a manner
that would require the registration of the Debentures under the Securities Act.
(j) Rule 144 Tolling. During the period of two years after the First
Closing Date or, if later, the Second Closing Date, the Company will not, and
will not permit any of its "affiliates" (as defined in Rule 144 under the
Securities Act) to, resell any of the Debentures which constitute "restricted
securities" under Rule 144 that have been reacquired by any of them.
15
(k) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Debentures sold by it in the manner described under the caption "Use
of Proceeds" in the Offering Memorandum.
(l) Transfer Agent. The Company shall engage and maintain, at its
expense, one or more registrars and transfer agents for the Common Stock.
(m) The Depository Trust Company. The Company will coordinate with the
Representatives and use its best efforts to permit the Debentures to be eligible
for clearance and settlement through the facilities of the Depository Trust
Company.
(n) Reservation of Common Stock. The Company will reserve and keep
available at all times, free of preemptive or other similar rights, a sufficient
number of authorized and unissued shares of Common Stock for the purpose of
enabling the Company to satisfy any obligations to issue Conversion Shares.
(o) Rating of Debentures. The Company shall take all reasonable action
necessary to enable Standard & Poor's or any other "nationally recognized
statistical rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Securities Act, to provide its credit rating of the
Securities.
(p) PORTAL Designation. The Company will use its best efforts to permit
the Debentures to be designated PORTAL securities in accordance with the rules
and regulations adopted by the NASD relating to trading in the PORTAL Market.
(q) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Initial Purchasers an
earnings statement (which need not be audited) covering the twelve-month period
ending December 31, 2003 that satisfies the requirements of the Securities Act.
(r) Company to Provide Interim Financial Statements. Prior to the
Closing Date, the Company will furnish the Initial Purchasers, as soon as they
have been prepared by or are available to the Company, a copy of any unaudited
interim financial statements of the Company for any period subsequent to the
period covered by the most recent financial statements appearing in the Offering
Memorandum.
(s) New York Stock Exchange Listing. The Company will use its best
efforts to list, subject to notice of issuance, the Conversion Shares and the
Put Shares, if any, on the NYSE.
(t) Agreement Not to Offer or Sell Additional Securities. During the
period commencing on the date hereof and ending on the 90th day following the
date of the Final Offering Memorandum, the Company will not, without the prior
written consent of BAS (which consent may be withheld at the sole discretion of
BAS), directly or indirectly, sell, offer, contract or grant any option to sell,
pledge, transfer or establish an open "put equivalent position" within the
meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or
transfer, or announce the offering of, or file any registration statement under
the Securities Act (other than a registration statement on Form S-8), any shares
of Common Stock, options or warrants to acquire shares of the Common Stock or
securities exchangeable or exercisable for or convertible into shares of Common
Stock (other than as contemplated by this Agreement with respect to the
Debentures); provided, however, that the Company may issue shares of its Common
Stock or options to purchase its Common Stock, or Common Stock upon exercise of
options, pursuant to
16
any stock option, stock bonus or other stock plan or arrangement described in
the Final Offering Memorandum, but only if the holders of such shares, options,
or shares issued upon exercise of such options, who is an officer or director of
the Company or any of its subsidiaries, has agreed or agrees in writing not to
sell, offer, dispose of or otherwise transfer any such shares or options during
such 90-day period without the prior written consent of BAS (which consent may
be withheld at the sole discretion of the BAS).
(u) Future Reports to the Representatives. During the period of five
years hereafter the Company will furnish certain reports, to the extent such
reports are unavailable, free of charge, in electronic format from the
Securities and Exchange Commission, to the BAS at ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇: (i) as soon as practicable after the end
of each fiscal year, copies of the Annual Report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and statements
of income, stockholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public or certified public
accountants; (ii) as soon as practicable after the filing thereof, copies of
each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as available,
copies of any report or communication of the Company mailed generally to holders
of its capital stock.
(v) Investment Limitation. The Company shall not invest, or otherwise
use the proceeds received by the Company from its sale of the Debentures in such
a manner as would require the Company or any of its subsidiaries to register as
an investment company under the Investment Company Act.
(w) No Manipulation of Price. The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
(x) Existing Lock-Up Agreement. The Company will enforce any agreements
between the Company and any of its security holders that prohibit the sale,
transfer, assignment, pledge or hypothecation of any of the Company's
securities. In addition, the Company will direct the transfer agent to place
stop transfer restrictions upon any such securities of the Company that are
bound by such existing "lock-up" agreements for the duration of the periods
contemplated in such agreements.
SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay all
costs, fees and expenses incurred in connection with the performance of their
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the issuance
and delivery of the Debentures (including all printing, without limitation,
costs), (ii) all fees and expenses of the Trustee under the Indenture, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Debentures to the Initial Purchasers, (iv) all fees and expenses
of the Company's counsel, independent public or certified public accountants and
other advisors, (v) all costs and expenses incurred in connection with the
preparation, printing, shipping and distribution of the Offering Memorandum
(including financial statements, exhibits, schedules, and certificates of
experts) and all amendments and supplements thereto, and this Agreement, (vi)
all filing fees, attorneys' fees and expenses incurred by the Company or the
Initial Purchasers in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Debentures for offer and sale under the state securities or blue sky laws, and,
if requested by the Initial Purchasers, preparing and printing a "Blue Sky
Survey" or memorandum, and any supplements
17
thereto, advising the Initial Purchasers of such qualifications, registrations
and exemptions, (vii) the expenses of the Company and the Initial Purchasers in
connection with the marketing and offering of the Debentures, (viii) the fees
and expenses associated with listing the Conversion Shares on the NYSE and (ix)
all expenses and fees in connection with admitting the Debentures for trading in
the PORTAL Market. Except as provided in this Section 4 and Sections 7 through
11 hereof, the Initial Purchasers shall pay their own expenses, including the
fees and disbursements of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL
PURCHASERS. The obligations of the Initial Purchasers to purchase and pay for
the Firm Debentures as provided herein on the First Closing Date and, with
respect to the Optional Debentures, the Second Closing Date, shall be subject to
the accuracy of the representations and warranties on the part of the Company
set forth in Section 1 hereof as of the date hereof and as of the First Closing
Date as though then made and, with respect to the Optional Debentures, as of the
Second Closing Date as though then made, to the timely performance by the
Company of its covenants and other obligations hereunder, and to each of the
following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Initial
Purchasers shall have received from Ernst & Young LLP, independent public or
certified public accountants for the Company, a letter dated the date hereof
addressed to the Initial Purchasers, in form and substance satisfactory to the
Representatives, containing statements and information of the type ordinarily
included in accountant's "comfort letters" to the Initial Purchasers, delivered
according to Statement of Auditing Standards No. 72 (or any successor bulletin),
with respect to the audited and unaudited financial statements and certain
financial information contained in the Offering Memorandum (and the
Representatives shall have received an additional three conformed copies of such
accountants' letter for each of the Initial Purchasers).
(b) No Material Adverse Change or Ratings Agency Change. For the period
from and after the date of this Agreement and prior to the First Closing Date
and, with respect to the Optional Common Shares, the Second Closing Date:
(i) there shall not have occurred any change, or any
development that could reasonably be expected to result in a change, in
the condition, financial or otherwise, or in the earnings, business,
operations or prospects, whether or not arising from transactions in
the ordinary course of business, of the Company and its subsidiaries,
considered as one entity, the effect of which is, in the judgment of
the Representatives, so material and adverse as to make it impractical
or inadvisable to proceed with the offering or delivery of the
Debentures as contemplated in the Offering Memorandum; and
(ii) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the claims-paying
ability rating accorded the Company's insurance subsidiaries by any
"nationally recognized statistical rating organization" as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act.
(c) Opinions of External and Internal Counsel for the Company and Ernst
& Young LLP. On each of the First Closing Date and the Second Closing Date the
Representatives shall have received: (1) the favorable opinion of ▇▇▇▇ & ▇▇▇▇▇▇
LLP, external counsel for the Company, dated as of such Closing Date, the form
of which is attached as Exhibit A (and the Representatives shall have received
an additional three conformed copies of such counsel's legal
18
opinion for each of the Initial Purchasers); (2) the favorable opinion of
internal counsel for the Company dated as of such Closing Date, the form of
which is attached as Exhibit B (and the Representatives shall have received an
additional three conformed copies of such counsel's legal opinion for each of
the Initial Purchasers); and (3) the favourable opinion of Ernst & Young LLP
dated as of such Closing Date, the form of which is attached as Exhibit E (and
the Representatives shall have received an additional three conformed copies of
such counsel's legal opinion for each of the Initial Purchasers).
(d) Opinion of Counsel for the Initial Purchasers. On each of the First
Closing Date and the Second Closing Date the Representatives shall have received
the favorable opinion of Shearman & Sterling LLP, counsel for the Initial
Purchasers, dated as of such Closing Date, with respect to the matters
customarily addressed in such transactions.
(e) Officers' Certificate. On each of the First Closing Date and the
Second Closing Date the Representatives shall have received a written
certificate executed by the Chairman of the Board, Chief Executive Officer or
President of the Company and the Chief Financial Officer or Chief Accounting
Officer of the Company, dated as of such Closing Date, to the effect set forth
in subsections (b)(ii) of this Section 5, and further to the effect that:
(i) for the period from and after the date of this
Agreement and prior to such Closing Date, there has not occurred any
Material Adverse Change;
(ii) the representations, warranties and covenants of the
Company set forth in Section 1 of this Agreement are true and correct
with the same force and effect as though expressly made on and as of
such Closing Date; and
(iii) the Company has complied with all the agreements
hereunder and satisfied all the conditions on its part to be performed
or satisfied hereunder at or prior to such Closing Date.
(f) Bring-down Comfort Letter. On each of the First Closing Date and
the Second Closing Date the Representatives shall have received from Ernst &
Young, LLP, independent public or certified public accountants for the Company a
letter dated such date, in form and substance satisfactory to the
Representatives, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to subsection (a) of this Section 5, except
that the specified date referred to therein for the carrying out of procedures
shall be no more than three business days prior to the First Closing Date or
Second Closing Date, as the case may be (and the Representatives shall have
received an additional three conformed copies of such accountants' letter for
each of the Initial Purchasers).
(g) Registration Rights Agreement. The Company and the Initial
Purchasers shall have executed and delivered the Registration Rights Agreement
(in form and substance satisfactory to the Initial Purchasers), and the
Registration Rights Agreement shall be in full force and effect (assuming due
execution, delivery and performance by the Initial Purchasers).
(h) Lock-Up Agreement from Officers and Directors of the Company. On or
prior to the date hereof, the Company shall have furnished to the
Representatives an agreement in the form of Exhibit C hereto from each officer
and director of the Company, and such agreement shall be in full force and
effect on each of the First Closing Date and the Second Closing Date.
19
(i) PORTAL Designation. On or before each of the First Closing Date and
the Second Closing Date, the Securities have been designated for trading on
PORTAL.
(j) Consent. On or before the First Closing Date, the consent (in form
and substance reasonably satisfactory to the Initial Purchasers and their
counsel) of SouthTrust Bank to the issuance of the Debentures contemplated in
this Agreement.
(k) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, the Representatives and counsel for the Initial
Purchasers shall have received such information, documents and opinions as they
may reasonably require for the purposes of enabling them to pass upon the
issuance and sale of the Debentures as contemplated herein, or in order to
evidence the accuracy of any of the representations and warranties, or the
satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when
and as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Optional Common Shares, at any time prior
to the Second Closing Date, which termination shall be without liability on the
part of any party to any other party, except that Section 4, Section 7, Section
8 and Section 9 shall at all times be effective and shall survive such
termination.
SECTION 6. SUBSEQUENT OFFERS AND RESALES OF THE SECURITIES.
(a) Offer and Sale Procedures. Each of the Initial Purchasers and the
Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Debentures:
(i) Offers and sales of the Debentures shall only be made
to persons whom the offeror or seller reasonably believe to be
qualified institutional buyers, as defined in Rule 144A ("Qualified
Institutional Buyers"). Each Initial Purchaser severally agrees that it
will not offer, sell or deliver any of the Debentures in any
jurisdiction outside the United States except under circumstances that
will result in compliance with the applicable laws thereof, and that it
will take at its own expense whatever action is required to permit its
purchase and resale of the Debentures in such jurisdictions.
(ii) No general solicitation or general advertising
(within the meaning of Rule 502(c) under the Securities Act) will be
used in the United States in connection with the offering or sale of
the Debentures.
(iii) In the case of a non-bank Subsequent Purchaser of a
Note acting as a fiduciary for one or more third parties, each third
party shall, in the judgment of the applicable Initial Purchaser, be a
Qualified Institutional Buyer.
(iv) Each Initial Purchaser will take reasonable steps to
inform, and cause each of its U.S. Affiliates to take reasonable steps
to inform, persons acquiring Debentures from such Initial Purchaser or
affiliate, as the case may be, in the United States that the Securities
(A) have not been and will not be registered under the Securities Act,
(B) are being sold to them without registration under the Securities
Act in reliance on Rule 144A or in accordance with another exemption
from registration under the Securities Act, as the case may be, and (C)
may not be offered, sold or otherwise transferred except (1) to the
Company, (2) in accordance with Rule 144A to a person
20
whom the seller reasonably believes is a Qualified Institutional Buyer
that is purchasing such Debentures for its own account or for the
account of a Qualified Institutional Buyer to whom notice is given that
the offer, sale or transfer is being made in reliance on Rule 144A or
(3) pursuant to another available exemption from registration under the
Securities Act.
(v) No sale of the Debentures to any one Subsequent
Purchaser will be for less than U.S.$100,000 principal amount and no
Note will be issued in a smaller principal amount. If the Subsequent
Purchaser is a non-bank fiduciary acting on behalf of others, each
person for whom it is acting must purchase at least U.S.$100,000
principal amount of the Debentures.
(vi) The transfer restrictions and the other provisions
set forth in the Offering Memorandum under the heading "Notice to
Investors", including the legend required thereby, shall apply to the
Debentures except as otherwise agreed by the Company and the Initial
Purchasers.
(vii) Each Initial Purchaser will deliver to each purchaser
of the Debentures from such Initial Purchaser, in connection with its
original distribution of the Debentures, a copy of the Offering
Memorandum, as amended and supplemented at the date of such delivery.
(b) Covenants of the Company. The Company covenants with each Initial
Purchaser as follows:
(i) The Company agrees that it will not and will cause
its Affiliates not to, directly or indirectly, solicit any offer to
buy, sell or make any offer or sale of, or otherwise negotiate in
respect of, securities of the Company of any class if, as a result of
the doctrine of "integration" referred to in Rule 502 under the
Securities Act, such offer or sale would render invalid (for the
purpose of (i) the sale of the Debentures by the Company to the Initial
Purchasers, (ii) the resale of the Debentures by the Initial Purchasers
to Subsequent Purchasers or (iii) the resale of the Debentures by such
Subsequent Purchasers to others) the exemption from the registration
requirements of the Securities Act provided by Section 4(2) thereof or
by Rule 144A thereunder or otherwise.
(ii) The Company agrees that, in order to render the
Debentures eligible for resale pursuant to Rule 144A under the
Securities Act, while any of the Debentures remain outstanding and are
"restricted securities" within the meaning of Rule 144 under the Act,
it will make available, upon request, to any holder of Debentures or
prospective purchasers of Debentures the information specified in Rule
144A(d)(4), unless the Company furnishes information to the Commission
pursuant to Section 13 or 15(d) of the Exchange Act.
(iii) Until the expiration of two years after the original
issuance of the Debentures, the Company will not, and will use its
reasonable efforts to cause its subsidiaries over which it has control
not to, resell any Debentures which are "restricted securities" (as
such term is defined under Rule 144(a)(3) under the Securities Act),
whether as beneficial owner or otherwise (except as agent acting as a
securities broker on behalf of and for the account of customers in the
ordinary course of business in unsolicited broker's transactions.
21
(c) Qualified Institutional Buyer. Each Initial Purchaser severally and
not jointly represents and warrants to, and agrees with, the Company that it is
Qualified Institutional Buyer and an "accredited investor" within the meaning of
Rule 501(a) under the 1933 Act.
(d) Restricted Securities. The Initial Purchasers understand that the
Debentures have not been and, except as required pursuant to the Registration
Rights Agreement, will not be registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except pursuant to an exemption from the registration
requirements of the Securities Act.
SECTION 7. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If
this Agreement is terminated by the Representatives pursuant to Section 5,
Section 7, Section 10 or Section 11, or if the sale to the Initial Purchasers of
the Debentures on the First Closing Date is not consummated because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse each Representative and the other Initial Purchasers (or such Initial
Purchasers as have terminated this Agreement with respect to themselves),
severally, upon demand for all out-of-pocket expenses that shall have been
reasonably incurred by the Representatives and the Initial Purchasers in
connection with the proposed purchase and the offering and sale of the
Debentures, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges.
SECTION 8. INDEMNIFICATION.
(a) Indemnification of the Initial Purchasers by the Company. The
Company agrees to indemnify and hold harmless each Initial Purchaser, its
officers and employees, and each person, if any, who controls any Initial
Purchaser within the meaning of the Securities Act and the Exchange Act against
any loss, claim, damage, liability or expense, as incurred, to which such
Initial Purchaser or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or the laws or regulations of the provinces of Canada where the
Debentures have been offered or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based (i) upon any untrue statement or alleged untrue statement of a material
fact contained in the Offering Memorandum (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact, in
each case, necessary to make the statements therein not misleading; or (ii) in
whole or in part upon any inaccuracy in the representations and warranties of
the Company contained herein; or (iii) in whole or in part upon any failure of
the Company to perform its obligations hereunder or under law; or (iv) on any
act or failure to act or any alleged act or failure to act by any Initial
Purchaser in connection with, or relating in any manner to, the Debentures or
the offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability, expense or action arising out of or
based upon any matter covered by clause (i) or (ii) above, provided that the
Company shall not be liable under this clause (iv) to the extent that a court of
competent jurisdiction shall have determined by a final judgment that such loss,
claim, damage, liability, expense or action resulted directly from any such acts
or failures to act undertaken or omitted to be taken by such Initial Purchaser
through its bad faith or willful misconduct, and to reimburse each Initial
Purchaser and each such controlling person for any and all expenses (including
the fees and disbursements of counsel chosen by BAS) as such expenses are
reasonably incurred by such Initial Purchaser or such controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability,
22
expense or action; provided, however, that the foregoing indemnity agreement
shall not apply to any loss, claim, damage, liability or expense to the extent,
but only to the extent, arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by the
Representatives expressly for use in the Offering Memorandum (or any amendment
or supplement thereto). The indemnity agreement set forth in this Section 8(a)
shall be in addition to any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. The
Initial Purchasers agree to indemnify and hold harmless the Company, each of its
directors, each of its officers and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, against
any loss, claim, damage, liability or expense, as incurred, to which the
Company, or any such director, officer or controlling person 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 such
Initial Purchaser), insofar as such loss, claim, damage, liability or expense
(or actions in respect thereof as contemplated below) arises out of or is based
upon any untrue or alleged untrue statement of a material fact contained in the
Offering Memorandum (or any amendment or supplement thereto), or arises out of
or is based upon the omission or alleged omission to state therein a material
fact necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Offering Memorandum
(or any amendment or supplement thereto), in reliance upon and in conformity
with written information furnished to the Company by the Initial Purchaser
expressly for use therein; and to reimburse the Company, or any such director,
officer or controlling person for any legal and other expense reasonably
incurred by the Company, or any such director, officer or controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action. The Company hereby
acknowledges that the only information that the Initial Purchasers have
furnished to the Company expressly for use in the Offering Memorandum (or any
amendment or supplement thereto) are the statements set forth in the table in
the first paragraph the eleventh paragraph under the caption "Plan of
Distribution" in the Offering Memorandum; and the Initial Purchasers confirm
that such statements are correct. The indemnity agreement set forth in this
Section 8(b) shall be in addition to any liabilities that the Initial Purchasers
may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, 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
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action
23
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
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of such indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (BAS in the case of Section 8(b)
and Section 9), representing the indemnified parties who are parties to such
action) or (ii) the indemnifying party shall not have employed counsel
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 shall be at the expense of the
indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
SECTION 9. CONTRIBUTION. If the indemnification provided for
in Section 8 is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party, as incurred, as a result of any losses, claims, damages,
liabilities or expenses referred to therein (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Initial Purchasers, on the other hand, from the offering of the
Debentures pursuant to this Agreement or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, on the one hand, and the
Initial Purchasers, on the other hand, in connection with the statements or
omissions or inaccuracies in the representations and warranties herein which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company, on the one hand, and the Initial Purchasers, on the other hand, in
connection with the offering of the Debentures pursuant to this
24
Agreement shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Debentures pursuant to this Agreement
(before deducting expenses) received by the Company, and the total discount
received by the Initial Purchasers, bear to the aggregate initial public
offering price of the Debentures. The relative fault of the Company, on the one
hand, and the Initial Purchasers, on the other hand, shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact or any such inaccurate or alleged inaccurate representation or warranty
relates to information supplied by the Company, on the one hand, or the Initial
Purchasers, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 8(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no
Initial Purchaser shall be required to contribute any amount in excess of the
discount received by such Initial Purchaser in connection with the Debentures
offered by it and distributed to the public. No person 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 guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective commitments as set forth opposite their names in Schedule A. For
purposes of this Section 9, each officer and employee of an Initial Purchaser
and each person, if any, who controls an Initial Purchaser within the meaning of
the Securities Act and the Exchange Act shall have the same rights to
contribution as such Initial Purchaser, and each director of the Company, each
officer of the Company, and each person, if any, who controls the Company with
the meaning of the Securities Act and the Exchange Act shall have the same
rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL
PURCHASERS. If, on the First Closing Date or the Second Closing Date, as the
case may be, any one or more of the several Initial Purchasers shall fail or
refuse to purchase Debentures that it or they have agreed to purchase hereunder
on such date, and the aggregate amount of Debentures which such defaulting
Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase
does not exceed 10% of the aggregate number of the Debentures to be purchased on
such date, the other Initial Purchasers shall be obligated, severally, in the
proportions that the amount of Debentures set forth opposite their respective
names on Schedule A bears to the aggregate amount of Debentures set forth
opposite the names of all such non-defaulting Initial Purchasers, or in such
other proportions as may be specified by the Representatives with the consent of
the non-defaulting Initial Purchasers, to purchase the Debentures which such
defaulting Initial Purchaser or Initial
25
Purchasers agreed but failed or refused to purchase on such date. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the Initial Purchasers shall fail or refuse to purchase Debentures and
the aggregate amount of Debentures with respect to which such default occurs
exceeds 10% of the aggregate amount of Debentures to be purchased on such date,
and arrangements satisfactory to the Representatives and the Company for the
purchase of such Debentures are not made within 48 hours after such default,
this Agreement shall terminate without liability of any party to any other party
except that the provisions of Section 4, Section 7, Section 8 and Section 9
shall at all times be effective and shall survive such termination. In any such
case either the Representatives or the Company shall have the right to postpone
the First Closing Date or the Second Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Offering Memorandum or any other documents or arrangements may be effected.
As used in this Agreement, the term "Initial Purchaser" shall
be deemed to include any person substituted for a defaulting Initial Purchaser
under this Section 10. Any action taken under this Section 10 shall not relieve
any defaulting Initial Purchaser from liability in respect of any default of
such Initial Purchaser under this Agreement.
26
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First
Closing Date this Agreement may be terminated by the Representatives by notice
given to the Company if at any time (i) trading or quotation in any of the
Company's securities shall have been suspended or limited by the Commission or
by the New York Stock Exchange, or trading in securities generally on either the
Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges; (ii) a general banking moratorium shall have been
declared by any of federal, New York, Delaware or California authorities; (iii)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective substantial change in United States' or
international political, financial or economic conditions, as in the judgment of
the Representatives is material and adverse and makes it impracticable to market
the Debentures in the manner and on the terms described in the Offering
Memorandum or to enforce contracts for the sale of securities; (iv) in the
judgment of the Representatives there shall have occurred any Material Adverse
Change; or (v) the Company shall have sustained a loss by strike, fire, flood,
earthquake, accident or other calamity of such character as in the judgment of
the Representatives may interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured. Any termination pursuant to this Section 11 shall be without
liability on the part of (a) the Company to any Initial Purchaser, except that
the Company shall be obligated to reimburse the expenses of the Representatives
and the Initial Purchasers pursuant to Sections 4 and 7 hereof, (b) any Initial
Purchaser to the Company, or (c) of any party hereto to any other party except
that the provisions of Section 8 and Section 9 shall at all times be effective
and shall survive such termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE
DELIVERY. The respective indemnities, agreements, representations, warranties
and other statements of the Company, of its officers and of the several Initial
Purchasers set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Initial Purchaser or the Company or any of its or their partners, officers or
directors or any controlling person, as the case may be, and will survive
delivery of and payment for the Debentures sold hereunder and any termination of
this Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in
writing and shall be mailed, hand delivered or telecopied and confirmed to the
parties hereto as follows:
If to the Representatives:
Banc of America Securities LLC
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with a copy to:
Banc of America Securities LLC
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
and with a copy to:
Shearman & Sterling LLP
27
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
If to the Company:
ProAssurance Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇, M.D.
with a copy to:
▇▇▇▇ & ▇▇▇▇▇▇ LLP
3100 Southtrust Tower
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
28
SECTION 14. SUCCESSORS. This Agreement will inure to the
benefit of and be binding upon the parties hereto, including any substitute
Initial Purchasers pursuant to Section 10 hereof, and to the benefit of the
employees, officers and directors and controlling persons referred to in Section
8 and Section 9, and in each case their respective successors, and personal
representatives, and no other person will have any right or obligation
hereunder. The term "successors" shall not include any purchaser of the
Debentures as such from any of the Initial Purchasers merely by reason of such
purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed in such state.
SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the
entire agreement of the parties to this Agreement and supersedes all prior
written or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may be
executed in two or more counterparts, each one of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement may not be amended or modified unless in writing by
all of the parties hereto, and no condition herein (express or implied) may be
waived unless waived in writing by each party whom the condition is meant to
benefit. The Table of Contents and the Section headings herein are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a
sophisticated business person who was adequately represented by counsel during
negotiations regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Offering Memorandum (and any amendments and
supplements thereto), as required by the Securities Act and the Exchange Act.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company and the several
Initial Purchasers set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any Initial
Purchaser, the officers or employees of any Initial Purchaser, any person
controlling any Initial Purchaser, the Company, the officers or employees of the
Company, or any person controlling the Company, (ii) acceptance of the
Debentures and payment for them hereunder and (iii) termination of this
Agreement.
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Initial Purchasers, the Initial
29
Purchasers' officers and employees, any controlling persons referred to herein,
the Company's directors and the Company's officers and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Initial Purchasers merely because of
such purchase.
30
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
PROASSURANCE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Operating
Officer
By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------
Name: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇, M.D.
Title: Chairman and Chief Executive
Officer
The foregoing Purchase Agreement is hereby confirmed and
accepted by the Representatives as of the date first above written.
BANC OF AMERICA SECURITIES LLC
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ SECURITIES LLC
Acting as Representatives of the
several Initial Purchasers named in
the attached Schedule A.
By: BANC OF AMERICA SECURITIES LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
SCHEDULE A
AGGREGATE
PRINCIPAL AMOUNT
OF FIRM
DEBENTURES TO BE
INITIAL PURCHASER PURCHASED
Banc of America Securities LLC ............................... $80,000,000
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Securities LLC ............................. $20,000,000
Total ...................................... $100,000,000*
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* Assuming no exercise of the Initial Purchasers' option.